Almond acreage

The almond harvest has commenced in most parts of California. Due to the drawn-out bloom we saw earlier this year, the harvest this year is likely to take longer than in previous years.

In theory, this could increase the risk of weather-related disruption to the almond harvest, but in practice this is unlikely: you'd have to go back to 1989 to find a year in which the rainfall during the harvest period was heavy enough to cause any kind of disruption to almond growers harvesting their crop. The harvest-time weather in California tends to be fairly predictable, which is one advantage Californian almond growers have over their Australian counterparts.

This year, one of the key numbers to keep an eye on with respect to the Californian almond industry will be the growth of almond acreage in the state.

There are good reasons to suspect that almond plantings in California will be under pressure this year: higher interest rates, surging labour costs, as well as a lower almond price -partly due to the strength in the US dollar, but compounded by the tariffs issue- are all likely to have a hand in this.

But there is another factor that has come into play that could also reduce the growth of California's almond acreage this year: we might be starting to see farmers in California substitute almonds for another type of crop, olives.

During the drought years in California, there was some speculation in the media that the extreme dry could result in farmers start to replace almond trees with less thirsty olive trees.

The logic seemed sound: like almonds, olive oil is a high value crop, but olive trees require much less water than almonds.

But despite the talk, nothing really happened: at the start of 2018, there were only 40,000 acres devoted to olive oil in California, compared to over 1,000,000 acres of almond orchard.

However, it does look like the tariff issue in the US might be finally starting to shift the economics in favour of olive oil.

According to an AgFax report last week, one company, California Olive Ranch, has planted over 2000 acres of olives just this year:

California Olive Ranch, the pioneers of premium and affordable extra virgin olive oil, celebrates their 20th anniversary with an announcement of the largest olive tree planting in California and the U.S. to date. Just this year alone, the brand will have planted 2,200 acres, bringing the number of total acreage in California to 3,200 since 2016...

The US produces around 80% of the world's almonds, but less than 1% of the total global olive oil supply. Yet the US apparently consumes over 10% of the worldwide olive oil supply each year, and at a rapidly growing rate. Thus, olive oil produced in the US is nowhere near enough to meet even local demand: in contrast to almond farmers, olive growers in the US have no reason to worry about tariffs.

Last year saw the smallest increase in new almond tree plantings in California since 2003, according to the CDFA almond acreage report earlier this year.

The signs are that the number of new plantings is probably going to be even lower this year, and this would especially be the case if the 'substitution' impact starts to come into play in a significant way.