China has agreed to reduce tariffs by half on $75 billion in American products on Feb. 14, 2019. This could be a desperately needed respite for U.S. farmers caught in the midst of the US China trade war. More specifically, this could signal a significant, positive change for the American pecan industry.
Winston and Bob Millican of Millican Pecan Company in San Saba , Texas inspect inshell pecans on their family farm.
In 2018, tree nut farmers were hit with retaliatory tariff hikes twice in one year 15% in April and another 25% in July. This amounted to a total 47% tariff for US pecans. These tariffs have been particularly brutal for pecan growers in the US. In 2017, the US exported some \$228 million worth of in shell pecans to China, accounting for over 76% of their overall exports. One of the few winners in this trade war has been Mexico, which saw a 3000% increase in pecan exports to China between 2017 and 2018. The reason is simple economics, as Mexico still benefits from a 7% tariff on pecans. This tariff imbalance is bitterly ironic as just before the trade war began, the US Pecan Growers Council had finally negotiated tariffs from 14% down to 7% over several years through tough, extended negotiations with the Chinese government. Now, instead of reaping those hard won rewards, pecan growers find themselves victims of an international trade war and seeing price declines as high as 40% due to oversupply.
However, with phase one of the trade deal coming into effect, relief may be just around the corner. In addition to tariff reductions, China h as agreed to purchase approximately $40 to $50 billion dollars in US agricultural products. According to agricultural consultant, Shanghai JC Intelligence Co., about \$2.5 billion of that will likely be in American nuts. Bloomberg ) US pecan farmers are certainly hoping this is the case. Fifth generation pecan farmer, Winston Millican, of this is the case. Fifth generation pecan farmer, Winston Millican, of www.www.MillicanPecaMillicanPecan.comn.com in in San San Saba, Texas said, “It will be great tSaba, Texas said, “It will be great to have US pecans going back to China. Having more demand for o have US pecans going back to China. Having more demand for pecans should help with prices, which have been down for the last couple of years.” The hope for pecans should help with prices, which have been down for the last couple of years.” The hope for farmers like Mr. Millican is that with China already shifting its import of soybeans and corn elsefarmers like Mr. Millican is that with China already shifting its import of soybeans and corn elsewhere, where, the pecan industry will stand a solid chance of full recovery with the implementation of the first phase the pecan industry will stand a solid chance of full recovery with the implementation of the first phase trade deal as China will have to honor its new import requirements somehow. Analysts at global trade deal as China will have to honor its new import requirements somehow. Analysts at global financial firm UBS seem to agree, financial firm UBS seem to agree, CNN citing their response, "We think it is highly challenging for citing their response, "We think it is highly challenging for China to import $200 billion more goods and services from the US over the next two years without China to import $200 billion more goods and services from the US over the next two years without reducing imports from educing imports from elsewhere”.
What is certain is the pecan industry has been hit hard in the last few years. Weather events had already What is certain is the pecan industry has been hit hard in the last few years. Weather events had already damaged the industry in 2017 damaged the industry in 2017 –– widespread enough that the USDA stepped in to assist farmers in the widespread enough that the USDA stepped in to assist farmers in the hardest hit areas. Then the very next year hardest hit areas. Then the very next year saw the trade war with China. However, American pecan aw the trade war with China. However, American pecan growers do have an advantage. The US produces about 80% of pecans, the only native tree nut in North growers do have an advantage. The US produces about 80% of pecans, the only native tree nut in North America. The US pecan industry is also represented by the US Pecan Growers Council which has America. The US pecan industry is also represented by the US Pecan Growers Council which has lobbied successfully worldwide for over a decade on behalf of American growers. While the trade war has caused some hardship for growers, the industry itself is resilient and there is every expectation has caused some hardship for growers, the industry itself is resilient and there is every expectation things will begin to normalize again.things will begin to normalize again.
