California's pistachio growers have made a bullish bet on the future: They've planted so many trees over the past few years that the state's production of the greenish nut is expected to more than double, hitting in excess of a billion pounds by 2020.
The ramped-up production has little to do with any rebound in the U.S. economy. It's a gamble that, half a world away, Chinese consumers' voracious appetite for pistachios will continue to grow.
"We have a great market in China," said Judy Hirigoyen, director of global marketing for American Pistachio Growers. "We could literally sell our entire crop to just China."
Bolstering that confidence is a belief that China's urban middle class, which has seen its spending power more than double over the past decade, will continue to expand. But it's also been buoyed by geopolitical events. The other two major pistachio-exporting countries, Iran and Syria, have been roiled by sanctions and civil war. California growers swooped in to pick up the slack just as Chinese consumption was beginning to take off.
U.S. pistachio exports to China, where they are called the "happy nut" because of the curved seam of the shell, now exceed 80 million pounds, up from just 1 million a decade ago. And even with the increased production, demand is outpacing supply, pushing prices on the Chicago Mercantile Exchange to an all-time high.
Growers have watched their fortunes rise as well. Total crop values are now over $1 billion, a fivefold increase from when growers first began their aggressive ramp-up of production in 1997, according to the Administrative Committee on Pistachios.
That has filled the industry with a sense of swagger. In February, the American Pistachio Growers, the industry trade group, released its first-ever Super Bowl commercial, featuring Korean pop sensation Psy, of "Gangnam Style" fame.
However, pistachio farmers have planted so many trees lately that the exports must now continue to skyrocket in order to find a market for all their crops. In 2001, there were 100,000 acres of pistachio trees in California. Now, there are more than 240,000. Because a tree takes seven years before it bears fruit, many of those acres have not come on line yet.
Lincoln-based Fiddyment Farms is one grower that has not expanded its acreage in recent years. Instead, working alongside the pistachio growers group, the company has chosen to focus on developing international marketing campaigns to build a global appetite for California nuts.
"We're trying to be ahead of the curve," said Fiddyment Farms general manager Thom Dille.
With thousands of acres of new nut-bearing trees coming on line before any are due to stop producing, a steady increase in production is just a function of time for the pistachio industry. Demand and therefore price is less predictable, but Dille is optimistic.
"I think we can absorb the growth at this point in time," Dille said. "There might be some impact on prices in the future, but the prices have been so good that (the industry) probably can sustain at a somewhat lower price."
The state's pistachio trade is dominated by one player: Paramount Farms, the world's largest grower, producing more than 450 million pounds of pistachios and almonds on its vast holdings in the San Joaquin Valley. Paramount is headquartered in West Los Angeles and owned by Stewart and Lynda Resnick.
"There's really two groups there's Paramount and then there's the other processors," Dille said.
The China boom is being felt by large and small players alike.
Teresa Keenan's family operation, Keenan Farms, has been growing nuts in the Central Valley town of Avenal since the industry first got started in California in the 1970s. Her farm completed a major additional planting in 2005, which is just now beginning to produce pistachios. She knows that hitching so much of the industry's fortunes to the growth of China's emerging middle class carries risks. Even a slight hiccup in China's economy could stick growers with bulging supplies, which, in turn, could cause prices to plummet.
She's anticipating that other sales opportunities will open up in emerging markets such as India, where pistachio sales are nascent.
"We still have a lot of markets to tap into around the world," Keenan said.
The massive growth in exports to China didn't happen by accident. It was part of a concerted effort by growers to cultivate new consumers. Pistachio farmers watched with envy as the state's almond growers mounted an aggressive and wildly successful campaign in China. Almond growers brought in the high-powered Washington public relations firm Hill+Knowlton Strategies, enlisted the U.S. Agriculture Department to bring nut buyers from China to tour California farms and hired Chinese film actress Gao Yuanyuan as their celebrity spokeswoman.
Almond exports to China hit 236 million pounds in 2012, an almost tenfold increase from 2000. Almonds have now surpassed grapes to become the state's second most valuable crop, behind dairy.
Keenan and her fellow producers set out to repeat that feat with pistachios. China, like most of the world, once got the bulk of its pistachios from the traditional producing areas of the Middle East, mainly Iran. But as sanctions took hold, California farmers sensed opportunity.
In 2011, the American Pistachio Growers launched a road show in China. They drafted Miss California and the U.S. water polo team as spokespeople and staged a local media blitz, in-store appearances and nutritional seminars across the country. The nuts were pitched as part of a healthy diet that improves skin and hair.
"They ate it up," recalls Noelle Freeman, Miss California 2011. Pistachios and Miss California were briefly a trending topic on Weibo, the Chinese version of Twitter.
Keenan Farms now says international sales of which China makes up the largest piece account for half of its overall business. Keenan said she's not worried about the looming bumper crop of pistachios that will hit the market over the next few years, as output doubles. "Pricing really hasn't been a problem," she said. "The price goes up; we sell more and more pistachios."
Louise Ferguson, a fruit and nut scientist at the University of California, Davis, says growers have already begun to diversify the uses of pistachios. "You're going to see pistachios, like almonds, move into a greater number of food uses," Ferguson said. "For example, you're going to see them more in trail mixes, you're going to see them more in cereal, you're going to see them more as an ingredient in baking foods."
Ferguson also noted the hardiness of pistachio trees gives growers a unique ability to slash costs if economic conditions warrant, while retaining the ability to resume quickly after a long production hiatus.
"The nice thing about pistachios is, unlike an almond or a walnut, if the market goes south on us for a while, this is a tree that could exist with almost no care," Ferguson said.
With proper care and control of the canopy, Ferguson said, pistachio trees can produce for upwards of 75 years.
"We have trees on our property that were planted in the 1970s, and they're still reaching maximum production," Keenan said. "We don't know how long they're going to last."