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Can We Compete with Imports?

Both the number of countries exporting products to the United States and the amount of product coming in are increasing.

By Thomas R. "Dell" Cotton, Jr.
Manager, Peanut Growers Cooperative Marketing Association

On August 18, 1999, at a seminar entitled "The Peanut Dilemma - Searching for Solutions" Dell Cotton spoke about imported peanuts and peanut products and whether or not these imports were considered to be under trade agreement quotas. Because the industry is faced with a new farm bill and the possibility of expanded access under new trade agreements, Cotton agreed to update the information for The Peanut Grower.

Beginning in January of 1998, confectionary products containing peanuts or peanut products were broken into six separate categories and assigned tariff codes by the U.S. Customs Service. A chart showing the imported poundage by year for each of these categories follows. While the following will provide seemingly endless figures, I hope you will examine each of these charts and look for identifiable trends that could be important to our industry.

These charts of confectionary products show the quantities of peanuts that enter the United States outside of trade agreement quotas, and it is important to be aware of this. As you can see, many countries export peanut products, with Canada and Mexico accounting for 65 percent of the most recent total.

The only other category of products that enter the states without quotas, other than confectionary products, are peanut butter from Mexico and peanut oil.

When you study the numbers in these charts, it is understandable why there is great concern in the U.S. peanut industry about imports. The charts show that, not only are the amount of products increasing over time, but the number of participating countries is increasing also.

After reviewing the import poundage, the following points come to mind:

1) Imports under the imposed trade agreement quotas covering peanuts (shelled, in-shell, blanched and prepared or preserved), peanut butter and peanuts from Mexico totaled 74,106 tons for 1998-1999; 79,373 tons for 1999-2000; and will be approximately 85,000 tons for 2000-2001. Converted to farmer stock tons, these yearly totals become 118,544, 126,416 and 134,289, respectively. When non-quota items are included (confectionary items and Mexican peanut butter), the equivalent farmer stock tons for each year becomes 164,437, 167,853 and 176,740. Thus, the quota in this country is effectively being increased by 30 percent each year; a fact that our trade negotiators are not recognizing.

2) Of particular interest in these charts are the countries that are benefitting from trade policies. Canada is at or near the top of most charts, yet no peanuts are grown there. It is hard to accept that trade policy is supposed to allow countries to set up industries to take advantage of import quotas when they do not produce the raw commodity from which the import is derived.

3) For years we have heard arguments about a so-called world market price. It has been explained that one of the fallacies in this is that the United States produces peanuts mainly for the edible market, with leftovers going to the oil market as opposed to our world competitors who grow mainly for the oil market. This is a true statement, however, I am baffled by what is happening to oil imports and exports. From Oct. 1, 1999, through Sept. 30, 2000, more than 12,000 tons, or 24,000,000 pounds, of oil stock was exported from the United States into Mexico. This represents 65 percent of total oil stock exports. For nearly the same time period, more than 29,000,000 pounds of crude oil entered the states from foreign sources. What is happening to the oil stock going into Mexico, and why is there such a market for foreign oil in the United States that we cannot supply ourselves?

Re-entry of Exported Additionals
A final subject related to imports that must be addressed for the peanut program to operate properly is the provision of the Farm Bill, which states that contract additional peanuts exported from the United States cannot re-enter the states without a penalty. If this were allowed, it would undermine the price support system.

For example, Canada is a huge market for U.S. peanuts, as 10 million to15 million pounds are exported to Canada each month. Canada also imports peanuts from other countries, including Argentina, China, Nicaragua, Mexico and others. From June 1999 to October 2000, Canada imported 251,367,722 pounds of peanuts from all sources. It is a safe assumption that the U.S. origin peanuts included in this total, or 200,365,533 pounds, were additional peanuts. According to the previously mentioned provision, the only peanuts available to make into products for Canada to export to the United States are those that are not U.S. additional peanuts, which, in this case, would be 51,002,189 pounds.

During this time period, 44,807,676 pounds of peanut butter were exported from Canada into the United States. This equals 47,048,060 pounds of shelled peanuts. Canada also exported 113,810,259 pounds of confectionary products to the states. Using the 25 percent conversion rate, this equals 28,452,565 pounds of shelled peanuts.

Therefore, out of 51,002,189 pounds of eligible imports into Canada from which products could be made for export into the states, 75,500,625 pounds of equivalent products entered our country from Canada. Because of conversion estimations and inventory control, these figures could be off somewhat, but not by much, and it could differ in either direction.

The point is some U.S. additional peanuts are being made into products for re-entry into this country.

What can be done about this? Nothing but enforcement of the current law. Examination of records would be the only way to find out what is going on and to root out the abusers. However, this has not been the chosen course of action by authorities.

Finally, where do these charts, figures and questions leave us? For the grower segment, it leaves a lot to think about as discussions take place in preparation for a new farm bill. With the continued push for free trade, it is expected that more access to the U.S. market will be granted. When coupled with increasing importation of processed products, the system must be adjusted. If these adjustments can be agreed upon, implemented and are successful, perhaps some of the processed product manufacturing, as shown in these charts, will return to the United States.