The Economic Impacts of the California Almond Industry

53 Pages·2014·0.34 MB·English

by  William Matthews

The Economic Impacts of the California
Almond Industry

A Report Prepared for the Almond Board of California

Daniel A. Sumner, William A. Matthews, Josué Medellín-Azuara and Adrienne Bradley

University of California Agricultural Issues Center
Table of Contents

Report Sections:

• Executive summary…………………………………………………………......…..……...pg.1-2
• Introduction…………………………………………………………….………….............pg.3-5
• Chapter 1: Contributions of the Almond Industry to the California Economy… ……….pg. 6-20
• Appendix A: Value of the Almond Industry to the Econbomy of the Central Valley ..…pg. 21-32
• Chapter 2: Background Description of the California Almond Industry ……………...pg. 33-48
• Concluding Remarks……………………………………….………………………..….pg. 49-50

List of Tables and Figures

Chapter 1 Tables and Figures
• Box 1.1 (Definitions Box)…………………………………………….…………………..pg. 13
• Figure 1.1 Flow of almonds and other inputs through the production and marketing chain …pg. 14
• Table 1.1 California Statewide Almond Impact Multipliers…………………….......…....pg.15
• Table 1.2 Statewide Economic Impacts of California Almond Growers, 2012-2014…….pg.16
• Table 1.3 Statewide Economic Impacts of California Hullers and Shellers, 2012-2014…pg.17
• Table 1.4 Statewide Economic Impacts of California Almond Handlers, 2012-2014 ….pg.18
• Table 1.5 Statewide Economic Impacts of California Almond Manufacturers, 2012-2014 …pg.19
• Table 1.6 Statewide Economic Impact of Entire Almond Industry, 2012-2014 ........…...pg.20
Table of Contents (cont.)

Appendix A Tables and Figures
• Table A.1 California Central Valley Almond Multipliers………………………………...pg.27
• Table A.2 Central Valley Economic Impacts of California Almond Growers, 2012-2014 ….pg.28
• Table A.3 Central Valley Economic Impacts of California Hullers and Shellers, 2012-2014 …..pg.29
• Table A.4 Central Valley Economic Impacts of California Almond Handlers, 2012-2014 .….pg.30
• Table A.5 Central Valley Economic Impacts of California Almond Manufacturers, 2012-2014 ….pg.31
• Table A.6 Central Valley Economic Impact of Entire Almond Industry, 2012-2014 ……..pg.32

Chapter 2 Tables and Figures
• Figure 2.1 Annual Nominal and Real Value of Total Farm Gate Revenues for Almonds, Crop Year
1930-2012………………………………………………………….…………………..…...pg.41
• Figure 2.2 Top California Agricultural Commodities by Percent of Total Annual Farm Cash
Receipts……………………………………………………….…..………………………...pg.42
• Figure 2.3 Annual California Almond Acreage and Yield per Acre, Crop Year 1919-2013....pg.43
• Figure 2.4 Volume U.S. Almonds Exported, Crop Year 1965-2013………..….………….pg.44
• Figure 2.5 California Almond Exports to Top 15 Destinations, Calendar Year 2013……..pg.45
• Figure 2.6 Export Growth in Top Destinations for California Almonds, Calendar Year 1996-
2013………………………………………………………….……….…..………………...pg.46
• Figure 2.7 California Almond Production, Export Volume and Farm Price Calendar Year (2000-
2013)…………………………………………………………..………….………………..pg.47
• Table 2.1 California Almond Huller-Shellers, Calendar Year 2013…..……….…………..pg.48
• Table 2.2: Distribution of Crop by Handler Size, 2013/14…….…………...….………..…pg.48
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The Economic Impacts of the California Almond Industry

Executive Summary

The California almond industry is a large and dynamic part of California agriculture and makes
major contributions to the California economy. Almond production and value of production
have been growing rapidly and the industry has become a larger share of agriculture and its
economic contributions have been growing in recent years. California almonds are especially
important in international trade. Almonds are projected to account for about 25 percent of
California farm exports.
Contributions to the California economy can be understood by distinguishing between
direct, indirect, and induced effects of economic activity and by looking at both the value of
industry output as well as the value added above the cost of goods and services purchased from
other sectors. Direct effects are impacts within the affected industry; indirect effects are the
changes to industries that support but are outside the directly affected industry; induced effects
are economic ripples from added consumption generated by the direct and indirect effects. Value
of industry output is the value of the direct output or service contribution of the industry;
whereas, the value added calculations measure the economic contribution of the industry above
the cost of goods and services purchased from supporting industries.
This report uses projections of the value of the 2014 almond crop, with comparisons to
2012 and 2013 crop years, to estimate contributions of the almond industry to the statewide
economy in California.
We estimate that for the 2014 crop the California almond industry contributes much to
the California economy.
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• The total impact on the value of California output, including direct, indirect, and induced
economic output, is about $21.5 billion.
• Of the total output value of $21.5 billion, about $11 billion is value added. This includes
indirect and induced value added. Value added is the economic output measure that contributed
to the size of the California economy (Gross State Product).
• Of the $11 billion of total value added to the California economy, about $7.6 billion is
attributable to almond farming. The remaining $3.4 billion is contributed by the almond
processing and manufacturing sectors.
• The whole almond industry, including processing and marketing, generates about
104,000 jobs statewide, three quarters of which are outside the almond industry.
• Of these 104,000 jobs, total statewide employment generated by almond farming is over
68,000 jobs; direct almond farm employment is about 21,000 jobs, and approximately 47,000
additional jobs are generated through indirect and induced economic activity associated with
almond farming. The remaining job generation of approximately 36,000 jobs is associated with
the direct, indirect, and induced economic activity of the processing and manufacturing sectors.
Although its economic linkages are statewide (and global), the almond industry is
especially important to the economy of the California Central Valley.
Members of the California almond industry also contribute to the state and their local
communities in many ways that cannot be captured in financial calculations. Through charitable
activities, community engagement, and leadership, members of the almond industry help make
California, especially rural California, a more healthy and vibrant place. Finally, almonds
contribute to consumer nutrition and wellbeing in California and throughout the world.

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Introduction

This report describes and estimates the economic contributions and impacts of the California
almond industry. It also provides background and related information to help interpret our
quantitative measurement of economic impacts.
Chapter 1 shows the contributions to California economic activity tracing through the
direct, indirect and induced impacts of the almond industry. We present a flow chart that shows
the stages from almond production on farms, through almond hulling and shelling, almond
handling and initial processing, and finally to almond manufacturing. These stages lead to the
retail sales of almonds and sales to domestic food processors or exports. We use the software
IMPLAN, which is an input-output modeling software and dataset that utilizes publicly available
economic data to assess effects of changes in economic activity. We supplement IMPLAN with
data provided by almond industry members, which allow us to adapt the model to fit the
specifics of the industry. The model and data specify linkages (indirect effects) from each
segment of the almond industry to associated input industries including farm inputs such as
fertilizers and tractors as well as equipment and materials used in hulling and shelling, handling
and manufacturing. We also trace the influence of income earned in the almond industry
(induced effects) as it ripples through the economy because of purchases by employees and
owners of farms and almond marketing firms.
We find that in addition to billions of dollars of direct value of output and value added
and thousands of direct employees, the almond industry contributes additional billions of dollars
and thousands of jobs to the economy through these indirect and induced impacts. We project
that the 2014 almond crop will contribute about $11 billion of value added to the California gross
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state product (the measure of the size of the California economy) and almost 104,000 jobs
statewide, three quarters of which are outside the almond industry.
The almond industry is important especially in the Central Valley of California where
almond production and processing are located. Almond economic impacts and employment
comprise a substantial part of total economic activity and jobs in the economy of the Central
Valley and especially in rural regions. Farms and processors not only employ many Central
Valley residents directly, they also buy goods and services from other local firms that also
provide jobs and generate incomes. Income generated for employees and proprietors goes to buy
local consumer goods and services as well as to pay taxes locally and statewide.
Of course, these economic calculations do not fully capture the contributions of the
members of the California almond industry to the state and to their communities. Through
charitable activities, engagement, and leadership, members of the almond industry help make
California, especially rural California, a more healthy and vibrant place. Members of the almond
industry contribute in many tangible ways that are not captured in purely financial transactions.
The almond industry also contributes to ecological benefits through leadership in sustainability
programs and the development of honey bee best management practices that we have not
quantified. In addition, of course, almonds contribute to consumer nutrition, health and
enjoyment in California and throughout the world.
Chapter 2 provides background information about almond production, supply and
demand, including the importance of almond exports to the industry and to California
agricultural exports more broadly. This information is useful to interpret the estimates presented
in Chapter 1.
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As a major part of California agriculture, generating about 15 percent of the value of
California farm output and almost 25 percent of agricultural exports, the California almond
industry is a major contributor to a healthy and vibrant agriculture and a sound California
economy needed to offer economic opportunity in the state.

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1. Contributions of the Almond Industry to the California Economy

The key objective of this project is to measure the economic contribution of the
California almond industry. We consider the almond industry as comprised of four segments or
sectors: almond growing, almond hulling and shelling, almond handling, and the manufacture of
almond products. Other industries are considered as providing materials or services to the
almond industry. Nut-tree nurseries, processed food industries that use almond products as
ingredients, and retail markets and restaurants that sell almond products are not treated as sectors
within the California almond industry. We include their relationships to the core industry in our
calculations as indirect impacts (see Figure 1.1).
We use the input-output model and data base from IMPLAN to quantify relationships
across the whole economy and how segments of the almond industry relate to each other industry
or sector within California. Box 1.1 provides definitions of economic effects and multipliers. To
measure the total economic contribution of the California almond industry we collected
information from individual firms within the industry that engage in the growing, hulling-
shelling, handling and manufacturing of almonds.
We begin with table 1.1 which shows the multipliers that turn direct almond output, value
added and employment into the full economic contributions for each sector of the almond
industry including the indirect and induced impacts. (The appendix includes tables and
descriptions of the contributions of the almond industry within the Central Valley of California,
where the almond production and much of the processing is concentrated.)
The direct output multiplier for each of the industry sectors is one by definition: $1.00 of
direct output by each sector equals $1.00 in direct output for the economy. The indirect output
multiplier can be interpreted as the number of dollars of output generated in supporting industries
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from a one dollar increase in direct output by the corresponding sector. For example, in table 1.1
under the column for almond growers, the indirect value of output multiplier for almond growers
is 0.37 meaning that every dollar of expanded output by almond growers results in $0.37 of
additional output generated by supporting industries that provide materials and services
purchased by growers. “Indirect” output multipliers are higher in the handling and manufacturing
sectors because growing almonds requires more labor, land and other inputs generated on the
farm, whereas processing of almonds requires more purchased inputs from supporting industries
such as transport services, materials for packaging, and equipment. The “induced” effects
multiplier measures the output in the rest of the economy linked to an increase in direct output
through consumption activities of employees and owners within the sector. The total effects
multiplier is the sum of direct, indirect and induced effects multipliers. It measures additional
statewide economic output from an increase in output by the four sectors of the almond industry.
Again, the handling and manufacturing sectors, through their greater dependence on supporting
industries for purchased inputs, have the highest multipliers of overall effect on economic output.
The almond manufacturing sector produces an additional $1.71 in economic output for every
$1.00 of direct output increase for a total addition of $2.71 to the California economy.
Value added can be interpreted also on a per dollar basis. As defined in Box 1.1, value
added is the measure of “new” value generated from the inputs held within a segment during the
process of combining purchased inputs into a marketable product. This “new” value is
represented by salaries and wages, proprietor income, profit and indirect business taxes. The
direct value-added multiplier measures the amount of each additional dollar of output value that
is allocated to one of the four categories and not to purchases from outside the industry or
segment. This portion of output value is what the almond industry contributes to California’s
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