Almond production in California, where 80% of the world’s almonds are grown, is at an all-time high . Almonds are specialty crops earning high returns for producers and institutional investors alike [2, 3]. The almond industry contributes heavily to the state’s economy; at $5.1B in 2015, almonds are California’s top export by value . Since 2010, California has experienced an extended drought which has impacted agricultural production and the industry at large. News outlets even reported that “almonds are sucking California dry,” a reference to the amount of water needed for almond farming .
Famoso Nut Company is an almond processing and sales company based in Kern County, California, the largest almond-producing county in the state. Famoso works directly with growers, runs a processing plant for hulling and shelling, and sells almond products and byproducts.
Survival of the hardiest almonds
Most varieties of almonds require a specific climate to grow – cold winters, wet springs, and dry summers for harvest. Weather pattern shifts (i.e. summer rains, warmer winters) threaten the ideal growing environment in Central California which puts Famoso’s key business input at risk .
Changing weather patterns in the years to come may be manageable for Famoso even as it impacts growers’ total yield. Like grapes produced for wine, not all almonds have the same temperature requirements . In the future, different types of almonds may be more competitive in the region. It is in Famoso’s best interest to proactively work with researchers and growers to closely monitor weather changes and plant accordingly to optimize yields. A “wait and see” approach may otherwise result in low yields which would impact the entire value chain.
Longer term, if almond trees require relocation to higher latitudes in response to warming temperatures , Famoso will have to build strong relationships with growers (who enjoy being able to come to the plant and check on their products) so that the processing plant can serve a larger radius. While transportation and related labor costs may increase from the field to the plant, ultimately, almonds and byproducts from hulling and shelling move south to ports and other buyers, so total transportation costs should not increase drastically .
What to do about water?
In California, the majority of water is stored in the form of snow in the Sierras. As winter fades, this snowpack melts and replenishes a network of dams and reservoirs (surface water). In recent years, warmer temperatures mean that most water has come in the form of rain and the snowpack is melting earlier and more quickly. Additionally, the state has seen less overall precipitation due to bad droughts .
When surface water is not available, growers pump water from underground aquifers. Property owners currently have rights to underground water sources and can drill wells to pump as much water as they’d like. This is leading to subsidence – as groundwater is depleted, the land above it collapses because nothing is holding it up. This damage is irreversible and permanently diminishes both water storage capacity and agricultural land in the region. Water districts are currently working with landowners to encourage the community to self-regulate its water usage. To support these efforts, Famoso funded research that resulted in a map which highlighted the best soil types for percolation and shared it with districts and growers. That way, they can most efficiently set aside acreage to flood, which allows water to seep back through the soil and recharge underground water sources [6, 10].
Without the right incentives, actors may act in their own interest which can lead to irreparable harm for the industry. As a key player in the production value chain, Famoso should work to educate growers and local regulators to influence regulation that can serve as guardrails to protect the longevity of the land.
Additionally, Famoso should encourage its growers to invest in new irrigation methodology and technology (i.e. sensors). By helping growers understand the payoffs of this large capital investment and even going so far as offering to loan money for improvement projects directly, Famoso could solidify its supplier relationships and also reduce climate change’s impact on its business.
Additional questions for consideration:
- For every 1°C increase in average temperature, California risks losing $26B or 1% of GDP . Given the risks associated with depleting water sources, what should the following stakeholders do to address this challenge?
- Public institutions
- Private companies
- Industry associations
- Scientific community
- Almond prices remain high, so acreage is increasing as growers chase financial return. Who within the value chain bears the most risk when almond production exceeds global demand and prices fall? On the other hand, risk of water depletion would limit production and therefore increase pricing. There will be winners and losers in both scenarios; who bears the cost ?
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 “2017 California Almond Forecast,” United States Department of Agriculture, National Agricultural Statistics Service, May 10 2017, https://www.nass.usda.gov/Statistics_by_State/California/Publications/Fruits_and_Nuts/2017/201705almpd.pdf, accessed November 2017.
 “Barbarians at the farm gate,” The Economist, December 30, 2014, https://www.economist.com/news/finance-and-economics/21637379-hardy-investors-are-seeking-way-grow-their-money-barbarians-farm-gate, accessed November 2017.
 Davis, Heather. “Almonds: Harvesting value beyond the farm,” TIAA.org, August 7, 2013, https://www.tiaa.org/public/assetmanagement/insights/commentary-perspectives/perspectives/almonds-harvesting-value, accessed November 2017.
 Willis, David. “How almonds are sucking California dry,” BBC.com, November 16, 2014, http://www.bbc.com/news/magazine-30052290, accessed November 2017.
 “California Agricultural Statistics Review, 2015-2016,” California Department of Food and Agriculture, https://www.nass.usda.gov/Statistics_by_State/California/Publications/California_Ag_Statistics/Reports/2015cas-all.pdf, accessed November 2017.
 Bruce Beretta (Famoso Nut Company), interview by author, phone, November 13, 2017.
 Bland, Alastair. “With Warming Climes, How Long Will A Bordeaux Be A Bordeaux?” NPR.org, May 8, 2013, https://www.npr.org/sections/thesalt/2013/05/06/181684846/with-warming-climes-how-long-will-a-bordeaux-be-a-bordeaux, accessed November 2017.
 Hannah, Lee, et al. “Climate change, wine, and conservation,” Proceedings of the National Academy of Sciences of the United States of America, 2013 110 (17) 6907-6912; published ahead of print April 8, 2013, doi:10.1073/pnas.1210127110, accessed November 2017.
 Waymouth, Belinda. “Climate change puts California’s snowpack in jeopardy in future droughts,” UCLA Newsroom, March 9, 2017, http://newsroom.ucla.edu/releases/climate-change-puts-california-s-snowpack-under-the-weather, accessed November 2017.
 Charles, Dan. “As Rains Soak California, Farmers Test How To Store Water Underground,” NPR.org, January 12, 2017, https://www.npr.org/sections/thesalt/2017/01/12/509179190/as-rains-soak-california-farmers-test-how-to-store-water-underground, accessed November 2017.
 Hsiang, Solomon, et al. “Estimating economic damage from climate change in the United States,” Science, June 30, 2017, pp. 1362-1369.
 Swegal, Hayden. “The rise and fall of almond prices: Asia, drought, and consumer preference,” Beyond the Numbers: Global Economy, vol. 6, no. 12 (U.S. Bureau of Labor Statistics, October 2017), https://www.bls.gov/opub/btn/volume-6/the-rise-and-fall-of-almond-prices-asia-drought-and-consumer-preference.htm, accessed November 2017.
[Exhibit 1] “2017 California Almond Forecast,” United States Department of Agriculture, National Agricultural Statistics Service, May 10 2017, https://www.nass.usda.gov/Statistics_by_State/California/Publications/Fruits_and_Nuts/2017/201705almpd.pdf, accessed November 2017.
[Exhibit 2] “Summary of Recent, Historical, and Estimated Potential for Future Land Subsidence in California,” State of California Department of Water Resources, 2014, http://www.water.ca.gov/groundwater/docs/Summary_of_Recent_Historical_Potential_Subsidence_in_CA_Final_with_Appendix.pdf, accessed November 2017.