The Pits: Local Cherry Growers Fight Back
By Craig Manning | June 12, 2019
The chilly spring might not have been ideal for most Traverse City locals, but it’s been perfect for at least one thing: the local cherry crop. According to Ben LaCross of the Leelanau Fruit Company, this summer should see a superb cherry harvest, thanks in part to the slow transition into warmer spring weather.
“In the cherry business, we always like a long, slow warm-up, and that’s definitely what we’re getting this spring,” LaCross says. “It looks like we are going to produce a very healthy and robust crop of cherries this year. I think quality should be great and I think quantity should be great.”
But the mid-July through mid-August harvest window isn't the only thing on the minds of local cherry growers. LaCross says U.S. cherry prices have dipped from 25 cents per pound in 2014 to between 13 and 15 cents per pound last year. The break-even point is around 22 cents per pound, which means most domestic cherry growers actually lost money on every pound of cherries they produced in 2018.
The problem is foreign imports – primarily from Turkey -- which LaCross says are flooding the market and drastically lowering the market price of cherries. The Turkish government heavily subsidizes its cherry growers, enabling those growers to sell into the U.S. market far below the cost of production. Domestic farmers then face a dilemma: keep prices above the break-even point and cede market share, or drop prices to stay competitive and absorb big losses.
“Dumping,” when an exporter undercuts the price of a good in a foreign import market with the goal of winning a competitive advantage, is legal under World Trade Organization rules, but that legality ends if the importing country can prove that dumping practices have hurt their domestic producers. The U.S. also has anti-dumping laws of its own, which enable the Department of Commerce (DOC) to investigate foreign trade practices and determine if an exporter is selling products below “fair market value.” If the DOC finds guilt, it can impose countervailing duties, an import tax designed to counter heavy subsidization.
American producers can file complaints with the DOC and the International Trade Commission to allege harmful dumping practices. One such petition was filed in April by five American dried cherry processors – including four from Michigan. The petitioners, which include Traverse City-based growers Cherry Central Cooperative and Shoreline Fruit, are seeking substantial tariff increases on Turkish dried cherry imports. On June 6, the International Trade Commission voted unanimously to move forward with the petition and investigate.
The petition has come at a cost, though: $2 million to build a case and hire legal representation.
It won’t be the end of the battle, either. Even if the DOC finds Turkey is guilty of dumping dried cherries into the U.S., any duties will only apply to dried cherries, and only to those that come from Turkey. The problem, LaCross says, is that Turkish dried cherries are just the tip of the iceberg. Other products, like cherry juice concentrate, are being dumped on the U.S. market, too. And other countries, like Serbia and Chile, are ramping up their cherry subsidies to follow Turkey. “Our small industry does not have the funds to fight dumping on different products from different countries for the next several years,” LaCross says.
United States Senator Gary Peters (D-Michigan) is trying to make matters easier for domestic cherry growers. Peters introduced legislation called the Self-Initiation Trade Enforcement Act to create a special task force within the DOC to identify potential trade abuses. If unfair trade practices are found, action would be automatic; industry trade groups wouldn’t need to petition in order to get action.
“If you’re a big industry like the steel industry, and you see dumping of steel products on your market, you have the resources to hire the army of economists and attorneys and others to build these cases,” Peters tells The Ticker. “If you’re a group of growers in Traverse City, then that’s a pretty big lift. The federal government needs to help.”
Peters has discussed the legislation with President Trump, who called it “a fantastic idea” and promised his help. Last year, Trump revoked Turkey’s duty-free access into the U.S. market for cherry juice, instituting a half-cent-per-liter tariff on those imports.
Both Peters and LaCross see the Self-Initiation Trade Enforcement Act as a high-stakes moment for domestic cherry growers. “Right now, they believe they can get away with it,” Peters says. “They figure they have the resources to outlast a group of cherry growers in northern Michigan. And you can be assured that if the Turks are successful in driving American producers out of business, they will then just raise their prices back to their cost. In the long run, consumers will likely pay more money, and we are going to lose jobs in America.”
For LaCross, nothing less than Traverse City’s status as the “Cherry Capital of the World” is on the line.
“We need our government to step up and help us fight these illegal dumping practices, or we’re not going to have a cherry industry in Michigan anymore,” LaCross says.