Garlic tariffs work for Christopher Ranch

While economists, stock market investors and some agricultural exporters are decrying the continued trade war with China, the nation's largest garlic grower-shipper is ecstatic over the duties placed on Chinese garlic.

"We are very excited about it right now," Christopher Ranch Vice President Ken Christopher said Friday, May 10, the day after the 25 percent duty on Chinese garlic went into effect.kenbilKen and Bill Christopher.

He said the duty was first announced several months ago, but then continued to be delayed. With trade negotiations between the United States and China not reaching fruition this past week, the Trump Administration took unilateral action and increased tariffs to 25 percent from 10 percent on $200 billion in Chinese imports. China retaliated by increasing its own tariffs the same percentage on about $60 billion of U.S. imports to that Asian country. The agricultural sector was hit hard, especially in products such as soybeans, wheat, sugar and poultry.

But Christopher said the increased duty on all imported Chinese garlic was well overdue. The California garlic industry has long argued that Chinese garlic is being "dumped" in the U.S. market at below-cost prices. Christopher said the system in place to thwart that has long been ineffective. He believes the new tariff will come closer to leveling the playing field.

Christopher explained that California garlic is typically sold at about $2 per pound, with a 30-pound carton of fresh garlic having an f.o.b. price of $60. Chinese garlic, he said, is often in the U.S. marketplace for $20 for a 30-pound carton. With a 25 percent tariff, that price will increase to about $25 per carton.

Christopher also believes that the tariff will result in less Chinese garlic being shipped to the United States, resulting in a rising price and a tariff that is greater in terms of dollars.

So if the market rises to $25 for a 30-pound carton of Chinese garlic, the 25 percent tariff would net $6.25 and the total price would be $31.25, bringing it even closer to what he believes is superior U.S. garlic.

Christopher said that over the years, the Chinese garlic has not fared as well at retail, but the U.S. market struggles to capture foodservice business because of the low-cost Chinese alternative.

The Christopher Ranch executive does not believe the tariff will result in a corresponding increase in the price of California garlic. He said Christopher Ranch works with its customers on a year-round program with year-round pricing. He said the company takes into account its own cost factors in establishing that price.

Christopher added that the Gilroy, CA-based company is not anti-imports and has no problem competing against garlic grown in Spain, Argentina and Mexico. In fact, he said the company sources some of that product and sells it to its customers, though it is not packaged under the Christopher label. He believes suppliers from those countries base their price on the market and their costs and are not "non-market actors."

If China decreases its garlic sales to the United States, Christopher believes producers in those countries as well as the United States will fill the void with increased production.

The new tariff did not apply to product that had already left China and was en route to the United States. Consequently, Christopher said the first garlic on which the import tariff will be collected will not be in the U.S. market until late May.

However, how long the new duties remain in effect is anyone's guess as there is much pressure from many sectors -- including agriculture -- for China and the United States to end this trade war with a new bi-lateral trade agreement.

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