Insight: U.S. walnut growers, in revolt, look to China

Wed Mar 7, 2012 7:12am EST
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By P.J. Huffstutter

RIO OSO, California (Reuters) - It was a proud moment for the Kafkares family when they first hung the Diamond Walnut Growers sign in their orchard more than a decade ago.

People across this rolling stretch of northern California loved that red diamond logo: the symbol of a century-old agricultural icon, whose crop has long been an ingredient favored by holiday bakers.

Now, the family is tearing down the sign in disgust. So are their neighbors.

An accounting scandal over payments made by Diamond Foods Inc DMND.O to its growers -- as well as concerns that Diamond may have been paying below-market prices for their crops -- has hurt their confidence in the company, the largest U.S. walnut processor.

That relationship had already been strained in recent years as Diamond, a walnut farmer-owned cooperative until it became a publicly traded company in 2005, sought to become a diverse snack foods company.

The company's once dominant position in the walnut industry is eroding as farmers flee Diamond's ranks, according to court filings, company documents seen by Reuters, and interviews with more than 25 growers and some former Diamond executives.

Exactly how many farmers have left Diamond in recent months in unclear, but all of the growers spoken to for this story had either recently left the Diamond fold or were considering doing so, because they expect to get higher or more stable payments from the company's rivals.

Diamond declined to comment or allow its executives to be interviewed, saying its agreements with its walnut growers are confidential.   Continued...

Walnut grower Matthew Conant holds a walnut in his walnut grove in Rio Oso, California February 23, 2012. "There's a lot of uncertainty right now", says Conant, former supplier to Diamond Foods and district director of the California Farm Bureau Federation. An accounting scandal over the payments made by the largest U.S. walnut processor Diamond Foods Inc to its growers has hurt their confidence in the company. REUTERS/Robert Durell