It takes one glance at current news headlines to know that agriculture trade is a hot-button issue within the industry. Amongst countless exported crops being hindered by tariffs, the California walnut industry is no different. With California English walnuts making up two-thirds of the world’s trade, the California Walnut Commission is on high alert to ensure that growers are protected from tariffs that could damage their markets.
Pamela Graviet, the commission’s senior marketing director, spoke deeper on this issue.
“If you look at the three major markets—China, Turkey, and India—where we have tariff issues,” Graviet said, “that represents twenty percent of our total shipments … it’s over $300 million we’re going to lose.”
Thus far, the walnut industry has avoided paying the full tariff direct to China through the “gray market,” or the sales of walnuts through other countries that feed into China.
“But when you’re tariff constrained or in a trade war” Graviet explained, “they are also cracking down on those other routes, and the gray market has also suffered.”
The California Walnut Commission will continue their work to protect nearly 100 handlers and 4,800+ growers that make up the California walnut industry.
Paul Wenger, a Stanislaus County almond and walnut grower told California Ag Today recently that California growers have often suffered with tariffs. “The proposed trade agreements such as TTIP and TPP along with NAFTA would have helped solve tariff problems,” he said. “But TTIP and TPP are gone.”
“The Trump administration may try to negotiate a bilateral agreement with other countries, and he seems to be working on NAFTA with Mexico,” noted Wenger, who is also the past president of the California Farm Bureau Federation.
At the end of the day, Wenger hopes that calmer minds will persevere and we’ll see these trade negotiations get done and we’ll move forward.
“Because we are in a world market,” Wenger explained. “As much as President Trump puts tariffs on steel and aluminum … saying that we’re going to bring back our rust belt, well, we’re not, because it’s not the market that has killed the steel industry, it has been the regulations. Our steel industry can’t produce at a level that people are willing to pay.”
There are a lot of crops that can only be grown in a Mediterranean climate. There are only five Mediterranean climates in the world; California is one of them and the largest producer of specialty crops.
The central part of Chile can produce a lot of the crops that we have today. But other than that, it’s the south tip of Australia and South Africa and the Mediterranean region itself.
“When you really think about who can produce, as long as we have the water, not only do we have to worry about marketing our product, we have to also fight for our water so we can produce those crops. And long-term, people are going to find a path to California for the crops that we grow here,” Wenger said.
California Ag Today recently spoke with Paul Wenger, past president of the California Farm Bureau Federation. He farms 700 acres of almonds and walnuts in Stanislaus County. He said that California Farmers and other stakeholders of the industry need to be less negative about the current trade war with China.
“The more we talk negatively, the more that negative things are going to happen,” he said. “As I talked to walnut processors. They’re optimistic. That’s good news. I’ve talked to some walnut processors and said, ‘Well, what’s going to happen this year?’ We shouldn’t expect much as far as prices.”
“Marketing is always a self-fulfilling prophecy and it’s more psychology than it is anything,” Wenger said. “We are one of the largest producers now. Certainly, China is the largest producer. But China had a terrible crop and so they need walnuts, and so strange things can happen and the Chinese are always one that can bend the rules when they need.”
“We know that’s why President Trump has been going after China supposedly over some of these intellectual properties. Certainly, those aren’t the things that hurt agriculture, but we in agriculture are paying the price as we look at these countervailing tariffs that are coming on,” Wenger said.
Wenger explained that the Chinese know that, throughout the Midwest, it was the farm vote that helped and the rural states that helped bring home a victory for the president, so they’re going to go after President Trump.
A large amount of product was sold last season at a low price.
“We just go through the Affordable Care Act and then the port slowdown on the 2015 crop, which went into the 2016 crop, which was a little better We got a little bit better than 2017 crop was a good year for us,” Wenger said. ‘So you’re looking at a pretty good ’18 and now this happens.”
If a market is lost, it takes time to get it back. California Ag Today recently spoke with Brian Kuehl, executive director of Farmers for Free Trade, about the topic. A concern is that competitors are entering the markets that we currently occupy.
“No farmers invest huge amounts of time and energy trying to open markets or trying to develop trade relationships, and they’re being torn up in a matter of months,” Kuehl said.
Tariffs will cause long-term problems. One major issue is that when tariffs are established, other countries will begin put to put tariffs on our food. Those countries then begin to plant more crops to adjust. Soon, those countries become their own producers instead of relying on the U.S. Those countries then look to other countries that are more dependable, which in turn becomes a competitor to the United States.
The renewal of NAFTA will help.
“If this is not resolved soon, we certainly are doing lasting damage to agriculture. It could trigger the next farm crisis,” Kuehl said.
It looks like the U.S. is moving toward a deal with Mexico on a renewal of NAFTA.
“Hopefully that would quickly lead to a deal with Canada,” Kuehl explained. “Mexico and Canada are our biggest trading partners.”
For many of our products, China is one our largest trading partners, and certainly one of the ones that is growing the fastest in terms of population.
“We do not want to squeeze ourselves out of the Chinese market for a decade to come; that that would be a colossal error,” Kuehl said.
The U.S. has routed products in the past. Some countries including Vietnam and Hong Kong route products into China.
“There might be a tariff on product going into China directly, but we know some of our growers are able to avoid the product that tariff by selling first to Vietnam and then Vietnam shifts into China,” Kuehl said. “That same tactic with Hong Kong is being shut down. China is getting much smarter at saying you can not circumvent our tariff, so we are going to hold you to these tariff rates.”
Water and labor are major agricultural issues in California. California Ag Today recently spoke with Steve Forbes, chairman and editor in chief of Forbes Media, about the topics.
“I think that the more people are realizing the enormous opportunities of technology in agriculture. They think that it is going to get better and better in the future,” Forbes said.“Everything from reservoirs to desalination plants should be modeled after Israel. They have been building desalination plants because Israel is in a desert where they have been getting rainfall.”
“This is a very sophisticated use of water in agriculture where they are a real global power,” Forbes said.
Today, Israel uses 10 percent less water as a whole, not per capita, than they did 70 years ago despite the economy being 60 times larger.
Forbes thinks labor is also an issue.
“We are hurting ourselves, our food production, not just in agriculture but construction as well,” he said.
Forbes said we should recycle the programs that we once had, programs where returning people come in for specific time periods for specific jobs. This would help prevent the illegal immigrant problem because workers know they can come back.
On another note, he discussed the current trade war that the U.S. is in with China.
“If you hear 10 percent tariff on aluminum, that’s a 10 percent sales tax; put it that way and people’s eyes go up and they get it right away,” Forbes said.
Putting sales taxes on American consumers, agriculture, farmers, and businesses is not the best way to resolve very real trade abuses.
“Everyone knows from the disaster and the depression of the 1930s what trade wars can lead to,” Forbes said.
Forbes also explained that GMOs greatly benefit producers and should not be attacked as harmful to consumers.
“GMOs have been studied fairly well, and they are making food more plentiful. It makes food a safer in terms that you don’t have to use as many pesticides,” he said. “GMOs make a better use of water, and there is a lot less loss to diseases and insects. We are using human ingenuity to make the human condition better.”
There is Fear China Could Turn to Other Countries For Ag Products
By Mikenzi Meyers, Associate Editor
The ongoing threat of Chinese tariffs on American agriculture has recently been the topic of conversation for agriculturalists. With China posing a possible 25 percent tariff on U.S. soybeans back in April, it seems this conversation is here to stay. The added tariff could drive Chinese buyers to choose other markets on many California commodities, including walnuts, tree fruit and beef.
Matt Lantz, vice president of global access for Bryant Christie Inc., deals with international trade, and these issues on a daily basis. Bryant Christie is an international affairs management firm that is based in Sacramento and Seattle, where they help U.S. commodity groups and agricultural companies with their international trade issues in order to export their products.
Lantz explained that this new threat is a major concern for California agriculture.
“China is an incredibly important market for California fruit and vegetable exploiters, and any tariff or increased inspection makes it more difficult to export,” he said.
Making matters worse, Lantz pointed out that buyers are going to turn to the countries without the tariff—which can be bad news for producers.
There Is Worry that Some Companies May Lose Ground on Exports to China
By Mikenzie Meyers, Associate Editor
California growers are on edge due to newly imposed tariffs that could cause the state’s agriculture to suffer. After China recently retaliated against the United States’s steel and aluminum tariff by pushing its own on U.S. imports, they have good reason to be worried. California Ag Today recently spoke to Shannon Douglass, first vice president of the California Farm Bureau Federation, who is heavily involved in this conversation.
“No matter what you’re growing, so much of our products are exported, and so it’s a really vital concern to many of our farmers,” Douglass said.
She explained that it isn’t just a concern for those involved with fresh produce—which might be the first affected—but also any farmer who depends on sales to foreign markets.
One of the biggest concerns is losing the progress made in growing the foreign market, but Douglass seemed hopeful as CFBF has continued working with those driving legislation,
“We certainly don’t want to lose that ground that we worked so hard to develop,” she said.
Agriculture has always been a winner in the trade arena, and although the climate of foreign markets may be uneasy, Douglass and the California Farm Bureau Federation are continuing the conversation to make progress toward a hopeful future for all farmers.
“The greatest part of the conference was meeting a lot of good people—current customers and new people who handle and trade almonds globally,” said Ricchiuti.“We talked about the economic defaults in the Middle East, India and China and how they have affected current supply and demand.”
Ricchiuti said, “Everyone was questioning the 2 billion pound-subjective estimate for the almond crop,” USDA’s National Agricultural Statistics Service (NASS) early forecast about the coming Fall 2016 California almond crop developed after it is set [unripe nuts have emerged, ready to mature].
Many thought the subjective estimate was low—that more of a crop is out there. Some handlers and traders,“fear that if we don’t have a good progress shipment report for this next month, it would be a disadvantage,” he said.
But, having a more positive outlook, Ricchiuti held that the crop is at least that amount and could be more. “It’s a reality but it shouldn’t scare everyone in the marketplace that the price should go down any more. We need to be positive and I think the price can even move up a little more with the shipment reports being positive,” he said.
“We keep positive on shipment reports because everyone’s been buying hand-to-mouth. The warehouses are empty; there’s no one stockpiling almonds, even at the low prices. There’s hesitation in buying, but they’re buying on need and it’s picking up,” noted Ricchiuti.
Ricchiuti stated, “We just need to get these people away from thinking it’s doom and gloom and the sky is falling. It is not; it’s something that is very positive. First of all, there will be plenty of almonds to sell,” he elaborated.
“We had a good shipment month last month and this month looks like it’s going to be good. People are still hungry for almonds; they still want almonds, but pricing is disrupting the market.”
“Even if it’s more than two billion,” Ricchiuti commented, “we think there’s a world market and demand from the consumer for almonds will continue.” He expects they will have less carryover [unsold crop], which will help with diminishing supply. “We feel it’s stabilized now. It has come up somewhat, about 50 cents a pound in the last few weeks.” he said, “so that’s been very positive.”
Ricchiuti explained, “We are looking forward to the objective estimate [in late June to early July] to really hone in where we are, what the May shipment reports will be, and move on from there. We just need to keep a very positive marketing attitude, keep selling almonds and keep selling the consumer on how nutritious and how good they are for you.”
Ricchiuti said conference topics included the immense nutritional value of almonds, how good they are for you and the diversified uses—”more so than any of the other nuts. We need to teach this younger generation to include almonds into their lifestyle. ‘Hey, have a handful of almonds every day.'”
The following was written by Agriculture Secretary Tom Vilsack:
“Throughout history, agriculture has served as a bridge to foster cooperation, understanding and the exchange of ideas among people. I have no doubt that agriculture will continue to play that powerful role as we expand our relationship with the Cuban people in the coming years.
“Today’s announcement expands opportunity for U.S. farmers and ranchers to do business in Cuba. It removes technical barriers between U.S. and Cuban companies and creates a more efficient, less burdensome opportunity for Cuba to buy U.S. agricultural products. It also makes those products far more price competitive, which will expand choices for Cuban shoppers at the grocery store and create a new customer base for America’s farmers and ranchers.”
The trade agreement includes a number of trade priorities that address such diverse issues as cross-border trade delays, technical dialogue related to beef and organic trade, agricultural cooperative extension outreach, and climate change collaboration.
“Mexico is a vital partner for California agriculture,” said Secretary Ross. “Further collaboration between our countries will enhance the opportunities within the agricultural sector for farmers and ranchers in both of our nations.”
The agreement follows months of dialogue between CDFA and SAGARPA that culminated in a meeting between Secretary Ross and Secretary Enrique Martinez at the Produce Marketing Association trade show in Anaheim at the end of October.
California is the largest agricultural producer and exporter in the nation, with more than $18 billion in food and agricultural exports. Mexico is California’s fifth largest export destination valued at $888 million. Over the last ten years, agricultural exports to Mexico have increased three-fold.