December 2, 2024

By Weiyi Zhang, Ph.D., Associate Director, Agricultural Economics, Manulife Investment Management

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 explores current and projected trends in the market, highlighting key factors that influence supply and demand.

Rising Global Health Awareness Blends with Culinary and Cultural Tradition

Rapid growth in world total almond and pistachio consumption (MMT)

Source: USDA, PSD, as of October 31, 2024. MMT refers to million metric tons.

Increasing health and wellness awareness is a primary driver of demand growth for almonds and pistachios: for example, both can help control blood sugar levels, blood pressure and cholesterol level.[1,2] In addition, health experts also advocate for nut consumption due to their heart-healthy fats, protein content, and essential nutrients. These characteristics have resulted in the rise in popularity of almond-based products, such as almond milk, almond butter, and gluten-free almond flour. The increase in global health awareness complements the traditional culinary significance of these nuts — which are a staple of Mediterranean and Middle Eastern cuisines — and has bolstered demand. The versatility of these nuts, which can be used in both sweet and savory applications, supports their continued demand across diverse culinary landscapes.

The health benefits and traditional uses of almonds and pistachios have significantly contributed to rising consumption as consumers seek healthier snack options. The growing demand for healthy snacks helped drive a 180 percent increase in global almond consumption over the past two decades through 2023 when consumption reached an expected 1.6 million metric tons (MMTs).[3] Pistachio consumption experienced an even stronger uptick, increasing by 194 percent to nearly 1 MMTs in 2023.[4]

Source: USDA PSD, as of October 2024. Note: ROW stands for the rest of the world.

Source: USDA PSD, as of October 2024. Note: ROW stands for the rest of the world.

Global Economic Growth Has Fueled Increasing Consumption

Economic growth, particularly in emerging markets, has contributed to increased disposable income that enables consumers to spend more on premium food products. Over the last two decades (2004–2023), while North America and the European Union (EU) remained the top two almond consumption regions, East Asia (increasing 9 percent per year), the Middle East (increasing 8 percent per year), and South Asia (increasing 11 percent per year) also experienced significant growth.[5] Combined, these three regions accounted for 45 percent of global almond consumption growth 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 (increasing 20 percent per year) and South Asia (increasing 14 percent per year) also showing rapid growth.[6]

Economic growth has played a pivotal role. Two of the fastest growing consumption regions, East Asia and South Asia, are home to two of the populous leading developing countries, China and India, which have witnessed a growing middle class with a penchant for healthier eating habits. In China, almond and pistachio consumption, largely reliant on imports, has grown annually by 19 percent and 12 percent, respectively, over the past twenty years, driven by rising incomes and expanding retail networks. Similarly, India’s almond and pistachio consumption has seen steady annual increases, up by 11 percent and 17 percent, respectively, per year, 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 three pounds per capita in the U.S. and EU regions in 2023. While per capita consumption of tree nuts in China and India remains a fraction of that in the U.S. and EU, it has grown significantly, increasing 12-fold in China and 6-fold in India over the last two decades. In highly populated developing countries such as India and China, even small increases in per capita consumption relative to the U.S. and EU can produce significant increases in consumption as has been demonstrated over the past two decades.

Combined almond and pistachio per capita consumption (pounds) and total consumption (million pounds) for select countries, 2004 vs. 2023

Source: USDA, PSD, U.S. Federal Reserve, as of October 31, 2024.

Income Growth Supports Increased Tree Nut Demand

As incomes rise, consumers have greater disposable income 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 stage of a country’s economic development can significantly affect that country’s growth potential of per capita consumption of almonds and pistachios.

Current per capita consumption levels of almonds and pistachios are notably higher in the U.S. and the EU than in China and India; however, the historical relationship between growth in per capita consumption and rising income underscores the distinct economic dynamics at play. In the U.S., every 1 percent increase in GDP per capita is estimated to boost combined almond and pistachio consumption by 1.2 percent. In the EU, the same economic growth is estimated to result in an increase of 0.9 percent in per capita consumption. In comparison, in developing markets, the effects of economic growth on consumption are expected to be amplified. In China, a 1 percent per capita growth in GDP is estimated to raise tree nut consumption by 6.1 percent, while in India, consumption is estimated to increase by 8.6 percent with the same scale of economic growth. Further, considering the faster GDP growth projected for developing markets over developed markets, these factors suggest that while consumption in developed markets is currently higher, developing markets exhibit greater proportional growth potential in tree nut consumption from both faster income growth and greater potential per capita consumption growth.

Per capita tree nut consumption growth per 1% growth in per capita GDP

Source: USDA, PSD, U.S. Federal Reserve, MIM TA Economic Research, as of October 31, 2024.

Supply Dynamics are Evolving, While Demand Remains Strong

Supply fundamentals are supportive of increased capital investment in tree nuts. Commercial production of tree nuts requires specific climate conditions and capital commitment for infrastructure to establish and maintain orchards. Therefore, only a few regions around the world meet the specific requirements. California accounts for most of the global almond and pistachio supply. With California almond production forecast to plateau or even decline due to water challenges, a constrained supply alongside increasing demand may improve the outlook for almond producers. Meanwhile, as the pistachio sector approaches maturity, the moderate growth seen in supply suggests a balanced market that can meet expanding consumption driven by health-conscious consumers and economic growth in both developed and developing regions. Taken together, we believe these supply dynamics should provide favorable conditions for tree nut investments, as demand growth momentum continues.

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, highlighting the market’s sensitivity to global trade dynamics. Conversely, free trade agreements and reduced tariffs can enhance market access and stimulate production.

In this environment of variable trade relationships, Australia, already the second-largest global almond producer, capitalized on the opportunity to expand its market presence in China during the 2018 U.S.-China trade disputes. Australian almond exports to China increased more than fourfold as a result, reaching a peak of 61,000 MTs in 2022 as Chinese importers sought alternative suppliers, accounting for nearly half of China’s almond imports.[7] Investors with a global footprint and a geographically diversified almond market presence are expected to benefit from multiple options for access to high-demand-growth markets.

Additionally, diversification along the value chain is also crucial for the tree nut market, as almonds and pistachios mature as farm commodities respectively. Investment into midstream processing and marketing operations can complement investment in nut crop orchards, diversifying cash flow sources and mitigating crop price volatility. For example, investments in processing and packing can help to differentiate products in increasingly more competitive markets; effective marketing can build consumer loyalty and open new market channels, especially international markets. By diversifying cash flow sources, investors can better manage financial risks and mitigate the impact of crop price volatility, leading to more resilient and sustainable investments.

Future Sustainable Growth Prospects

The outlook for almonds and pistachios is promising, underpinned by sustainable demand 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 and within new and developing markets is expected to drive demand growth, particularly in regions with growing middle-class populations and rising health awareness. Producers are actively 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 to help fully realize and accelerate the potential demand growth.

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 supply-and-demand-fundamentals, investors can strategically position their investments in nut crops and complementary mid-stream assets to benefit the burgeoning market for these valuable, increasingly sought-after and healthy food products.

ABOUT THE AUTHOR

ENDNOTES

¹ European Journal of Clinical Nutrition, October 2, 2013, https://www.nature.com/articles/ejcn201384.

² Nutrition Today, May 2016, https://journals.lww.com/nutritiontodayonline/fulltext/2016/05000/pistachios_for_health_what_do_we_know_about_this.6.aspx.

³ USDA PSD, as of October 31, 2024

⁴ USDA PSD, as of October 31, 2024

⁵ USDA PSD, as of October 31, 2024

⁶ USDA PSD, as of October 31, 2024

⁷ International Trade Centre, Trade Map, accessed on October 31, 2024.

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