With the drought easing in parts
of California, this year's almond harvest is shaping up to be a record haul for
the state that could help its growers crack the nut on more sales.The harvest
underway in California's San Joaquin Valley is expected to result in an
estimated 2.05 billion pounds of almonds this season, according to the U.S.
Department of Agriculture. That's up about 8 percent from last year and would
shatter 2011's record crop, which weighed in at 2.03 billion pounds.
That level of supply should lead
to lower almond prices that "flow through" to the U.S. consumer,
spurring additional demand, Goldman Sachs analyst Jim Godsil told investors. It
could also contribute to signs of stabilization in the industry.Following a 6.4
percent decline in shipments during the year ended last July, the crop's
shipments for the current crop year are 1.811 billion pounds. That's just
slightly lower than last year's 1.813 billion, according to the Almond Board of
California.While domestic numbers have been slower to recover, export volumes
are up by almost 4 percent, with the four months ended July producing
double-digit percentage growth in shipments. International demand has picked up
as prices on California's almonds have moved lower.
Yet some are concerned there may
be overcapacity in the state's almond industry, which produces about 80 percent
of the world's production. That could weigh on pricing down the road and ultimately
hurt farmers' profits."Everybody can see that the almonds have been
overplanted," said Bill Diedrich, who has grown almonds near Fresno since
the early 1990s.Consumers have already taken an interest in almond products
because of their "heart health" benefits. Almond milk, for example,
has recorded a 30 percent compound annual growth rate over the last four years,
according to Nielsen data. Sales of almond milk reached $938 million in the 52
weeks ended July 2, a nearly 8 percent increase from a year ago, the firm said.Even
Starbucks is a fan. The coffee chain will make almond milk available in more
than 4,600 stores next week, and a nationwide rollout is expected by the end of
September."We're definitely on the upside with the growth," said Kyle
McClintock, an almond grower in the southern San Joaquin Valley, near
Bakersfield."We're seeing more almond milk, more almond butter, more
almond flour, more trail mix, and more use of almonds in confections."
Yet despite growing in
popularity, almond prices have lost nearly half their value over the past year,
from around $5 last spring to below $3 a pound in recent weeks. That's because
the domestic almond industry relies heavily on exports, so a strong U.S. dollar
has made American-grown nuts more expensive on the global market. That's
allowed Australian-grown almonds to become more competitive, hurting U.S.
prices.But there are signs the price decline has helped swing things back in
favor of California growers. According to Goldman Sachs, the U.S. has seen
"record" export shipments over the last three months, with pricing
relatively stable. What's more, Goldman predicts there will be only "modest
rises" in the price of almonds for the next several years, which should
keep demand strong."Demand has adjusted to the substantial price falls earlier
in the year," Godsil said.A decline in almond prices is good news for
ConAgra Foods, Hershey, Kraft Heinz and Kellogg, which all use almonds in
packaged foods. Major almond milk producers such as WhiteWave Foods, known for
its Silk brand, could also benefit.But it's not something farmers are happy
with, particularly those outside of Northern California. There hasn't been much
drought relief for many of the almond-growing regions in the Central Valley.
Growers such as Diedrich, who farms east of the Fresno area, have received below
normal rainfall and low allocations of water from irrigation districts.
In some cases, farmers in this
region were counting on higher almond prices to help pay for costly
supplemental water purchases. McClintock was one of the lucky ones whose
irrigation district received 100 percent of the water allocation this year."The
availability of more water really, really helped increase the crop size for us,
which has been able to offset that drop in price," he saidOverall, almonds
were the second-most valuable agricultural commodity in 2014, with $5.9 billion
in total cash receipts, according to the California Department of Food and
Agriculture. Milk ranked first, with $9.4 billion in cash receipts.Starbucks'
use of almond milk could further stimulate demand for the nut, and lead to more
consumers selecting it an alternative to dairy."Even though almond milk
only accounts for 6 percent of the entire milk category, the performance over
time is nothing short of remarkable," said Isabel Morales, Nielsen's
manager of consumer insights.Since 2012, almond milk has gained 4 share points
in the "milk" category to become "the most important cow milk
substitute, followed by soy milk," Morales said.