SIC 0173
TREE NUTS

This classification covers establishments primarily engaged in the production of tree nuts, including almonds, filberts, macadamia nuts, pecans, pistachios, and walnuts.

NAICS Code(s)

111335 (Tree Nut Farming)

Industry Snapshot

Nuts are high in unsaturated fat and low in saturated fat, and they are considered to be a high-energy food containing dietary fiber and essential vitamins and minerals. Most varieties are used throughout the year as nutritious snacks. Products containing nuts include ice cream, candy, assorted baked goods, and even, in the case of almonds, cosmetics.

The United States is a dominant world player in the commercial production of tree nuts with 875 companies claiming tree nut production as their primary operation. The total crop value of tree nuts produced in the United States was reported by the U.S. Department of Agriculture (USDA) to be approximately $1.5 billion in 2001. By contrast, the value of the 1971 crop was only $194 million. In addition, the per capita consumption rate was 2.5 pounds in 2001.

California alone grows 83 percent of U.S. nut crops. In fact, nearly all almonds, pistachios, and walnuts are produced in California. Almonds generate roughly $1 billion in sales annually, making them California's number-one export. Almond exports grew from 320 million pound to 326 million pounds during the 2002-03 growing season. California is also the second largest producer of pistachios in the world, behind Iran.

U.S. production of pistachios reached a record 243 million pounds in 2001, compared to just 1.8 million pounds in 1977. Filberts or hazelnuts are grown in Oregon

and Washington State, and production has more than tripled in 20 years, according to the USDA. Macadamia nuts are native to Australia but have become an important crop in Hawaii over the past 50 years. The outlook for macadamia nut producers is especially bright, as demand continues to exceed the available supplies.

The pecan, the black walnut, and the butternut (white walnut) are native to the United States. Pecans grow in the central and southern United States. Georgia is the leading pecan producer and also accounts for 5 percent of total U.S. tree nut production. New Mexico and Texas also produce pecans. Native walnuts grow throughout the central Mississippi Valley and the Appalachian regions. Only the imported English or Persian walnut, grown in northern and central California and Oregon, is considered to be of commercial importance. At the turn of the twenty-first century, per capita consumption of almonds, pecans, and pistachios was on the rise, while consumption of walnuts declined.

Almonds, the sixth largest U.S. food export, and the largest horticultural export, are shipped to more than 90 foreign countries. Europe and Japan are the largest markets for almonds, while Canada and Germany are the largest markets for U.S. tree nuts in general. Because per capita consumption of almonds remained at less than one pound as of 2003, U.S. almond growers tended to export roughly 75 percent of production. Exports to Europe received a boost with the passage of the General Agreement on Tariffs and Trade (GATT). Before its passage, almond shipments over 100,000 pounds incurred a 7 percent tax. A 2 percent tariff was imposed on shipments under 100,000 pounds. GATT doubled the allowable tonnage under the 2 percent limit and provided for a gradual decrease of the 7 percent tariff to 5.5 percent. U.S. producers continue to seek new market opportunities.

Tree Nut Production in America. These nuts are grown in orchards using modern cultivation methods that include supplemental irrigation, fertilizers, and insect and disease control for maximum productivity. Harvesting is mechanized, with the exception of macadamia nut gathering, in which the nuts are shaken from the trees and transported to processing factories. Here the hulls or shells are mechanically removed, and then they are electronically sorted and graded.

Background and Development

Government agencies have been instrumental in establishing the importance of tree nuts in the United States. Several important pieces of legislation have been implemented over the years, such as the almond marketing order that established the Almond Board of California in 1950 to stabilize the volatile almond market, and the creation of the California Pistachio Commission in 1981 to aid the development of the industry. In addition, the USDA has been instrumental in developing more productive varieties of pecans that have expanded the industry.

Though the consumption level dropped to a mere .5 pounds per capita, the 1995 almond crop still brought in a USDA-estimated $1 billion. That same year California yielded 148 million pounds of pistachios from about 60,000 acres, a crop valued at about $141.6 million.

Although well below 1993's record crop of 365 million pounds, 1995's 268-million-pound crop was much stronger than the previous year's 199-million pound yield. The USDA estimated that the 1995 crop had a value of almost $250 million. The 1994 walnut crop weighed in at more than 235,000 tons with a value by the USDA at nearly $239 million. In 1995, the United States exported 38,396 metric tons of shelled walnuts.

Current Conditions

After jumping to an all-time high of $2 billion in 1997, the production value of tree nuts dropped back to $1.4 billion the following year. By the early 2000s, this had increased to $1.5 billion. Tree nut production in the early 2000s exceeded 2 billion pounds as both U.S. and international demand increased. Per capita consumption of tree nuts in the U.S. grew from 1.7 pounds in the late 1970s to 2.5 pounds in the early 2000s.

Due to increased production of pistachios, which reached a record 243 million pounds in 2000, the U.S. had become the second largest grower of pistachios in the world by the early 2000s. Accounting for 20 percent of total pistachio production worldwide, the United States was second only to Iran, which accounted for 51 percent of total pistachio production. U.S. pistachio growers export roughly 44 percent of their crops each year. Leading export markets include Hong Kong, Belgium, Italy, and Germany. Although pistachio exports declined 35.3 percent to 6.3 million pounds in the 2002-03 growing season, U.S. per capita consumption, which grew to a record high of one-quarter pound in 2001, continued to increase.

Increased demand for higher quality pecans in the early 2000s fueled an increase in U.S. pecan imports. During the 2002-03 growing season imports increased 31.2 percent, growing from 27.7 million pounds to 36.4 million pounds. Mexico is the leading supplier of pecans to the United States. Georgia typically produces roughly 33 percent of all U.S. pecans; however, difficult weather conditions in 2002 pushed that figure down to 25 percent. Exports of pecans during the 2002-03 growing season declined 35.3 percent, falling from 9.8 million to 6.3 million. Per capita consumption of pecans has averaged nearly one-half pound throughout the early 2000s.

Industry Leaders

Founded in 1910 as the California Almond Growers Exchange, Sacramento-based Blue Diamond Growers is the largest almond grower-owned cooperative with 4,000 members. Blue Diamond's members produce one-third of California's almond crop. Sales in 2003 totaled $433 million.

Diamond Walnut Growers, Inc., of Stockton, California, produces 50 percent of the country's walnut crop. Based in Hawaii, the privately owned Mauna Loa Macadamia Nut Corp. posted a net income of $1 million on sales of $17 million in 2001.

Further Reading

Blue Diamond Growers Home Page, 1998-2000. Available from http://www.bluediamondgrowers.com .

U.S. Department of Agriculture. "Fruit and Tree Nuts: Background." Washington, DC: Economic Research Service, 10 September 2002. Available from http://www.ers.usda.gov/Briefing/FruitandTreeNuts/background.htm .

U.S. Department of Agriculture. "Fruit and Tree Nuts Outlook." Washington, DC: Economic Research Service, 28 January 2004. Available from http://www.ers.usda.gov .

U.S. Department of Agriculture. "Washington Agri-Facts." Washington, DC: Washington Agricultural Statistics Service, 28 January 2004. Available from http://www.nass.usda.gov/wa/agri2jan.pdf .