By John Deal and S. Aaron Hegde
Pistachios generally rank in the top-five agricultural exports from California while often ranking in the top-three agricultural exports of Kern County. Pistachios grown in California make up 100 percent of U.S. pistachio exports.
Even though pistachios make up a small percentage of total U.S. exports, they are very important in both Kern County and California. Although Iran has long dominated the pistachio export market, the United States (thus California) has steadily increased its market share since the 1980s. These changes have resulted from a variety of factors, including California production, safety concerns with Iranian pistachios, and political issues and trade policies.
This article will look at a brief history of these issues, the current primary export markets for California and Iranian pistachios, and challenges in maintaining current export markets and expanding into future markets.
A majority of California pistachios are exported — 67 percent in 2014 and 90 percent in 2015. The top-three destinations for California pistachios have been the European Union, China/Hong Kong and Canada. However, as domestic production decreased by roughly 47 percent between 2014 and 2015, exports correspondingly decreased by approximately 25 percent, though this decrease was not evenly spread among the top-three destinations.
The EU imported 4.3 percent fewer pistachios, while China imported 51 percent fewer in 2015 compared to 2014. During this period, the U.S. dollar appreciated by 19.5 percent and 1.5 percent against the euro and the yuan, respectively, thus increasing costs to buyers in those regions. At the same time, Chinese pistachio production and yields have been steadily rising, replacing the need for exports, which fell from about 30 percent of consumption to approximately 16 percent.
On average, U.S. exports accounted for 37 percent of world pistachio exports, while Iran contributed 40 percent of the same over the last five years. Iranian exports decreased by 25 percent between 2012 and 2013 due to a self-imposed ban on pistachio exports over the first half of 2013. This ban was imposed by the Iranian government to reduce the domestic price of pistachios.
Since 1997, the EU has banned the importation of Iranian pistachios due to their high levels of aflatoxin, a carcinogen produced by a fungus due to improper drying of pistachios. As a result, Iran has since focused its export efforts toward Asian and Middle Eastern countries, including China, the United Arab Emirates and Vietnam.
More recently, Iran has been experimenting with methods to reduce aflatoxin levels, potentially opening up access to the EU market, thus posing a threat to U.S. exports.
Over the last decade, pistachio imports by the EU have grown by less than 5 percent, while imports by China and Vietnam have increased by more than 200 percent and more than 1,000 percent, respectively. In order to expand the U.S. pistachio export market, producers need to focus on these regions. The Trans-Pacific Partnership would have eliminated the current 25 percent import tax on pistachios in Vietnam. Iran was not a signatory to this agreement. In lieu of this agreement, the U.S. would need to negotiate a reduction in taxes through a bilateral treaty instead.
While the upside for U.S. pistachio exporters is limited, there are some potential downsides. First, the U.S. could lose some of its market share in the EU if Iran is able to meet the European aflatoxin standards, thus enabling them to export to EU countries. Second, there is limited growth potential in new markets. Any political discord between the U.S. and China could further limit market access to these regions. Given the importance of pistachios to Kern County, producers would benefit from more intensively exploring opportunities in Asian markets.
— John Deal is an economics lecturer at CSUB and S. Aaron Hegde is the CSUB environmental resource program director and professor of economics.