China's Health-Obsessed Middle Class Going Nuts For...Nuts

American Almond, Walnut, Pistachio, Pecan And Hazelnut Growers Struggle To Keep Up With Demand Chinese demand is reshaping the American nut industry China's emerging middle class isn't only becoming a key consumer demographic for automotive, fashion, jewelry and cosmetic brands, it's proving a booming market for one very specific industry: US-grown tree nuts. Earlier this year, the Wall Street Journal reported that the price for a pound of in-shell pecans rose to an average of US$2.14 last year, double that of three years ago, noting that a public perception of pecans as being a particularly healthy nut has sent demand from China skyrocketing. While this has been a boon for pecan growers in American states like Arkansas, Georgia, Alabama and Texas, it has also illustrated the dramatic effect that China's middle class can have (and is already having) on food prices overseas. From the Wall Street Journal: For now, life is good for pecan growers, who produce about $550 million a year worth of nuts at today's prices. Grower Bill Goff sold the entire crop of his 1,800 acres of Georgia pecans to Chinese buyers last year. But he's not putting the profits into a sports car. Instead, he is buying up another 500 acres of pecan orchards. In Georgia, he says, pecan orchards hovered between $3,000 and $3,800 an acre five years ago. Today, they sell for between $4,500 and $6,000 an acre. Rather than slowing down over the past year, it seems China's appetite for nuts has only intensified. According to a new report by Rabobank's Food & Agribusiness Research and Advisory group, not only is the trend gaining steam, it's extending far beyond pecans -- a development that could be a windfall for American tree nut farmers but hit American consumers in the pocketbook. From the Southwest Farm Press: U.S. almond, walnut, pistachio, pecan and hazelnut growers have experienced banner years of crop prices recently, as China's once largely agrarian country transforms its economy from export-driven to consumer-driven. The move is giving China's urban middle class more purchasing power to afford premium products such as tree nuts. Additionally, an expanding worldwide health and wellness movement has found fertile ground in China, where these nuts play a key role in balanced nutrition. The two shifts have U.S. tree nut farmers enjoying record prices and scrambling to plant more acreage as the projected demand will last into the long term. "The Chinese government is promoting an economy that is favorable for many U.S. exports, especially tree nuts," said the report's author, Karen Halliburton Barber, assistant vice president and senior agricultural analyst with the Food & Agribusiness Research and Advisory group. "As the Chinese middle class grows, so will the demand for almonds, walnuts, pistachios, pecans and hazelnuts. This is good news for growers here in the U.S." As the article points out, the emergence of the Chinese middle class is reversing the traditional China-US trade model. Now, when dealing with the middle class, the case is more regularly one in which "China is becoming the customer and the U.S. is becoming the seller." With middle-class consumption rising into more niche items that had previously been available only to the wealthy or for very special occasions, and more Chinese putting a greater focus on health in the wake of regular food safety scares, exporters like the nut growers in the US are keen to cash in on exploding demand for imported food items. Still, as Karen Barber contends this week, American growers can't simply sit back and expect the Chinese market to remain an easy source of income: Barber contends that there are inherent risks with U.S. growers placing so much dependency on the Chinese market, especially if the U.S. cannot meet short-term demands and China develops trade relationships with other countries who grow the same nuts. In addition, the increasing strength of the dollar could raise the costs of the exports. Part of the increased costs could be passed on to Chinese consumers, who may shy away from increased prices. Barber notes that, while this is a concern, premium imported tree nuts are already being purchased by higher income segments of the population who are more likely to afford the higher prices.

China's Health-Obsessed Middle Class Going Nuts For...Nuts

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Published November 23, 2011

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China's Health-Obsessed Middle Class Going Nuts For...Nuts