Trade truce with China raises hopes but not prices

Tariff wars against orange, apple growers still in place

By John Lindt
Sierra 2 the Sea news service

CENTRAL VALLEY – News that there would be a truce in the escalating tariff war with China has offered some hope to the local citrus industry. But despite the announcement a few weeks ago by the Trump administration there is so far no relief where it counts: in farmer’s wallets. 

Citrus exports to China continue to suffer a 70% regulatory tariff. That results in too much fruit forced on the domestic market and continues a slump in prices.

China said they would purchase at least $40 billion annually over two years of U.S. agricultural products. In exchange, the Trump administration has agreed not to apply additional tariffs. 

“We’ve been hammered by the dispute with China,” Joel Nelsen, the recently retired president of California Citrus Mutual (CCM), said.

In a news release the Exeter-based trade group explains. 

“For California citrus and most commodities, the retaliatory tariff issue has not been resolved in this agreement. Currently, citrus is experiencing a 50% increase on top of the existing tariffs. This brings the total tariff…to 70%. This has significantly slowed exports to China and put downward pressure on the domestic market,” the release stated.

“Pricing last year was the worst we’ve seen in recent memory,” CCM president Casey Creamer said. Despite the agreement with China, “it’s no better now.” He recently estimated that average price on a carton of conventional 88 size fruit was in the $12 range right now.

“China has generally indicated that they would be open to issuing exemptions to the tariffs, but to date have not removed the citrus tariffs,” Creamer said.

He is hopeful that could change.

“The next 20 days will be an incredibly important view of how the Chinese government responds now that the deal is signed,” Creamer added.

Creamer is relying on some assurances that China will exempt some commodities in time to ship this season to China but there is little time left and the Chinese New Year is already here. Now China has bigger unrelated worries with a contagious virus spreading worldwide.

Meanwhile American citrus is losing its market to Chile and South Africa.  Initially China imposed a 20 percent tariff on citrus, and then as the dispute rose, more tariffs were placed, taking it to 60 percent. For the 2019-20 season California citrus has lost its market to Australia, South Africa and Egypt.

Trade is what the industry needs and being embroiled in a trade war going into a third year would not be a good thing.

Valley congressman Kevin McCarthy recently noted that, “China has historically been among the top five export destinations for California’s fresh citrus, a testament to our hardworking farmers and agricultural community. Unfair Chinese tariffs on our country’s fresh citrus, however, have unfortunately caused devastating implications on California fresh citrus producers who anticipate losses of more than 50 percent in exports to China and Hong Kong this upcoming shipping season.”

President Trump’s former chief economic adviser Gary Cohn said on CBS’s “Face the Nation” in the past few days that he thinks the president’s tariffs on China “totally” hurt the United States, and that he doesn’t believe they have helped achieve a different “outcome” with China.

Indeed farmers may be excused for wondering if they wouldn’t be better off if those steel and aluminum tariffs had not happened.

Still the U.S. has fought back with more retaliation. As of last October a new tariff war has been imposed by the U.S. against subsidized EU citrus. A 25 percent additional duty was imposed on imported fresh oranges, lemons, clementines and mandarins. This applies to citrus from all member countries of the European Union, including Spain, a major source of citrus for the United States.

Ironically farmers have been fans of two big trade measures in place when Trump took office, but canned by him. One was the North American Free Trade Agreement (NAFTA) and other was the Transpacific Partnership. Both now are gone but a revised NAFTA pact finally was signed in recent days.

A look at FOB Prices

Creamer said the California navel crop has been estimated at 73 million cartons, which is about 7 percent smaller than the 2018-19 crop. He said the smaller crop has produced larger sizing, better demand and higher Free On Board (FOB) prices. In early January, the average price on a carton of conventional 88 size fruit was in the $12 range.

In the 2018-19 season the weighted average price per carton for the navel crop was $13.43 per carton, which was a $4.58 decrease from the 2017-18 season. That year the weighted average price per carton for the season was $18.00, which is $3.52 more than the 2016-2017 season and near $6 more than the 2015-2016 season. Navel revenue out of District 1 will reach about $1.1 billion.

Dark Cloud

Not just citrus but the apple industry has been hit by the trade war as well. The dark cloud hanging over U.S. fruit exports won’t go away says a recent report.

While the Trump administration has put in place programs to mitigate the effects of trade retaliation, those programs haven’t compensated for the loss of export sales, said Mark Powers, president of the Northwest Horticultural Council, in Yakima, Wash.

As increased tariffs hit American products, apple farmers are among those getting hurt. The tariffs come from countries including India and China in response to U.S. tariffs on steel, aluminum and other goods. Today, 60 percent and 70 percent tariffs are imposed on U.S. apples sold to China and India respectively.

Even good news comes with a cloud over head. Japan announced a new trade agreement with the U.S. but it mandates the U.S. orange growers will have to wait 5 to 7 years for tariffs to be reduced.

Last week President Trump spoke to the American Farm Bureau membership meeting saying farmers should go out and buy more land and more tractors to supply all the ag goods China will buy.

Western Farm Press recently noted that Trump claimed net farm income is up more than $30 billion, an increase of nearly 50% in three years, adding that “under the previous administration, net farm income plummeted by 20%.” But added that in fact, net farm income peaked in 2013 during the Obama administration.

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