California situation, page-74

Looking at the details in those figures, the almond yields were down about 7% compared to last year.

So it would seem that the 5% estimated increase in the total crop (v last year) is down to the huge number of almond trees planted in 2013 and 2014, back when the almond price was surging.

Of course, you have to take these figures with a grain of salt. As we saw with Select Harvests earlier this year, chaotic weather can impact nut development, and I think this could also be an issue in those northern parts of California that were hit by extreme weather earlier this year.

Worth pointing out, the high almond price hasn't been the only thing encouraging farmers to plant more almond trees in California. Indeed, I believe almond acreage in California hit a new record last year, at which point the almond price had fallen substantially.

I think the main driver of this has been the absurdly low interest rates in the US. Almonds are a high value crop, and even given the low almond price, it is still profitable to use borrow money to expand almond acreage.

But the spate of plantings we have seen in recent years will probably come to an end in 2017.

This is partly down to higher interest rates: The US Federal Reserve has raised interest rates three times since December last year, and they have indicated they intend to increase rates one more time before the end of the year.

But another significant issue that is likely to impact the expansion of almond acreage has to do with labour costs.

There was an article on this topic that I think is worth a look on one US news site earlier this week.

Reports on this topic of agriculture labour costs have been fairly frequent this year on US news sites, and most of these articles conclude that the high labour costs will simply encourage farmers to plant more high value crops at the expense of low value crops.

But this more recent report on the subject is a bit more circumspect, pointing out that labour issues are problematic even for growers of high value crops such as almonds.

The article quotes some experts on the topic:

Anti-immigrant sentiment, a decline in illegal immigration and an aging population among existing migrant workers are all feeding into a growing labor crisis.

“Follow-the-crop migrants have almost disappeared,” Martin said. “Meanwhile, the ag-related jobs in this state are increasing, not decreasing. Agriculture has to find a way to respond to this slowdown.”
With dwindling supplies come higher costs.

“We’re seeing the cost of labor going up even without the minimum wage going up,” Sandoval said.
Even so, raises to the minimum wage are on the way too. Legislation in states like California and Washington will boost the wage floor to levels Martin described as unprecedented. (Colorado is also in the process of phasing in higher minimums.)

California’s current glide path tops out at an hourly minimum of $15 by 2023. In addition, the state passed an overtime bill that will put added strain on agricultural employers. Labor already makes about a third of the cost to produce high value crops.

So even now labour costs are one-third the cost of production of growing tree-nuts, and given the increases in the minimum wage, represented in this chart, you would have to assume that is going to climb higher. It is hard to see how that isn't going to flow on through to a higher almond price.