Vicky BoydThe U.S. almond industry has a diversified export market and doesn't rely on any one country too heavily.Business is booming for the U.S. tree nut industry, with rising grower prices, larger crops and ever-increasing demand during the past five years.
But with stagnate global economies and a potential for increased competition, the industry should carefully consider expansion and err on the side of caution.
Those recommendations came from a recent report published by Rabobank, New York, and written by Karen Halliburton Barber in Fresno, Calif.
One large unknown looming over the tree nut industry is China, the largest export market.
In 2012, for example, the U.S. lost market share for pecan exports to China as South Africa's industry provided a viable alternative to record-high U.S. prices.
South African pecan production more than doubled that year after a short 2011 crop. Between 2010 and 2012, production increased 44 percent.
As a result, U.S. pecan exports declined, sending U.S. pecan prices crashing.
Barber wrote that it should send a "wake-up call and a significant lesson for the entire U.S. tree nut industry's dependence on China as its largest buyer, underscoring the importance of diversifying its customer base.
The U.S. almond industry, on the other hand, has a more diversified customer base and faces only minimal competition from Australia and Spain. Demand is an unknown for the almond industry.
For walnut growers, China poses competition as the largest producer globally.
So far, China's domestic demand continues to exceed production, and arable land is limited.
Nevertheless, China's burgeoning walnut industry is on U.S. producers' radar.
The main competition for U.S. pistachios is Iran. But that country's production is expected to continue to decline in the main production region of Kerman during the next three to five years because of serious water problems.
Although plantings have expanded elsewhere, they are expected to take at least a decade to offset the continued overall decline.
Food safety issues, particularly around aflatoxin, remain a competitive issue. Iran has been working to improve food safety and speed hulling to reduce staining.
Given these factors, Burton said the U.S. tree nut sector appears in a good competitive position.
The big unknown is when will the industry move from its rapid growth phase, where production and prices have risen in unison, to a more mature phase. During that period, supply catches up with demand, and the normal laws of supply and demand equilibrium dominate.