The market for U.S.-grown treen nuts will continue to remain bullish for both the mid- to long-term, thanks mostly to explosive consumer demand from an increasing middle-class in China.
Those were the findings of a recent report from Rabobank's International Food & Agribusiness Research and Advisory group that looked at the future of the U.S. tree nut industry.
"It's been a good story for growers," says Karen Barber, assistant vice president and senior agricultural analyst with FAR in Fresno, Calif.
Record exports to China have absorbed much of the increase in U.S. tree nut production during the past five years, resulting in high grower returns.
At the same time, most notably in the pecan industry, processors have had to choose between exporting to China and honoring long-standing relationships with domestic buyers.
During the 2009-10 market year, for example, pecan exports jumped 61 percent over the previous year and totaled nearly 62 million pounds. China accounted for more than half of all U.S. pecan exports.
Vicky BoydChina accounted for 37 percent of U.S. walnut exports in 2010-11During the 2010-11 marketing year, walnut exports to China increased to more than 98 milliion pounds and were up 132 percent over the previous year. China now accounts for 37 percent of all U.S. walnut exports.
Although the almond export market is more diversified than the other tree nuts, China still accounts for 14 percent of total exports.
During the 2010-11 marketing year, almond exports to China jumped 26 percent, totaling 168 million pounds.
With all of the three nuts, most of the exports were in-shell.
The nuts are then processed in China, where labor is much less expensive than in the United States.
Chinese buyers also are going directly to large growers and bypassing handlers in many cases.
Barber says a handful of Chinese buyers have become registered walnut handlers to comply with the California Walnut Board marketing order.
Because the pecan industry is less vertically integrated than the almond or walnut industry, Barber says she knows of one large pecan processor that went out of business. Smaller processors also have had to change and are faced with higher processing costs and shrinking margins.
The buying-direct trend has yet to hit the pistachio market.
Nevertheless, sales of pistachios to China during the 2010-11 marketing year were up 33 percent from 2009-10. Shipments totalled nearly 80 million pounds.
As China continues to gobble more of the U.S. production, prices domestically also have risen.
"There will continue to be pressure on the other demands and other markets," she says. "It will depend on who's willing to pay the higher prices."