The almond bloom is at hand in California's 550,000 acres of bearing almond orchards, and growers and handlers have never been more anxious.

Demand for almonds has put spot market prices into “hyperspace” at more than $3 per pound. The California almond industry is on hands and knees, begging Mother Nature like never before for a fourth consecutive billion-pound crop to throttle back an overheated market leaning precariously close to squelching the very demand it has worked more than a decade to create.

It is an insatiable worldwide demand that has made California almonds the most financially successful crops for growers among more than 350 California crops.

A crop of significantly less than a billion pounds not only this year, but next year could have a long range impact on the state's almond growers. If the '05 and '06 crops are too small and prices soar much beyond what they are now, demand could not only soften but go away. This would force the industry to rebuild demand lost to high prices.

This would not bode well for a huge production increase expected after 2006 when thousands of new orchards come into production.

The almond industry promotional efforts through the Almond Board of California; its largest marketing cooperative, Blue Diamond, and others has created an unprecedented world demand for almonds. Recent claims that almonds are healthy have only added to the demand. Industry leaders say supplies have simply not kept up with the demand the industry has created. One handler said the supply of almonds from 2004 may run out before this year's crop arrives. Compounding the problem have been poor crops in Spain, the only other country with significant almond production.

Significant crop

Demand for almonds rocketed almonds into the position of the fifth most economically significant crop in California in 2003, the latest year figures are available, at more than $1.6 billion. By comparison, that is more than the combined value of all hay and cotton produced in the state.

Almonds were 10th in 2001 at $740 million. Almonds accounted for 6 percent of the $27.1 billion total farm income in California in 2003.

When 2004 returns are in, almonds could move past lettuce which was fourth in 2003 at $1.7 billion. The average grower return in '03 was $1.57 per pound. That will be exceeded for 2004 and move almonds closer to the $2 billion value mark.

Milk and cream were No. 1 in value in 2003; the nursery industry was second and grapes third.

The almond industry has achieved such lofty economic importance from only 500,000 acres of almond orchards. By comparison there are about 1 million acres of grapes in the state that generated $2.3 billion in grower income in 2003.

Even if a fourth consecutive billion-pound crop develops in 2005, growers are assured excellent per pound returns.

Costly honeybees

The big news right now in the almond industry is that growers are shelling out big bucks to rent from beekeepers honeybees to pollinate what they hope will be a huge crop. Last year the average price for a hive of honeybees was $50. This year most beekeepers are charging $80 to $90 with some confirmed prices over $100 per hive and “coffee shop prices” of as high as $130 per hive.

Growers generally place 2 to 2.5 hives per acre in their orchards, putting bee pollination average cost at $200 to $250 per acre. Growers are not thrilled to pay those prices, but they have no choice because honeybees supplies are short due to mite damage in the hives. However, with prices almost sure to reach well past $2 per pound even for a huge 2005 crop, growers have the money to do it.

The cost of bees represent a value equal to about 200 pounds of almonds per acre. The statewide average yield in 2003 was 1,890 pounds per acre. The year before it was 2,000 pounds.

The shortage of honeybees seems to be widespread, according to Joe Traynor of Bakersfield, Calif., one of the state's largest bee brokers. “I am getting two to three calls per day from growers looking for bees,” said Traynor. The calls are expected to continue until bloom begins about Feb. 15.

Traynor brokered bees for his growers and beekeepers last May for $59 per hive, a 5 percent increase over the year before. “I goofed,” admits Traynor. “I did not expect $100 prices until 2008.” It is happening in 2005.

Hive thefts

Bee prices are so high, thefts have increased. Traynor said he had reports of two beekeepers with colonies in Stanislaus County losing 200 hives each. The state's largest growers have long had security patrols during pollination. Traynor said smaller growers are joining together this year to pay for security services as well.

Dave Baker, director of member relations for Blue Diamond, said it has been a “struggle” for growers to get adequate bees, “but it seems like everyone is getting bees. We are still getting calls from growers looking for bees, but by no means is the phone ringing off the hook.”

Although some growers are paying $100 or more for hives, Baker believes the statewide average will be in the $80 to $90 range, still almost double the average cost last season.

“Beekeepers for the most part have done away with guaranteed hive strength because the varroa mite has done substantial damage. Some have been decimated by the mite,” said Baker.

Visalia, Calif., almond field buyer Roger Pitts said had to “scout around” for bees for some of his growers.

“One grower had such poor bees last year he told his beekeeper not to come back. He needed 800 hives for this year. It is hard to jump into a bee market like this year and find 800 hives right away,” said Pitts. Another grower bought additional almond acreage, said Pitts, but the bee contract did not go with the orchard, leaving the grower to scramble for pollinators.

Most growers were covered as bloom approached, said Pitts, who works in the Southern San Joaquin Valley. The highest confirmed price he has seen is $108 per hive.

More '06 hives?

Last season, high honey prices convinced growers to stay home with hives. Honey prices have dropped significantly since. This year's hive rental prices make honey prices irrelevant. If prices remain high, some believe it could encourage beekeepers to develop more hives for the 2006 almond pollination season.

Availability and price are not the only factors in bee pollination this year.

Pitts is concerned about hives weakened from the mites and poor weather for bee buildup ahead of almond bloom. “I have heard cull rates of 20 percent to 40 percent in some hives because of the mites. Hive strength is going to be an issue this year. A few bees rattling around in a box does not pollinate a crop.”

Rick Kindle, vice president of marketing and operations at Gold Hills Nut Co. in Ballico, Calif., said most of Gold Hills growers have bees.

“We have received a few faxes from beekeepers looking to place bees, and we have passed those around to growers. However, no one seems to be taking.”

The bee shortage is partly due to some almond growers wanting “insurance” beyond an “adequate” 2 to 2.5 hives per acre. Some are looking to set bigger than normal crops to capitalize on demand and seemingly record prices.

“I would like to have three hives per acre this season,” said farm manager Troy Lyles, manager of Airway Farms in Fresno County. “My beekeepers seem to be a little short this year and it looks like I might have to settle for 2 hives per acre.

“We have had good beekeepers, but the mites have hurt their hives,” said Lyles

‘Cheap insurance’

“I do not think we are in a position to get hurt this year with a short crop, but it would be cheap insurance to get another half a hive or a full hive more, especially with these almond prices.” He was willing to pay $90 for extra hives.

The uncontrollable varroa mite is the reason for the bee shortages. Beekeepers have lost two effective acaracides to resistance, according to University of California entomologist Eric Mussen.

“This has been a rough year for beekeepers and the hives going into the orchards may not be as strong as beekeepers and almond producers would like,” said Mussen.

Heavy rain in the Santa Barbara and Ventura area also has weakened bees stored in that area before being moved into the almond producing areas in Central and Northern California. Floodwater also washed away some colonies, added Traynor. On the other hand, bees being stored in the San Diego area “are doing great with plenty of wildflowers and generally good weather,” he added.

California beekeepers pollinate more than 50 commercial California crops, but it is the almond deal that “holds the system together,” said Mussen.

Many colonies are brought in from elsewhere, and Mussen noted that out of state beekeepers are “having serious problems with colony health also.”

Weather in the San Joaquin and Sacramento Valleys, the two major almond producing areas in the state, has been good on the trees. Heavy rain has replenished deep moisture, and cold weather has provided plenty of chilling hours.

However, that same weather is not idea for bees foraging in the wild. “Bees do not have a chance to get out and work wildflowers when it is foggy and cold,” said Traynor.

Bud set good

“The trees are in good shape,” said Baker “Bud set looks good.” Most areas were seeing bud push in mid-January.

“We need two one-billion pound crops this year and next from a bearing acreage that will remain about the same both years,” said Baker. “We also need a good crop from Spain for a change to help add to the total world inventory.

“The worst case scenario would be to have bad crops both years and extremely high prices that would make consumption drop off. With all the new plantings coming after 2006, losses in consumption now would really hurt us when we will need high consumption in a few years,” said Baker.

“The last thing we need right now is a short crop,” echoed Pitts.

Blue Diamond president and CEO Doug Youngdahl told owner-members at their 94th annual Blue Diamond meeting in Fresno recently that tree orders are on pace to exceed 50,000 net new acres per year through 2010, the result being a dramatic new wave of almond supplies that will begin to hit markets in 2007 and 2008.

Part of this new acreage could be replacement for older orchards. It is estimated that 100,000 acres in the ground now are more than 20 years old and low yielding compared to new plantings. They remain profitable at today's prices, but if and when prices drop, those orchards will come out and be replaced by much higher yielding new plantings.

“There is no doubt about it, 2004 will be another outstanding year for most California almond growers,” said Youngdahl.

“At the same time, however, customers are being challenged by the higher prices, especially those customers that did not cover all of their 2004 crop needs early at lower prices. They may now be forced into taking action and some may even curtail their use of almonds,” Youngdahl admitted.

Reallocated or lost

Whether such action will result simply in a reallocation of supply in the short term or lost consumption for the long term remains to be seen, said the Blue Diamond president.

“The balancing act between consumption and price is still playing itself out in the marketplace,” said Youngdahl.

Kindle said it looks like the 2004 crop may come in 80 million pounds below estimate, putting it right at one billion pounds.

That is putting current almond prices in “hyperspace,” over $3 per pound for certain varieties, said Kindle, adding he believes 70 percent to 75 percent of the 2004 crop was sold to users at about $1 per pound less than current spot prices.

“When you tell a customer what he has to pay for almonds today, you hear the phone drop,” said Kindle. “They hang up and then go around the block looking for cheaper prices. Then they call back if they need the almonds for their markets.”

“Everyone loves almonds and the only place to get almonds is California,” said Kindle.

“Needless to say, a good 2005 bloom and crop are needed to minimize the risk of more buyers questioning the value of California almonds,” said Youngdahl. “A bumper crop will feed the marketplace and tend to moderate today's prices, making almonds more affordable for customers while maintaining strong, profitable grower returns. In any case, it is now clear that the 2004 crop return will shatter the 2003 average revenue per acre record earned by growers.”

e-mail: hcline@primediabusiness.com