The looming almond crunch

The Californian almond harvest is currently winding up, according to the Blue Diamond update yesterday, and presumably it won't be too long before we find out which of those two divergent crop estimates earlier in the year was the more accurate.

At the end of last week, Merlo Almonds had an almond price update, with the Nonpareil price now listed at $2.82 USD per pound.

That equates to $4.21 per pound in Australian dollars at the current exchange rate, or $9.26 on a per kilo basis. Remember, back in August the company stated that they had sold most of the crop this year in the $8.60-8.70 range, so it seems the local almond price has risen by some 6-7% since then. I guess that explains why the share price was buoyant yesterday, despite the market slump.

I thought it was worth devoting some time to the situation in Spain, as there has been some terrible developments impacting almond growers in many parts of that country over recent weeks.

You might have seen the news reports last month on the devastating floods in Spain, resulting in thousands of hectares of agricultural land being flooded.

The map below shows the areas impacted by the torrential rain that hit Spain in the second week of September. Many of the largest almond producing areas of Spain, including Castilla La Mancha, Murcia, Valencia and Andalucía were partially or completely drenched by the storms.



Some trees were torn down by the storms, but as the storms hit during the almond harvest, a more significant problem is that farmers in flooded areas may not be able to complete their harvest. The Spanish crop projections for the year were already fairly pessimistic, as a result of frost damage in early Spring.

And yet there is another problem causing even greater consternation for some Spanish almond growers: the dreaded Xylella Fastidiosa bacterium.

As was noted here a while ago, this tree disease was first detected in parts of Spain in 2017, and it has since become a major problem in the south-eastern Spanish province of Alicante.

The text below is from an update of the situation in Spain on the Freshplaza website a few hours ago (bear in mind the statement below that Spain is the world's second largest producer is incorrect, it is the third largest).

...A lethal Central American plant disease that is devastating olive trees in southern Italy is now killing almond trees in southern Spain. This is a serious development, being a true outbreak threatening Europe’s crops.

Formerly mostly restricted to southern Italy’s Puglia region, where tens of thousands of olive trees are dying from an infection by the Xylella fastidiosa bacterium, now the disease has moved to the rugged terrain of Alicante province. There is no cure for the disease, which in the US is known as Pierce’s disease.

Almond trees mysteriously started to show signs of sickness several years ago and in 2017 scientists declared they had identified the cause as Xylella fastidiosa. Since then, about 521 square miles in Alicante have been designated as affected. To contain the outbreak, the European Union is that demanding that infected trees and other trees within a 320-foot radius be cut down. So far, about 1,300 sick almond trees and thousands of surrounding trees have been cut down.

Spain is the world’s second-biggest almond producer, after the United States. Alicante’s big almonds are highly valued as nuts to eat and are used in a variety of dishes.

On a recent summer morning, Elias Andres, a 42-year-old almond farmer and president of a farmers’ cooperative, walked over a terraced field where he had been growing almonds until all the trees were cut down this year due to Xylella.

Xylella is considered one of Europe’s biggest agricultural threats, with the potential of widespread devastation. The pathogen this year was found in two decorative olive trees in mainland France and it previously had been found on Spain’s Balearic islands and on Corsica. It’s also been found in Italy’s Tuscany region and in Portugal.

As noted above, when a tree or plant with Xylella is identified in Europe, EU regulations stipulate that all vulnerable plants within 100 metres need to be removed.

This policy has been causing some contention: one farmer called Cuart, who was quoted in another recent article on the same topic, claims he was forced to remove some of his almond trees that were mistakenly identified as being infected by Xylella, which left him out of pocket, as no compensation is provided. The farmer then goes on to note that he wasn't the only one in the area to be impacted by the policy:

...Cuart said a local butcher had 3,000 trees cut down even though the trees were well looked after, with regular pruning and fertilizing. “They came in and tore out all the trees,” he said. “It’s a tragedy.”

Despite his misgivings, he said the disease was a catastrophe. “It’s advancing, spreading. This is what is frightening. They say it cannot be stopped,” he said. “You can lose a whole life’s work when they cut down all the trees, even the healthy ones around you.”

Once a tree has been identified as being infected and removed, the impacted farmers are not allowed to replant the trees for five years. It isn't hard to imagine that this is likely to have an adverse impact on Spanish almond production over the long term.

In fact, growers in all three of the largest almond producing countries in the world have been under pressure lately.

In Spain, the problem is the aforementioned Xylella tree disease. In California, the tariff situation and strong US dollar is putting pressure on almond growers. Meanwhile, in Australia, sky-high water prices is influencing investment decisions in the agricultural space, leading some investors to steer clear of planting almonds, as was noted in this article in the Financial Review last month.

It increasing looks as if the world might be faced with a major shortage of almonds two or three years from now.