Pistachios the ‘new darling’ among US tree nuts: Rabobank

High growth margins, resistance to water salinity and promising export markets are among factors drawing investor attention to pistachios, according to the author of a recent Rabobank outlook.

David Magana, senior Rabobank analyst for North American fresh fruit and vegetables, wrote in a June report that pistachios have become the “new darling of the US tree nut industry,” with a sixfold growth in the farmgate value of US production over the past 15 years. It labeled the more than billion-pound US pistachio crop last year as a “new normal” and projected a 2022/23 crop of 1.22 billion pounds.

Magana told Agri Investor that while the family-owned Wonderful Company does dominate production in a market more consolidated than those for almonds and walnuts more familiar to investors, there are other large companies in the pistachio industry. Recent years have seen strong consumer demand, he said, driven by healthy eating trends and the introduction of new offerings like flavored and shelled pistachios.

“Now we are seeing increasingly more interest [from] institutional investors and private equity firms looking in the pistachio space,” Magana said, noting that such institutions were previously much more “heavily involved in the almond industry.”

In the report, Magana wrote that while almond and walnut markets are at a more mature stage, gross returns for pistachio growers have been higher than other crops for much of the past two decades. In 2000, there were just 75,000 acres bearing pistachios in the US, whereas almonds covered 500,000 acres and 200,000 acres were devoted to walnuts, according to Rabobank.

Magana projected that in five years, US pistachio-bearing acreage is expected to be almost seven times 2000 levels at about 500,000 acres, while almonds are likely to account for just three times 2000 levels and walnuts to account for a roughly a two times larger area.

“Pistachios traditionally are a true long investment. You need to wait a little bit longer to have full development trees than other industries like almonds,” he added. “Now, there is a higher proportion of new [pistachio] cultivars that reach maturity at a younger age and have higher and more consistent yields. That will be reducing the amount of time until when you can have your investment back.”

Among other factors encouraging growers to plant pistachios is their compatibility with lower quality, more saline groundwater due to their historical roots in the Middle East, Magana said. Investors that continued planting almonds amid then-rising prices and strong demand during the middle years of last decade, he added, now face drought and increased regulation of groundwater in California.

“Some of them are pulling out those orchards because of the combination of high-cost water, increasing costs, lack of availability of water and now low prices for two consecutive marketing years,” he said. “We’re seeing some acreage switching from almonds to pistachios and recently also some table grapes and also annual crops switching to pistachios.”

Exports account for about 70 percent of US pistachio production and Rabobank’s report highlighted October and November’s Chinese New Year holiday as a particularly important driver of demand. Magana added that whereas export markets for US walnut and almond producers have been down in recent years, production challenges in key markets such as Turkey and Iran have helped US pistachio exporters.

“Going into the 2022/23 season, they are expecting Iran’s crop is going to be down again. The question is: what’s going to happen when we have on-years for the US, Turkey and Iran?” said Magana.  “That will really put to the test how strong the global demand for pistachios really is and how resilient or profitable it will continue to be.”