FarmTogether Q3 Tree Nut Market Outlook

Demand for healthy and convenient food is on the rise, and plant-based proteins are more popular than ever. Tree nuts, in specific, have surged in production over the last several years as global consumer demand for nutrient-rich, “snackable” proteins soar.

As we wrap up the 2021-22 crop season, let’s take a closer look at the current market for each of the tree nut crops that we invest in here at FarmTogether – almonds, walnuts, pecans, hazelnuts, and pistachios – as well as the industry outlook for the 2022-23 harvest season.

Tree Nut Market Update

Almonds

As predicted by the July USDA California Almond Objective Measurement Report, the 2022 almond harvest – which has been well underway since August – has been lighter than last year’s harvest. This drop is largely attributed to the impacts of the late spring frost in California.

However, this lighter crop is actually a welcome sight from a pricing perspective. Unsold “carry-in” from last year’s almond harvest is still influencing the market, so the smaller crop is helping to alleviate some of the downward pressure on prices caused by persistent high supply.

Thus far, the 2022-23 crop year has started off on a positive note. August set a new almond sales record of 195 million pounds, up 42% compared to 2021, while almond shipments saw a record-setting month totaling 228 million pounds.

Hazelnuts

Hazelnut prices are down from record-setting 2021 prices, largely driven by export issues and a large crop forecast in Turkey. However, despite these headwinds, the hazelnut market is anticipated to grow considerably during the next six years, with industry experts forecasting demand to increase at a compounding annual growth rate (CAGR) of 8.1% between now and year-end 2028; today, the current U.S. hazelnut market is estimated at $416 million, with a projected value of $720.9 million by the end of 2028. This growth will primarily occur in Oregon, which produces 99% of the country’s hazelnut crop and is the location of all of FarmTogether’s hazelnut properties.

Europe is the leading hazelnut-consuming region due to the increasing demand for hazelnuts from the chocolate industries of the region, especially in chocolate spreads such as Nutella. North America, however, is also expected to see an increase in hazelnut demand with the continued marketing of Nutella, new CPG product development, and an upswing in demand for healthier products. Studies have shown that Hazelnuts contain rich dietary sources of protein, unsaturated fatty acids, and linoleic acid, as well as a higher concentration of alpha-tocopherol (vitamin E) than most other nuts. North America is expected to dominate the market by 2027.

Pistachios

Pistachio growers around the Central Valley are reporting a lower-than-expected pistachio harvest, which began in August. This drop is potentially due to the late season frost, insufficient chilling hours, or simply the continuation of an alternate-bearing trend with many orchards coming off a higher-than-normal year in 2021.

However, this smaller crop yield, coupled with an increasing global demand for healthier snacks, should provide positive support for prices moving forward. Today, pistachio prices are holding at $2.25 - $2.50 per pound.

California, in particular, is well-positioned to benefit from rising prices. The state is a dominant force in pistachio production, accounting for more than 99% of the U.S. supply. In fact, it is estimated that California growers will produce 6.9 billion pounds of pistachios over the next five years, which is 2.4 billion more than they produced in the previous five-year period.

Walnuts

Walnut production is predicted to decline slightly in the 2022-23 season; the current crop is estimated at 720,000 tons, down 1% from last year’s 725,000 tons. This lower supply likely increased grower prices to $1,410 per ton, compared to $1,220 per ton in 2021, increasing the value of production for growers.

With harvest well upon us, there remains ample opportunity to focus on new marketing initiatives, drive new product innovations, and grow additional market segments.

Pecans

The U.S. pecan harvest for the 2022-23 season has nearly begun, and early market prices have been encouraging.

Prior to both the trade war with China and the economic impacts of the COVID-19 pandemic, China represented the largest market for U.S. pecan exports. While the export market has faced recent challenges, however, pecan growers have done an outstanding job in helping to build domestic pecan consumption. In fact, between the 2017-18 growing season and the 2020-21 season, pecan growers saw a 92% rise in domestic shipments. Demand for pecans is expected to continue to grow over the next ten years, with growers looking for new regions to plant pecan trees.

Despite headwinds ranging from late season frosts to global chain supply disruptions, the U.S. nut industry remains resilient. The country’s track record and history signal that it will remain a critical force in global agriculture going forward.