Almond Outlook: Risk of Oversupply?

Key Points

• The risk of an oversupply of almonds over the next five to 10 years depends heavily on what happens with yields. Two wildcards affecting U.S. almond yields are weather and California’s Sustainable Groundwater Management Act (SGMA).
• Some in the industry expect SGMA will keep yields flat. Because southern California is more reliant on ground water, we could expect growth of almond acreage to concentrate in the north. However, per-acre yields in northern California are 28% less than in southern California, meaning that overall yields would flatten. In this scenario, the industry may be undersupplied and unable to meet almond’s expected strong demand growth. Prices would increase to incentivize greater acreage growth.
• Others in the industry believe that a return of normal weather patterns would mean a return to the growth of pre-2014 trend yields and create oversupply. In this scenario, prices would drop to stimulate additional export demand, namely from China and India. However, with this high demand potential, prices would not have to drop very far to achieve the needed growth.
• Ongoing trade disputes, though, could remain unresolved in the years ahead and significantly raise the risk of oversupply – particularly if almond yields return to trend in the U.S.

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