Economics of Walnuts in California

Introduction

Walnuts accounts for a greater percentage of fruits and nut crops in California (Ramos 2). Nearly all walnuts produced on a commercial basis in the United States come from California, thus makes a great contribution not only to the economy of the state but also to the nation at large.

The first variety of walnuts grown was the hard-shelled English variety before the soft-shelled varieties were introduced in 1860 and 1870. Examples of varieties grown in California include: franquette, Payne, Eureka and Hartley. Walnut orchards mostly do well where the soils are very deep and the climate is favorable (Ramos 3).

Over the last decade, the production of walnuts has tremendously increased. This is occasioned by awareness of various means of production and health benefits derived from consumption and increased demand in foreign markets (California Walnuts.org 5). The Walnut Marketing Board has been controlling much of the California walnut production, while Independent processors and buyers have been playing a crucial role in marketing and to some extent production. This makes them key to the industry’s development (Hasey 3).

According to a report released by California Agricultural Statistics (CASS) in the late May 2007, acreage under walnuts in the early 1920s was about 34,138 and this has grown in leaps and bounds to about 243,000 acres. The high demand especially from Europe, Asia and Middle East has provided impetus for quality improvement of the crop.

This has been enhanced by technological development by way of research and improvements in marketing efforts in the industry. In addition, the walnut industry has been profitable in present years. As a result, farmers have increased planting acreage (Diamond foods 1). This essay will explore the economics of walnut establishment and production in California. In particular, the paper will be narrowed down to issues, trends and challenges facing the walnut industry in California.

Walnut Industry in California

Walnuts are among the top agricultural produce in California. Nearly all the walnuts produced in the U.S. come from this state. Therefore, walnuts contribute significantly to the economy of California and to the country’s trade balance of trade (Hasey 4). The competitiveness of the California’s walnut industry is attributed to its ability to steadily produce and market high quality products.

The industry’s capacity has been enhanced through technological advancement by means of research and harmonization of marketing activities. Nonetheless, the industry like other agribusiness sectors is being challenged by the rapid and unpredictable demands of the current society, for example, increased urbanization, environmental degradation and global market volatility (Karen5).

Walnuts have been grown in California for over three centuries since the Spanish invasion in mid 1860s. The first commercial nurseries were established in Santa Barbra and Nevada by Sexton and Gillet respectively.

Sexton produced soft shell walnuts which were well acclimatized to the southern conditions. On the other hand, Gillet produced frosty hardy variety imported from France and were well adapted to Northern conditions. Even at the moment, the walnut varieties grown in California are from the above two early varieties (Hasey 7).

Initially, farmers grew walnut orchards with plantlets. As a result, yields and quality were compromised by non-uniformity of trees. Rigorous scientific research and development saw the introduction of vegetative propagation which resulted in more consistent and uniform orchards. This was embraced by the whole industry (Hasey 8). In the state of California, walnuts did very well in areas where there were suitable climate and deep soils.

In the early 1920s, the overall walnut acreage was estimated to about 34000 acres, mostly in the southern region. The industry continued to grow and by the late 20s the total acreage had expanded to over 100000 acres, still mostly in the southern region. Over three quarters of this acreage consisted of young trees, signifying increased output in the future. In overall, California accounted for more than half of the U.S. production (Klonsky 3).

However, the walnut acreage in the Southern region started to decline in the 1940s and almost disappeared in the 1960s. This was attributed to numerous reasons, especially 2nd world war and growth in urbanization. In addition, citrus was more marketable and lucrative during this period than walnut. Thus, many farmers replaced walnut with citrus. Nonetheless, the acreage began to increase immediately after the 60s, largely in the rivers of the central valley.

The industries’ marketing trend

In the earlier days, the growth of new and disorganized walnut industry was hindered by fluctuations in price and marketing challenges. Farmers reacted by forming local cooperatives. The first cooperative was formed in the late 1880s. Several years later, other cooperatives were created, and a central union was established to regulate prices. Nevertheless, rivalry among the local cooperatives persisted. For this reason, the California Walnut Association was set up in the early 1990s to assume the marketing role for its members (Hasey 8).

Up till then, the industry faced stiff rivalry from French importers in the local market. However, by early 1920s the industry had captured more than 50 percent of the U.S. market. California’s walnut industry continued to grow to capture a larger share of the U.S. market. The U.S. Walnut Marketing Board was formed in 1962 to regulate product quality and market. The board moved its base from Los Angeles to Stockton and changed its name to Sun-Diamond Growers after a series of merger with other cooperatives (Hasey 9).

The growth of the industry is also attributed to independent buyers and handlers who provide an alternative economic option to numerous farmers. Initially, cooperatives controlled over 90 percent of the market. However, things have significantly changed. Nearly half of the market is currently controlled by the independent sectors. The cooperation between the two groups has also contributed to the success of the industry (Klonsky 3).

California’s walnuts are traded in a vibrant market. Even though U.S. remains its main market, large quantities are exported. Currently, nearly 40 percent of the products are sold in the global market. As a result, the industry is increasingly becoming exposed to global competition.

The industry mainly attributes their success in the global market to promotion funds provided by the federal government (Farm express 4). However, Karen Klonsky attributes this success to a number of factors(4). The first factor is strict adherence to quality measures put in place and followed to the letter by farmers.

This is observed throughout the production and processing stages. Second, farmers have incorporated various forms of technologies in the production and processing of walnuts in order to ensure high quality (Karen 5). Third, farmers have put in so much investment in storage facilities in order to maintain the requisite quality of nuts after processing. The accepted moisture content of the nuts is a maximum of 8%, which is highly recommended by experts (Karen 6).

The presence of Californian walnuts in various foreign markets across Asia and Europe has increased the demand for the product. The industry is recording more exports than it did ten years ago (Farm express 6). Paradoxically, much of the exports go to Asia, which is the leading world producer of walnuts.

The California Walnut Commission is culpable for the outstanding performance in the global market. The group was launched in the year 1987 through a California state law. This commission has developed a number of strategies and programs such as the Market Access Program, which focuses on introducing various products into the international market. The strategies also focus on the need to expand existing markets for various products by increasing awareness and quality of products (Farm express 7).

The European market has been a huge export zone for both in-shell and shelled nuts. However, market forces such as diverse consumer preferences led to higher demand for shelled walnuts compared to demand for in-shell walnuts. This resulted to increased export of shelled walnuts to the European market, which boosted the growth of the local industry in California. The German market is expanding and has developed into a leading destination for Californian walnuts (Farm express 7).

The strategies applied by the commission were also very successful in opening up the Asian market. The Market Access Program has facilitated the penetration of the walnuts into the South Korean market. South Korea is one of the largest importers of the California walnuts in Asia.

The future of California walnuts in the South Korean market received a huge boost in the year 2007, when the United States of America and South Korean governments signed an agreement that would lower the cost of trading between the two countries (Farm express 8). Additionally, Californian walnuts are a huge international brand that has helped to promote the culture of people in the state, as well as attracting foreign investors (Farm express 9).

Conclusion

Growing walnuts contribute significantly to the California’s economy and to the country’s balance of payment account. The walnut industry in California has grown in leaps and bounds over the last one decade. The main contributing factors to the speedy growth include better awareness on various methods of production and increased demand for walnuts.

Commercial growing of walnuts is a widespread activity in California because of the low cost of production. Farmers in the state have made great contributions to the history of walnuts. Walnut growing is characterized by the cultivation of gardens that consist of walnut trees and absence of vegetation.

The California Walnut Commission is culpable for the outstanding performance in the global market. This commission has developed a number of strategies and programs such as The Market Access Program, which focuses on introducing various products into the international market.

The efforts by the commission have been very successful, as California walnuts managed to penetrate foreign markets in Germany. The strategies applied by the commission were also very successful in opening up the Asian market, which had partly blocked the trading of Californian walnuts. The United States and South Korean Free Trade Agreement has played a crucial role in the growth and development of the walnut industry in California over the last couple of years.

Works Cited

California Walnuts.org. California Walnuts: Sizes and Colours. Web. 09 Nov. 2013. www.walnuts.org.

Diamond foods. California walnut acreage trending upwards.PDF file. Web. 09 Nov. 2013. http://www.diamondfoods.com/docs/growers/News_Summer08.pdf.

Farm express. California Walnut Industry Surges With Record Exports. Web. 09 Nov. 2013. http://westernfarmpress.com/tree-nuts/california-walnut-industry-surges-record-exports.

Hasey, Janine. The Walnut Industry in California: Trends, Issues and Challenges. California: Agricultural Issue Centre, 1994. Print.

Klonsky, Karen. Economics of walnut establishment and production, California: California university Department of Agricultural and Resource Economics, 2006. Print.

Ramos, David. Walnut Production Manual, California: Cengage Learning, 2009. Print.

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