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A Little Nut Defies Laws of Economics

California's almond farmers are reaping profits from bumper crops

May 18, 2003|Melinda Fulmer | Times Staff Writer

In years past, ads for Blue Diamond Growers showed farmers in California standing waist-deep in almonds, entreating consumers to eat "A Can a Week" to get rid of the surplus. New ads have them buried up to their necks in almonds -- with big smiles on their faces.

Why not? Last fall's record haul of 1.1 billion pounds of almonds didn't bring the drop in price that comes with most bumper crops.

In fact, more nuts have meant more money for Blue Diamond cooperative members and the state's other almond growers and processors. Last season's crop is fetching as much as 20% more a pound than the 2001 harvest, which was 25% smaller. Many of the state's 7,000 almond farmers are reaping handsome profits, without the aid of government subsidies or trade protections.

This would seem to defy conventional agricultural economics. California's glut of grapes has wreaked havoc on vineyards and wineries in the state, and prices for other California fruits and vegetables, such as garlic, raisins and apricots, have been hurt by increasing competition from farmers overseas.

Almonds are a different game. California is virtually a cartel, supplying about 80% of the world's almonds, up from 60% a decade ago. No other country can match California in producing almonds as abundantly, cheaply and efficiently.

California growers also have had success opening up new markets, such as India and Eastern Europe. At the same time, they have helped boost consumption in the United States by 57% since 1996, according to the U.S. Department of Agriculture, by promoting the brown wrinkled nut as a healthy snack and getting it into more candy, cereals and ice cream.

"With almonds, you have demand increasing. My raisins are just worthless," said Antonio "Tony" Campos, a large grower and processor of almonds and a producer of raisins in Caruthers, Calif.

One reason almonds are more profitable than raisins: 4,000 of the state's almond farmers bargain collectively for prices through Blue Diamond, which isn't a stranger to hardball tactics.

Doug Youngdahl, chief executive of Blue Diamond, recounted what happened last May when he took the podium at the International Tree Nut Congress in Cape Town, South Africa. Facing an assembly of buyers from around the world, he couldn't deny that California was awash in almonds. Even so, he told them that it was in their best interest to pay higher prices now, because a glut could turn into a shortage if low prices forced some almond growers out of business.

Then came the threat: If they refused to pay more, Youngdahl said, he and others in California would hold almonds off the market to shrink supply.

Youngdahl said his demands were met with disbelief and a lot of head-shaking. Ultimately, Blue Diamond got what it wanted: price increases of 15% to 20% to $1.20 a pound.

This will go down in commodity history, Youngdahl said.

Certainly it was a rarity for the agricultural industry, known for looking to the government for help. Producers of corn, soybeans and cotton are rescued from oversupplies by federal price supports. Trade restrictions help California's avocado farmers cope with stiff competition from Mexico.


California's Edge

Almonds are different. California's edge is productivity: Farmers in the Central Valley harvest about 2,000 pounds per acre from their large irrigated fields. Almonds are native to Spain, the world's second-biggest producer, where growers typically reap only about 100 pounds per acre, according to nut farmers and other industry executives.

"There was a time when Spain was the largest growing country in the world," said Juan Luis Peregrine, a nut distributor in Almeria, Spain. That was when he started in the business in the 1960s. Last year, Spain bought $136 million of California almonds, making it the state industry's second-largest export market, after Germany.

It's clear why Spain lost ground to California. Almond operations in Spain are small family farms perched on rocky hillsides, and Spaniards still harvest nuts by hand, tapping mallets against each tree and catching the falling nuts in nets.

In California, major almond growers such as Campos own thousands of acres of trees in Kern, Fresno, Merced and other counties in the Central Valley. Large mechanized shakers, which cost more than $100,000, now stand in for much of the industry's workers. Once clamped onto a trunk, these machines can strip a tree of its bounty in less than one minute.

Campos never dreamed he would become one of the largest almond farmers when he left his small village near Pamplona, Spain, for California in the mid-1950s. He started out as a sheepherder before working his way up from farmhand to farm owner. In 1979, Campos and his brother planted their first almond trees, lured by the high prices the nuts were fetching compared with cotton and hay.

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