AN ECONOMIC ASSESSMENT OF PISTACIO'S Executive Summary The pistachio tree, Pistacia vera, belongs to the same family as cashews, mangoes, poison ivy, poison oak, and sumac. The fruit produced by pistachio trees is a semi-dry drupe, similar to the fruit of an almond tree. Pistachio nuts are small (less than an inch long) and uniform in size with relatively thin shells. Most pistachios are roasted and marketed in their partially-open shells as a snack food. The Census of Agriculture reported 1,051 farms growing pistachios in the United States in 1992, with 69,345 acres in orchards. California accounted for 96 percent of U.S. pistachio acreage in that year, and most of the industry's expansion has occurred in that state. The combined acreage of Arizona, New Mexico, Nevada, and Texas accounted for about 4 percent of all U.S. pistachio acreage reported in the 1992 Census of Agriculture. The bulk of California's production is located in Kern and Madera counties in the San Joaquin Valley. Kern County accounted for 40 percent of the state's 1992 pistachio acreage, and Madera County, about 30 percent. Tulare, Fresno, Merced, and Kings counties (also in the San Joaquin Valley) each reported 2,000 to 5,000 acres. Butte and Glenn counties (in the Sacramento Valley) reported nearly 650 acres each. Although there are more small farms than large farms producing pistachios, the bulk of production is from large, diversified operations. Nearly a dozen growers have more than a thousand acres and one company (Paramount Farms) has about 15,000 acres of pistachios in western Kern County. Homa Company and Keenan Farms, Inc. are also large operations. However, most pistachio orchards range from 40 to 80 acres in size. In Kern, Tulare, and Fresno counties, farms with pistachios frequently also grow almonds and citrus fruit. Madera County growers often have a similar number of acres in pistachios and almonds. Other crops produced by pistachio growers throughout the San Joaquin Valley include cotton, wheat, onions, olives, garlic, and lettuce. Pistachio production fluctuates widely from year to year, mainly due to the natural tendency of trees to be alternate bearing. However, pistachio nuts can be stored from one season to the next so carryover stocks, and to a lesser extent imports, act to stabilize supplies and prices. U.S. consumption of pistachios, mainly as a snack food, has nearly doubled since the early 1980's. While U.S. imports have shrunk and California production has grown, important export markets have developed in the Far East, notably Japan and Hong Kong, as well as in Germany. Pistachio trees are either male or female, and the trees that produce nuts, consequently, do not produce pollen. Cultivars used as pollinators are called male (or "nonbearing") and those used for nut production are referred to as female (or "bearing"). Pistachio trees produce nuts about six years after planting and reach full-bearing potential in twelve to fifteen years. Mature pistachio trees have a pronounced tendency to alternately produce heavy crops (an "on" year) and light crops (an "off" year). This characteristic is referred to as an "alternate bearing" tendency. The aggregate effect of the alternate-bearing pattern is reflected in state-level yields. However, county-average yields reveal additional variations that probably are related to the age of the trees. In Kern County, where some of the first orchards were planted, average yields are 2-4 times higher in "on-years" than in "off-years." Annual yield changes in Madera and Glenn counties are less marked, but follow the same pattern as in Kern County. The major production perils to pistachio production are excessive rain and humidity, late frosts and hard freezes, warm winters, drought, and various diseases and insect pests. Rain and humidity promote fungal diseases which have probably contributed more to yield reductions than any other peril. Late-spring frosts, unusually warm winters, and drought may also reduce yields. Most of the pistachio crop is mechanically harvested in September. The highest-quality nuts are harvested within ten days after maturity. Pistachios are hulled, dried, and sorted soon after harvest, but may be roasted, salted, colored, and shelled later. There is no marketing order establishing minimum quality standards, but voluntary inspection and grading is widespread. The pistachio industry is well organized, with a state marketing agreement administered by the California Pistachio Commission. Disaster assistance payments for pistachio losses totalled $387,748 during the 1988-93 period. Payments were relatively high following the California freeze, at $211,136 in 1991, and at $160,265 in 1992. Payments were less than $10,000 annually in other years. California accounted for nearly 96 percent of the disaster payments made between 1988 and 1993, while Arizona accounted for 4 percent, and Texas accounted for 0.2 percent. Our assessment is that there would not likely be significant interest in crop insurance for pistachios, beyond the basic coverage contained in the catastrophic insurance plan. The most significant loss in the 15-year history of the commercial industry was due to a hard freeze in December 1990 that killed a large number of trees. Insurance on pistachio nut production would not have provided very much help to growers in that year because the crop had already been harvested. If a multi-year pistachio nut policy had been in effect, however, producers would likely have collected sizeable indemnities in the following year. We believe that California pistachio growers are likely to be more interested in tree insurance than pistachio nut insurance. The loss of pistachio trees causes greater economic injury than the loss of the nut crop. A tree constitutes a long-term capital investment and its loss entails multiple years of foregone production, as well as the expense of establishing a replacement. The development period for a new tree is at least 5-6 years, with 7-8 years needed before an economically significant crop can be harvested. About 12 years are required before the tree attains its mature production potential.