American Society of Farm Managers and Rural Appraisers meeting

Attending the tree nut session at the American Society of Farm Managers and Rural Appraiser national conference in Tucson, Ariz. are from left: Steve Runyan, Runyan Appraisal Service, Bakersfield, Calif.; Jim Zion (session speaker), Meridian Growers, Clovis, Calif.; and Charles Havranek, agricultural appraiser, Glendale, Ariz.

Pistachio leader sees headwinds in growth curve

2014 pistachio crop third-largest on record Billion-pound crop projection a moving target Alternate-bearing cycle tougher to predict

America’s pistachio industry faces some daunting headwinds in the near future, according to one industry leader.

Jim Zion, managing partner with Meridian Growers, a global marketer of tree nuts and dried fruit in Clovis, Calif., believes that California’s prolonged drought and limited water availability, coupled with insufficiently cool winters, could push the industry’s hopes of a billion-pound crop milestone back another year or two.

Zion told farm leaders at the American Society of Farm Managers and Rural Appraisers (ASFMRA) national conference late last fall that industry projections of a billion-pound crop were probably out to 2020, three years later than projections just a couple years ago.

Now, the milestone may not be reached until 2021 or 2022, Zion told Western Farm Press in March.

Though the billion-pound crop is an ever-moving target, Zion remains confident in two things: the American pistachio industry will reach that milestone sooner than later, and global buyers will consume the additional production.

Still, Zion jokes that the pistachio industry has a poor record of predicting crops.

“Of all the things we do well we’re not good at predicting crops,” Zion told pistachio growers at the American Pistachio Growers annual meeting in February.

Speaking to the rural appraisers and farm managers, Zion said,  "Last year at one point we thought we were going to have a 400 million pound crop and we ended up at 519 million pounds, the third largest crop we’ve ever seen.

Customers are already asking Zion for his estimate on the 2015 crop size. He simply tells them it could be anywhere from 400-700 million pounds.

Inadequate chilling

Given ample water and adequate chilling, Zion is confident the industry could be at 650 million pounds today, yet both have been in short supply in the past several years and are blamed for shorter yields.

Predicting the crop size ahead of the projected April bloom just cannot be done, Zion says.

Last year, some pistachio growers reported yields of better than 3,000 pounds per acre while others had abysmally poor yields. Zion said hail on Arizona’s crop had some impact and for some growers in the Lost Hills area of Calif. water shortages dropped yields to less than 1,000 pounds per acre.

Richard Matoian, executive director of American Pistachio Growers in Fresno, Calif., notes the yield curve trend continues to climb. Yield per acre in 2010 hit 3,000 pounds, up from 2,500 pounds in 2002. Now at least 94 percent of growers are hitting at least a ton to the acre.

Zion says pistachio growers are also learning is the on-year, off-year production cycle may not be as clearly understood or defined as first thought.

“It’s getting more difficult to predict the on and off years,” Zion said.

Starting in 2002 and 2004, growers began to see a pattern of on-year, off-year cycles. By 2012, that cycle broke and the last few years have been difficult for growers to predict whether the trees would produce a high-yield on-year crop or a lower yield off-year crop.

The big question is what 2015 will produce?

“Will we have an on-year or off-year?” Zion asks. “We don’t know.”

Zion said, “We’re still a relatively young industry so there’s still some things we’re still learning.”

Still, pistachios remain a profitable crop for California, Arizona, and New Mexico farmers, though it’s one that is not without its up-front expense.

Zion told the ASFMRA crowd that it generally takes seven years from planting to produce a crop of pistachios and a few years more to recover capital costs.

Solid returns

Pistachios are not the only tree nut with solid grower returns. Walnuts and almonds are doing well for growers..

Zion painted a rosy financial picture for the group, saying that “it’s a good time to be in the pistachio business.”

“There’s a lot of interest in planting pistachios right now because of the returns,” he said.

According to Matoian, the five-year average return to pistachio growers is just over $2.50 per pound. In 2013, growers saw the price spike to $3.53 per pound.

The drought tolerance of pistachios versus almonds makes pistachios a better choice for new orchard plantings, Zion says.

“I’ve seen dryland pistachios in Arizona produce a crop: not a great crop, but they still get nuts," he said. “If you don’t water almonds all you’ll have is firewood.”

Zion shared that orchard choices in California depend on proximity to the Sacramento/San Joaquin River Delta.

“If you’re north of the Delta you’re probably looking at putting in walnuts. If you’re south of the Delta you’re probably looking at pistachios,” he continued.

Pistachios tend to have Alternaria fungal issues in the northern San Joaquin Valley because of the cooler temperatures and higher humidity, he says. Many of the California pistachio plantings are from Madera County to Kern County.

Appraisers appeared interested in pistachios, asking questions about typical planting densities, agronomic considerations and other questions pertinent to helping them appraise land values.

Zion explained that temperature thresholds in places like the southern Arizona growing region around Bowie, Willcox and San Simon could determine planting decisions because of frost conditions during April bloom.

Marketing

World demand for pistachios remains relatively strong at 1.2 to 1.3 billion pounds, Zion says. While this has softened, he is impressed at how additional production has been gobbled up by world markets.

Iran remains a formidable competitor to U.S. pistachios. Current U.S. production is tracking close to Iranian production, which Zion guesses was about 600 million pounds last year.

Turkey is another market for the U.S. to watch, though production is consumed predominantly in the country..

China continues as America’s largest market, with 25 percent of all U.S. pistachios consumed there. The recent labor work stoppage at the West Coast sea ports prevented many U.S. nut exports from reaching China in time for Chinese New Year.

Also in the headwinds, Zion sees is a slowdown in the Chinese economy. Though still growing at a much faster pace than the U.S. economy, China’s double-digit growth of recent years has slowed to perhaps 7 percent, “which is significant,” he said.

Couple that with a strong U.S. dollar relative to other currencies, particularly the Euro, Zion sees trouble getting foreign buyers to expand consumption of pistachios at a time when the U.S. industry continues to grow.

Boosting grower returns for the big three tree nuts – almonds, pistachios and walnuts – has been bolstered by the legitimate marketing claims of health benefits, coupled with aggressive marketing efforts on the part of the individual trade associations and marketing orders.

The Almond Board of California has largely led the way in tree nuts with studies and marketing that have helped push that industry’s marketable sales to two billion pounds within recent years.

Zion believes marketing efforts on the part of all tree nuts can continue to boost global sales of American-grown nuts.

While almonds, pistachios and walnuts continue to enjoy healthy growth curves, Zion says American pecans have remained flat because they don’t market their crop as well.

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“They’re (pecans) are going through a major reassessment of what they want to do as an industry,” Zion told the ASFMRA crowd.

“There’s a lot of a discussion on creating a federal marketing order,” he continued.

Why the lag in pecan demand over other nuts, one appraiser asked Zion.

“I think it’s awareness,” Zion said. “They have not done a good job of making people aware of their product.”

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