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Investor Relations

Californian agriculture: still a winning proposition

with Ashok Krishen, Managing Director & Global Head, Edible Nuts

California has experienced its fair share of droughts, but the current drought is now entering its fourth consecutive year and is posing new challenges not historically seen before due to increased population, more water users and ageing infrastructure. Growers in California are now conserving water for their tree crops and diversifying their crop rotations to higher value, more water efficient and drip irrigated row crops. The drought is also causing older, low-producing almond orchards, vineyards, and pomegranate crops to be removed. Growers, the industry, and the public have responded to the drought by improving their irrigation and soil management practices, improving water usage and recycling for urban usage, and finally voting for new water legislation including the Sustainable Ground Water Management Act and the US$7.5 billion water bond to build more storage.

There is a lot at stake – the state’s agriculture value chain supports more than 1 million jobs, generates US$46 billion in farm output with an additional US$100 billion in economic impact. The state of California is an agricultural powerhouse. Indeed, it is a breadbasket not just for the US but also to the world. Home to more than 400 crops, some 250 of which are grown in the San Joaquin Valley alone, its near-perfect diversity of micro-climates and soil conditions have allowed many crops to thrive – cotton, tomatoes, almonds, walnuts, garlic, wine grapes and many others.

The Californian almond industry saw an 88% acreage increase from 1998 to 2014, as growers diversified more of their acreage into tree nut crops like almonds, walnuts and pistachios. Almonds, like other tree nuts, deliver one of the highest crop revenue per acre-foot of irrigated water.  Demand is also on the rise, as both developed and developing markets become more cognisant of almonds’ myriad health benefits.  Ensuring long-term success for one of the state’s largest economic drivers requires a vision that puts sustainable operations at its core.

It has taken determined efforts from both the public and private sectors, working closely with other key stakeholders, to deliver the progress achieved so far. It’s our firm belief that these same symbiotic relationships will underpin and secure the future of the agriculture sector in California.

As the world’s number two grower of almonds, Olam is delighted to work within a community that promotes responsible growth, aligned to our own belief in respecting and optimising natural capital.  This has become ever more critical in today’s water scarce environment.  Having studied the Californian model of agriculture closely, we are confident that it will prosper especially for the select crops where California remains the dominant and most cost-effective producer of these crops. The almond complex is one that is both financially and environmentally sustainable, and this is where Olam can compete and grow.

Built for sustained success

The state has long recognised the economic importance of agriculture and has invested heavily in the necessary supporting infrastructure, research and talent.

Today, California is home to sophisticated water infrastructure, with federal and state water projects such as the Central Valley Project (CVP) which delivers approximately 7 million acre feet of water for agriculture, urban and wildlife use, irrigates about 3 million acres of California’s agricultural land while supplying water for nearly 1 million households (source: California Water Plan Update 2013[1]).

Complementing the strong water infrastructure is a supportive network of education and academic participation. Again, much credit has to go to the state, which has invested heavily in these areas. California is home to top universities with expertise in areas such as irrigation technology, pest management and seed development.

Olam has always been a strong believer in the importance of education and research in nurturing leaders, and we have been able to work closely with these institutions as well as recruit future talent from them.   For example, we recruit from local universities for our Management Trainee programme and internships, host tours for high school students to promote awareness of agriculture/food science majors and organise career awareness seminars for college students.  We have also funded research by contributing US$200,000 to the California State University, Fresno, which went to its Jordan College of Agricultural Sciences and Technology.

The University of California, Davis is the alma mater for many of our employees in California. The university’s Division of Agriculture and Natural Resources (ANR) works closely with the industry to help address environmental concerns, protect plant health and provide farmers with scientifically tested production techniques to generate sustainable business models.

 Uniting the Industry

The continued success of California agriculture must also be attributed to its industry organisations, which have worked tirelessly to safeguard the future of California agribusinesses.

The Almond Board of California (ABC) ensures sustained economic, social and environmental growth for the commodity and its business community. It now comprises more than 6,000 almond farmers and boasts more than 40 years of research and experience. With a robust budget of US$60 million per year, the ABC has also invested nearly US$1.6 billion in industry-funded research over the years. Our extended management team has adopted practices and research findings from the ABC, embedding them in our farming operations and indeed in our business model.

With such a strong supporting ecosystem and a community that places emphasis on enabling long-term growth and leadership, California agriculture helps all parties to unlock a continual, virtuous circle of mutual value creation. Our corporate purpose of Growing Responsibly ties in perfectly with the state’s aim of prioritising and championing sustainable agriculture. We are confident that California will retain its crown as a leading producer of agricultural products for the foreseeable future, and Olam’s investors will reap the benefits of our continued presence in the Golden State.

¹California Water Plan Update 2013: http://www.waterplan.water.ca.gov/docs/cwpu2013/Final/04_Vol1_Ch03_Ca_Water_Today.pdf