The Van Trump Report

Interesting… A Double-Edge Sword as Almond Farmers Juggle Drought and Plunging Prices

A majority of the world’s almonds supplies come from California, a state that happens to be experiencing a historic drought. As shrinking water supplies threaten to push already razor-thin margins into negative territory, growers are increasingly questioning the economic sanity of sinking more money into the water-thirsty crop.

Almond prices have plummeted to around $1.75 per pound since peaking at $4 per pound in 2014, and growers fear they could still sink lower. Some analysts forecasts prices this spring could drop as low as $1.42 per pound. Insiders equate the dramatically lower prices largely to shipping snags that have led to record carry-over stocks.

According to a report from The Wonderful Co. put out in March, California’s almond crop hit a high of 3.1 billion pounds in 2020. That same year, total shipments peaked at almost 2.9 billion. But then in 2021, shipments dropped almost -12% amid logistical problems created by the Covid-19 pandemic. Exporters say the ongoing problem is directly related to shipping containers as companies find it more lucrative to return them empty to China rather than loading them with U.S. exports. As California exports about 70% of its almonds, the shipping bottlenecks contributed to over a billion pounds of unsold almonds that were carried over from last year’s crop.

California growers are actually cheering the USDA’s most recent forecast that estimates the state’s 2022 almond crop will shrink by -4% compared to 2021. That’s despite a nearly +4% increase in acreage to a record-high 1.37 million acres in 2022. But that increased acreage didn’t accompany an increase in water supplies which were impacted by both a third year of drought as well as local and regional supply cuts. That means the cost of water has also skyrocketed, which comes on top of other input prices like fertilizer that have seen prices nearly double in some cases.    

Dwindling water supplies have led to almond growers harvesting their crops earlier than usual, while others are being forced to let orchards die. Farmers have ripped out thousands of dead trees, a huge sacrifice considering it takes 7 years on average for an almond tree to begin producing fruit. But with almost 90% of the state in “extreme drought,” growers face even greater water cuts ahead with some only getting 5% of their normal allocations from local water boards and zero from Federal resources.  

As California cities now prepare to enforce water cuts, almond growers in the state also face increased criticism about the sustainability of the crop. It’s estimated that the average water footprint for just one California almond is about 3.2 gallons. As California exports most of its almond production, critics argue that this is essentially the same as shipping precious water resources overseas.

Some anticipate almond milk could soon face consumer pushback if the crop’s water critics gain more traction, which could quickly happen in California’s densely populated cities as water cuts and costs increase. Almond milk could also become cost-prohibitive for consumers as the industry works through its stocks and California growers increasingly turn to more profitable crops. That probably doesn’t mean consumers will return to traditional cows milk, but industry experts think it could open up more opportunities for newer alternatives like oat and hemp milk. (Sources: Los Angeles Times, AgNet West, NPR, USDA)

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