California commodity outlook

These commodity outlooks were presented at the 28th Annual Agribusiness Management Conference in Fresno, an event presented by the Center for Agricultural Business, California Agricultural Technology Institute, Jordan College of Agricultural Sciences and Technology, California State University, Fresno, and Bank of America.

• Pistachios

The two-year supply for 2009 and 2010 is predicted to exceed the past two years for the U.S. pistachio crop, but it appears the nuts will find a market despite dramatic rises in new plantings. And despite its first ever voluntary pistachio recall due to possible salmonella contamination traced to one California processor in March, sales resumed to near normal levels by June when prices rose to historic highs. No illnesses were confirmed as a result of a consumer eating pistachios.

The 2009 harvest was expected to total between 375 and 425 million pounds. The 2008 “off year” crop was 288 million pounds and the 2007 “on-year” crop was 416 million pounds. A large “off” crop is expected in 2010.

Export demand is particularly strong in China and the European Union. The market was strengthened in part due to a smaller than forecast California crop, a worldwide shortage due to a 2008 freeze in Iran, and continuing weakness of the U.S. dollar. Exports outpaced U.S. domestic shipments again for the 2008-2009 crop, with 207 million pounds sent abroad and just over 100 million pounds shipped domestically.

• Almonds

It is expected that the California almond crop will reach 1.35 billion pounds, a 16 percent decrease from the record 2008 crop of 1.62 billion pounds.

Demand remains strong, with worldwide shipments of California almonds up 10 percent for the 2008-2009 fiscal year over the prior year, reaching 1.39 billion pounds, a new record. The United States is the largest single market growing 4 percent over the previous year to a record 411 million pounds and accounting for 30 percent of total shipments.

Western Europe was the top regional market, taking 448.5 million pounds. The top five export destinations for the $2.3 billion crop were Spain, Germany, China, India, and the United Arab Emirates.

The 2008-2009 farm price averaged $1.40 per pound. Kern, Fresno and Stanislaus led the state in production, representing 57 percent of the crop. Nonpareil continues to be the leading variety, followed by Carmel and Monterey. There were 710,000 bearing acres in 2009, up from 680,000 in 2008. The projected average nut set per tree was 5,589, down 25 percent from the 2008 almond crop.

Scientific research on the nutritional benefits of almonds has helped boost sales, and the nut appears to have weathered a recessionary economy as a food and ingredient. Another strong shipment year is expected for 2009-2010.

• Grapes

As raisin grape acreage continues to decline in California, the state’s table grapes are posting record highs in overall volume and exports and the market for wine grapes during the recession has moved to cheaper wines. Both the wine grape and raisin industries felt the effects of a lower green crush price of $165 per ton, a price that is expected to result in still more raisin grape acreage being removed. The 2009 estimate is that there are 221,000 acres of raisin varieties in the state.

Air quality regulations will halt all vineyard burning, including prunings and paper trays, in June.

The 2009 raisin crop is estimated at 275,000 tons, and the Raisin Bargaining Association field price is set at $1,323 per ton. Organic production exceeds demand, meaning there are reduced incentives for growing that category.

Exports for table grapes reached all time highs during 2008 in many markets. In 2008, the total crop of fresh grapes from California reached nearly 100 million boxes, an all time high for a crop valued at $1.1 billion. Total bearing acreage for fresh grapes was about 98,000. From 1999 to 2008, the total crop value increased an average of 2.5 percent each season.

Through January 2009, more than 27 million 19-pound boxes of table grapes, valued at a record high of more than $350 million, were sent to offshore markets and Mexico.

Lower priced wines – less than $7 per bottle – comprise 62 percent of the wines produced in California while only contributing about a third of the revenue.

The current economic downturn has changed consumption patterns. Consumers are drinking cheaper wines and making fewer wine purchases when dining out.

It appears grape prices have stabilized somewhat in the state’s main production areas in recent years. But the movement to what some call a “cheap is chic” approach, is encouraging the importation of cheap bulk wine and that threatens to displace some of the lower priced California grapes.

• Dairy

California’s dairy industry had one of its most devastating years in 2009 as economic woes continued domestically and abroad as U.S. exports dropped.

California has seen year-over-year production declines in 13 out of the last 14 months. Decline in demand for dairy products because of the weak world economy is seen as the largest factor contributing to declines in producer prices.

Compounding the problem of low prices for milk is record high production costs. A dramatic increase in feed prices was fostered largely by demand for corn in ethanol production. Between February 2008 and October 2009, dairy producers remained in the red by as much as $8.67 each month.

California may lose over 10 percent of its dairies this year — about 185 enterprises. As dairy goes, so do a number of allied operations. The crisis impacts industries such as truckers, feed companies, dairy equipment suppliers and seed and fertilizer companies.

The slowdown also sent shockwaves through the alfalfa industry, which has been plagued by dismal prices. And some say a slow recovery in milk prices will mean a slowed recovery for hay prices as well.

The milking herd has been reduced by voluntary culling and through the Cooperatives Working Together program. The U.S. Department of Agriculture says milk cow numbers are expected to decline by 253,000 head from 2009 levels. The agency expects a “recovery in prices is unlikely until 2010 when the decline in milk production, forecast for both this year and next, impacts the market.”

Meanwhile cheese and butter inventories remain high. Nonfat dry milk inventories have dropped, giving some recent strength to powder prices.

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