Hazelnuts harvested from the orchards head to the processors in the fall. Oregon growers will receive at least 83 cents per pound for the 2019 crop. (Oregon Hazelnut Industry)

While hazelnuts remain mired in a broader trade conflict, Oregon farmers will receive a substantially higher minimum price for the crop this year.

The crop still faces steep tariffs in China — a major export destination for Oregon hazelnuts — but the industry has become more accustomed to operating during the ongoing trade dispute with that country, experts say.

“Now that we’ve been through the tariff situation, we know how to prepare for it,” said Terry Ross, executive director of the Hazelnut Growers Bargaining Association, which negotiates prices.

Growers will receive at least 83 cents per pound of hazelnuts for the 2019, regardless of variety, up from the 62 cent floor established last year. Though it’s an improvement, the minimum price is still less than half the record $1.70 per pound set in 2014.

“We want to pay more to the grower but the market can only accept so much product with an 81.5% tariff and tax,” said Larry George, president of the George Packing Co., a processor based in Newberg, Ore.

Last year, the Oregon hazelnut industry also had to contend with the plunging value of currency in Turkey, which is the major global producer of the crop.

As the value of the Turkish lira dropped, its hazelnuts effectively became less expensive than those grown in the U.S.

“Last year was a perfect storm. We had the lira collapse and we had a trade war. This year, everything is about the same as last year, but we survived,” said Michael Severeid, vice president of sales and marketing for Willamette Hazelnut Growers, a processor in Newberg.

Though the Turkish currency is still cheap, it’s no longer in free fall. Since last September, the lira has been trading in the range of about 16-19 cents. The previous year, its value had dropped from about 28 cents to 16 cents.

Farmers in Turkey are expected to produce a large volume of hazelnuts this year but that country’s government has committed to buying one-fourth of the crop, said Ross of the Hazelnut Growers Bargaining Association.

“That’s helped stabilize the marketplace,” he said.

In China, consumers have been more willing to pay higher prices for hazelnuts than originally expected, said George of the George Packing Co.

Hazelnuts were previously routed into China through Hong Kong and Vietnam, but those “trans-shipment” channels were shut down by the Chinese government as it raised tariffs, he said.

Despite the higher tariffs, shipping hazelnuts directly into China “through the front door” has removed a major constraint of the trans-shipment method, which had a limited capacity to move product, George said.

“That pipeline could only take so many containers per year,” he said.

The trade dispute between the U.S. and China has thus created a dynamic of “short-term pain, long-term gain” because the hazelnut industry won’t have to deal with that bottleneck in the future — when tariff rates will hopefully be lower, George said.

“People are freely moving the product in the market in China,” he said.

Unfortunately, trade problems and lower prices have slowed investments in new hazelnut orchards — Oregon farmers have only planted 1,500 acres in 2019, down from 8,650 acres in 2018 and 10,900 acres in 2017, George said.

“There are too many processing plants for too few hazelnuts in the market,” he said.

The initial rate of 83 cents per pound is likely a “bridge price” that will lead to higher prices for hazelnuts later in the marketing year, said Severeid of Willamette Hazelnut Growers.

Though it’s uncertain when the trade dispute will be over, there’s reason for the industry to be optimistic about the domestic market, he said.

Food manufacturers have been using hazelnuts in new products, such as M&M candies with hazelnut filling, he said.

“That’s good because M&M is a leader and others will try to copy them,” Severeid said. “The United States in the long run should be our most stable, best market.”