A trio of leaders analyzed the prospects for the almond, grape, tree fruit, and vegetable industries during the recent spring ag outlook conference of the California chapter of the American Society of Farm Managers and Rural Appraisers in Bakersfield.
Joe MacIlvaine, president of Paramount Farming Company, Bakersfield, said the health of the California almond industry is good, although not as spectacular as the days of $3 per pound prices in 2005.
By the end of March, the industry had shipped nearly 900 million pounds after last year's record 1.4 billion-pound crop. “This shows a remarkable effort on the part of the almond industry and bodes well for the future,” he said, adding that distribution channels are being maintained and the industry is not facing an over-supply situation.
Bearing almond acreage for 2007 was 615,000, and yield per acre averaged 2,200 pounds, reflecting a substantial hike since the mid-1990s when yields were around 1,400 pounds. “This is a remarkable increase in the level of production and it is primarily due to better varieties, better growing methods, improved irrigation and additional trees per acre,” said MacIlvaine, whose company is the largest grower of almonds in the U.S.
Growth has been seen in both domestic and export markets, and foreign demand is taking about 70 percent of the crop, mostly to Spain, but also throughout the world as developing nations seek to improve diets.
Although almond prices have been favorable, especially for premium Nonpareil nuts, MacIlvaine said direct costs of production for a typical Kern County orchard have risen sharply, from about $1,800 per acre in 2005 to $2,300 today.
“That's over 25 percent more in just three years,” he said. “We haven't seen that kind of escalation for a long time, and it is due mainly to increased costs of fuel and fertilizers.
“We've also seen the cost of bees (for pollination) go from $100 an acre to $300. But as long as we can maintain the great marketing efforts we can keep up with these costs.”
MacIlvaine conceded that his real worry is a short crop, such as one 60 percent to 65 percent of normal, that would provide too little for growth in the global markets the industry serves.
The productivity and returns of an almond orchard depend on the location, variety and spacing, pest control costs, costs of water, and quality of the crop.
Turning to pistachios, which produced more than 400 million pounds in 2007, he said growth there has been more dramatic than for almonds.
The “rush to permanent crops,” he said, is behind the increase of 2007 bearing acreage of 120,000 acres, four times that of 1999. Present non-bearing acreage is 60,000, so big increases in crops are yet to come. By 2015, production is projected at nearly 750 million pounds.
Prospects for the grape and tree fruit industries are generally less promising and are challenged by issues, according to Barry Bedwell, president of the California Grape and Tree Fruit League.
The table grape industry, composed of about 500 growers, has grown to a farm-gate value of $1.1 billion and is highly specialized and highly competitive, he said.
Part of that is because the industry is also highly cooperative through its state commission and has more contractual agreements than other fresh fruit. Potential exists for 100-million-box crops, and exports account for 38 percent of total shipments.
For peaches, plums, and nectarines, Bedwell said acreages have remained constant during the past five years, but prices fell in 2007, even with the problems suffered by growers in the Southeastern U.S. The California industry struggled to market a crop approaching 60 million boxes in 2007.
A big issue for tree fruit is “lateral sales,” he explained. The industry has 1,100 growers and a high number of marketers, along with a declining number of retail outlets due to consolidation. With the retail consolidation, many marketers sell “laterally” to other marketers, and profit that might otherwise have gone to the grower is absorbed.
Orchard pullouts are accelerating. Market share for domestic sales is stagnant, and about one quarter of the production is sold as exports.
Depending on the popularity of their varieties and timing, growers of some varieties made money in 2007, while others did not. Bedwell said about a third of the growers did well, a third broke even, and a third lost money, in some cases, for the third or fourth year in a row.
“Experts predict profitable levels for production overall at 40 million to 45 million boxes,” Bedwell concluded. “So that means we are still overdue for a market correction. But with all the specialty fruit we have in the San Joaquin Valley, once we do get to that level, we should be in good shape.”
Discussing the outlook for California vegetables was Tom Nassif, president of Western Growers Association, who said regulatory costs for California growers put them at a competitive disadvantage to their counterparts elsewhere in the nation. Producers of vegetable crops in particular have migrated out of the state.
He said for California growers to remain relevant to the state's and nation's food supply and maintain a reasonable amount of prosperity, they have to overcome a number of challenges.
Among the most significant is the cost of regulations for air and water quality. One example, Nassif cited, is citrus. “Citrus growers in the San Joaquin Valley average more than $347 an acre, but for Texas growers they average less than $32 an acre. That means the California growers add 18 percent to their cost of production, while the Texas growers add only 3.3 percent.”
Lettuce is another example. In the Salinas Valley growers regulatory costs are $115 per acre, or 4.8 percent, while in Yuma the growers, many of them the same who farm in the Salinas Valley, pay $70 per acre, or 2.5 percent, for regulatory costs.
Regional transportation costs are another disparity. “This is a unique challenge for growers and shippers with the possibility that the shipping costs might exceed the fair market value of the commodity they are shipping,” Nassif said.
During March, when the national average for diesel fuel was $3.96 per gallon, it was $4.11 in California, thus cross-country loads each cost $500 more.