Just when almond growers and
other California farmers were hoping for rainfall relief this year, the almond
industry is concerned the persistent cold, wet weather brought on by El Nino
might dampen pollination activity and potentially trigger lower crop yields.
"A key question is what will
happen to almond blooms in February," said Vernon Crowder, a senior
analyst with a focus on food and agribusiness research for Rabobank. "Bees
don't fly in bad weather."
Quick science lesson here. In
crops, including almonds, apples and cherries, bees travel from bloom to bloom
for food. In the process, they spread pollen containing the male sex cells,
which enables the plant to bear fruit. But bees can stay in their hives when
it's cold and rainy instead of making their pollinating rounds.
The market for nuts including
walnuts broadly behaves like a commodities market. Anticipated future trends
impact near-term pricing. As the weather trend known as El Nino rolls out in
the Northern Hemisphere and dumps rain, there has been growing talk an El
Nino-impacted "wet bloom" could yield a sub-par 2016 crop. The
blooming period typically begins in February.
At the surface, bee activity
might appear insignificant. But insufficient pollination is a big variable for
the agricultural industry. "It's a critically important factor," said
Janie Gatzman, a senior appraiser for American AgCredit, which specializes in
financial services to agricultural customers.
"If we get rain during the
entire bloom period, pollination will be very poor," said Gatzman, who is
also an almond farmer. "As an appraiser, I wonder how that will impact
orchard values in 2016."
The threat of an El Nino
"wet bloom" is even more striking for almond growers in the Central
In the 2013 crop year, California
almond cash receipts improved for the fourth consecutive year as revenue soared
to $5.77 billion. Per pound prices rose to $3.21 in 2013 from $2.58 a pound in
2012, according to the California crop report release in 2015.
Almond prices are now hovering
around $3.30 a pound for premium varieties, said Tom Rogers, an almond farmer
in Madera County. That almond price is down roughly $1.75 off the peak of
around $5 a pound during last year's harvest.
In California — where more than a
third of the country's vegetables and two-thirds of the nation's fruits and
nuts are produced — almond buyers are in a holding pattern, not filling
inventory just yet until the market reveals its hand a bit more.
"I'm concerned (about a
possible wet bloom) but not worrying until it gets here," said Rogers, a
third-generation California farmer. He has weathered previous El Ninos with his
brother, including the last one in 1997-98.
Of course it's tricky to pinpoint
lower nut prices specifically to worries of a wet blooming season. There are
plenty of global trends also influencing pricing. A slowing world economy,
including China, is lowering demand.
About 60 to 70 percent of
California almonds are shipped internationally. In China, almonds are
especially popular in the autumn and winter. Packaged nuts are an appreciated
Lunar New Year gift.
"Our shipments to Europe and
China are way off," Rogers said.
The possibility of under
pollination and a sub-par 2016 almond year also alludes to an agricultural
ecosystem that increasingly has been moving toward higher margin, permanent
crops likes almonds, walnuts and pistachios. Permanent crops mean you can't
idle farm land during dry years. That's the opposite of annual crops like rice
An area the size of Lebanon
California has endured four
consecutive years of a drought. Amid low supplies, water prices have swung
wildly — from $2,000 per acre foot in the southern part of the Central Valley
to around $5 an acre foot in the northern portion , depending on local
variables. (An acre-foot is roughly 325,000 gallons of water. Just imagine a
swimming pool that's an acre across and a foot deep.)
With such dramatic changes in
water prices, more farmers have incentives to bet their farm and livelihood on
higher margin, permanent crops. "As the water situation gets less
predictable for farmers, they must go toward those higher value crops to stay
in business," said Gatzman of American AgCredit. "You have no choice
but to grow the highest value you can."
And high value often means nuts
or wine grapes. Total California acreage devoted to four permanent crops alone
— almonds, walnuts, pistachios and wine grapes — stands at nearly 2 million
acres, an area the size of Lebanon, according to a 2014 trend report on
agricultural land and lease values. The report is from the California Chapter
of the American Society of Farmer Managers and Rural Appraisers.
Almond farmer Rogers owns a
175-acre almond farm in Madera, northwest of Fresno, and produces some 2,500
pounds of almonds per acre. He's all in, on a single crop.
"It's one of the thrills of farming," Rogers said. "You just don't know."
Persistent water issues
Looking ahead, farmers naturally
are focused on snowpack and what that will yield this year. Winter snowpack
melts into spring runoff and eventually travels south to refill lower-lying
As always, the paramount concern
is water. While forecasts vary, it could take another year or two of normal
rainfall for California to recover from the drought.
A weather pattern known as El
Nino has brought pockets of rain to California. But farmers aren't out of the
woods yet, especially junior water rights holders who acquired their water
entitlements in more recent decades including the 1960s and 1970s.
"There will still be
significant water curtailment for junior water rights holders," said
Crowder of Rabobank. "There will be some repercussions related to the
drought. There's a risk not all the reservoirs will be refilled."