The California almond industry is in a time of transition, shaped by a mix of economic, environmental, and regulatory factors.
Here’s an overview of the key elements driving this transition:
Economics
Market fluctuations: The industry has experienced volatility in almond prices due to varying global demand, trade disruptions, and a recent oversupply. This has put financial pressure on growers, pushing them to rethink their strategies.
Export challenges: Trade tensions, particularly with China – one of the largest markets for California almonds – have led to tariff barriers, reducing exports and forcing the industry to seek new markets. The industry is actively working to diversify its global customer base and reduce reliance on a few major export destinations.
Supply chain disruptions: The pandemic and global supply chain issues have exacerbated challenges, leading to higher costs and delays in reaching international markets. This has necessitated a reassessment of logistics and distribution strategies.
Environmental Pressures
Water scarcity: California’s persistent drought conditions have highlighted the unsustainable water consumption in almond farming. With almonds being a water-intensive crop, the industry is under pressure to adopt more water-efficient practices. The introduction of drip irrigation, soil moisture sensors, and other advanced technologies are part of the effort to use water more judiciously.
Climate change: The effects of climate change, including shifting weather patterns, extreme heat, and unpredictable rainfall, are forcing almond growers to adapt their practices. Some are experimenting with drought-resistant almond varieties and altering planting schedules to cope with these changes.
Sustainable groundwater management: The implementation of the Sustainable Groundwater Management Act (SGMA) is reshaping how water resources are managed in California. This legislation aims to prevent over-extraction of groundwater, requiring growers to comply with strict water use regulations, which could limit the expansion of almond orchards and affect existing ones.
Sustainability and Innovation
Sustainable practices: In response to environmental concerns and consumer demand for more sustainable products, the industry is increasingly focusing on reducing its environmental footprint. This includes initiatives to lower carbon emissions, improve soil health, and manage waste more effectively, such as through the recycling of almond hulls and shells.
Technological innovation: Technology is playing a crucial role in this transition. The adoption of precision agriculture, data analytics, and automation is helping farmers maximize yields while minimizing inputs like water and pesticides. These innovations are essential for maintaining profitability and sustainability in the face of rising costs and environmental constraints.
Research and development: Ongoing research is focused on developing new almond varieties that are more resilient to climate change and require less water. Additionally, efforts are being made to improve the overall health of almond orchards and enhance the nutritional profile of almonds to meet consumer preferences.
Regulatory and Market Adaptation
Regulatory changes: Compliance with new environmental regulations, particularly those related to water usage and sustainability, is a major focus for the industry. These regulations are driving changes in how almonds are cultivated and may lead to a reduction in the total acreage devoted to almond farming.
Consumer preferences: Shifts in consumer behavior, particularly towards plant-based diets and sustainable products, are influencing the almond market. The industry is capitalizing on the growing demand for plant-based proteins and snacks but must balance this with the need to address environmental concerns about water use and sustainability.
Almonds: Transition and the Future
The 2024 California Almond Objective Measurement Report from the U.S. The Department of Agriculture (USDA) forecasts that 2.8 billion pounds of almonds will be harvested this fall. If so, the 2024 crop would be the third largest on record and 13 percent larger than the crop produced last year.
USDA’s National Agricultural Statistics Service (NASS) projects the 2024 almond yield at 2,030 pounds per acre. This yield estimate is higher than the previous two seasons, but close to the 10-year average of 2,111 pounds per acre. Preliminary 2024 almond bearing acreage is unchanged from a year ago. If the bearing acreage estimate is realized, 2024 will mark the first year since 1995 that almond acreage does not increase year over-year. In part, a slowdown in almond acreage is due to historically low almond prices that have tightened producers’ margins. As NASS notes, growers have been getting historically low prices for their almonds over the last few years. I think that could start to change this year for a couple reasons.
First is because of what is called carry-in. First quarter shipments of almonds are up year over year by 5 percent, according to data from RaboResearch Food and Agribusiness. Additionally, April 2024 shipments were up 15 percent. As such, RoboResearch Food and Agribusiness says the current almond inventory is currently very tight, which puts the industry on track to have a very manageable carry-in.
Almond bearing acreage in California has also come down a bit over the last couple years and is estimated to decrease slightly or at least remain flat in 2024-25. This should help from a supply-demand perspective in terms of getting a higher price for growers for the 2024-25 almond crop.
Additionally, domestically most of the supply chain challenges that have hurt the almond industry over the last few years have improved considerably. This will help in improving domestic demand for almonds, particularly in wholesale and retail channels, as well as in the important ingredients market.
Almond exports also seem to be on the rebound. The Almond Board of California has redoubled its efforts to grow export markets and among other achievements is growing exports with India, which has the second largest population in the world and a growing consumer appetite for almonds.
The almond association also is targeting Turkey, Morocco and Indonesia as potentially new export markets for California almonds.
Europe, China and India are currently the top export markets for California almonds. Broadening the geography and creating new marketplaces is key to growing export sales, which will help in achieving higher prices for almond growers.
The California almond industry is in an important time of transition. This is something growers and the allied industry should realize and take note of.
The industry is progressing fairly well on all of the key elements I’ve identified in the beginning of this piece. These are key elements because in order to have a successful transition – successful ultimately defined as an extended period of time when almond growers can be paid a price for their almonds that allows them to make a profit – each of these elements must be addressed in a serious and sustained way.
Clarise Turner, president and CEO of the Almond Board of California, said in a recent address to members and the press that she doesn’t see demand slowing for almonds, even though the state’s almond industry did experience its first major reduction in bearing acreage in the last 10 years.
I agree with her. But it’s also important to note that the huge growth in demand that we’ve seen over the last two decades has slowed. The industry now must focus on new ways to reignite some of that growth.
Turner further said that grower returns are low, which makes the macroeconomics of growing almonds a challenge. Banks are not giving growers lines of credit extensions or new credit, she said, and if a grower succeeds in getting a new line of credit, the interest rates are upward of 8 percent.
“Right now, our price is at one of the lowest levels that it’s been in 10 years,” she said. “Growers are not making money.. And that can only happen for so long until you start to see people getting out of business, which we are seeing some of that.”
According to the Almond Board of California, 90 percent of almond farms in the state are family owned and 70 percent are less than 100 acres, which makes the low returns a major challenge for almond growers.
My estimate is that the price growers get for their almonds will improve this year.
This is important because if it doesn’t, we’re going to see more growers reduce and eliminate almond acres until a sustainable price is achieved. Perhaps there’s room for that because almond acreage in California has grown so much over the last couple decades. But those hurt the most will be the 70 percent of family-owned almond farms that are less than 100 acres, which isn’t something any of us want to see happen.
I think the industry is on the right track in terms of addressing the key elements for a successful transition. Growers need a break this year and hopefully the confluence of conditions I’ve described will give it to them in the form of a better price for their almonds than they’ve been getting over the last few years.
The future can be a bright one for the California Almond industry.
My Job Depends on Ag Magazine columnist and contributing editor Victor Martino is an agrifood industry consultant, entrepreneur and writer. One of his passions and current projects is working with farmers who want to develop their own branded food products. You can contact him at: victormartino415@gmail.com.
