Now the shadow of a trade war
Farmers are wary of trade wars. With demand issues staring at them, they are already under pressure to reduce crop acreage in 2025 and now they fear exports will face a new hurdle this year with a trade war underway.
Already farmers are pulling trees and vines faster than planting new ones. They will tell you it’s lack of water. But demand and oversupply are also big factors.
Case in point this new year are wine grapes with trade group Allied Grape Growers again pleading with growers to pull 50,000 acres from the ground before the season starts with 40,000 of those acres suggested to be pulled from the interior- the Central Valley region.
Allied’s president Jeff Bitter has offered a bitter truth that supply needs to be pared to meet the decline in demand in wine consumption, he told growers at their January meeting.
But it’s not just wine grapes. Several of the Central Valley’s big nut crops are mostly under price pressure as well with an oversupply in both almonds and walnuts that requires more trees to come out.
California’s total almond acreage dropped again in 2024, making three years in a row that acreage has decreased, something that has not happened since at least 1995, according to a winter report from Land IQ to the Almond Board of California.
Total acreage dropped by about 40,000 acres from 1.56 million acres in the last crop year to just over 1.52 million in 2024.
Walnut prices have forced a similar trend, says a report. “From September 2023 to August 2024, growers in the Golden State have removed approximately 18,000 acres with nearly 10,000 more acres under high stress and abandoned. While this is a slowdown from the previous year, this is still a high removal rate, continuing the decline in producing bearing acres, which now stand at 370,000 acres.”
With these removals, walnut growers are more hopeful prices will climb back above $1 per pound from the red ink levels of 30 to 40 cents a pound seen in recent years,
Also under pressure this year are processing tomatoes, a major crop in Kings and Fresno Counties. The most recent USDA report shows acreage of processing tomatoes at just 200,000 acres this year compared to 300,000 acres as recently as 2015. Expected this year production will be lowest in 20 years as processors reduce their contracted demand.Local processors Olam and DelMonte have closed their doors and won’t need product.
The region’s top industry – dairy farmers are being told a major processor Leprino Cheese is closing one of two mozzarella plants here and the huge cream buyer is banking on more supply coming from Texas – not the Central Valley.The local dairy industry counters that they need an adequate water supply or production will wither.
Shadow of trade war
Not helping the outlook for our crops are the potential tariff impacts of a trade war now underway with China today, a big buyer of Central Valley crops as well as fears Mr Trump will add Canada and Mexico, our largest trade partners.
President Trump has now imposed a new 10% increase in tariffs on goods coming from China and already China has struck back impacting around $1 billion in ag products we send to China.
The ag trade group Western Growers commented this week saying ” China…. a significant fresh produce importer, is the No. 2 importer of American tree nuts. Imposition of tariffs with our key trading partners in this manner and at these levels will almost certainly result in retaliatory tariffs that harm American growers.
While we appreciate the border security issues apparently motivating the Trump Administration, rival growers of specialty crops outside of the U.S. will move quickly to seize the new business opportunities created by these tariffs to sell into the Canadian, Mexican and Chinese marketplaces. Their success in doing so could permanently displace American growers from these key markets. This is the same pattern that emerged during the imposition of tariffs on Chinese goods during the first Trump Administration.”
They have seen what happened last time.
A recent report notes that in 2018, President Trump levied tariffs on steel and aluminum imports to help U.S. steel and aluminum producers.China then retaliated by raising tariffs on U.S. products, including hiking the tax on American almonds from 10% to 25%.“China was our number one export market when the tariffs went into effect,” said Clarice Turner, chief executive of the Almond Board of California.It’s now fallen to number four. Last fiscal year, China imported about 37% fewer California almonds than it did the year tariffs hit. That period coincides with average prices dropping from over $2.50/lb to $1.60/lb and the dollar value dropping from $5.6 billion to $3.9 billion using USDA figures.
Significantly China is an important destination for California milk products, particularly milk powder and butter made in the Central Valley. China is the world’s largest dairy importer and the third largest destination for U.S. dairy exports.
We don’t want to lose market share to other world competitors. A Cornell study says “Mexico, Canada, and China are pivotal to the U.S. dairy export landscape, accounting collectively for over half of the nation’s dairy exports by value annually. History has shown us the risks associated with trade instability. For instance, retaliatory tariffs from China alone resulted in an approximate $2.6 billion in lost revenues for U.S. dairy farms from 2019 to 2021. This underscores the potential financial hazards that could lie ahead.”
On the domestic front, dairy operators are also worried about a potential cutback in school lunch programs.
How important is China as an export destination? Tulare County’s most recent crop report says 68% of the county’s pistachio exports go to China and almost 20% of oranges.
Some 22% of King’s farm exports go to China.
Research on trade war cited by the LA Times in December said”farming areas in the Central Valley and Southern California are especially vulnerable to economic damage. They projected that five counties — Fresno, Kern, Tulare, Merced and Imperial — probably would bear the brunt of the losses in a trade war, accounting for 53% of the estimated total losses. A majority of voters in each of those five counties voted for Trump in the election.”
photo California Almond Board