Strong demand for California almonds will hold, but growers need to brace for lower returns as overseas areas compete with increased production, according to Jim Zion, managing director of Meridian Nut Growers in Fresno, Calif.

Zion analyzed the almond outlook in a talk before the recent spring outlook forum of the California Chapter of the American Society of Farm Managers and Rural Appraisers in Visalia, Calif.

Zion, who joined speakers for wine grapes and pistachios, said almonds continue to be an attractive alternative to other California crops such as cotton, as demonstrated by recent years of increased plantings bringing bearing acres to 600,000 in the state.

Pending official 2006 surveys of new plantings, Zion said he looked for the planting rate to level off. (Estimates released by the California Field Office of the National Agricultural Statistics Service after Zion’s talk set new plantings of almonds during the past three years at 100,000 acres.)

Zion has been using an estimate of about 1 billion pounds for the 2006 crop with a carryover of about 150 million pounds.

Despite clear indications for California crops of 1.5 billion pounds or more in a few years, Zion feels they can be sold. Over 75 percent of the California crop goes into export, with stable pricing for European markets, where almonds have been replacing hazelnuts in confectionary products.

Almond growers enjoyed high prices of $2.65 to $2.75 per pound from the 2005 crop, but he expects prices for the coming crop to run about $1.65, plus or minus 25 cents, across all varieties.

He said the industry has been very supportive of the Almond Board of California’s (ABC) generic promotion, which has in the past five years steered consumers to almonds as a nutritional, healthy alternative to other snacks.

“Many candy companies have created new products around almonds, which now have a consumer image of being value-added, and consumers are willing to pay more for products that include them.”

Another advantage for the industry is its markets both at home and abroad. “If something happens in one market, we have the others and don’t have to worry about it much,” he said.

But almonds also have their weaknesses. Given the high price of water and other inputs, California almonds cost more to produce and are subject to sharp price competition from production in Australia, Spain, and other nations having both expanded production and lower costs than California growers.

Zion and other marketers also continue to fear the potential for a food safety scare that could be a serious setback for almonds. With that in mind, the ABC has been promoting best management practices to prevent such an event.

In tracing the California wine grape industry, Glenn Proctor, a wine broker with Joseph W. Ciatti Co. in San Rafael, Callif., said the record 4.3-million-ton crush of 2005 was a blend of good and bad news for growers.

Up and down the state, increases in production averaged 35 percent over the previous year, mostly due to larger berry size and not additional acreage coming into bearing. Bearing wine grape acreage in 2005 was only 800 acres greater than the 473,000 harvested in 2004.

The good part, he said, was early in the season when most growers sold portions of their crop at prices equal to or higher than in 2004, they received higher gross per-acre returns, and quality was outstanding.

But later in the season when the larger size of the crop was realized and wineries reached crush capacity, growers without a home for their grapes were caught with few options and some vineyards were not harvested.

In assessing bulk wines, Proctor said, “We will be able to work through the 2005 crop, but we expect to have a headache with it over the next six to 12 months. Early season wine buying activity has been good, taking us through some of the 2005 inventory, but then it slowed down significantly.”

Meanwhile, the international bulk wine market continues very competitive, with major varieties from the United States at higher prices than the same varieties from Europe, Chile, Argentina and Australia.

But, Proctor noted, the 2005 inventories will provide supplies for the United States to compete strongly and with limited new acreage and growing demand, prospects for 2006, 2007 and 2008 are good.

One concern is some buyers are saying since they bought so much of the 2005 crop, they plan to buy less 40 percent less in 2006.

“We are optimistic about the future, but we are cautious about the present,” Proctor said.

In sketching a profile of the pistachio industry, Hanford grower, processor, and marketer Chuck Nichols said consumer demand is expanding, with foreign sales leading domestic.

The 2005 California pistachio crop was 283 million pounds, down from the preceding season’s “on-year” production of 347 million pounds.

The chief competitor is Iran, whose production approaches half the world supply, compared to the approximately one-third coming from California. He said statistics from Iran are notoriously inaccurate, but there may be as many as 80,000 growers there, some with plots of less than one acre.

While Iran has very serious quality and aflatoxin contamination issues, its pistachio industry remains profitable and will continue to be highly competitive.

Pricing for California pistachios was constant during the past few years at about $1.40 per pound, although in the past year it went to more than $2.

“Most of us in the industry think prices will come off this level, and we will be looking at $1.20 to $1.50, open, in-shell, for the next five to seven years,” Nichols said.

Profits from the price hike led to planting increases, but, he added, the high prices are not sustainable.

The trees take seven years to get into production, Nichols said, and California bearing acreage for 2007 will be about 115,000 acres and by 2012 it will be about 175,000 acres.

Problems persist with tariff disputes with Iran, food safety issues for all pistachios caused by Iranian product trans-shipped from Europe to the United States, imbalance in profitability between growing and process segments, and litigation challenging the California Pistachio Commission.

However, Nichols said, the nuts are now regarded as a healthy food by consumers, demand for them is expanding, and the California industry will have time to develop new markets before new acreage comes into bearing.