UC study helps farmers analyze costs to grow almonds

California's almond farmers have achieved high yields and increased efficiencies, yet costs associated with growing almonds have risen dramatically while net returns per acre have shrunk.

To increase on-farm efficiency and reduce input costs, California almond growers can utilize cost-and-return studies that have been prepared by the University of California, Davis, Department of Agricultural and Resource Economics since 1938.

UC Davis Cooperative Extension Specialist Karen Klonsky, who produces cost-and-return analyses for various crops grown throughout California, has recently released the 2011 cost-and-return study: "Sample Costs to Establish an Orchard and Produce Almonds."

"This study shows what a grower's cost of production will be and what it will cost to plant. It is up to them to see whether they think that the prices for almonds are going to hold as demand is there so that it remains profitable," Klonsky said. "Farmers who are already farming can look at this study and say, 'If pruning is $183 an acre and I'm spending twice as much on pruning, what's up with that?' This serves as a benchmark and where you are different, you can ask why."

Cultural costs topped the list of expenses that growers face every year, according to Klonsky's data. The category covers pruning, orchard floor management, disease and pest control, and all-terrain vehicle and pickup truck use.

The study analyzed costs for an assumed 40-acre orchard in the northern San Joaquin Valley with 16-by-22-foot spacing, 124 trees per acre, micro-sprinkler irrigation and a 25-year orchard life. Under that scenario, cultural costs were $1,782 per acre. The second-highest expense was land. In the study, the interest payment for land ownership cost $750 an acre.

Other expenses included:

• $418 per acre for cash overhead, which includes office expenses, insurance, sanitary service, property taxes and building and irrigation system repairs;

• $376 per acre for purchasing trees;

• $345 an acre in harvest costs;

• $303 an acre in equipment costs.

The total cost of production came to $3,974 per acre.

Stanislaus County almond grower Nick Short of Hughson, whose family has been farming almonds for four generations, said the UC reports provide a great reference tool for farmers.

"Every farm is different, but we can all use the reports as a tool to aid in our own operations. I have utilized both the almond and walnut cost studies in planning our redevelopment schedules as the costs are more up-to-date than our previously used cost estimates," Short said.

Brent Holtz, UCCE San Joaquin County director and a contributor to Klonsky's study, said trends revealed in the study include the fact that growers are "planting orchards at higher densities of trees per acre and are typically using low volume irrigation systems."

Almond Board of California spokeswoman Jenny Konschak said the marketing order has used the UC information to determine the most efficient irrigation water delivery systems and techniques, which have helped reduce growers' water and energy costs.

"This study gives us an ongoing view of costs of production and pressures that agriculture is facing," Konschak said. "There are three main facets of this study that we were interested in as it relates to the cost of production: energy, which is closely tied to fertilizers and pollination costs."

The per acre cost of pollination totaled $280 for two colonies, Klonsky noted.

"Pollination is a big one that has changed dramatically. It is now $140 a hive. When I started in 1981, hives were $25 each. It is a substantial cost today," Klonsky said.

Holtz said in many cases farmers can grow almonds a little cheaper if they do not have to purchase new equipment, or if their land is already paid off, or if they are not having a disease or rodent problem.

"We try to find accurate numbers so that potential growers don't feel misled about production costs or orchard establishment costs," Holtz said. "We also discuss common varieties being planted now—usually nonpareil at 50 percent and two pollinators at 25 percent each."

The study also features an analysis that goes over the costs per acre at varying yields that shows a grower's break-even point.

"If we're assuming a yield of 2,000 pounds per acre at $1.50 a pound, that is a loss. They are going to cover their production costs and their harvest costs, but they are not going to be able to have enough money left over for their land payments and taxes and insurance and any debt they still have on the trees," Klonsky said. "If they own their land free and clear and their trees are paid for and their equipment is mostly paid off, then they will have a cash profit. It depends on their situation."

An almond acreage report released in late April by the U.S. Department of Agriculture National Agricultural Statistics Service showed that new almond acreage planted in 2010 was the smallest amount that went into the ground in 18 years. An estimated 13,362 new acres were planted in California last year, 7,241 acres fewer than were planted in 2009. New plantings reached an all-time high in 2005 with 62,507 new acres planted.

When asked if this is a sign of things to come for California almond plantings, Klonsky replied, "Five years ago, I said this (almond planting) has to start slowing down and it never did."

Holtz attributed the slowdown in new plantings during 2010 to the recession and "everybody playing it cautious."

"I saw a lot of planting this spring and I bet that figure will be more than double the 2010 figure," Holtz said. "We had record production last year and the price held. I have talked to many people this year who are concerned about increased production costs, but the reply was almost always the same: 'Almonds are still the best crop in town,' and they are still planting."

USDA announced last week that its subjective forecast for 2011 California almond production is 1.75 billion pounds, 6 percent above last year's production. Estimated bearing acreage for 2011 is 750,000 acres.

Almonds are successful because they are a flexible commodity that can be easily grown in California's unique climate, Klonsky said. She credited the Almond Board for the long-term success of the business due to marketing efforts and advertising campaigns.

"The Almond Board has managed to have demand increase with supply, and they've sought out new international markets," Klonsky said. "Every magazine that you pick up has a healthy almond ad. They are just the poster child of doing that right."

To view Klonsky's 2011 study, go to: http://coststudies.ucdavis.edu/files/AlmondSprinkleVN2011.pdf.

(Christine Souza is an assistant editor of Ag Alert. She may be contacted at csouza@cfbf.com.)