The U.S. trade war with China continues to affect many American imports into that country, including those of California almonds. Because China is the third-largest market for almonds, the California almond industry is continuing to feel economic pressure from the ever-increasing tariffs.
Dave Phippen of Travaille and Phippen in Manteca, worked with his partners to apply for the Market Facilitation Program both in 2018 and 2019. He has this simple piece of advice for growers interested to apply: be prepared and be organized.
In recognition of this growing issue, the U.S. Department of Agriculture (USDA) last year allowed producers of specialty crops – including almonds – who have been hurt by trade disruptions to apply for the Market Facilitation Program (MFP).
This year, the program will provide $14.5 billion in direct payments to assist impacted producers. That amount is in line with USDA’s estimated impacts of the retaliatory tariffs on U.S. agricultural goods.
In California, more than $36.1 million in payments have been made to California almond growers in the past two years, according to Brooke Raffaele, public affairs and outreach coordinator for the California Farm Service Agency (FSA) in Davis. A total of 4,337 almond-related properties have been enrolled in the program, she said.
Growers have until Dec. 6, 2019, to register their orchards at their local county FSA office and become eligible for MFP, both the 2019 program and the 2018 program.
MFP – Payments and Process
There is strong financial incentive for growers to consider applying for the MFP. In 2018, payments were based on 3 cents per pound of almonds produced. In a typical orchard with an average yield of 2,200 pounds per acre, that works out to about $66 per acre. This year – when China escalated the tariffs – USDA revised the payment formula to offer growers $146 per acre.
That means for a grower with 80 acres of almonds, MFP funds are worth roughly $5,280 through the 2018 program and $11,680 through the 2019 program.
“Ag faces a lot of costs. We want to ensure almond growers are aware of the opportunity to apply and decide if they want to participate,” said Julie Adams, vice president of Global Technical and Regulatory Affairs for the Almond Board of California (ABC). “Two-thirds of our growers farm 100 acres or less. We recognize these payments aren’t a perfect solution, but they provide a means of helping the industry, particularly some of the smaller growers.”
Dave Phippen is a partner at Travaille & Phippen, a vertically integrated almond business in Manteca. The company not only grows almonds but also handles about 40 million pounds annually. Travaille & Phippen has participated in both the 2018 and 2019 MFP programs.
Phippen supports the program and has this advice for growers who still plan to sign up: Be prepared and be organized.
He said it is relatively simple to enroll a small family-run operation in the MFP. A company like his, however, with five partners and properties in two counties, is more complicated.
“If you and your wife own the property, this will be a real fast process,” he said. “If you’re in a partnership like we are, you’ll need the organizational papers from the partnership or limited partnership, as well as the organizational papers from the general partnership.
“You’ll need to have your property tax statement, which helps to identify the parcel. Each of your partners will need to give you power of attorney – in my case, I had four other partners. You also need each partners’ Social Security Numbers, and if your property is held in a trust, you’ll need those papers.
“The other thing you’ll need is a bank account routing number. Usually, what they want is a voided check. And if you’re involved in share crop situation, you’ll need your lease, and what percentage of crop you get and what the others get.”
Ultimately, Phippen said, “If you’re prepared and you have all the documents you need, you can do it in one sitting.”
Phippen suggests growers make an appointment at their local FSA office. Applicants should expect to spend a few hours there, and he said he was able to enroll properties from both counties he farms in at the same meeting rather than having to go to two offices to apply for the program in each county.
Growers who haven’t yet enrolled in the MFP should remember that they may qualify for payments for 2018 and 2019, due to a change in how the adjusted gross income (AGI) limit is being applied: Growers who were deemed ineligible for MFP in 2018 because their average AGI was higher than $900,000 may now qualify if they can verify that 75% of their average AGI was derived from farming. The same change applies to 2019 program eligibility.
In addition, orchards must have been planted before Jan. 1, 2016 to qualify.
Complete qualification details, as well as the MFP application, are available on the USDA website. In addition, in October 2019 the Almond Board and Almond Alliance of California co-hosted workshops with local USDA Farm Service Agency offices to share key information and answer growers’ questions about the program. Growers may click here to view a recording of the workshop held at the Almond Board office in Modesto on Oct. 16, 2019, during which Farm Service Agency District Director Chris Keeler answered growers’ questions and explained the difference in payments through the 2019 and 2018 programs.
Trade Resolution a Lengthy Process
Though Adams said U.S. and Chinese trade negotiators have had “constructive talks” recently, she said the key will be to see the details behind what could be a “phase one” agreement. It’s not clear how quickly the tariff situation will be resolved.
In September 2019, China increased its tariff on U.S. almond kernels and in-shell to 60%, up from 10% in April 2018. That has had a dramatic impact on U.S. exports to China, which bought 170 million pounds of almonds in 2017-18,1 trailing only Spain (203 million pounds) and India (200 million pounds) among U.S. export markets.
“Because we have such strong demand and diversity of markets, we’ve been able to redirect those almonds into other markets, including the U.S. and India, where the demand is still high,” said Adams. “But we’ve seen Australia, which has a free trade agreement with China and a zero tariff, divert a lot of nuts there.
“The concern we have is that the longer this trade disruption continues, you risk it being harder to get back into the Chinese market. Buyers have to find interim solutions and we don’t want those to become a long-term alternative.”
Adams said the Almond Board continues to invest in promotional activities to keep California almonds top of mind with Chinese consumers. ABC also has maintained contact with Chinese importers and customers, recognizing the long-term value and importance of those relationships.
“There are always going to be trade issues and market disruptions, but it’s important that consumers and customers continue to see us as long-term partners in those markets,” Adams said.
In the meantime, until a resolution is reached between the U.S. and China, Adams strongly encourages all California almond growers to consider participating in the MFP.
“It is never going to offset the impact of all the tariffs,” she said, “but it’s an effort to address some of the impact that almond growers are facing.”
[1] Almond Board of California, “2018 Almond Almanac.” Pages 30-31.
