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pecan groves

Chinese tariffs threaten U.S. pecan industry

From Georgia to New Mexico, record pecan crop faces trade war trouble, and it’s not over

It was a great year for pecan production in Georgia, New Mexico and Texas, with Georgia, the usual leader in pecan production in the United States, raking in 107 million pounds of nuts to remain at the top of the list as the state with the highest pecan production.

In the 2017-2018 season, New Mexico experienced a bumper crop, increasing production by 28 percent compared to the previous year, bringing in 92 million pounds of high grade commercial pecans. Texas also experienced a good year for America's favorite nut, reporting 38 million pounds of total production. Collectively, those three states produce the greatest volume of pecans and the majority of the pecans grown and marketed in the U.S.

"Last December a seven percent tariff was imposed on U.S. pecans by China. In April this year and as a result of the U.S.-China trade dispute, an additional 15 percent was imposed by China, bringing the current tariff to 22 percent. But as a result of the trade dispute, what we can now call a trade war, China recently announced they will impose another 25 percent tariff effective July 6 this year, bringing the total China tariff on U.S. pecans to 47 percent," says Jonathan Arn, owner of Carter Pecans in Albany, Georgia.

Arn, along with many other pecan growers in multiple states, have expressed concerns that such high tariffs could be devastating to the U.S. pecan industry and to U.S. agriculture in general.

"We're rolling off a bumper crop year, and so is most of the U.S., and now we are facing a major road block in marketing our pecans. About 65 percent of Georgia pecans, for instance, are sold to China," he added. 

He says falling prices for pecans are the direct result of China's counter tariffs in response to the president's steel and aluminum tariffs imposed in April, and he warns pecan prices could go even lower if an extended trade war develops.

"You can't fix trade deficits with trade wars," he advises.

It's not just Georgia pecan producers who are sweating over trade developments in recent months. In New Mexico, enthusiasm going into the year was high, and for good reason. The value of the New Mexico pecan crop in the season that ended in February through March this year, rose by $220 million over the 2016-2017 season — a record high. But now growers are wondering how deep the trade war with China and other nations will cut into their profits this year.

While a much smaller percentage of New Mexico pecans are exported to China, pecan officials in the state say there could be an overstock of pecans later this year if producers elect not to sell to China because of the tariffs. If that happens, it could result in growers selling pecans for less than they cost to grow them. Such a glut of pecans could see lower prices for consumers at the grocery store but it would represent tough times at pecan operations across the nation.

Sens.Tom Udall and Martin Heinrich of New Mexico drafted a letter to U.S. Trade Representative Robert Lighthizer earlier this year when China introduced a 15 percent tariff on many U.S. farm products, including pecans grown in New Mexico. In that letter, they told Lighthizer that retaliatory tariffs will hurt American farmers.

“Increased tariffs are already causing significant uncertainty and will make farming difficult for our state’s growers and producers,” the senators warned.

Texas, who enjoys success with its smaller native pecans, will also feel the pinch over tariffs and the growing trade war. According to one Texas grower, his operation deals with low margins, meaning the cost of growing pecans and doing business, leaves a small window of profit opportunity. Any action that upsets the apple cart — in this case the pecan cart — at any time, is bad for business.

"At the end of the day the growers, nut processors, packers, handlers and the exporters, work more or less on fixed margins and those tariffs ultimately come out of all our pockets," adds Arn, who ships between 400 to 500 containers full of pecans to China each year.

"Yes, I would say we have a real problem across the industry. Right now there is a lot of pecan inventory in China; we have a massive crop in the U.S. this year, South Africa is reporting a large crop, Mexico is set to produce 350 million pounds of pecans this year [that are not subject to Chinese tariffs], and on top of that we have seen not one or two, but three different tariff increases imposed by China on U.S. pecans this year, and no one knows when it will stop."

In addition to worries over Chinese tariffs, agricultural producers fear expanded trade tariffs imposed by the White House on the European Union and other nations could quickly escalate to include more food and farm items and non-farm products as well. And now the White House has been hinting at raising the trade ante with China by adding an additional 10 percent tariff on top of those already in place on China. Analysts say such an action would only escalate the trade war and would invite another retaliatory response from Chinese trade officials.

"I think the conversation should be, how do we open up market access in China for more American products. U.S. farmers and other U.S. industries need that access. You can't reduce trade barriers by throwing up tariffs. It just doesn't work," Arn said.

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