California Navels continue to suffer from trade war - FreshFruitPortal.com

California Navel season to be "more catastrophic" than last if China tariffs remain

The California Navel orange could be even more of a disaster than the 2018-19 campaign if China's retaliatory tariffs are not lifted and reduced shortly, according to an industry representative.

Casey Creamer of the California Citrus Mutual (CCM) said that prices over recent weeks for Navels have fallen even lower than last year, and he attributed the situation mainly to the effects of the ongoing U.S.-China trade war.

The CCM previous described the 2018-19 campaign as one of the worst in history, as a large domestic crop combined with trade issues and heavy imports hit prices hard.

Speaking with FreshFruitPortal.com, Creamer said that this year, California Navels started off with very similar pricing to the previous year, but then proceeded to decline as more fruit was harvested.

"We’re seeing prices well below even last season at this point in time, and we have a better quality crop Navel crop than last year, with lower volumes and larger calibers," he said.

He believed the situation with China was the "number one reason" for this. Prior to the major increase in tariffs - essentially from 20% to 70%, including VAT - for California Navels in 2018, the Asian country had been one of the largest export markets.

"China is a significant market for exports and just having that reduction in export volumes means we're now trying to move more volume into other export markets or moving it on the domestic market," he said.

"Just a small shift in supply and demand can have a big impact ... so I think what we have at this point in the season is more supply, and that is leading us to prices well below the cost of production. So right now, growers are losing money when it comes to Navels."

Creamer added that exports to China are running even lower year-on-year this season despite the same tariffs being in place, as Chinese importers would have had time to find alternative supplies.

He was hopeful that the signed 'phase one' trade deal with China that will come into effect on Feb. 15  could lead to the removal or lowering of tariffs on California Navels.

While the agreement makes no mention of the retaliatory tariffs, it does oblige China to buy significantly more U.S. agricultural products, and Creamer said that for it to do so it would make sense for China to lower taxes on its importers.

"Right now it's the beginning phases of peak export season, so if the market opens up and tariffs come off and volumes start moving, that fixes a whole lot," he said.

"If that doesn't happen and if China doesn't hold up to its commitment, we're looking at a more catastrophic season than what we had the year prior."

He noted that a recently implemented trade deal with Japan has put the U.S. on a level playing field with other Navel supplies and is leading to higher exports to that market. In addition, exports remain good for the leading Asian market - South Korea. However, neither of these two markets can compensate for the huge cut in volumes going to China.

The situation, however, is better for lemons and mandarins, which are seeing improved market conditions.

Creamer said that mandarin prices are generally higher than last season, boosted by lower import volumes from South America. The trend of rising imports, however, remains a concern, he said.