California’s Almonds a Hit in Soviet Union : Provides Some Relief for Growers Faced With Glut

In Moscow, Russians say nyet to Star Wars but da to California almonds.

To the joy of Sacramento’s hustling almond dealers, the Soviet Union almost overnight has flowered into a major market.

“Russians grind up almonds and put them in chocolate bars,” says Walter Payne, vice president for marketing at California Almond Growers Exchange. “They were using hazel nuts from Turkey, but we got in when Turkey had a bad crop.”

In the 1984-85 crop year ending June 30, Soviet traders bought 45 million pounds of California shelled almonds, up from 11 million the year before. Prospects for the 1985-86 crop year that started on July 1 look even better.

That’s the good news.

Worldwide Almond Glut

The bad news is that the Almond Exchange needs every sale that it can get, because its 5,800 grower members are in deep trouble.

The world is wallowing in a glut of almonds. Exports from California are expected to set records this year, both in dollar receipts and volume. But the huge sales are achieved at prices too low for farmers to make money.

“It’s better to ship than store,” Payne says. “But we’re doing it at prices well below the cost of production.”

“Some farmers may be pulling out their trees this winter,” guesses Pete Yamamoto, a Turlock grower. Yamamoto chairs the California Almond Board, a federal agency that monitors American marketing and research.

In 1980, the wholesale price for “select sheller run” almonds, one benchmark in the industry, was $1.88 a pound. The return to growers was as high as $1.50. This year “select sheller run” goes for only $1.04. Growers get between 65 and 75 cents a pound.

Yamamoto says the production cost averages between 80 cents and 90 cents a pound. It varies from farm to farm, depending on the interest rates at which growers have borrowed and their general efficiency.

Almonds are a mechanized crop, with comparatively low labor costs. Yamamoto says growers cover part of the deficit by delaying the purchase of new machinery.

But, he notes, “You can only keep on repairing equipment so long.”

The world almond glut stems partly from an explosive production increase in California--the only American state where almonds are grown commercially. Last year’s crop of 587 million tons was the largest ever. The 495-million-ton crop this year is the second largest.

Abandoned Declining Crops for Almonds

California came out of World War II with about 91,000 acres of almond orchards. In the 1960s and early 1970s, almond sales and prices took off. Growers abandoned declining crops like peaches and put in almond trees.

This year the state has about 395,000 acres of almond orchards, more than four times the 1950 acreage. They account for more than 60% of the world’s production.

Inevitably, big guys like oil and insurance conglomerates got into the game, but Payne says about 80% of California’s almonds still are grown on family farms.

The surging California output is more than the United States can eat. To cope with the explosive growth, the Almond Exchange plunged into foreign trade and scientific research into making almonds more attractive.

Today about two-thirds of the California crop is exported, with 88 countries counted as markets. In terms of dollar sales, almonds now are the state’s top food export.

American Market Recovering

West Germany, expected to take 90 million tons this year, remains the largest foreign buyer. The Soviet Union last year edged out Japan for second place, though Japan is expected to buy a record 37 million tons in the 1985-86 crop year.

The American market has been flat for the last three years, but Payne says it began firming last spring.

“Almonds have a high-price, high-markup image,” says Steve Easter, the exchange’s vice president for governmental relations. Now the exchange is trying to offer retailers incentives for markdowns.

The hope is for domestic sales of about 150 million pounds this crop year, compared to 138 million pounds in 1984-85.