California almond growers and handlers are in rarified air these days.
Nonpareil Supreme almond prices are above $2.25 per pound in the wake of strong world demand bolstered by positive health claims from eating almonds and a weak U.S. dollar making California almonds more affordable. Another disappointing Spanish crop and uncertainty about this year's California almond crop from its 530,000 acres of orchards are two more reasons almond prices are bumping up against a level that may deter consumption.
This scenario has everyone in the California industry waiting to exhale, and exhale everyone will on May 11 when the season's first crop estimate is released. That first breath after the subjective estimate is released by the California Agricultural Statistics Service will be accompanied by either cheers or signs of despair. It will all depend on the numbers.
Blue Diamond Growers president Doug Youngdahl, 57, is trying his best to will that number to be a big one — at least one billion pounds of almonds.
And he is not alone. It will take that many California almonds to just barely keep up with worldwide demand.
Wet, cold, windy weather during bloom not only kept honeybees in their hives and from their all important task of pollinating almonds, it sent prices soaring and almond handlers in a bit of a panic worried about how to continue meeting demand that has set records for five seasons.
Youngdahl is optimistic the crop will come in between 900,000 and 1.1 million pounds.
His optimism is bolstered by reports that there were periods during the inclement weather when the bees worked the trees, more so in the San Joaquin Valley than the Sacramento Valley.
It was a rapid, flash bloom with an excellent overlap of blooming varieties, another plus. “It was one of the best (overlaps) in years, according to growers,” said Youngdahl.
A strong bloom was another positive factor. “Many in the industry were amazed to see a strong bloom remaining on the trees after the rains and winds on Wednesday, Feb. 25,” said Youngdahl. Coolers weather also prolonged the bloom.
Record post bloom high temperatures may have allowed more almonds to survive than would otherwise. Put is all together and there is “cautious optimism” for a good crop size.
He hopes it is big enough to lower customer concerns from what Youngdahl calls “upper stratosphere layers.
“The air is getting kind of thin” at current almonds prices, admits Youngdahl, and customers are beginning to consider reducing new almond product development and reducing the amount of almonds going into existing products.
“If that happens, it could create great difficulty in our industry,” laments Youngdahl.
‘Turned on light’
However, the president of the largest almond marketing cooperative in California has no one to blame but himself and other almond handlers for the tight supply and record prices in the midst of record shipments.
It was Blue Diamond, said Youngdahl, who “turned on the light” three years in the industry by pointing out what he called industry statistics that “made no business sense.”
California was fielding increasingly larger crops, selling more almonds that it was producing with minimal carryovers in a market with a 24-year growth rate of almost 6 percent annually and a decade-long growth rate leading up to 2000 of 10 percent annually.
And, yet grower returns were barely over the cost of production, less than $1 per pound.
Facts begged for higher prices for producers with patient and deliberate marketing of available supply. And it worked when the industry told the world almonds were worth more than growers were getting paid and started managing supplies accordingly.
Shipments have set records for five straight seasons and prices have caught up with an unbelievable grower return record in 2002, virtually assured higher prices for the current marketing year (2003 crop) and an unquestionable record lock for the nuts now hanging on the trees.
The state's first billion-ton crop made California's almonds a $1.2 billion segment of California agriculture and that will definitely go when the final tally is made for 2003.
The industry's first billion crop in 2002 earned Blue Diamond growers 26 percent more on a per bound basis and from 45 per cent to 65 percent more on a per acre basis than they received for the 830-million-pound 2001 crop which was a record. Statewide the average price was $1.10. It had not topped $1 since 1998 when the crop was about half the size it was in 2002.
Youngdahl said 2003 final returns will be another per acre revenue record.
“And, the next several years should be very good for the almond industry,” said Youngdahl.
How good for how long?
That is where Youngdahl hedges and for good reasons. There is a saturation point, even in a market growing as incredibly fast as California almonds.
“I share my optimism and the numbers … there is a very, very bright future for almonds. However, there are economic risks in planting a crop that will be there for 20 years,” he said.
“There are no guarantees — the world is not an unending expansion for consumption,” he said.
Cautious or not, many long-time almond producers have increased acreage or replaced older orchards with newer, higher producing orchards ones in recent years. There were 60,000 acres of orchards non-bearing in 2002. Plus, non-almond farmers have planted new orchards, often replacing less than profitable crops.
The Interstate 5 corridor through the state's Central Valley from Redding to Bakersfield has become almond alley.
Youngdahl said 225,000 to 250,000 new acres will be planted by the end of the decade which would bring the state's total almond orchard acreage to close to 800,000 acres, double what it was in the early 1990s.
Youngdahl calls these new orchards “high-octane” because they are generally closer spaced trees with better pollinating varieties resulting more almonds per acre than old plantings.
California almonds are also attracting non-agricultural “investors” looking for good returns. It is reminiscent of past California wine grape price run ups, which attracted investment banks, insurance companies and the likes only to see massive exoduses when the prices plummet.
Youngdahl does not envision a near-term collapse for almonds because 24 years of an almost 6 percent annual consumption rate increases does not a big downturn any time soon. Supply and demand now is at best in balance today.
“We should not be concerned about larger crops in the near future,” he said. “We need larger crops to satisfy growing demand for California almonds.”
However, it will not last forever. Youngdahl said eventually the industry will be “challenged” to effectively market all the almonds California can produce. “It is imperative that the industry not be lured into the old ways of thinking that in the past led to California almonds being grossly undervalued,” he added.
“It was a huge, mistake for a grower to get up in public and say he can produce almonds for 65 cents per pound as one grower did in 1999. It took only two weeks for the market to go in that direction,” bristled Youngdahl. Market prices are based on supply and demand, “not based on the lowest cost producer.
“Today's market is an indication of the incorrectness that transpired in 1999, 2000 and 2001,” he emphasized
California produces 85 percent of the world's almonds. Seventy-one percent of California's almond product is exported. Almonds have long been California's No. 1 export agricultural commodity.