Whether it is food processing, almonds, or dairy, many of California’s key agricultural industries are paying close attention to the ongoing trade negotiations.
The North American Free Trade Agreement [NAFTA] has generally been seen as a positive for agricultural agricultural industries in California. Part of this has to do with the tariff reduction that has enabled producers to export to Canadian and Mexican markets.
Another part has to do with the advantages that NAFTA allows California and the United States to have in exporting certain products. As the industries capitalized on these advantages, some were able to make Canada and Mexico important markets for their exports.
Recent NAFTA talks have left some industries hopeful, but others are still watching to see how the talks progress and what it could mean for their markets.
Dairy Industry: Hesitant but sees negotiations on the right track
“It’s a really important piece of the dairy industry, because Mexico is our number one export market,” said Annie AcMoody, Director of Economic Analysis at Wester United Dairymen.
According to AcMoody, while cows don't fare as well in hot weather, California's dairy industry has been able to succeed due to the number of resources farmers have available to improve outcomes, like fans and misters. Additionally, California's location makes it difficult for other countries to compete with California for that dairy market in Mexico.
"That being said, with the tariffs, it’s made it a little bit more challenging, but you can see why we’re well positioned to supply that market,” AcMoody said.
Even with Canada and their supply management program putting higher tariffs on dairy imports, AcMoody says the dairy industry has found a way to make the situation work, but a decrease in those tariffs would be a big win for the dairy industry.
Mexico is a top export country for California and the United States. In 2016, 30 percent of dairy exports went to Mexico and 12 percent went to Canada. While many products are being sent, cheese is one of the biggest commodities. If that market is lost, then that milk gets stuck in the country, and AcMoody says that could mean depressed prices for producers.
“If we can keep our tariff free access to Mexico with the dairy industry like we’ve had in the past, we’ll be satisfied,” AcMoody said. “NAFTA, for the sake of the dairy industry, was not a bad deal in terms of our relationship to Mexico. Anything that puts us back to where we were would be a win for the dairy industry.”
Almond Industry: Encouraged by Mexico deal, looking for Canada to re-enter
“It’s always been an important area, and the zero tariffs that we’ve enjoyed have just made it easier to move from California into both regions,” said Julie Adams, Vice President Global, Technical, and Regulatory Affairs at the Almond Board of California. Since NAFTA, the almond industry has been able to continue growing and expanding.
Adams says Mexico is an important market for the almond industry. In 2017, the industry exported about $70 million worth of almonds into Mexico. It’s part of a trend they’ve seen in Mexico, where consumers are looking into healthier snacking options.
As for Canada, Adams said Canadian consumers had similarities in their priorities of health consciousness and finding nutritious snacks. In 2016, six percent of almond exports went to Canada.
Regarding the recent trade negotiations with Mexico, Adams sees it as a positive, however, the Almond Board is looking forward to seeing Canada be part of the trade discussions.
“Almonds are an important crop here in California and for all of the growing communities in the central valley,” Adams said. “They are important in terms of economic value but also a very important food, I think, for consumers here in the U.S. and in all of our export markets.”
“From our perspective, any trade agreement that keeps products flowing with minimal disruption is great to see.”
Food Processing Industry: Seeking more details on the agreement, Canada
“As I understand it, the US is still imposing tariffs on Mexican steel, and that can have an effect on the cost of cans for the California fruit and vegetable canneries,” said Robert Neenan, President of the California League of Food Producers (CLFP). “So, at this point we need to learn more about the details and whether Canada will be joining the agreement before we draw any conclusions about the negotiations.”
CLFP represents companies producing canned, frozen, dried, and dehydrated products and companies with products like olive oil, cheese, beverages, and snack foods. According to Neenan, the Mexican and Canadian markets have been important for the food processing industry, and NAFTA has promoted trade among the countries that has generally been good for their members.
Some of the key products include canned fruit and tomatoes, frozen vegetables, dried fruit and nuts — almonds, raisins, and prunes — and snack foods.
According to Neenan, Mexico has tended to focus their fruit and vegetable production toward the fresh market. They aren't currently producing significant numbers of canned tomatoes, canned peaches, olive oil, nuts, dried fruit and vegetables.
This has allowed some of California's most efficient processors to take advantage of the highly recognizable brand names they carry and “some of the most efficient processing plants in the world” to capitalize on the Mexican market.
The California League of Food Producers is waiting on more details and information on whether Canada will be joining the agreement before drawing conclusions on the negotiations.
“Businesses want rules-based and stable trade agreements and NAFTA has provided that platform,” Neenan said. “Our members certainly hope that the US, Canada, and Mexico can come to a mutually beneficial agreement soon so that businesses can have more certainty about their costs and export rules.”
