Going long on permanent crops: long-term demand fundamentals of almonds and pistachios

Within global agricultural markets, tree nuts have emerged as highly popular consumer commodities in recent years. These nutrient-dense nuts aren’t only favored for their health benefits but also for their culinary versatility. As demand for healthy, plant-based foods continues to rise, understanding the supply-and-demand fundamentals of tree nuts, particularly almonds and pistachios, is crucial for investors considering long-term investments in the agricultural sector. This article delves into current and projected trends in the market, highlighting key factors that influence supply and demand.

Increasing health and wellness awareness is a primary driver of demand for almonds and pistachios: Almonds help control blood glucose, blood pressure, and cholesterol levels, while pistachios are effective in managing blood pressure and reducing cardiovascular risks. Health experts advocate for nut consumption due to their heart-healthy fats, protein content, and essential nutrients. This increased global health awareness complements the traditional culinary significance of these nuts, which are integral to Mediterranean and Middle Eastern cuisines. The popularity of almond-based products, such as almond milk, almond butter, and gluten-free almond flour, further drives almond consumption. These nuts’ versatility in both sweet and savory applications ensures their continued demand across diverse culinary landscapes.

Almonds and pistachios’ health benefits and traditional uses have significantly contributed to rising consumption as consumers seek healthier snack options. For instance, in 2024, global almond consumption reached 1.6 million metric tons (MTs), up from 0.6 million MTs in 2004, reflecting a 180% increase over the past two decades. Similarly, pistachio consumption saw an even stronger uptick, increasing by 194% from 0.3 million MTs in 2004 to nearly 1 million MTs in 2023.

Almond consumption by region

Source: USDA PSD, as of October 2024. MT refers to million metric ton. ROW refers to rest of world.

Pistachio consumption by region

Source: USDA PSD, as of October 2024. MT refers to million metric ton. ROW refers to rest of world.

Global economic growth has fueled increasing consumption

Economic growth, particularly in emerging markets, has contributed to increased disposable incomes that enable consumers to spend more on premium food products. Over the last two decades (2004–2023), while North America and the European Union remained the top two almond consumption regions, East Asia (+9% per year), the Middle East (+8% per year), and South Asia (+11% per year) also experienced significant growth. Combined, these three regions accounted for 45% of global almond consumption during this period. In the case of pistachios, the Middle East maintained its status as the world’s leading consumption region over the past two decades, with East Asia (+20% per year) and South Asia (+14% per year) also showing rapid growth.

Economic growth plays another pivotal role, particularly in leading developing countries such as China and India, which have witnessed a growing middle class with a penchant for healthier eating habits. In China, almond and pistachio consumption, which is largely reliant on imports, has respectively grown by 19% and 12% annually over the past 20 years, driven by rising incomes and expanding retail networks. Similarly, India's almond and pistachio consumption has steadily increased, up by 11% and 17% annually, respectively, supported by economic growth and cultural preferences for nuts in traditional cuisine.

Total consumption growth has reflected remarkable per capita consumption growth over the last two decades. Consumption of almonds and pistachios exceeded 3 lbs per capita in the United States and European Union regions in 2023. While per capita consumption of tree nuts in China and India remains a fraction of that in the United States and European Union, it has grown significantly, increasing twelvefold in China and sixfold in India over the last two decades.

Income growth supports increased tree nut demand

As individual consumers’ incomes rise, they have greater disposable incomes to spend on higher-quality or premium food products, including healthy snacks. Consequently, consumers can afford more of these goods, leading to increased demand and consumption growth. On a related note, the different stages of countries’ economic growth can significantly affect the increased per capita consumption of almonds and pistachios.

Current per capita consumption levels of almonds and pistachios are notably higher in the United States and the European Union than in China and India; however, growth in per capita consumption as incomes rise underscores the distinct economic dynamics at play. In the United States, every 1.0% increase in GDP per capita is projected to boost combined almond and pistachio consumption by 1.2%. In the European Union, the same economic growth is expected to result in an increase of 0.9% in per capita consumption. Conversely, in developing markets, the effects of economic growth on consumption are expected to be greater in scale. Take China, where a 1.0% GDP per capita growth is anticipated to raise tree nut consumption by 6.1%, while in India, consumption is expected to increase by 8.6%. Further, considering the faster GDP growth projected for developing markets, these results highlight that while consumption in developed markets is currently higher, developing markets exhibit greater proportional growth in consumption as incomes rise, reflecting higher income elasticity of demand for tree nuts in developing markets.

Supply dynamics complement demand fundamentals, creating a promising investment outlook

Supply fundamentals are supportive of tree nut investments: With Californian almond production forecast to plateau or even decline due to water challenges, a constrained supply alongside increasing demand can improve the outlook for almond producers. Meanwhile, as the sector approaches maturity, the moderate growth seen in pistachio supply suggests a balanced market that can cater to expanding consumption driven by health-conscious consumers and economic growth in both developed and developing regions. Together, these supply dynamics indicate favorable conditions for tree nut investments, promising sustainable returns as demand continues to outpace supply.

Diversification is crucial to opportunities in the tree nut market

Global trade dynamics significantly influence the supply chains of almonds and pistachios. Export policies, tariffs, and trade agreements can either facilitate or hinder the flow of these nuts across borders. For example, U.S. trade relations with major importing countries such as China and India directly affect tree nut export volumes. In 2018, the imposition of tariffs on U.S. agricultural products by China resulted in a temporary decline in U.S. exports to China, which highlights the market’s sensitivity to geopolitical factors. Conversely, free trade agreements and reduced tariffs can enhance market access and stimulate production.

On the other hand, Australia, already the second-largest global almond producer, saw an opportunity to expand its market presence in China. After the U.S.-China trade disputes in 2018, Australian almond exports to China increased from 13,000 MTs in 2018 to a peak of 61,000 MTs in 2022 as importers sought alternative suppliers. Investors with a global footprint are expected to benefit from a diversified almond market presence that maintains access to high-growth demand markets.

Future sustainable growth prospects

The outlook for almonds and pistachios is promising, underpinned by sustainable growth prospects. As consumers continue to prioritize health and wellness, demand for these nuts is expected to rise steadily. We believe that almond and pistachio consumption will continue to grow, especially as consumers in developing markets increasingly prioritize healthy snacking. Expansion into new markets is expected to drive demand growth, particularly in regions with growing middle-class populations and rising health awareness. Producers are exploring opportunities in emerging markets and leveraging targeted marketing campaigns to promote the health benefits and culinary versatility of almonds and pistachios in these regions. 

Investing in long-term growth opportunities

Investments in almonds and pistachios offer a compelling opportunity for long-term growth, driven by robust demand fundamentals and evolving supply dynamics. Rising global health awareness, economic growth, and cultural integration continue to fuel demand, while advancements in agricultural practices and technological innovation enhance supply prospects. Despite challenges such as climate variability and trade uncertainties, the investment outlook for almonds and pistachios remains positive. By understanding and leveraging their supply-and-demand fundamentals, investors can strategically position themselves in the burgeoning market for these valuable crops.

This article previously appeared in GlobalAgInvesting.