Foon Rhee

Foon Rhee: Betting big on almond boom

Workers do a final inspection of almonds at Blue Diamond Growers’ plant in Salida.
Workers do a final inspection of almonds at Blue Diamond Growers’ plant in Salida.

Blue Diamond Growers is the world’s biggest almond marketer and processor. Its sprawling 44-acre plant in Salida is the world’s largest almond receiving station. And October is the peak month for preparing almonds for consumers here and abroad.

So when I toured the site last week, I was in the center of the almond universe. And it’s about to get bigger.

Construction is wrapping up on a state-of-the-art receiving warehouse that will expand the Salida facility’s capacity by 30 percent. It will start storing almonds in mid-November and go into full operation with next year’s harvest. “We’re gearing up for larger crops once the drought breaks,” says plant manager Darrell Nelson.

The giant cooperative – based in Sacramento and one of the capital city’s best-known brands – is placing a huge bet that California’s almond boom won’t bust anytime soon. A lot of farmers – not to mention Silicon Valley investors, hedge fund managers and real estate speculators – are all-in as well.

But their wagers will only pay off if demand rises and prices stay high. And that depends in part on more people in far-off lands eating more almonds, since about two-thirds of California’s production goes abroad.

Almonds are by far the state’s most valuable agricultural export, about $3.4 billion a year. So the industry is keeping close tabs on the mammoth Trans-Pacific Partnership now before Congress.

The White House makes it a big selling point that the trade deal would reduce or eliminate thousands of tariffs on products “Made in America.” That includes getting rid of levies on almonds of 20 percent imposed by Vietnam and 2.4 percent by Japan. About 14 percent of the state’s total almond exports by volume go to the 11 foreign nations in the TPP.

This would be a fine time for a boost in almond exports. After eye-popping growth, especially in China, foreign sales are slowing. As of September, Blue Diamond’s early numbers for the 2015 crop show a 20 percent drop in exports compared to 2014, including a 22 percent decline in the Asia-Pacific.

Blue Diamond, which reported a record $1.5 billion in revenue from its 2013 crop, continues to add markets around the globe and to whip up new almond-based snacks and milk products to boost domestic consumption. Owned by more than half of the state’s 6,000 almond growers, the cooperative employs nearly 1,000 in Sacramento and about 400 in Salida, about 70 miles south. That will increase by about 15 with the new warehouse.

The big beige building off Highway 99 is a very visible sign of Blue Diamond’s confidence that its business will grow by 20 percent in the next few years, topping $2 billion in annual revenue.

While Blue Diamond won’t say how much the new facility cost, Nelson was more than happy to show it off. “One of a kind,” he called it.

From the outside, it doesn’t look special. The innovative features are on the inside. To make sure the almonds look and taste their best, the goal is “gentle handling in every way possible,” said Nelson, who has been with Blue Diamond for 34 years, the last nine as Salida plant manager.

Conveyor belts will ease the almonds from unloading stations. They will slide down metal spirals to the sloped floor 60 feet below. Processing will begin with fumigation before the almonds go down chutes to conveyor belts that will take them to the main plant for cleaning, sorting and packaging. No human hands will touch these almonds until final inspection.

The 58,000-square-foot building will be able to handle 62 million pounds of almonds at a time. With four existing receiving warehouses, the bustling Salida plant runs around the clock for 10 months out of the year, churning through as many as 7 million pounds of almonds a day. While Blue Diamond’s plants in Sacramento and Turlock add all those fancy flavors, Salida focuses on natural brown almonds, shipping them to industrial customers, candy makers and to 90 countries.

All those almonds are grown in an ever-growing number of orchards between Bakersfield and Redding. Despite the historic drought, dozens of orchards have been planted, nearly doubling almond acreage in the last 20 years. Unlike field crops, they can’t be fallowed, and they have replaced crops that generally need less water. That has led to harsh criticism, demonization even.

To defend itself, the almond industry has produced studies on its importance to California’s economy. As long as prices stay high and the market grows, a lot of people will make a lot of money – Blue Diamond and its growers among them.

But what if the almond bubble bursts? When I asked Nelson, he shrugged it off. The company line is not to worry. If they’re wrong, all those millions of almonds won’t look as good, no matter how gently they’re handled.

$3.4 billion

Value of California’s annual almond exports