Anuga 2019: Organic exporters speak out on US-China trade challenges as conflict continues to bite

07 Oct 2019 --- A year into the US-China trade conflict, US exporters of organic products continue to feel the strain of increased tariffs, which is catalyzing the sector to broaden the scope of its markets. FoodIngredientsFirst met with representatives of the sector on the showfloor of the ongoing Anuga 2019, to discuss export challenges. Representatives spoke out on how US traders are dealing with tariff-related headwinds as well as other principal challenges to organic production.

“The US farm economy is not economically strong right now,” stresses Marcus Carlin, CFO of Everbest Organics, a Michigan-based US producer of organic legumes. “The demand for organic produce is there, but obviously these tariffs are hurting the growth of our export business. We are here [at Anuga] to promote US-organically grown products and try to maintain good business relationships and maintain a presence amid these difficult business conditions.”

At Anuga 2019, Everbest Organics is showcasing its range of dry pulses, from organic black beans, chickpeas, white kidney beans, dark red kidney beans, black eyed peas, and also navy beans. In addition, the company specializes in a wide variety of organic high protein soybeans for the tofu, soy sauce and natto markets.

Organic Motmorency tart cherries by Stoneridge Orchards (Royal Ridge Fruits).Among the myriad of organic producers present on the Anuga showfloor, held in Cologne, Germany (October 5 to 9), are members of the US Organic Trade Association (OTA). USDA certified organic produce is exported worldwide, with global consumers gaining increasing familiarity with the label. However, tariffs are severely impacting the potential for growth.

At this year’s Anuga event, Royal Ridge Fruits, a producer of Montmorency tart cherries, is among the representatives of the OTA in attendance, who are looking to broaden the export opportunities for USDA Organic certified products.

“[Due to the US-China trade war] we’ve missed an opportunity to attend a trade show in this year. I skipped attending SIAL China, because it just didn’t make any sense, as we’re uncertain about what the current duties are. We chose not to go because the duties are fluctuating,” Thomas Bauer, Vice President Industrial Sales of Royal Ridge Fruits tells FoodIngredientsFirst.

“It’s a big world, and we want to make sure that we’re spreading our customer base beyond Asia. Our blueberries are particularly popular in China. Currently, we’ve also got customers in Hong Kong, Vietnam, South Korea and Malaysia,” he continues.

Oregon-based foodguys, a global sourcing specialist active in organic produce, was among the member companies of the OTA present on the showfloor of Anuga 2019. Ricky Bala-Shaw, Sales Agent at foodguys, highlights the importance of adaptability in dealing with trade conflict contingencies.

“We’ll always play by the rules, we’re not trying to undercut anyone. Sometimes we’ll have a customer that only wants to source from a certain country, so that is the criteria that we will need to meet. If they want to avoid a certain country because of said tariff wars or price hikes, then we will do that as well,” he says.

On top of its trade conflict with China, the US has also weathered tariffs on €2.8 billion (US$3.2 billion) worth of goods in 2018, which include taxes on US products such as bourbon whiskey, cranberries, peanut butter and orange juice. At the time, European Trade Commissioner Cecilia Malmström said President Trump’s tariffs on the Union left no alternative option but for the EU to impose its own “rebalancing measures.”

Earlier this month, it was further announced that the US now plans to impose a new 25 percent tariff on wine, whiskies, fine cheeses and other agricultural imports from the EU, as a penalty for the illegal subsidies obtained by the European Airbus aircraft manufacturer. The White House has since called for a meeting with the World Trade Organization (WTO) on October 14 to commence the tariffs.

Following the WTO ratification of US countermeasures in the WTO Airbus dispute, Commissioner for Trade Cecilia Malmström asserted, “Our readiness to find a fair settlement remains unchanged. But if the US decides to impose WTO-authorized countermeasures, it will be pushing the EU into a situation where we will have no other option than to do the same.”

Challenges to producing organicThe switch from conventional to organic farming is often mired with challenges.
As the demand for organic produce gains pace, the agri-sector sees more farmers transitioning from conventional to organic farming. Bauer of Royal Ridge Fruits explains that the shift from conventional to organic, while highly demanded, is not an immediate switch.

“The main challenge of transitioning from conventional to organic is obviously dedicating the ground to organic production. If you choose to do 100 percent organic right off the bat, you’d have to buy root stock, which is very expensive. Treating ground that is conventional-related, in the case of conventionally grown cherry trees, takes three years. During these three years, you have to treat [crop cultivation] as “organic,” but can only sell its produce as “conventional.” This is a significant financial challenge,” explains Bauer.

Carlin elaborates, “The whole mindset for the producer must change. No longer can the farmer go and spray some kind of chemical on their fields to kill weeds, they have to be out there on a daily basis making sure that their fields are properly weeded. In organics, it’s more important to ensure that your soil nutrition is at an optimal level, because you can’t have the extra herbicides, fertilizers, etc. You really have to be a true steward to the land in order to be a good organic grower.”

At present, US demand for organic produce is subject to regional preference. “In the US market, organic is particularly tough to sell in the midwest, with the exception of Texas. We go into the major markets – the Pacific Northwest, California, San Diego. As soon as you begin to branching away into Florida or the Pacific Northeast, like New York, there is not much,” explains Bauer.

But as the organic trend barrels forward, the sector sees heightened competition. “The domestic versus import option: there are a lot more people trying to offer organic products now, meaning there is a lot more competition, meaning everyone is trying to make a sale. Because of the way the food industry works, you can be going to the same person that someone has already gone to,” says Bauer.

Seasonal availability is another major issue faced by organic producers. “One of the significant challenges with sourcing organic produce at the moment is that we want to be able to supply our customers on a consistent basis you’ll have some ingredients that only come in during a certain season, or time of the year, because of that we have to find alternative sources so that we can supply our customers consistently,” highlights Bala-Shaw.

By Benjamin Ferrer

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