Natural and organic products giant Hain Celestial says it expects to “see pricing actions across the industry based on the California drought”.
Speaking to analysts on the firm’s second quarter earnings call this week, Hain Celestial United States CEO John Carroll said: “Going forward, we expect pricing for almonds, dairy and California-based commodities to rise.
“These increases will drive us to announce price increases on the products affected by these higher commodity costs, but we will not be alone in this.”
He added: “Almonds have been under cost pressure even prior to the drought. So we will price on almonds very shortly because we have a sense of where the crop is going this year.
“We buy as many almonds as anybody in the packaged food business with the exception of people who just sell bagged nuts. And we're ready to pass on pricing that addresses where the costs are going for the next crop.”
Blue Diamond: Drought in California could cause stress to the orchards, which may result in smaller almonds and less supply than 2013
So what is happening with the 2014 almond crop?
Bill Morecraft, General Manager of the global ingredients division at Blue Diamond Almonds - the world's largest almond marketer and processor - told FoodNavigator-USA that the industry is still selling the 2013 crop.
He added: "It is still too early to predict the almond kernel size and prices for the 2014 crop," which will likely be harvested in August.
“Our first official look at the size of the 2014 crop will come this May with National Agricultural Statistics Service (NASS) subjective estimate," he said. "After this assessment, we will have a better projection of what to expect for this crop.”
Growers will be more cautious in selling the remainder of the 2013 supply
Asked about the impact of the prolonged drought in California, he said: “It could cause stress to the orchards, which may result in smaller almonds and less supply than 2013.”
However, much depends on when the stress occurs in the growing cycle, he said. If, for example, it occurs during the nut-sizing period (typically post February bloom through April), the kernel size is apt to be smaller.
Meanwhile, significant stress from late April through to the end of May, while the nut is solidifying, can have an adverse impact on kernel weight.
“Growers will be more cautious in selling the remainder of the 2013 supply of almonds to prepare for the potential effects of the water situation. There are many variables to take into consideration, such as weather patterns and water supply, therefore it is still too early to make predictions for the almond crop moving forward.”
In the meantime, he said: “Market prices remain very firm.”
Almond Board of California: Innovative irrigation practices have enabled farmers to do more with less water
The Almond Board of California told FoodNavigator-USA that it "shares concerns about California’s sustained drought conditions".
A spokesperson added: "The California almond growers, most of whom are multi-generational family farmers with 50 or fewer acres, are committed to sustainable farming and have been using state-of-the-art farming practices and technologies that minimize the water quantity required for maximum yield per acre.
"Over the last three decades, innovative irrigation practices by California’s almond growers have helped to almost double per-acre yield by using close to the same amount of water applied per acre. Our current research is looking at new breakthroughs in water-efficient farming and technologies that reduce water usage with minimal impact to orchard production."
The California almond crop has been growing steadily for 40 years, but things really took off after the turn of the century, with the crop doubling in size from around 1bn lbs a decade ago to an estimated 2bn lbs in 2013.
Several factors have contributed to the meteoric rise of almonds, including growing demand from China and a growing interest from manufacturers interested in their health benefits, a rapidly growing market for almond-based products in the dairy free market, wider use in ready to eat cereals, plus continued demand from more traditional bakery and confectionery customers.
Click here to read more about the potential impact of the drought on commodity markets.