Almond farmers see 'silver lining' amid tough times

By Ching Lee 

Acknowledging the tough economic conditions almond growers have faced in recent years as production costs soared while earnings plummeted, the Almond Board of California maintains that the long-term outlook for the tree nut remains positive, even as the industry struggles through some growing pains.

Almond leaders say changing times and shifts in consumer behavior mean the sector will need to evolve and innovate to remain competitive and drive global demand for the state’s 3.5-billion-pound crop. They outlined their efforts and ways they’re trying to address economic challenges during the “state of the industry” presentation at the 2023 Almond Conference last week in Sacramento.

“There is a silver lining,” said Alexi Rodriguez, ABC Board of Directors chairwoman. “For the short-term outlook, things will remain difficult, and tough decisions will have to be made. But for those that can hang on—and it is going to take some time—we do believe there’s good reason to remain optimistic about the future of almonds and their profitability.”

The almond board itself is going through change as President and CEO Richard Waycott wraps up his 21-year tenure at the end of the month. Incoming President and CEO Clarice Turner, who most recently served as president of Napa Valley winery Joseph Phelps Vineyards in St. Helena, told conference attendees she sees “huge opportunities ahead” for almonds.

“As the industry struggles to deal with the challenges, many of which we don’t control, it’s critical to pull together and focus on what we can control and what we can influence to find our way forward,” she said.

Nearly 10 years ago, when almond prices reached a record high of $4 a pound, the sector seemed unstoppable as farmers rushed to plant more trees while U.S. and global markets gobbled up supply—not just the nut itself but in the form of myriad almond products.

Fast forward to 2023, with prices at $1.40 a pound, the words “oversupply” and “overplanting” come up “a lot these days,” Waycott said. So is talk about the industry’s abnormally large carryover inventories, even though production has dropped by more than 500 million pounds from its high point three years ago.

Impacts of the pandemic, especially how it congested ports and snarled supply chains, delaying shipments of almonds and other California agricultural exports, played a key role in the current supply overhang. But even before that, Trump-era trade wars that resulted in retaliatory tariffs on almonds also hurt the industry’s ability to sell product to key export markets such as China.

At the same time, California growers face increasing competition from other almond-producing regions such as Spain, Australia, Turkey, Morocco and Portugal. Australia, with its free trade agreement with China, has a significant advantage in that market while tariffs imposed on California almonds going to China remain at 25%, Waycott pointed out.

“We definitely want to get the Chinese tariff corrected and continue to grow that market,” he added.

Even with the sector’s challenges, almonds remain well ahead of other tree nuts in consumption—at 2.15 pounds per person in the U.S. and about half a pound per person globally. The nearest competitor—at 1.23 pounds domestic per capita consumption—is cashews, Waycott noted. He said even though the industry has done a good job of driving domestic almond consumption—with the U.S. being the largest market—there’s room for growth in the more than 100 countries where California currently ships almonds.

“We’ve got obviously a big job ahead of us still,” Waycott said.

One bright spot this year is the removal of retaliatory tariffs by India, the top export market for California almonds. Board leaders said they remain committed to improving market access by addressing trade issues such as tariffs and technical barriers. For example, they highlighted the work the almond board has done to manage shipment rejections by the European Union due to elevated aflatoxin levels.

Doug McKalip, chief agricultural negotiator for the Office of the U.S. Trade Representative, said U.S. trade officials have been engaging with trading partners and “holding (them) accountable for the agreements we already have,” including resolving phytosanitary barriers that “really don’t align with the science.”

McKalip told conference attendees that trade negotiators were able to reach an agreement with the Indian government to drop the tariff—and to implement the change in 2023—through direct bilateral engagement rather than a free trade agreement, which can take five to six years of negotiation. He stressed relationship building and “a lot of boots on the ground.”

“That’s how we can replicate the kind of success that we’ve had there (in India) into some of the other countries that we know we need to make some gains and some improvements,” McKalip said.

Beyond trade issues, the industry has had to navigate a different marketing landscape as consumer behavior and attitudes have changed since the pandemic.

David Magaña, RaboResearch Food and Agribusiness analyst, said inflation has had a huge impact on consumer behavior, expectations and confidence, with shoppers trading down due to higher prices.

Buddy Ketchner, founder and president of Studio Eleven57, a marketing strategy firm, said people are “prioritizing value to manage inflation.” They’re increasingly choosing private labels over more expensive name brands and eliminating nonessential spending. They’re also splurging, but they’re doing so selectively, with impulse purchases rising. That means services and brands that “lean into indulgence, premium and treating myself are doing well,” he said.

With hybrid remote work here to stay and workers spending more time at home, he said, how people snack and eat has changed because they now have easy access to their refrigerators and home pantries. That means almonds “need to fit into these new routines and behaviors,” Ketchner added.

“I think we have to be at whatever the eating occasions are going forward,” Waycott said, “and they may not be the traditional ones, but we have to find out where to be, when to be and with what product.”

To better position almonds at the center of consumers’ new habits, the almond board has doubled down on promoting the nut’s “health halo,” with nutrition research exploring the health benefits of almonds, including findings on skin health, gut health, exercise performance, immunity and mental health.

This year, the almond board signed Deion Sanders, pro football Hall of Fame member and University of Colorado head coach, as a spokesperson to spread word about its new exercise recovery research.

Emily Fleischmann, the almond board’s vice president of global market development, said Sanders has garnered 10 times more exposure than the almond board has received from any other spokesperson with which it has partnered.

The almond board uses more than 80% of its funding to drive global demand, with focus on 10 markets: the U.S., India, China, the United Kingdom, Italy, France, Germany, Mexico, South Korea and Japan. It is also exploring Brazil, Argentina and Chile.

At the convention trade show, Harbir Singh, a representative for Dave Wilson Nursery in Hickman, said the nursery business has felt the impacts of inflation and the almond sector’s slowing growth. With almond prices down and the high cost of removing and replacing trees, “farmers are holding tight,” he said.

“They’re not buying as many trees,” Singh said. “They’re removing trees, but they’re leaving the ground vacant or they’re going with some cover crop or something else.”

While some growers may be pulling their trees, Bhanwar Singh of Mobi Venture Inc. in Morgan Hill, who works in the tech business but also grows almonds, said he’s increasing his plantings. But he’s doing so in a measured way—about 20 to 40 acres every year.

“I’m in it for the long term,” he said.

(Ching Lee is an assistant editor of Ag Alert. She may be contacted at clee@cfbf.com.)