Reduced harvest in Turkey means higher prices in Oregon
By MATEUSZ PERKOWSKI
Amid the current economic gloom, Doug Olsen says he realizes he's lucky to be an Oregon hazelnut grower.
The 2009 harvest has hit full swing earlier than normal, with growers reaping ample quantities of high-quality nuts.
Most importantly, prices are healthy.
"Nobody's going to get fat, but everybody's going to make some money," Olsen said.
At about $0.75 to $0.80 per pound, hazelnuts are fetching roughly $0.10 to $0.15 per pound above the cost of production, said Olsen, who grows several hundred acres in the northern Willamette Valley.
Oregon's projected production is up 19 percent, to 38,000 tons, and the percentage of defective nuts is the lowest in more than three decades, according to the USDA's National Agricultural Statistics Service.
"We're bullish," said Compton Chase-Lansdale, president and CEO of the Hazelnut Growers of Oregon, a cooperative that packs and markets the nut.
The positive outlook for Oregon farmers is partly the result of significantly lower-than-expected production in Turkey, the world's largest hazelnut producer, he said.
That country's reduced production was aggravated by an insect infestation, Chase-Lansdale said. Altogether, Turkey is projected to harvest 350,000 tons of hazelnuts, down from the 550,000 tons anticipated earlier this year.
"That's supporting much higher kernel prices," he said. Oregon growers primarily sell into the in-shell market, but strong kernel prices provide them with additional options and improve overall market conditions.
The U.S. dollar has weakened against the European euro and other currencies, which makes Oregon hazelnuts more affordable overseas, he said.
The state's largest export customer, China, continues to have an unabated appetite for hazelnuts, Chase-Lansdale said.
"The Chinese economy seems to have more resilience," he said.
Hazelnut farmers have seen a major reversal in fortunes since the cusp of the 21st century, when low prices and the specter of Eastern filbert blight cast a shadow over the industry, Olsen said.
Since then, markets have improved and Oregon State University has released several new tree varieties that are resistant to the fungal pathogen, said Mike Klein, manager of the Hazelnut Growers Bargaining Association.
The group represents growers in price negotiations with packers.
"We're at that point where we've wanted to be for a number of years, which is a lot more people interested in planting hazelnuts," Klein said. "We haven't been able to attract the biggest customers, because we haven't had enough supply. ... This helps with that."
Major food buyers need a reliable source of raw materials, which poses a challenge due to the cyclical nature of hazelnut production -- strong yields are often followed by weak ones the following season, said Olsen, who also serves as president of the bargaining association.
"It's hard to entice a Hershey's when one year you can provide them with a trainload of nuts and the next year you can supply them with a truckload of nuts," he said.
As of 2008, Oregon had a total of 30,100 acres of hazelnuts, with 28,400 acres of bearing maturity, said Polly Owen, manager of the Hazelnut Marketing Board, which promotes the crop and oversees quality control.
Based on an informal survey of tree nurseries, Owen estimates an additional 1,000 acres were planted last winter and about 1,200 acres will be planted this coming winter. However, some acres are likely being removed due to blight damage.
The Oregon industry dominates U.S. hazelnut production, but growers aren't worried its strong economic position relative to other crops will spur over-planting, she said. Hazelnuts are traded on a global market, and Oregon is still much smaller than such behemoths as Turkey.
"Our acreage could increase significantly before we could impact the world," Owen said.