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Walnuts and citrus evaluated as permanent crop choices

Many California growers are at a crossroads in deciding which permanent crops will provide the best returns in the future. What to pull and what to plant are overriding issues difficult to resolve without thorough investigation and planning - and perhaps, a fully functioning crystal ball.

The California Chapter of the American Society of Farm Managers and Rural Appraisers addressed those issues at its recent Spring Outlook Conference in Sacramento with a pair of growers who offered their perspectives of how to go about making some basic decisions.

Walnut grower Charles R. Crain Jr., noting that the prune and peach markets are in decline and nut markets are expanding, warned simply: “Don’t grow what you can’t sell, and look to the future 10 years out.”

From its headquarters at Los Molinos, the Crain family farms more than 5,000 acres of 17 varieties of walnuts in Butte, Glenn, and Tehama counties and processes its own production and that of 450 other growers in the state.

Walnuts presently enjoy benefits of expanding markets, semi-perishable harvest, several varieties with unique characteristics to allow differentiation of products, and lower cultural costs, although they do require alluvial-fan soils in short supply in the northern part of the state.

Assuming the essentials of proper climate, the right soils, and adequate water are available, Crain said, a grower considering new orchards can then turn to considering markets. Since the export market has the greatest potential for walnuts, quality linked with product differentiation is crucial in supplying differing preferences of buyers in Italy, Spain, or Germany, and is perceived as having greater value.

Second to China

California, the source of about 35 percent, or 340,000 tons, of the world supply of walnuts, is second in the world behind China, which supplies 42 percent, or 370,000 tons. Although China has 10 times the number of trees California has, its walnut exports are dropping, while California maintains a relatively stable production, even with cyclical fluctuations. “With export markets, one of the most important things is to have a stable supply of good quality product,” he said.

“So the ‘big fish’ in the market,” Crain said, “is China, which is not only the largest walnut producer but also the world’s largest consumer of everything. Our balance of trade with them is upside-down and declining fast. We are looking at them as a potential market for our product. I wouldn’t be surprised if in 10 years China becomes our largest export market for walnuts.”

Walnut plantings in China, he explained, have been part of a massive reforestation project, replacing other species consumed for fuel. The project is currently under forestry authorities, but if agricultural agencies were to take over responsibility, the trees might be used for aggressive nut production.

Turning to varieties, Crain said about 800 new selections are being made each year at the University of California, Davis to find new varieties. These will hopefully lead to new products to fill expanding, differentiated niches for kernel color in various markets around the world. Lighter color is especially sought after as a perceived indicator of higher quality in Asian markets.

Chandler variety

Chandler, with about 35 percent of the total, is the largest variety grown in California, and Hartley is at 25 percent. Along with Howard and Tulare, they allow improved returns with product differentiation. Crain estimates Chandler, adaptable throughout the state, will contribute more than half the crop in the next five to six years, as acreage of Hartley, which has limitations in disease resistance and longevity and lesser appeal in export markets, declines. v Crain said the larger-kernel Howard, preferred in many markets, in 2004 brought an average of 12 cents a pound more than Hartley in his company’s sales as buyers, considering Howard a greater value, asked for it by name.

“New walnut cultivars will continue to be in demand for some time, as older varieties become obsolete. Both China and India are large competitors, but they also have expanding economies that should make them expanded markets for California walnuts in the near future,” Crain said.

Bill Phillimore, executive vice president, Paramount Farming Co., Bakersfield, dealt with other crops that might be considered. Paramount farms some 120,000 acres in Kings and Kern counties. Its acreages of 25,000 each in citrus, almonds, and pistachios and 6,000 in pomegranates make the company the largest grower of those crops in the state.

Crops concentration

Reminding that anyone going into farming must have a healthy amount of optimism to begin with, he said Paramount has concentrated its operations to those four crops. “Part of our focus when we are looking at crop selection is the product itself. We want to know it is healthy, has good shelf life, and is convenient for consumers. We also look for the potential for vertical integration, so we can grow, process, and market the crops ourselves.”

They have decided to get into clementine production, even though Phillimore admits cultural methods have to be worked out to avoid seeds occurring in fruit grown in the San Joaquin Valley. In the case of their pomegranates, they not only grew the crop and developed fresh markets but also invested heavily in developing techniques for processing of juice and their own plant.

Before planting, they also evaluate the crop industry itself: who and what the competition is and whether there is strong industry leadership. The idea is to have a product that can be somehow separated or differentiated from the rest to enhance returns and to help the company avoid being trapped with a commodity with a price the same as countless others.

He said Sunkist Growers, for example, is a strong leader and the entire California and Arizona citrus industry benefits from that leadership.

Selecting the best climate, soil, and water for a crop is also vital. “We see a lot of almonds being planted where we do not want to be farming. We may spend more on our irrigation systems up front to so that an extra 200 to 300 pounds of nuts per acre in yields will make a difference in the bottom line. If you get it wrong, you may never recover.”

Quick corrections

When it comes to risk assessment, he said the privately owned Paramount can move rapidly to capitalize on new opportunities or, if a downside occurs, also correct mistakes quickly. He urged growers to show “no emotion” in pulling low-yielding orchards, even though they might have been good producers in the past. Yielding to sentiment and leaving a substandard orchard in place for one more season can cost dearly.

Phillimore said he expects the citrus industry to continue to be a tough business. He added that the industry needs to be restructured, mainly because packinghouses now have far too much control and receive a set per-box fee regardless of the price of the fruit. The industry will have to work out some sort of corrections to help improve grower returns.

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