He traced prospects for almonds and other nut crops in the state during the recent 2001 Spring Ag Outlook Forum of the California Chapter of the American Society of Farm Managers and Rural Appraisers in Sacramento.
California tree nuts, in general, he said, deserve some mid- to longer-term optimism, although recent large crops make for a dimmer outlook for the near future.
"Our almond trees are more productive today than they were 20 years ago. Average production per acre is about 1,500 pounds now vs. 1,000 pounds before," he said.
He also noted that the large almond crops of more than 800 million pounds in 1999 and 700 million pounds in 2000 fostered precipitous drops in returns. Additional production of new plantings driven by high returns in the mid to late 1990s compounded the decline.
"It takes new trees three to five years to come into bearing, and by the time the farmer gets the economic signals to stop planting, the industry has more acres than it needs."
Bearing acreage in 2000 reached 500,000, and some visionaries say one-billion-pound crops are only a few years off.
Non-bearing acreage is estimated at 100,000, and MacIlvaine said it may be even more. "There’s no question we are in a period of rapidly rising supply."
Domestic consumption of almonds, he said, has increased in recent seasons, spurred by sharply lower prices, plus a U.S. Supreme Court decision allowing the Almond Board of California to resume its domestic consumer promotion.
The U.S. population, however, cannot possibly consume the all the almonds, so export sales have risen steadily over the past 15 years to nearly 80 percent today.
As recently as 1997, 75 percent of the exported volume went to Western European developing nations and Japan. New markets and more sales, he said, will rest with the 80 percent of the world population in China, India, and the Middle East, where relatively few people have even seen almonds. Recent spikes in demand in China and India demonstrate the growth potential of Asian markets.
Most almonds bound for China enter, in-shell, at Hong Kong, where they have a 30 percent duty, plus a value-added tax of 17 percent. China’s admission to the World Trade Organization would hopefully reduce those charges to a total of about 25 percent, MacIlvaine said.
Mostly shelled product is shipped from Hong Kong elsewhere in China, but a new product, roasted and salted, in-shell Carmels or Nonpareils, has "exploded" in popularity, he said.
All almond shipments to India are in-shell to be shelled out, entirely by hand, and sold as kernels. The California product, he said, has nearly completely replaced traditional supplies from Pakistan and Afghanistan.
"California’s advantage is its dominance in world trade in almonds. Although Spain used to be an exporter, it is now a net importer, although it does then compete with us with processed almonds," MacIlvaine said.
Turning to California’s 193,000 acres of walnuts, he said acreage has remained relatively flat. The 1999 crop of about 283,000 tons brought prices of about 44 cents per pound, although a smaller crop of about 240,000 tons in 2000 was expected to raise returns to the low 60-cent range.
Exports of walnuts have also been increasing, the current share more than 40 percent, vs. 25 percent in 1980. Chief customers are Spain, Germany, Japan, and Italy, but all are mature markets for walnuts with little indication of growth.
One challenge walnut growers have is China, where, as an example of costs, nursery plants go for about 60 cents apiece in contrast to the $12 to $15 California growers pay.
MacIlvaine, who visited a walnut-producing area of China earlier this year, said walnuts are shelled by hand and separated into 10 different grades for export. "The process looks fairly crude, but the product they are putting out is very attractive."
The nearly 80,000 acres of bearing and 20,000 acres of non-bearing California pistachios, he said, have seen a more modest growth rate than almonds. Instead of new growers getting into pistachios, the expansion has been "internal," or additional acreage planted by existing growers.
Since about 1981, growers have been using verticillium- resistant rootstocks and are planting in the best production areas of the state. Although as little as 30 percent of original trees on susceptible rootstock lived with the fungus, all trees in the resistant plantings survive it.
Prices of pistachios have been flat for the past decade, at around $1 per pound, while growers concentrated on yields to improve returns. so those with above-average yields have managed to stay in business.
In 1997, California benefited from the European Union’s decision to ban aflatoxin-tainted Iranian pistachios. But last year’s record 147-million-pound California crop posed a marketing challenge, and MacIlvaine said he expects some softening of prices, along with inability to move the crop in a single season.
He said Iran, with its plantings at higher elevations, is subject to weather impacts on production. At the same time, California growers cope with the crop’s trait of alternate bearing. These situations, he said, translate to a highly variable world supply.
The industry, he added, needs to do a better job in stimulating exports, and the ability to store the nuts from one season the next will be critical.
California tree nuts, he said, still have good things going for them over the longer term, including health benefits, the ability to improve diet more cost-effectively than meat products, and adaptability for blended into native diets.
Yet California growers with smaller nut acreages, he warned, have not only water and energy challenges but also the need to be more efficient. "People in these industries are going to be successful based on their individual operations."