Following some ups and downs, kernel prices for California’s 2014 crop almonds in the second week of March where back to where they were during last year’s harvest – around $4 a pound.

“Right now, the market is rather quiet,” says Paul Ewing of independent almond processor RPAC, LLC, based in Los Banos, Calif. “It’s a classic standoff between buyers and sellers.”

After rising sharply in August following the start of the 2014 harvest, grower prices for new-crop almonds dipped in October. They began bouncing back up in January as three straight years of drought continued into the fourth and the industry faced the prospect of another year of reduced production. Recently, they’ve slipped about a dime a pound over the course of several weeks. Ewing attributes that to a slowing in buying interest and good weather at bloom, which would suggest the potential for higher yields this year.

“The market is concerned about the uncertainty involving the impact of drought on future supplies, not just for this year, but beyond,” Ewing says. No small worry, since California growers produce about 80 percent of the world’s supply of almonds.

In the meantime, sellers are biding their time to better gauge the potential for the size of this year’s crop before selling almonds, he notes. And the robust strength of the U.S. dollar in relation to other currencies is pushing the price of almonds above levels many overseas buyers are currently willing to pay.

“In California, the price buyers are paying for almonds has risen 17 percent since June,” Ewing says. “That contrasts to about a 50-percent cumulative increase in price over the same period that European importers have been paying due to the stronger US dollar.” 

In some cases, these overseas buyers are reducing package sizes to keep almond prices more in line with shoppers’ budgets, Ewing explains. Some are reducing the ratio of almonds in mixed-nut products. Others are promoting lower-priced alternative products that don’t include almonds.

Although helping to curtail consumption of almonds, some reduction in sales has been necessary due to the drop in size of California’s crop from 2013 to 2014. Still some segments of the U.S. market, such as almond butter and some bar applications, have continued to grow, Ewing notes.

The recently-ended work slowdown by longshoreman at U.S. West Coast ports, which caused shipping containers full of almonds to sit on the docks for weeks, also crimped consumption of California almonds. “In January and February, some processors were unable to sell their almonds, simply because they weren’t sure they could actually ship product to overseas buyers,” Ewing says.

However, the on-going drought remains the market’s top worry. That concern only deepened with the Feb. 27 announcement by the Bureau of Reclamation that California farmers will receive no federal water via the Central Valley Project (CVP). Also, some districts on the East side of the valley, which historically had very plentiful water supplies, will be providing very limited water or, in some cases, no water to their growers, due to the low reservoir levels and minimal snow pack, Ewing says.

Almond growers most impacted by the cutoff of CVP water are those on the West Side. Just how much they’ll feel the impact varies with the water district and the success of individual growers in finding additional sources of water.

“In many cases, they’re getting just 2 acre-inches of water at a time,” Ewing says. “Some growers are hoping to produce as many almonds as possible this year. Others would be happy just to keep their trees alive.”

Depending on the specific water district, many West Side almond growers have been paying around $1,100 to $1,500 per acre-foot for water, he said.

“They could easily be spending around $1.50 per pound of nuts (kernel weight) produced for water,” Ewing says. “That compares to about $1.25 for all other production costs, not counting any debt service. This works out to be the highest breakeven price we’ve ever seen.”

For a brighter take on this year’s almond market, Ewing singles out the Almond Board of California and its success over the years in helping to maintain and grow demand for almonds, both here at home and abroad.

“They’ve done a good job in the past year correcting a lot of misinformation the public has heard about our industry” he says. “And, despite the current stagnating demand for almonds and declining supply, the industry continues to invest tens of millions of dollars a year in encouraging consumption of almonds in the United States and around the world.”