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PISTACHIOS: THE QUIRKS OF AGRICULTURAL TRADE IN A NUTSHELL

pistachios

PISTACHIOS: THE QUIRKS OF AGRICULTURAL TRADE IN A NUTSHELL

Disappearing Red Pistachios

If you’re an American over a certain age, you might recall the experience of staining your fingers while prying open red pistachios. They were a somewhat exotic treat, put out on occasion in a special bowl. That might seem strange to younger Americans who are only familiar with the natural tan pistachios that are ubiquitous as a post-workout food and snack.

The different associations are the result of a dramatic shift in where pistachios were produced and shipped after 1979 when the United States imposed sanctions against Iran in response to the Iran Hostage Crisis involving the taking of more than 50 American diplomats.

Mr. Whitehouse Leaves Washington

Pistachios are a biblical fruit, renowned as a court favorite of the Persian Queen of Sheba, a frequent traveler on the Silk Road and Mediterranean maritime routes. Iran has cultivated them for thousands of years, though large scale commercial production in Iran began just over one hundred years ago. American production is a much more recent phenomenon.

In 1929, American botanist William Whitehouse explored Persia on behalf of the U.S. Department of Agriculture, scooping up pistachio samples from farms located in modern day Iran. He returned in 1930 and planted test plots. When the trees matured a decade later, only one proved fruitful – Whitehouse named it Kerman after a city in Iran’s Rafsanjan central plateau. Pistachio trees can live hundreds of years and take their time to reach peak production – around twenty years.

Ironically, the U.S. pistachio industry – born from a single Iranian seed – matured in the 1970s precisely at the moment Iran’s trade with the United States, including of pistachios in dyed-red shells, came to a crashing halt.

The tale of U.S.-Iran pistachio trade has four plotlines that dramatize the broader quirks of global agricultural trade.

Plotline 1:

Extreme Quantitative Restrictions – A Trade Embargo

For most of history, Iran has been the world’s biggest source of pistachios. They are Iran’s most significant agricultural export by volume and value. Iran was the biggest supplier to the United States, but damaged relations following the Islamic Revolution of 1979 changed that. U.S. sanctions imposed since that time have a complex and layered history but have almost always involved a complete embargo on Iranian exports to the United States.

Following the lifting of the initial embargo in 1981, Iran’s food exports to the United States rebounded somewhat before the embargo was reintroduced in 1987. In an easing of sanctions in 2000, very modest amounts of foods from Iran were imported through Treasury Department-issued licenses. By 2010, imports of foods from Iran were again fully prohibited. The 2015 Iran Nuclear Deal would have enabled Iran to export pistachios and other agricultural products and lifted restrictions on financing, which Iran hoped would inject much needed capital investment in the agricultural sector. U.S. withdrawal of the Nuclear Deal in May 2018 saw a return to strict U.S. sanctions on imports from Iran.

Milestones in US-Iran competition in global pistachio trade

Plot Line 2:

Classic Farm Subsidies

When sanctions were first imposed in 1979, U.S. pistachio production was 7,700 metric tons, up quite substantially from the first U.S. commercial crop in 1976 of just 680 metric tons. In comparison, Iran had averaged 19,504 metric tons per year in the decade leading up to sanctions, but peaked in 1978 at nearly 59,874 metric tons. At the time, Iran accounted for nearly 100 percent of U.S. imported pistachio nuts. After falling off during the embargo, Iran renewed exports when the embargo was lifted in the early 1980s.

In March 1986, the Commerce Department found in favor of a U.S. industry petition that complained the Iranian government was subsidizing pistachio production. Iran (as many developing countries do) was providing supports to its agricultural producers by subsidizing the cost of key inputs such as fertilizer, chemicals, seeds, water and energy and by guaranteeing a minimum price for their output. The investigation resulted in a 99.5 percent countervailing duty on in-shell pistachios and a 318 percent duty on roasted pistachios.

Because Iran was not a signatory to the General Agreement on Tariffs and Trade (GATT) and is not a WTO member (the United States has repeatedly blocked its application for accession), no injury determination was required.

US tariffs on pistachios

Plot Line 3:

“Less Than Fair Value”

In a parallel 1986 investigation, the U.S. International Trade Commission (USITC) found that the volume of raw in-shell pistachios imported from Iran had increased significantly after the embargo was lifted in 1981. U.S. producers had secured 93.2 percent of the U.S. market in 1980, which was about 12.5 million pounds. By 1985, the overall size of the U.S. market had swelled to 61 million pounds, and Iran’s share had grown to 42.3 percent, accounting for almost 100 percent of all imports.

At the same time, the unit value of imports from Iran (import price) fell by around half. The USITC determined that raw in-shell pistachios imported from Iran were being sold at “less than fair market value” (or, being “dumped”) in the U.S. market, causing material injury to the U.S. industry. The Commerce Department calculated an offset in the form of a 241 percent antidumping duty, which would be applied in additional to the 99.5 percent countervailing duty.

In years of embargo, the duties were irrelevant and thus only two reviews have since been conducted to determine whether the duties should remain in place. In both 2005 and more recently in 2017, the USITC determined they should.

Plot Line 4:

Developed v. Developing Country Producers

According to the Iran Pistachio Association (IPA), Iran has around 150,000 farmers, but more than 70 percent of the production is small-scale on orchards of 2 hectares or less. In a “good” year, annual pistachio production capacity reaches 280,000 metric tons in Iran, but harvesting is inefficient. Pistachios are picked by hand from fallen clusters, their hulls removed by hand, and the nuts graded manually. Inadequate water management undercuts Iranian production, but when Iran’s yield is strong, the country’s pistachio exporters hold a price and geographic advantage. And IPA says they are competitive globally based on strong demand for the wide variety of Iranian pistachio cultivars with different flavor profiles and a higher kernel to in-shell ratio.

In contrast, the United States has some 950 growers, mainly in California, whose mechanized production is highly efficient, yielding a whopping 487,500 metric tons over the 2018-19 season (though output is cyclical and weather-dependent so yields may be down over 30 percent this year). Achievements in increased outputs made during a period when the U.S. market was closed to Iran, its only major competitor, enabled the U.S. industry to reach a position where it could both serve the domestic market and challenge Iran for market share all over the world. Iran has barely exported any pistachios to the United States since 1986 but it remains a contender in key third markets.

US leads pistachio production

Combined, the United States and Iran account for more than 70 percent of global exports of pistachios. Iran tends to hold the top spot in the Middle East, India, and Eastern Europe and holds an edge in developing country markets. The key battlegrounds in the U.S.-Iran pistachio wars are Western Europe and China where demand is strong and growing.

American pistachio growers fretted when the Trump administration raised tariffs on products from China. When China retaliated, raising the tariff on U.S. pistachios from five to as high as 55 percent, that created an opportunity for China to substitute Iranian pistachios. However, Iran ultimately suffered a bad crop year and it’s not clear whether China collected the tariffs, so sales of U.S. pistachios in China actually increased.

Not a Happy or Tragic Ending

The U.S. pistachio industry was concerned about the potential for renewed competition from Iran under the 2015 nuclear deal that eased sanctions. Their fears were allayed when the USITC voted to maintain the 1986 legacy of prohibitive tariffs. No matter, the Trump administration has strengthened sanctions and the embargo remains.

In the end, global demand for pistachios is higher than production, leaving room for both American and Iranian producers to find a market for all they can grow.

In an NPR interview four years ago, Brian Blackwell, a grower from Tulare County, CA wasn’t concerned about the reentry of Iranian pistachios in the U.S. market and explained the nature of global commodity markets this way: “This is a global marketplace nowadays. So, if Iran brought a million pounds of pistachios into the United States, that just means there’s a million pounds that didn’t get sold in China or Europe. U.S. pistachios could fill that market.”

_______________________________________________________________

Andrea Durkin is the Editor-in-Chief of TradeVistas and Founder of Sparkplug, LLC. Ms. Durkin previously served as a U.S. Government trade negotiator and has proudly taught international trade policy and negotiations for the last fifteen years as an Adjunct Professor at Georgetown University’s Master of Science in Foreign Service program.

This article originally appeared on TradeVistas.org. Republished with permission.

pesticide

Pesticide Imports into the U.S. Expand Rapidly Against Large But Stagnating Domestic Output

IndexBox has just published a new report: ‘U.S. Pesticide And Other Agricultural Chemicals Market. Analysis And Forecast to 2025’. Here is a summary of the report’s key findings.

The revenue of the pesticide and agricultural chemical market in the U.S. amounted to $14B in 2018, waning by -3% against the previous year. This figure reflects the total revenues of producers and importers (excluding logistics costs, retail marketing costs, and retailers’ margins, which will be included in the final consumer price). Overall, pesticide and agricultural chemical consumption continues to indicate a moderate reduction. The most prominent rate of growth was recorded in 2016 when the market value increased by 5.6% y-o-y. Pesticide and agricultural chemical consumption peaked at $16.2B in 2013; however, from 2014 to 2018, consumption stood at a somewhat lower figure.

The Market For Pesticides And Other Agricultural Chemicals in the U.S. Is Buoyed By Domestic Products

In value terms, pesticide and agricultural chemical production stood at $14B in 2018. The U.S. market is largely supplied by domestic products, therefore the trend patterns of the consumption volumes and production volumes generally reflect each other.

Exports from the U.S.

In 2018, the exports of pesticides and other agricultural chemicals from the U.S. stood at 63K tonnes, jumping by 6.4% against the previous year. Over the period under review, pesticide and agricultural chemical exports, however, continue to indicate a deep downturn. The most prominent rate of growth was recorded in 2014 when exports increased by 17% year-to-year. In that year, pesticide and agricultural chemical exports attained their peak of 102K tonnes. From 2015 to 2018, the growth of pesticide and agricultural chemical exports remained at a somewhat lower figure.

In value terms, pesticide and agricultural chemical exports totaled $1.4B (IndexBox estimates) in 2018. The growth pace was the most rapid in 2018 when exports increased by 36% against the previous year. In that year, pesticide and agricultural chemical exports reached their peak and are likely to continue its growth in the immediate term.

Exports by Country

Brazil (11K tonnes), Canada (9.1K tonnes) and Mexico (6.6K tonnes) were the main destinations of pesticide and agricultural chemical exports from the U.S., with a combined 41% share of total exports. The UK, South Africa, Costa Rica, India, France, Belgium, Colombia, Peru and China lagged somewhat behind, together accounting for a further 33%.

From 2007 to 2018, the most notable rate of growth in terms of exports, amongst the main countries of destination, was attained by the UK (+92.8% per year), while the other leaders experienced more modest paces of growth.

In value terms, Brazil ($393M), Canada ($204M) and Mexico ($149M) were the largest markets for pesticide and agricultural chemical exported from the U.S. worldwide, together accounting for 52% of total exports. These countries were followed by the UK, France, China, India, Colombia, South Africa, Costa Rica, Belgium and Peru, which together accounted for a further 22%.

India recorded the highest growth rate of exports, among the main countries of destination over the last eleven-year period, while the other leaders experienced more modest paces of growth.

Imports into the U.S.

Pesticide and agricultural chemical imports into the U.S. totaled 62K tonnes in 2018, jumping by 15% against the previous year. Overall, the total imports indicated buoyant growth from 2013 to 2018: its volume increased at an average annual rate of +11.2% over the last five years. The trend pattern, however, indicated some noticeable fluctuations being recorded throughout the analyzed period. Based on 2018 figures, pesticide and agricultural chemical imports increased by +88.6% against 2014 indices. The most prominent rate of growth was recorded in 2017 when imports increased by 22% y-o-y. Imports peaked in 2018 and are likely to see steady growth in the immediate term.

In value terms, pesticide and agricultural chemical imports totaled $433M (IndexBox estimates) in 2018. Overall, pesticide and agricultural chemical imports continue to indicate a resilient expansion. The pace of growth was the most pronounced in 2017 with an increase of 81% year-to-year. Over the period under review, pesticide and agricultural chemical imports attained their maximum in 2018 and are likely to continue its growth in the near future.

The share of imports in terms of total consumption increased rapidly over the last two years and reached 6% in 2018. The largest increase refers to supplies from China and Mexico. Despite the tangible growth those figures, however, are still insignificant against the volume of domestic production.

Imports by Country

China (18K tonnes), Mexico (13K tonnes) and France (6.9K tonnes) were the main suppliers of pesticide and agricultural chemical imports to the U.S., together comprising 61% of total imports. These countries were followed by India, Israel, Germany, Italy, Chile and Belgium, which together accounted for a further 29%.

From 2007 to 2018, the most notable rate of growth in terms of imports, amongst the main suppliers, was attained by Israel (+86.9% per year), while the other leaders experienced more modest paces of growth.

In value terms, China ($140M) constituted the largest supplier of pesticide and agricultural chemical to the U.S., comprising 32% of total pesticide and agricultural chemical imports. The second position in the ranking was occupied by Mexico ($55M), with a 13% share of total imports. It was followed by France, with a 9% share.

From 2007 to 2018, the average annual growth rate of value from China amounted to +38.3%. The remaining supplying countries recorded the following average annual rates of imports growth: Mexico (+29.3% per year) and France (+10.9% per year).

Source: IndexBox AI Platform

One-Million Pound Success

With the help of three heavy-haul Kenworth trucks, Omega-Morgan of Oregon hauled a combination of nearly one million pounds on a two-day, 47 mile journey from Washington’s Klickitat County to the Bonneville Power Administration (BPA) Rock Creek substation.

Among the three heavy-haul trucks utilized to pull this off were two Kenworth T800 heavy haulers with a Kenworth C500 in the lead. A fourth heavy hauler was eventually added to the C500 truck in an effort to ensure adequate traction was provided.

“For this transport, there were quite a few obstacles we had to plan for, not to mention two-lane roads that had to be closed,” said Troy Tallent, vice president of operations at Omega Morgan. “For instance, we had to widen the gravel road from 16 feet to 20, and reduce the grade by the rail head (where the transformer was lifted off the railcar and placed in the trailer-cradle) from 16 percent to 15 percent.”

The original plan and final execution of the haul took several months in order to best deploy efforts without sacrificing the quality of the roadways encountered.

“This operation got a lot of attention because of its enormous size,” Tallent said. “What we do is about as heavy as heavy transporting gets. Kenworth trucks are built for these applications, which is why we only run Kenworth trucks in our heavy duty fleet. Nothing can deliver like a Kenworth.”

Kenworth is The Driver’s Truck™. For moe information. visit  www.kenworth.com/drivers.

Source:  SiefkesPetit Communications