February 23, 2022

A Quick Glance at Investing in Pistachios

by Sara Wensley

Director, Growth and Marketing

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A Quick Glance at Investing in Pistachios
FarmTogether's Sierra Foothills Pistachio Orchard - Crowdfunding Property
Despite California’s booming pistachio market, the nut is actually not native to the area. In fact, pistachios are relatively new to the state. Let’s explore how the pistachio went from ancient wonder to modern commodity.

Pistachios have been revered as a symbol of wellness and robust health since ancient times. In fact, archeologists have found evidence of human pistachio consumption dating back to 6750 BCE, and cultivation of the pistachio tree beginning as early as 2000 BCE. The Hanging Gardens of Babylon, one of the Seven Wonders of the Ancient World, are fabled to be planted with pistachios.

Today, pistachios are enjoyed by many cultures worldwide, playing a prominent role in healthy diets given their immense nutritional benefits. This role continues to increase as more consumers incorporate plant-based proteins into their diets. From 2016 to 2020, California, the world’s leading pistachio producer, saw a 56% growth in pistachio acreage. Today, they are the second-highest exported commodity from the state.

However, despite California’s booming pistachio market, the nut is not native to the area. In fact, pistachios are relatively new to the state.

Let’s explore how this nut went from ancient wonder to modern commodity.

From Ancient Wonder to Modern Commodity

Native to the Middle East, pistachios were first brought to the Western world when traders brought the nut to Italy and the larger Roman Empire around the first century AD. In the 7th century AD, the spread of Islam also brought certain culinary customs and traditions of the Middle East, including the consumption of pistachios, to a broader audience around the Mediterranean.

Despite their growing popularity in Europe and other parts of the world, however, pistachios were relatively uncommon in the United States until the 20th century. In 1929, botanist William E. Whitehouse traveled to Iran to select varieties of the nut to plant and trial in California. Out of the dozens of varieties he selected, only one type, Kerman, was successful.

Fast forward to the present, and the California pistachio industry has grown at a rapid rate, with the state now leading the world in pistachio production.

Pistachio' Unique Climate Suitability

Pistachios have the narrowest environment requirements of any commercially grown nut crop. They are unique in that they thrive in arid climates with saline soils – soils with soluble salts that typically impede most plants’ growth. This means pistachios are often suitable for growth in regions that are too dry for more water-intensive crops. On the other hand, pistachio trees also need cool winters at or below 45° F to remain dormant, a necessary process to conserve energy and nutrients to grow fruit the following spring.

As a result of these unique needs, California's southern San Joaquin Valley is perfectly suited for pistachio production and has become a popular region for pistachio growers; in fact, 96% of the state's pistachio farms are located in the five-county area.

With 485,000 acres of pistachios, California accounts for 48% of the world’s supply and 99% of U.S. production. Arizona is also seeing an increase in acreage, with 9,500 acres now grown to pistachios.

Delicious and Heart-Healthy: Pistachios Unique Flavor Profile

Long prized for their flavor, texture, and suitability for cooking, pistachios were originally used as an expensive addition to baked goods. After World War II, however, pistachios started to become a popular snack food given their health benefits; pistachios are known for being full of healthy fats, fiber, and vitamins.

More recently, researchers have discovered that pistachios can help lower glucose and insulin, and there is evidence that they may help control blood sugar levels. Diets with pistachios are also linked to considerably lower cholesterol and blood pressure.

Pistachio consumption in the U.S. has tripled over the last two decades as consumer preferences have increasingly emphasized plant-based proteins and snack foods.

Pistachio Profitability and Global Demand

Domestic and global demand has kept prices for CA pistachios on a sustained bullish run for several years, despite considerable increases in supply. The last decade, in particular, has seen immense growth in pistachio production, as growers flock to the nut for their robust profitability and drought tolerance. In the 2020-2021 growing season, global pistachio harvest topped 1 million metric tons, a 54% increase from the previous season, with American farmers bringing in the largest share of the supply.

The United States is not only the leading producer of pistachios, but it is also the leading exporter, mainly supplying to China, the European Union, and the United Kingdom. As a signal of growing international demand, exports from 2016 to 2021 exceeded average annual shipments between 2009 and 2015.

Innovations in Pistachio Breeding

Advances in pistachio breeding are rapidly changing the industry. Until recently, most American pistachio farms were planted with the Kerman cultivar. Seeking to reduce the reliance on only one pistachio variety, the University of California, Davis (UCD) launched a pistachio breeding program in 1990, which introduced new varieties for commercial plantings.

The most popular of the UCD cultivars is Golden Hills due to its high-quality, early harvest date, and slight yield advantage over Kerman. Many growers see it as a more robust climate-smart choice, as it requires a shorter and less intense cold period than Kerman. The popularity of this cultivar is growing quickly; 65,000 acres in California were planted with Golden Hills in 2020, compared to just 3,000 in 2012.

Pistachio Investors are Seeing Green

As consumers increasingly gravitate toward healthy, plant-based options, the pistachio market is experiencing robust growth. Domestic and global demand has kept prices for California pistachios, in particular, on a sustained bullish run for several years, despite huge increases in supply. These qualities and more make mature pistachio orchards a valuable asset for farmland investors.

At FarmTogether, we feature a variety of opportunities to invest in pistachio properties on a regular basis. We are excited to share these opportunities and our vision for agriculture with our investors.

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Disclaimer: FarmTogether is not a registered broker-dealer, investment advisor or investment manager. FarmTogether does not provide tax, legal or investment advice. This material has been prepared for informational and educational purposes only. You should consult your own tax, legal and investment advisors before engaging in any transaction.

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