- Author: Pamela Kan-Rice
The ongoing international trade turmoil between the U.S. and other countries has prompted import tariffs on many U.S. agricultural commodities in important export markets, which could hurt U.S. farmers.
A new report released by the University of California Agriculture and Natural Resources' Agricultural Issues Center estimates the higher tariffs could cost major U.S. fruit and nut industries $2.64 billion per year in exports to countries imposing the higher tariffs, and as much as $3.34 billion by reducing prices in alternative markets.
“One way to mitigate the impact of the tariff impacts would be to offer assistance to shift the products to completely new markets where these displaced commodities could be delivered without causing price declines,” said co-author Daniel A. Sumner, director of the UC ANR Agricultural Issues Center and UC Davis professor in the Department of Agricultural and Resource Economics.
When nuts and fruits are diverted back into the remaining markets for their crops, Sumner and co-author Tristan M. Hanon, a UC Davis graduate student researcher, expect farmers to lose revenue from lower prices.
The agricultural economists foresee major losses for many commodities caused by diverting the produce from high tariff countries to sell in the remaining markets.
Almonds alone could lose about $1.58 billion and pistachios could lose about $384 million, according to Sumner and Hanon.
The authors looked at the impact of tariffs on almonds, pecans, pistachios, walnuts, apples, oranges, raisins, sour cherries, sweet cherries and table grapes. All 10 nuts and fruits are perennial crops, growing on trees or vines, so growers cannot easily change their production quantities or plant a different crop.
The U.S. exports 13 percent of its almonds, 14 percent of its pistachios and 22 percent of its pecans to countries imposing the new tariffs. China and Hong Kong are major export markets for U.S. fruits and nuts. In 2016 and 2017, China and Hong Kong spent over $500 million to buy 40 percent of all U.S. almond exports, and nearly $600 million for most of the exported pistachios. Some of the exports to Hong Kong are transshipped to other markets, but most of it stays in the China market.
The new tariffs apply to all ten crops that are exported to China. “We consider most of the exports to Hong Kong with China because we understand that most of the U.S. fruit and nut exports to Hong Kong are destined for China,” Sumner said.
To avoid paying tariffs, there are clues that Hong Kong's open market is the entry point for nuts ultimately shipped to China, in what Sumner calls “leakage.”
“The 7 million people in Hong Kong would have to eat 20 times the pistachios consumed by people in other countries if they aren't sending them on to China, the Philippines and other Asian countries,” Sumner said. “China turns its back on leakage, but those commodities may be vulnerable if China decides to crack down.”
After the Trump administration imposed tariffs on an additional $16 billion worth of Chinese goods, China announced duties on $16 billion of American goods. Another round of new tariffs has now been scheduled.
In India, Mexico and Turkey, new higher tariffs apply to selected fruit and nut products. India, which buys roughly half of all exported U.S. almonds, applies new tariffs to almonds, walnuts and apples. Turkey's new tariffs apply to almonds, pecans, pistachios and walnuts. Mexico's tariffs target apples, for which the country paid about $250 million last year.
U.S. Secretary of Agriculture Sonny Perdue announced up to $12 billion in federal aid to farmers to soften the impact of tariffs.
“The U.S. government could purchase the commodities that would have been exported,” Sumner said. “Of course, the produce must be diverted from remaining markets to new market channels to avoid driving down prices.”
The full report “Economic Impacts of Increased Tariffs that have Reduced Import Access for U.S. Fruit and Tree Nuts Exports to Important Markets,” along with details on data, sources and methods, can be downloaded for free at the UC Agricultural Issues Center website at http://aic.ucdavis.edu.
[This article was updated at 10 pm, Aug. 14, to update the dollar estimates in this sentence: "Almonds alone could lose about $1.58 billion and pistachios could lose about $384 million, according to Sumner and Hanon."]
Cementing its place as California's most important agricultural commodity by farm revenue, California farms sold about $9.4 billion worth of milk while the dairy industry contributed approximately $21 billion in value added to the gross state product in 2014, according to a California Milk Advisory Board (CMAB) study conducted by the Agricultural Issues Center, a statewide program of UC Agriculture and Natural Resources. Including sales of inputs to dairy farms and milk processors along with raw milk and wholesale milk product sales, the dairy industry contributed $65 billion in total sales to the California economy in 2014. The growing demand for dairy products like cheese and yogurt as well as strong dairy exports accounted for 189,000 jobs that are dependent on the state's milk production and processing.
“The dairy industry's contributions are vital to California's economy, from creating jobs to stimulating local and regional economies to providing nutritious and enjoyable products to consumers everywhere,” said John Talbot, CEO of the California Milk Advisory Board. “A large number of California residents depend on the dairy industry for employment and these jobs would not exist without it.”
The $21 billion to California's gross state product included $7.4 billion as income to industry workers and owners and $13.4 billion through related, outside industries such as feed, veterinary and accounting services used for dairy production and electricity, packaging, equipment and trucking services used by processors. The tax revenue generated from these jobs supported important statewide initiatives to improve education, healthcare, roads, community services and the environment.
Overall, 189,000 jobs in California are associated with the dairy industry. Of this amount, approximately 30,000 jobs are on the farm and 20,000 jobs represent dairy processing. For every dairy farm job, there are several more jobs that are tied to the business and create a linked chain of economic impacts.
Additionally, the induced effect of the dairy industry also creates jobs in the community to support the area's dairy workers and their families, such as school teachers and local bus drivers.
California Holds Rank as Nation's Dairy Leader
California leads the nation in dairy production and dairy continues as the top commodity in the country's top agricultural state. It has been the nation's largest milk producer since 1993 and is also the country's leading producer of butter, ice cream, nonfat dry milk and whey protein concentrate. California is also the second largest producer of cheese and yogurt.
Farm milk sales generated $9.4 billion gross revenue in 2014. Wholesale dairy product (cheese, fluid milk, ice cream, butter and other dairy) sales hit $25 billion in 2014.
Dairy Farmers Improve Business Performance
As an essential part of California's farming heritage, dairy farmers understand the importance of protecting the land, water and air for their families, their communities and future generations. In 2014, California dairy farmers produced more milk with fewer resources. Talbot credits “improved dairy practices and management adopted by farmers” for the increased business efficiencies. The pounds of milk produced per cow increased to 24,000 pounds in 2014 from 15,000 in 1984. Farmers are applying 23 percent less water to their fields than they did in the early 1980s and have seen their average crop yields increase by more than 40 percent despite using less water.
Beyond the economic impacts calculated in the report, California dairy farmers and employees are active participants in their communities and contribute to social, environmental and other broad public goals.
Study Leaders and Methodology
The study was conducted by a team of researchers at the UC ANR Agricultural Issues Center (AIC). Daniel A. Sumner, the director of AIC who holds the Frank H. Buck, Jr. Chair Professorship in the Department of Agricultural and Resource Economics at UC Davis, led the study. Josué Medellín-Azuara, a project scientist at the UC Davis Center for Watershed Sciences, and Eric Coughlin, a junior research specialist at AIC, were part of the research team. They measured myriad impacts using dairy-specific data for 2012 and projections for 2014 and a database and model of economic linkages (IMPLAN).
About the California Milk Advisory Board
The California Milk Advisory Board (CMAB), an instrumentality of the California Department of Food and Agriculture, is funded by the state's more than 1,450 dairy families. With headquarters in South San Francisco and Modesto, the CMAB is one of the largest U.S. commodity boards. It executes advertising, public relations, research and promotions on behalf of California dairy products, including Real California Milk and Real California Cheese. For more, visit RealCaliforniaMilk.com.
- Author: Pamela Kan-Rice
Karen Ross, secretary of California Department of Food and Agriculture and former U.S. Department of Food and Agriculture chief of staff, and Katy Coba, director of the Oregon Department of Agriculture, will share their insights on what the Farm Bill is likely to mean for agriculture in the western states.
"The Farm Bill affects every California commodity,” said Daniel Sumner, director of the UC Agricultural Issues Center and conference coordinator. "Growers, lenders, agribusiness executives, policy advisors, agricultural leaders, university professionals, students and everyone who values comprehensive and objective information about the upcoming Farm Bill and U.S. farm policy are invited to participate in the conversation.”
Specific sessions include:
- "The Farm Bill: What it Does and What it Means.” Joseph Glauber, USDA chief economist, will explain what the Farm Bill does. Now working on his fifth Farm Bill, Glauber is one of the most objective and knowledgeable experts on U.S. agricultural policy.
- "The Expanding Role of Risk Management and Crop Insurance Policy" led by Hyunok Lee, UC Davis Department of Agricultural and Resource Economics, with participation from growers and risk management experts.
- "What Changing Federal Dairy Policy Means for Western Dairy and Related Industries" led by Professor Joseph Balagtas, Purdue University, with participation from producers, dairy industry experts and policy advocates.
- "How Federal Conservation, Energy and Climate Affects Policy for Western Agriculture" led by Professors John Antle and JunJie Wu, Oregon State University, with participation of scientists and stakeholders.
The conference is sponsored by OreCal, an Agricultural and Resource Policy Research collaboration between the Center for Agricultural & Environmental Policy at Oregon State University and the University of California Agricultural Issues Center.
More information about the conference is online at http://aic.ucdavis.edu/events/orecal_conference.html
Registration is $100, $50 for students, and covers conference materials, meals and the postconference reception. To register with a credit card, visit http://conferences.ucdavis.edu/farmbill. To register by check or UC Davis account, please contact Jonathan Barker at firstname.lastname@example.org. May 9 is the last day to register online./span>/span>
- Author: Jeannette E. Warnert
Legislation implementing the Korea free trade agreement, along with smaller agreements with Colombia and Panama, were negotiated several years ago. They finally gained Congressional approval on Oct. 12 and are set to be signed by President Obama on Oct. 21.
By phasing out or eliminating tariffs and other trade barriers, free trade agreements create larger markets for California-produced farm commodities. Since South Korea has no significant prospects to export farm goods to the United States, California agriculture is a clear winner from this agreement.
Hyunok Lee and Daniel Sumner from the Department of Agricultural and Resource Economics at UC Davis and the UC Agricultural Issues Center document the current importance of South Korea to California farm exports, the size of the trade barriers these exports have faced (many facing tariffs of more than 30 percent) and the advantages currently afforded by South Korea’s existing free trade agreements with important competitors, such as Chile and Australia.
“Lower trade barriers will allow California agriculture to better compete in a large, growing and lucrative market,” said Sumner.
“Food product prices are high in South Korea and consumers are willing to pay premiums for the high-quality products produced in California,” added Lee.
South Korea has a strong economy with about 50 million consumers and per-capita income of $30,000, higher than many European countries. In 2010, the value of California farm exports to South Korea was more than $400 million. Given the size of South Korea’s economy and the high trade barriers being erased, Sumner and Lee say the accord will do more for farm exports than agreements negotiated for almost 20 years.
Among other findings, the authors report that:
- The top California ag exports to South Korea are fresh oranges, with tree nuts, rice, and beef and beef products also in the top five.
- Other California crops that hold a double-digit share of the South Korean market are hay, grape juice and kiwifruit.
- With an import tariff of about 45 percent, South Korean imports of California table grapes, fresh strawberries, fresh apples and lettuce and rice are small, but have great potential for growth.
- South Korea is becoming a major export market for California grapefruit and lemons. Lower tariffs will increase demand.
- The United States is South Korea’s only supplier for almonds and the U.S. has more than a 90 percent share of walnuts. The current 8 percent almond tariff will be eliminated and walnut tariffs will be phased out over the next 6 to 15 years.
- Beef products are the top agricultural import (from all sources) into South Korea by value. With the new agreement, the within-quota tariff will fall by 2.7 percent each year, providing a gain for U.S. producers compared to import competitors.
- South Korea has high trade barriers for many dairy products, but with gradual reductions under the new agreement, the market will grow.
Daniel Sumner is available to comment on the free trade agreements with South Korea, Panama and Columbia. He can be reached at email@example.com, (530) 752-1668.
Hyunok Lee can comment about the size and potential growth of the Korean market. She can be reached at (530) 752-3508, firstname.lastname@example.org.