How California Produces 99% Of America’s Pistachios In A Drought | Big Business | Business Insider

Key Concepts

• Pistachio Cultivation in California: The video details the history, growth, and challenges of the pistachio industry in California, which produces 99% of the US supply.
• Water Scarcity and Agriculture: A central theme is the increasing difficulty of farming in California due to drought and tightening water supplies, particularly for water-intensive crops like pistachios.
• The Wonderful Company and Water Banking: The role of a major player, The Wonderful Company, in developing water storage solutions and its controversial control over a significant portion of it.
• Market Dynamics and Global Competition: The influence of international events (Iranian hostage crisis, trade tariffs) and consumer trends (Dubai chocolate craze) on the US pistachio market.
• Sustainability and Future of Farming: The ongoing efforts of farmers, both large and small, to adapt to water challenges and ensure the long-term viability of their operations.

California's Pistachio Industry: Growth Amidst Water Challenges

Introduction to California's Pistachio Dominance

California is the undisputed leader in US pistachio production, accounting for 99% of the nation's supply. Despite the crop not being native to the state, American farmers are anticipating another record harvest this year, driven by surging demand, notably from the "Dubai chocolate craze." However, this expansion is occurring against a backdrop of increasing difficulty in supplying these nuts due to the significant water requirements of pistachio trees, which consume approximately twice the amount of water as tomatoes. This situation is exacerbated by worsening droughts and California's tightening water supply, posing a threat to farms and businesses, especially smaller growers who must prioritize survival strategies.

Historical Roots and Introduction to California

Pistachios originate from Central Asia and the Middle East, regions with climates similar to California's, characterized by dry summers. Historically, pistachios were considered a luxury, even mentioned in the Bible. Alexander the Great introduced them to the Mediterranean around 330 BC, leading to cultivation in Italy and Spain, and later in France by the 1800s. Charles Mason brought the first pistachio nuts to California in 1854. Early attempts at cultivation were challenging due to soil compatibility and low yields. Recognizing the drought-resistant nature of pistachio trees, the US Department of Agriculture sent a botanist to Iran in 1929 to procure more productive seeds. A single thriving seed, named 'Gman' after its Persian province of origin, became the foundation for California's multi-billion dollar pistachio industry over the next century.

The Rise of Keenan Farms: A Family Legacy

Keenan Farms, one of the oldest pistachio growers in California, exemplifies the industry's growth. Bob Keenan and his father, Charles, began with just 100 acres before 1972 and now manage 20,000 acres. Their operation relies on specialized machinery, such as harvesters capable of shaking off up to 15,000 pistachios in five seconds, requiring trees with robust root systems. Zach Raven, overseeing the harvest, notes that the ease with which the pistachio hull "slips right off" indicates readiness. Approximately seven trees are needed to fill a single bin, with the goal of processing 130 trailers daily over an eight-week harvest period.

Economic Realities and Cultivation Demands

Pistachios are a high-cost crop, with farmers investing around $20,000 per acre before any nuts are produced. This investment covers watering, nutrition, and pruning, representing a significant gamble. It takes six years for pistachio trees to yield nuts, twice as long as almonds, meaning a prolonged period without return on investment. A unique characteristic of pistachio plants is their dioecious nature, with separate male and female trees; only female trees produce nuts. Crucially, substantial water is required during summer for optimal yields, with one acre needing over a million gallons annually, enough to supply 10 households for a year. Precise timing of water application is critical; deviations can result in up to half the shells being empty ("blanks"). Keenan's first commercial harvest in 1976 yielded only 500 lbs, a stark contrast to their current production of millions of pounds, surpassing the entire state's initial industrial harvest in the mid-1970s.

Impact of Geopolitics: The Iranian Hostage Crisis and Trade

The US pistachio industry's growth was significantly influenced by geopolitical events. In 1979, the Iranian hostage crisis led to US import restrictions on Iranian pistachios, creating a market opportunity for California growers. This period saw many farmers invest heavily in building the industry and developing processing techniques. Although the US lifted its embargo in 1981 after the hostages were released, Iran resumed shipping nuts. To counter this competition, California growers, including Keenan Farms, petitioned the government. An investigation by the US International Trade Commission found that Iran was engaging in "dumping" – selling pistachios below cost to eliminate rivals. In response, the US imposed a 241% tariff on Iranian pistachios in 1986, a measure that remains in effect and has been instrumental in the profitability of the US industry.

Advanced Processing and Global Reach

Keenan Farms utilizes specialized machinery, including an automated huller designed for pistachios, to process the nuts. Water is used to soften the skins for easier removal without shell damage. Dried pistachios are stored in silos, some capable of holding up to 2 million pounds. Mitchell Keenan oversees the processing, which involves scanning for defects, removing foreign materials like sticks and rocks, and sorting nuts by color into five different chutes. Further manual inspection identifies defects such as "spotting." Nuts that meet quality standards are then sized, with smaller, closed, or dark nuts being sent to a sheller to extract kernels. These kernels are then sorted again for defects. Approximately 60% of Keenan's business is international, with products shipped to countries like India for further processing. On an average day, the company packs and ships about 25,000 boxes.

The Wonderful Company: Scale, Innovation, and Water Management

The Wonderful Company, the world's largest pistachio grower, cultivates nuts on 60,000 acres, an area twice the size of San Francisco. Rob Raceboro, who oversees Wonderful Orchards, highlights the company's strategic approach, initiated by founders Stewart and Linda Resnik. Recognizing the US consumer's lack of awareness regarding pistachio health benefits, they focused on market development. The company has achieved higher yields, with their trees producing 20-40% more nuts than average using the same amount of water, through cloning superior-producing trees. Wonderful handles approximately 800 million pounds of pistachios annually.

The State Water Project and its Limitations

The fundamental water challenge in California is the geographical disparity between water sources in the north and demand in the south. The State Water Project, initiated in the 1950s, aimed to transport water from Northern California to the south. However, districts had to repay construction costs, and the project's actual water delivery capacity proved significantly less than initially projected (4.22 million acre-feet per year). This was due to unbuilt canals, pre-existing water rights, and environmental regulations enacted in the 1970s. Kern County, with its maturing nut trees in the early 1990s, faced severe water shortages, with agriculture experiencing up to a 50% cut during droughts.

Groundwater Overpumping and the Kern Water Bank

During water delivery stoppages, many growers, including Wonderful, turned to groundwater aquifers. Overpumping these aquifers led to domestic wells running dry, impacting communities. Even with this shift, groundwater supplies were insufficient in many parts of Kern County. To address this, California explored a water bank to capture and store excess rainwater underground. The Kern Water Bank Authority was eventually formed, with The Wonderful Company, through a private entity, gaining approximately 57% control. This share was secured by paying off a portion of the bank's startup costs and relinquishing some of its water deliveries, which Wonderful claims would be worth over $170 million today. This arrangement allowed Wonderful to store billions of gallons of water during wet periods, providing a crucial advantage during droughts.

Controversy and Ethical Debates Surrounding Water Rights

The Wonderful Company's significant control over the Kern Water Bank has sparked controversy, with critics arguing that public water, funded by residents, is being disproportionately managed by a private entity. The debate centers on whether water rights should be privately controlled and the ethics of such arrangements. Wonderful maintains that the bank utilizes stored surface water, not groundwater, and serves as a vital tool for drought management. They have also shifted acreage from other crops to pistachios, leveraging their competitive advantage.

Market Expansion and Consumer Awareness

Wonderful has invested heavily in marketing, including the 2009 "Get Kraken" campaign, which significantly boosted sales by increasing consumer awareness of pistachios sold in distinctive packaging. This strategy has been instrumental in the US dominating the global pistachio supply since 2016, surpassing Iran. The ResNicks have invested over a billion dollars to meet growing demand. By 2020, Wonderful Pistachios retailed $1 billion worth of nuts annually in the US. The recent "Dubai chocolate trend" has further accelerated demand, driving pistachio kernel prices up by nearly 35% between 2024 and 2025. California growers anticipate their largest harvest ever, with the global pistachio market projected to grow from $5.6 billion in 2025 to over $7 billion by 2030.

Global Competition and Shifting Trade Dynamics

The US supplies over 60% of the world's pistachios. However, China, a major buyer, has imposed tariffs on American nuts, leading to a more than 50% drop in imports over the past year. This has created an opening for Iran to regain market share in China. Iran remains a significant player, supplying about 16% of global pistachios, primarily to China, Turkey, India, and the UAE.

The Iranian Pistachio Experience and Cultural Significance

Nasim Alikani, owner of Soph Persian restaurant in New York City, highlights the cultural significance of pistachios in Iran. She imports a small bag of Iranian pistachios for her restaurant, noting their distinct flavor and texture compared to US varieties. Due to sanctions and escalating tensions, Iranian pistachios are scarce and expensive in America, making them a luxury for special dishes. Alikani laments the potential loss of authentic Persian flavors and cultural heritage if access to these ingredients diminishes. She also notes that extreme weather and supply chain disruptions have increased prices even within Iran.

The Cost of Pistachios and Farmer Sustainability

Alikani observes that pistachios in the US are "kind of inexpensive for what they should be," suggesting that the current pricing may not reflect the true cost of production or the potential suffering of small farmers or the land. Back in California, Keenan Farms continues to maintain its oldest groves, viewing them as a living museum. The Keenans acknowledge the increasing difficulty in keeping these trees productive and emphasize the need for innovation and resilience in addressing water issues. They express a commitment to sustainable practices and preserving their legacy.

The Future of California Agriculture: Innovation and Resilience

The video concludes by underscoring the need for continuous creativity and adaptation in the face of water scarcity. Smaller farms, in particular, must be innovative and resilient to survive. The Sustainable Groundwater Management Act (SGMA) of 2014 has restricted groundwater pumping, forcing farmers to leave fields unplanted ("fallowing") to conserve water credits. This act could lead to approximately 900,000 acres being taken out of production in the San Joaquin Valley by 2040. Despite these challenges, pistachio acreage is projected to grow significantly. The video highlights that those with access to water, like The Wonderful Company, can leverage it for high-value crops, potentially at the expense of other essential produce like fruits and vegetables, which could lead to price shocks. The ongoing "rat race for more water" disproportionately affects smaller farmers, while larger entities with strategic water management, like the Kern Water Bank, maintain a competitive edge. The future of California agriculture hinges on innovative solutions and a commitment to sustainability to ensure the survival of diverse crops and the livelihoods of its farmers.