C-WIN's Carolee Krieger in SacBee: California almond farmers, lured by high profits to expand orchards, face a drought struggle
http://www.sacbee.com/2014/05/11/6395024/california-almond-farmers-lured.html
California almond farmers, lured by high profits to expand orchards, face a drought struggle
By Dale Kasler
Published: Sunday, May. 11, 2014 - 12:00 am
PATTERSON -- This town calls itself the “Apricot Capital of the World,” but the slogan is out of date. Nowadays, it’s almond orchards that dominate the landscape in this part of Stanislaus County, along with much of the rest of the San Joaquin Valley.
Almonds have become California’s miracle food. Growing consumer demand has driven up prices and created a profitable $4 billion-a-year crop. In dollar terms, almonds are California’s leading agricultural export, leaving the state’s exalted wineries in the dust. In response, farmers have planted hundreds of thousands of acres of new trees in the past 20 years.
Drought, however, has brought big problems to the almond industry, perhaps more than any other segment of California agriculture.
Almonds and other permanent crops require more water than most row crops. What’s more, almond orchards can’t be idled in a dry year like tomato or cotton fields. Farmers who planted almond trees in recent years have tens of millions of dollars at risk, and find themselves sacrificing other crops in a furious effort to keep their orchards alive. This year’s crop is expected to decline, although it’s not known by how much.
“This crop is one of the more vulnerable ones to the drought,” said California farm economist Vernon Crowder. “Almonds are the big one.”
The plight of California’s almond growers has economic implications across the state. Almonds are California’s third largest farm product, and processors such as Sacramento’s giant Blue Diamond Growers are crossing their fingers and hoping for a decent crop. There’s a political component as well: The drought has intensified century-old rivalries over how water is allocated in California, and the explosion in almond farming has given rise to complaints about overuse.
Some environmentalists say almond farmers and their expanded orchards have contributed mightily to the overtaxing of the state’s fragile water system. They say growers have behaved recklessly by planting permanent crops in areas of the state, particularly south of the Delta, where water supplies are unreliable.
Growers counter that they’re making rational business decisions by devoting their scarce water resourcesto a high-revenue crop. That’s why growers such as Daniel Bays, who raises almonds on 600 acres in Patterson and nearby Westley, are continuing to plant new orchards even as water shortages persist.
“Yes, it’s a drought year, but we’re trying to plan long term,” said Bays as he surveyed a new field of trees planted near Patterson. “These things go in a cycle. If we held off every time there’s a drought, and didn’t plant ... we’d go out of business.” New almond trees require considerably less water than mature trees, he added.
The growth of almond farming in California has been a quiet revolution. Production in the state, which controls 80 percent of the world’s supply, has nearly tripled in 15 years. California almonds are widely used by food processors in candy, cereal and other products. They’ve also become popular snack foods inWestern Europe, China, India and other growing markets; exports have risen 40 percent in three years. Although there have been some ups and downs, prices paid to growers exceed $3 a pound, almost double the price of a decade ago.
“This market, this crop, has not slowed down for 20 or 30 years,” said Crowder, a senior vice president with agricultural lender Rabobank. “You’ve just seen demand skyrocket.”
One of the most visible symbols of the industry’s prosperity is Blue Diamond. The 104-year-old grower-owned cooperative has become a marketing powerhouse in recent years, pushing annual sales from $750 million in 2010 to an expected $1.5 billion this year. Blue Diamond advertises on “Sunday Night Football” and was the “official snack nut” of the U.S. ski and snowboarding teams during the Winter Olympics. In four years, sales of Almond Breeze, the company’s milk alternative for the lactose intolerant, jumped nearly tenfold to $265 million.
A big factor in Blue Diamond’s growth: the nuts’ reputation for high nutritional value.
“Anything with almonds carries the healthy halo,” said Mark Jansen, chief executive at the Sacramento company.
Backed into a corner
As summer approaches, Blue Diamond is watching the crop forecasts as closely as anyone. Jansen said he believes the company can procure “a pretty good supply” this year. But he acknowledged it will be tough for California growers to match last year’s crop.
“The water supply will impact the yields, probably even the size of the almonds,” Jansen said.
The U.S. Department of Agriculture has estimated the crop could decline 2.5 percent, to just under 2 billion pounds. But experts say it’s too early to say how production will fare. Crowder said he’s heard predictions that yields could drop as much as 20 percent. The harvest begins in August.
The industry’s problems are partly a function of geography. Because of its attractive soil and climate, the San Joaquin Valley is home to nearly 90 percent of the state’s almond crop. Yet that’s where the water shortages are most severe, especially on the west side of the Valley. Growers can pump groundwater to supplement their meager supplies, but groundwater south of the Delta is fairly salty. That’s bad for most crops, and it’s especially bad for almonds.
On top of that, mature almond trees crave water. They need around 4 acre-feet of water per year, or 1.3 million gallons. That’s almost twice as much as grapes.
The result is an industry backed into a corner. There have been scattered reports of growers ripping out older, less-productive orchards to save water. David Doll, a farm adviser at UC Cooperative Extension in Merced, said he thinks more trees will be removed this fall, after the harvest is done and farmers get a better sense of the water picture.
Of the 6,300 almond growers in California, most will find a way to produce a crop this year, Doll said. But if 2015 is as dry as 2014, the problems will deepen.
“I think a lot of guys will find ways to squeak by (this year),” Doll said. “If we go into another year of drought, I think the seams will probably begin to pop.”
That would be fine with Carolee Krieger, president of the California Water Impact Network. She and her environmental organization are among the plaintiffs in a lawsuit, pending in Sacramento Superior Court, charging that state officials and agricultural interests have teamed up to illegally steer a disproportionate volume of California water to farms over the past 20 years. This favoring of farms has added to the stress on the Delta, the lawsuit says.
In Krieger’s view, farmers have contributed to the state’s water woes by planting trees in areas of the state where water supplies are increasingly unreliable.
“In our camp, there’s absolutely no sympathy for them,” Krieger said. “They planted the permanent crops knowing that, in a drought, they could get their water cut off.”
‘In it for the long haul’
Farmers see it differently. They say California’s water troubles are a manufactured crisis, brought on by state and federal officials diverting too much water to protect endangered fish species.
As for the expansion of the almond orchards, growers say it’s a simple matter of economics: It makes far more sense to pour water on a high-revenue crop, such as almonds, than on cotton or some other low-value product.
“They’re planting a crop that makes money; farmers have been doing that from the very beginning,” Doll said. “I don’t think these guys are planting almonds ... because they want to use all the water.”
Besides, farmers say no one could have predicted a year as dry as this one. In recent years, many farmers on the west side of the San Joaquin Valley have been making do with smaller allotments of water from the federal government’s delivery system, the Central Valley Project, in part to ease the environmental stress on the Delta. This year, Bays and other growers who depend on the CVP have been told they’ll get no federal water.
“This is the first time we’ve ever had a zero allocation,” Bays said.
Drought is a constant in Bays’ world. His family’s main ranch near Westley is straddled by the California Aqueduct and the Delta-Mendota Canal, two of the main arteries of California’s struggling man-made plumbing system. A third-generation grower, Bays, 27, oversees a total of nearly 1,500 acres of land devoted to almonds, apricots, tomatoes and other crops.
Despite the zero allocation of government water, the Bays’ ranch has other sources, including groundwater. All told, Bays said his water supply is about 30 percent smaller than last year’s.
That’s forcing him to scramble. The ranch has purchased some water on the open market, spending as much as $800 an acre-foot. That’s about 10 times the cost of Central Valley Project water. Despite higher water costs, almonds are so valuable that Bays believes he can still turn a profit on this year’s crop.
Bays is conserving water, too. He plans to tear out some older, less productive apricot trees after the June harvest and is likely to leave that land fallow for the balance of the year.
Even as he retrenches, Bays is looking ahead. That’s why he just planted 25 acres of almonds on land that grew melons last year and tomatoes the year before. The new trees, barely shoulder high, represent a $250,000 investment, including new irrigation systems. The orchard won’t sprout any almonds for another three or four years, and probably won’t turn profitable for another three years after that.
“It’s not something you just jump into and jump out of,” Bays said of the decision to plant.
He said the new orchard represents an appropriate use of water.
“We’re trying to be the best stewards of what we have,” he said. “We’re in it for the long haul. My grandfather has been here, my dad’s been here, I’m here.
“You look at an almond orchard, it’s a long-term investment,” he added. “These trees, we figure, have a life of 25, 30 years.”