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Green Farms spread risk amidst US and China trade war

News - Date: 28 June 2018

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Green Farms Nut Co (Green Farms) has issued a statement, following a number of enquiries from their macadamia growers regarding rumours about the Chinese market.

According to Green Farms, the issues stemmed from the trade war between the US and China. “Macadamias are extensively exported into China through ‘grey channels’, which are used to avoid high import duties into the country. Due to the ongoing trade and tariff duty conflict between the US and China, Chinese authorities have clamped down on all ‘grey channels’. This is to ensure China's retaliation tariffs imposed on the US have the intended effect. Unfortunately, macadamias appear to be caught in this crossfire,” reads a media statement by Green Farms.

As a result of this, said Green Farms, Chinese ("grey channel") importers are dialling down their activities this season and are attempting to delay shipments in the hope that the embargo will pass. This has seen a slight softening of the nut-in-shell price. “The impact of this may play out similarly to 2015, whereby the new Chinese premier intended to demonstrate a clampdown on corruption and so also closed off ‘grey channels’, which resulted in huge contract defaults. In the long term, fundamentally, the Chinese market at a consumer level remains durable; however, it is the route to this market which is compromised,” says Green Farms.

For exactly this reason, explained Green Farms, one of their strategic imperatives has always been to ensure they spread their risk in all markets around the globe to ensure they do not leave their growers exposed. “And as such, we planned to only sell 20% of our 2018 nut-in-shell intake to China. Because of this, we feel secure that our growers are not likely to be overly affected by this issue,” says Green Farms.

However, says Green Farms, they will continue to monitor the situation carefully. “Should it deteriorate - as it did in 2015 - we will reduce our exposure to China to under 20% to ensure minimum risk to our grower base. The longevity of our relationships with, together with our loyalty to, the kernel market means that we are well positioned to serve the growing demand of this reliable active buying market. Additionally, our three processing facilities have the capacity to crack our entire intake if necessary,” said Green Farms.

A positive aspect of the ongoing trade war between the US and China, says Green Farms, is the weakening rand. “The majority of our currency has not been covered for the 2018 season, and we will look at potentially revising our exchange rate offer. Please also remember that any exchange rate benefit will get passed on to you at the end of the season,” says Green Farms.

 

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Photo: Green Farms Nut Co

 

 
 

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