Almonds, the beloved snack that recently overtook peanuts as the most consumed nut in the usa, might have gotten a little too popular for their own good.
Water, water everywhere: Why irrigation is needed Western Canada beat drought
Ken and Brian Vandeburgt haven’t seen corn so short on their dairy farm near Dewdney, B.C. “Typically we’ve 12-foot high corn,” Ken says. “This year it is short. It looks like Saskatchewan corn.”
Continue reading.
After many years of steady price increases, thanks mainly to sky-rocketing demand, the protein-packed nut has suddenly become much cheaper. Almond prices, which reached record highs early last year, have fallen by roughly 25 % since late 2014.
“They dropped much faster and additional than anyone had expected,” said Vernon Crowder, who is a senior analyst Radobank, a food and agribusiness research firm. “Last year, the typical price was about US$4 per pound. I’d guess that’s right down to around US$3 today.”
The price plunge, while a welcome bit of news for almond eaters, is putting a stress on the industry dealing with suddenly lower prices. And it’s also exposing the complicated and frequently unpredictable circumstances that dictate why certain nuts cost the things they’re doing.
Before almond prices fell, they rose to record highs, selling as much as US$5 one pound for premium varieties. An upswing had a lot related to demand, which grew by a lot more than 200 percent between 2005 and 2012.
But it also had to do with water – or really the lack thereof.
Almonds are a famously water-intensive crop, requiring greater than a gallon of water per almond. And California, that is accountable for producing roughly 80 percent from the world’s almonds, has endured a crippling drought over the past couple of years. That has put a terrible strain on local nut farmers, who, without steady rainfall have discovered themselves with fewer nuts than in years past.
For almond growers, this hasn’t been a massive problem. They sold fewer nuts, but composed for the harvest shortfalls by selling them confined – a simple adjustment towards the shift in supply. They also passed the cost of the irrigation needed to combat the drought onto consumers. And everybody paid the additional bit, a minimum of initially.
“Agricultural products tend to be inelastic,” Crowder explained. “When the supply shifts, the price changes accordingly, because individuals still buy pretty much exactly the same amount.”
In the case of almonds, volume sales fell by comparable amount as the crop yield fell, but dollar sales remained strong. People, quite simply, bought the almonds which were available, as they been on yesteryear, but paid more for each since there were fewer.
But then the American dollar started to strengthen, flexing its muscles against foreign currency, such as the euro and renminbi, turning high but manageable prices into headaches for anybody purchasing almonds abroad. And also the thing is: many people do – somewhere between 60 and 70 per cent of almonds manufactured in the Untied States are exported, the vast majority of which go to Europe and China.
Related
- How a 200-year-old secret marzipan recipe keeps this family business thrivingYou do not know just how much we depend on honeybees and how much their collapse could cost us
-
-
-
“It was unfortunate for the industry,” said Crowder. “Buyers didn’t respond well towards the high costs. We know some products were dropped or switched out – some mixes were adjusted to make use of less almonds.”
Most people associate almonds with their consumption whole, like a snack, but a substantial portion of almond sales would go to food manufacturers, who chop, slice and crush them into various chocolate bars, trail mixes, cakes, pie crusts, along with other desserts. Which is where companies, reacting to swollen prices in recent years, have skimped out. Total shipments of almonds fell by 12 percent this past year, while exports fell by 15 percent, according to the newest numbers released by the Almond Board of California.
The icing around the cake, however, came this past fall, when last year’s crop ended up being far bigger than expected. Many new almonds trees have been planted recently, as farmers, seeking to capitalize on historically high prices, switched out less profitable crops. But conditions were such that nobody – not really the USDA – expected there to be such a glut. Which has established an issue.
Buyers within the U.S., anticipating an inferior crop, committed to pay a lot more than they ought to have. Buyers abroad, meanwhile, started to walk away from deals they had made at prices they no longer desired to pay.
“The entire entire industry has dealt with lots of defaults out of India and Dubai,” Darren Rigg, a nut farmer in Tulare, Calif, told NPR syndicate Valley Public Radio earlier this year. “Guys going out of business, guys not picking up loads. Plus some of these just packing up shop and running off and away to the Himalayas. And thus we have cargo at foreign ports.”
The Financial Times, which wrote about the international backlash a week ago, put it much more grimly:
“Last year’s improvement in prices depressed demand, and buyers in China, the Middle East and India, who have led consumption in the last three to four years, have disappeared. Trading has ground to some halt as prices continue to decline and the quantity of rejected containers by buyers refusing to honour contracts has jumped.”
With extra almonds on hand, because of the unexpected glut, and even fewer individuals to purchase them, the industry has already established to sell its nuts at a lower price, or take a seat on them until prices rebound.
It’s going to be hard to flood the market again – this was a very specific scenario, which is why everything happened so quickly and am unexpected
“There’s some a ‘hey, let’s wait and find out what goes on to prices’ attitude available at this time,” said Crowder. “Especially due to El Ni?o, that could either hurt or help the industry.”
The weather pattern, that is expected to bring far more rain to the motherland of almonds than in years past, is creating some optimism ahead of the 2016 crop. In the event that pans out, and demand – especially abroad – doesn’t rebound, it might cause an even further drop in almond prices. But there’s no assurance that it’ll.
Almonds need rain, they also need sunshine during a particular sensitive season. A lot more than 80 percent of commercially available bee hives are used to pollinate the plants during the blooming period, and also the bees won’t fly if it’s too wet. If El Ni?o strikes in the wrong time, it might mean quite contrary: a disappointing crop – and value spike.
“Every year we glance in the bloom period, and try to guess how large the crop is going to be,” said Crowder. “That one approaching will probably be important.”
Over time, Crowder, who believes the price has bottomed out, expects the market to correct itself. Buyers, he states, have started purchasing almonds at lower prices in anticipation of a rise, and demand appears to be obtaining abroad. Meanwhile, while more almond trees are now being planted, there is only so much space left in California to develop the popular nut.
“Land is pretty scarce here – water, too,” said Crowder. “It’s going to be difficult to flood the market again – it was a really specific scenario, and that’s why everything happened so quickly and was so unexpected.”
