A global challenge
California’s almond crop has been seriously affected by long term drought, resulting in a global shortage. Sara Cimetta reports:
The global confectionery and sweet bakery sectors have been hit hard by California’s worst ever drought, lasting since 2011, which has devastated the production of almonds. The result has been scarcity and rising almond prices worldwide.
Sylvia Kälin, head of corporate communications for Lindt & Sprüngli in Switzerland, says the shortage has helped increase the price of chocolates that include almonds, at a time when cocoa prices are also rising. “Even if we always attempt to counter – at least partially – these challenges with ongoing increases in efficiency and volume, this situation may result in further price increases on the side of the chocolate industry,” she tells Confectionery Production.
Nuts, and particularly almonds, are one of California’s most abundant and expensive crops. It produces 80 per cent of the almonds used across the planet in everything from snack bars, marzipan and biscuits to smoothies, and no one can deny the nuts’ compatibility with chocolate. However, the use of almonds in confectionery goods has always come at a high price, and that price, both monetary and environmental, is growing higher because of the drought.
The facts
According to statistics from the US Department of Agriculture (USDA) National Agricultural Statistics Service, the price received for the commodity in the US was €3.22 per pound on 22 May, up from €2.95 one year ago. The same data shows the price of almonds has risen steadily and drastically over the past four years throughout the drought, up from €1.83 per pound in 2011, the first year of drought. In 2010, before the drought, the price of a pound of almonds was €1.64.
California’s almond crop uses eight per cent of the state’s agricultural water consumption, according to the Almond Board of California. The figures add up – the almond crop alone uses more water per year than the entire city of Los Angeles. In a state where water has become the most precious commodity, these statistics have prompted criticism of almond producers, who continue to fight claims of excess water consumption. Not only that, but because of the intense drought, the US Department of Agriculture is predicting that the 2015 California almond crop will produce eight per cent fewer almonds overall – 1.85 billion pounds down from 2.01 billion pounds in 2013. Yield is estimated at 2,080 pounds per acre, which is three per cent less than last year.
Additionally, should the drought continue, it may mean disaster for the state and its almond crops. In December 2014, the National Aeronautics & Space Administration (NASA) released data announcing the state would need more than 11 trillion gallons of water to end the drought – and that California only has about one year’s worth of water left in its reservoirs.
While this water will be needed for human use and consumption first, it is uncertain how well California’s agricultural crops will prevail, if at all. Not only that, but NASA says a few storms would not be enough to take the state out of its drought conditions and that recovery would take years.
Information provided by the Almond Board of California states that almond growers have been trying to find ways to reduce water consumption by the crops while still increasing the area they are grown in. Carissa Sauer, manager of industry communications for the Almond Board of California, says the drought is worse in some parts of the state than others.
“Due to different conditions through the Central Valley, almond grower water allocations vary, and those with less access are using deficit irrigation [watering less than usual, but enough to keep the tree alive] as advised by University of California researchers and farm advisors,” says Sauer.
Water is allocated in such a way that each tree has the chance to make it through the drought in the healthiest way possible, although some trees are definitely experiencing stress.
More than 70 per cent of almond growers use a demand based system instead of scheduled irrigation, meaning they only provide water to the trees depending on how much they need, according to Sauer. Due to this practice and a greater awareness overall, farmers have managed to increase water efficiency by 33 per cent per pound of almonds grown since before the drought over the past 20 years.
“Some growers are making up for unavailable surface water with groundwater, others are purchasing water through the water market at
a hefty price, while others still are pulling up their least productive, older almond trees and diverting the water to keep the younger trees alive,” says Sauer.
However, because the almonds represent a significant investment in California’s economy, the considerable amount of water they still use is tolerated from an economic standpoint. Almonds, in spite of the drought, bring in more than €10.1bn to California’s economy annually, according to the Almond Board of California. Not only that, but the nuts represent California’s number one economic export on a value basis – more than €2.2bn – and the industry employs more than 100,000 people.
According to the Almond Board of California, farmers are trying to find new ways to grow more of their crop using less water. The demand for almonds and almond products has been rising steadily throughout the past decade, since their rise in popularity as a healthy snack food.
Market reports
Sauer cites market report data saying that chocolate and chocolate with almonds saw moderate growth in sales worldwide last year compared to a year earlier. Chocolate was up 2.6 per cent overall and chocolate with almonds was up 2.4 per cent.
In 2014, the Almond Board of California commissioned consumer research conducted by the US-based advertising and research agency Sterling-Rice Group. The survey included 5,400 participants from eight different global markets, and indicates almonds were the number one ingredient selected for inclusion in consumers’ ideal chocolate product. Additionally, among consumers whose most recently bought chocolate bar included nuts, almonds were the nut of choice for 63 per cent of occasions.
Unfortunately, this increase in sales and taste for almonds could be threatened by the drought if prices continue to rise. Kälin explains that it is not only the supply of almonds, but also of hazelnuts, that has been troubling the confectionery and chocolate sectors. “The substantial price increases in important raw materials (cocoa beans, cocoa butter, hazelnuts, almonds, milk powder, etc), registered last year, and partially also this year, as of 2014, led to some punctual and moderate price increases on selected products from the Lindt & Sprüngli portfolio in all markets,” she says.
“Depending on the still challenging raw material price situation, additional price increases have been implemented by Lindt & Sprüngli in most markets this year,” she adds.
Major chocolate companies Mars and Hershey have documented incremental price rises of eight per cent and seven per cent respectively. Hershey first made its price hike announcement in July 2014, blaming the rising cost of raw materials and packaging, as well as shipping costs for the necessary increase. Neither Mars nor Hershey had raised prices before then since 2011, despite the surge in the price
of cocoa in the past five years.
However, Kälin says she is confident that rising prices will not affect consumer desire to buy chocolate. “Our experience is that in difficult times, consumers tend to switch even more frequently from quantity to quality, ie premium quality products. They prefer to buy less mass chocolate while treating themselves from time to time with a real premium quality product providing them with an exclusive taste and quality experience at a fair price for real value.”
Conclusion
Data from US stock market Nasdaq indicates that cocoa price futures will continue to rise, spiking particularly around October 2015, and Sauer believes the almond industry in California will weather the drought and bounce back.
“The almond industry will persevere and, with a long track record of funding research and adopting innovative solutions, the Almond Board will help facilitate solutions that will make a difference for almond growers and the California agricultural community over the long term,” she says.
California’s Mediterranean climate, which is essential for growing almonds, will ensure it remains the world’s top exporter of almonds unless the drought deepens to drastic levels, she concludes.
