Nutty Prices: Almonds, Cashews, Walnuts, and Pistachios

03 November 2016

Out of the dozen major tree nuts, four make up over 70 percent of total global production: almonds, cashews, walnuts, and pistachios. Countries in the developing world have started to consume more and more tree nuts as incomes grew. Starting in the last two decades, demand for tree nuts soared in the developed world as well, spurred by the many health studies that came in recent years that suggest tree nuts have vast health benefits.

Meanwhile, nuts have been promoted in other food forms, like snack bars, almond milk, and cashew milk. But while consumption of tree nuts has significantly increased, production hasn’t quite kept up; therefore, the price of major tree nuts has been rising over the last decade. Major tree nut producers have been constantly beset by production problems. Not only do new trees take many years to mature and bear fruit, many producers have had to deal with political turmoil and regional weather shocks.

Since each of the major nuts tends to have only a few dominant producers, regional supply shocks disproportionately reduce global production. For example, around 70 percent of the world’s almonds are grown in California; when the state was hit with a multi-year drought starting in 2010, it could produce fewer almonds, and prices soared. It’s not just almonds—cashews, walnuts, and pistachios have all experienced higher demand. Each has faced unique supply shocks, leading to volatile and rising prices.


People haven’t always seen tree nuts as a health food. The high amounts of fat in certain nuts used to deter the health-conscious. But as nutritionists better understand the varieties of fat, some—like the omega 3 fat—have become seen as healthier than others. While consumers in the developing world have already begun to consume more nuts as their incomes rose, recent health studies have pushed up demand in the developed world as well. Between 2004 and 2014, people in middle-income countries (defined as having per capita income between $1,046 to $12,746) have increased tree nut consumption by 800,000 tonnes; and people in high-income countries (with per capita income over $12,746) increased consumption by around 400,000 tonnes.

Demand for tree nuts
High-income countries are defined as having per capita income over $12,746, Middle-income countries are defined having per capita income between $1,046 to $12,746, and Low-income countries are defined as having per capita income below $1,046.

The health studies citing the benefits of nuts have come at a fast pace in recent years. Researchers have found health benefits for each the four major nuts, to the delight of the agricultural boards responsible for marketing them. Studies have found that walnuts promote heart health and improve weight management; that the high levels of antioxidants in pistachios help control high cholesterol; that almonds reduce oxidative damage; and much more.

Perhaps the crowning study is a 2013 article published in the New England Journal of Medicine. The study, lead by researchers at the Harvard School of Public Health and Brigham and Women’s Hospital University found that people who regularly eat nuts are more likely to live longer than those who do not. Specifically, tree nuts were linked to reducing the risks of cancer, heart disease, and respiratory disease.

Demand for tree nuts is at an all-time high

These and other studies (which also link tree nut consumption to weight loss and lower risks of diabetes, gallstones, and other health issues) have increased demand for nut products in both the developed and the developing world.

On top of the health benefits, nut consumption is driven also by income growth. As China and India grow richer, more of their people are eating nuts. India is both a major producer and consumer of cashews. Meanwhile, Chinese have significantly increased consumption of walnuts and cashews. They’ve long believed in the health benefits of walnuts in improving brain and kidney function; in addition, carvers have turned walnuts into jewelry items in the forms of bracelets and necklaces.

Another trend on the growth of nut consumption is worth mentioning: In the developed world, newer types of food have emerged that feature tree nuts. Consumers have developed a taste for dairy alternatives like almond milk and cashew milk both to drink and as non-milk creamers. Almond milk alone is on track to become a $1 billion industry. Shoppers can now easily find these (as well as products like soy milk and rice milk) in the refrigerated areas of supermarkets. In addition, more food items are using various forms of tree nuts. Almonds, walnuts, pistachios, and cashews are getting packed into snack bars, bunched into breakfast cereals, and sprinkled into salads.

Higher incomes and the touted health benefits of tree nuts have increased both their production and exports. Between 2000 and 2013, the export value of almonds grew by sixfold; walnuts by sixfold; cashews by fourfold; and pistachios by fourfold.

Tree nut export value
Between 2000 and 2013, the export value of almonds, walnuts, cashews, and pistachios grew between 400 - 600 percent.

Why production of tree nuts hasn’t kept up with demand

In general, the production of these nuts has settled in places which have an advantage in producing them. The temperate climate of California has been well-suited to producing almonds and walnuts; pistachios are adapted for the warm weather and low humidity of Iran, where they’ve been produced since the 5th century BC; and cashews need tropical conditions, ideal in Vietnam and West Africa. But although the climate profile has generally been agreeable for these nuts, weather shocks or political issues have hobbled production growth.

Tree nut production
While prices of tree nuts have risen, in some years the production of various nuts have actually fallen

Let’s start with cashews, which has seen the fastest growth out of the four tree nuts. Vietnam and West Africa—Nigeria, Ivory Coast, Benin, Guinea-Bissau, Burkina Faso, and Ghana—account for most of the world’s cashew production. Both regions have faced supply problems. Guinea-Bissau, at one point the world’s fifth largest producer of cashews, faced a military revolt in 2012 that stopped harvests. In 2011, a disputed election caused upheaval in Ivory Coast, at the time the fourth-largest cashew producer. As a result, global cashew production fell between 2011 and 2012.

Meanwhile, the worst drought to hit Vietnam in a century has reduced the size of the country’s cashew harvest. Vietnam is the world’s largest cashew exporter, and this crop reduction has pushed domestic prices to an all-time high. A severe El Niño weather phenomenon this year has also affected cashew producers in both Asia and Africa, while West African producers had to deal with unusually strong Harmattan winds from the Sahara. Though higher prices may entice more farmers to enter the market, cashew trees take up to five years to mature and bear fruit. It will be a long time before new entrants are able to provide more nuts.

Vietnam's 2016 drought
Vietnam has suffered a drought in 2016. The southwestern regions that produce the most cashews (including Binh Phuoc, which produces half the country's cashews) have been hardest hit.

That’s because Iran is the world’s largest producer of pistachios. For decades, the country has been under economic sanctions imposed by the US government and the western world. In January 2016, the UN lifted the most recent sanctions imposed on Iran. Although agricultural products were not directly affected by these UN sanctions, their disappearance will ease banking and shipping restrictions, making it easier for Iran to export pistachios to other markets. Iranian pistachios remained banned in US markets, but they’ll be able to access the large European market. Although the production of pistachios has been highly volatile, the ease in trade should bring more to the market soon.

The production outlook for walnuts (as well as almonds and pistachios) has recently improved. Although China is the world’s second largest producer of walnuts, little of it is exported. Instead, it is the US that supplies much of the walnuts for the rest of the world, being responsible for nearly half of the world’s walnut exports.

World Walnut Exports
Although China is a major walnut producer, most of it is domestically consumed. The US produces about the same amount, but is responsible for nearly half the world's exports.

The supply of the world’s walnuts is closely tied to the supply of the world’s almonds. Both nuts feature the US as the world’s largest exporter. While the US is responsible for exporting nearly half the world’s walnuts, it’s responsible for around 70 percent of the world’s almonds.

Meanwhile, US production of both almonds and walnuts are overwhelmingly concentrated in California. That hasn’t always been good for consumers, as California has suffered a multi-year drought. Although the almond industry in particular has enjoyed considerable access to subsidized water, and even after it dedicated more land especially to growing almonds, production still hasn’t been able to keep up with higher demand because of the water shortage.

California Nut Acreage
California added tree nut acreage in the last decade.

Almond planting in California has been a relatively recent phenomenon. Up until the 1950s, there were few almond trees in the state (instead, the major exporters were Italy, Spain, and Portugal). Instead, cotton was the major cash crop in California for most of the century. By mid-century, farmers realized that California was not optimal for producing cotton, and that the dry and warm climate could be better suited for producing almonds and other tree nuts. Helped along by irrigation and water subsidies, they moved towards nut production. Even though almonds are thirsty crops—it takes about a gallon of water to produce one almond—California has ramped up production to meet growing demand.

Moisture Condition in California Soils
Water availability and almond producer prices in California.

Even with extensive irrigation, the drought has reduced the amount of water available for agriculture. Rising demand for almonds and walnuts has created persistent worries of a production shortage. That inability to meet demand has been reflected in rising almond prices. Between January 2009 and January 2015, when the drought in California was most severe, the price of almonds that US farmers can expect to receive rose from an average of $4.50 a pound to nearly $7 a pound.

US Farm Gate Prices of Almonds, Walnuts, and Pistachios
Producer prices of almonds, walnuts, and pistachios have steadily risen until recently, when California's drought lifted.

As the drought eased in 2015, production grew more quickly. USDA Economic Research Office is forecasting record-high productions of both almonds and walnuts in the 2016/17 season. The high prices and the economic slowdown in China have dampened demand for almonds. The large harvest combined with lower demand have caused the price of almonds to fall for the first time in six years.


The health benefits of nuts have encouraged greater consumption in both the developed and the developing world, although the latter has increased demand also because of higher incomes. Consumers in developed countries are drinking more nut-based dairy alternative milk, as well as adopting nut-heavy Mediterranean diets. It should be noted that nutritional knowledge is not set in stone, and that we should not preclude the possibility that opinion will turn against nuts once again.

Almonds, walnuts, and pistachios are already seeing higher production, largely due to the relief of the drought in California. Although Vietnam is in a drought, West Africa—Ivory Coast in particular—has significantly increased production in cashews. And with the reduction of trade frictions, Iran should be able to export to more markets. (Overall production may still be hurt by rising labor costs Vietnam, a major processor, and California, due to the state’s higher minimum wage.) Finally, given that rising prices have enticed more producers to enter the market, the trees that have taken years to mature will be bearing fruit soon.

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