Iran Nuclear Deal Could Pinch Central Valley Commodities

Jul 31, 2015  | 00:06:21  | Ep4049

As California’s chronic dry spell bears down for a fourth consecutive year, parched streams and reservoirs like Lake Isabella, the victim of ‘exceptional’ drought, are exhibit A for the most dire classification of the U.S. drought monitor.

Cody Norris/USDA Forest Service: “We’re at about 10% capacity right now.  So we’re starting to see the cumulative effects that can happen after several years of low snowpack and low rainfall.  That affects all the farmers downstream from here.”

A percentage of Kern River water below the lake nourishes areas that produce vegetables, fruits and nuts sold in supermarkets nationwide.  Various crops are raised in Kern County, and some grow solely in the state’s drought-stricken Central Valley.

Roy Pierucci/Farm Manager/California Pistachios, Incorporated: “It’s kind of frustrating to walk them because there is very little crop.”

Sec. Karen Ross/California Department of Food and Agriculture: “80% of the world’s population enjoys almonds and pistachios from this state.  What we grow here cannot be easily duplicated in many other places around the country, let alone around the world.”

According to the Kern Economic Development Corporation, Kern County produced over $6 billion in farm commodities in 2013, second among all counties in the U.S.

Kern also boasts $15 billion in annual oil production – making it the nation’s number one oil county.  The Golden State itself is the country’s third-leading petroleum producer.  Business advocates say the area’s commodity tandem has helped fill state coffers.

Richard Chapman/President & CEO/Kern Economic Development Corporation: “The tax revenue that’s going to the state…Frankly the county…the state budget wouldn’t be balanced if you didn’t have the oil an ag tax revenue.”

President Barack Obama: “The bottom line is this.  This nuclear deal meets the national security interests of the United States and our allies.  It prevents the most serious threat, Iran obtaining a nuclear weapon.”

As crude prices try to claw their way back from the recent glut, some analysts caution reduced global trade barriers - part of an agreement with Iran – could have impacts on domestic commodities. The rogue nation sits atop the fourth largest crude reserves in the world, producing nearly 3 million barrels a day – with plans to add half a million more.

GOP Congressional leaders voiced their opposition, but the President vowed to veto any legislation aimed at unraveling the nuclear pact.

Les Clark/Executive Vice-President/Independent Oil Producers’ Agency: “It’s like anything else.  I mean you get so tight, you’re going to look at it and say hey it’s costing me more than what I can afford.  So what do you do?  You don’t continue with that project.  You shut her down.”

Investment firm Goldman Sachs says if sanctions are lifted, it will take Iran about a year to wade through procedure and compliance issues to step up production.  But it is the international pariah’s second largest export, behind crude oil, which truly vies for dominance with its American counterpart in California.

Roy Pierucci/Farm Manager/California Pistachios, Incorporated: “We normally get, a good crop for us up here is 18 truckloads. Last year we had 2 ½.”

Roy Pierucci is the farm manager for California Pistachios, which operates on 160 acres north of Bakersfield.  At $3 a pound, Pierucci says neither drought nor low yields will halt production.

Roy Pierucci/Farm Manager/California Pistachios, Incorporated: “You just keep going.  You can’t give up.  And the market’s been good, so even though you’re not producing high, the price has been fantastic.”

According to American Pistachio Growers, an industry trade group, California cultivates nearly 99% of the nation’s pistachio crop.  The tree nut represents a more than one billion dollar industry, with 513 million pounds harvested out west last year.

The Iran Pistachio Association, a Middle Eastern industry think-tank, estimates Iran’s average pistachio harvest at 560 million tons.  And while the American and Iranian markets have gone head to head, the U.S. banned the Persian nut outright in 2010.  The world market followed suit in 2013. 

As supplies tapered off, Golden State entrepreneurs reaped the benefits. Pistachio prices have increased 40% over the past five years.  If Iran opens the spigot, flooded markets might hamper returns on the west coast. 

Roy Pierucci/Farm Manager/California Pistachios, Incorporated: “But we raise such a better quality nut than they do.”

So far, officials with California’s pistachio industry have shrugged off the specter of competition from the Middle East, saying farmers will endure any price dips and prosper.  And a spokesperson for the Administrative Committee for Pistachios, a quality control entity created by growers, says high levels of contamination from aflatoxin, a toxic fungus, would keep Iranian product largely out of U.S. and European markets.

Roy Pierucci/Farm Manager/California Pistachios, Incorporated: “And until you get a pair of squeezers or pliers, and squeeze it, you don’t know if there’s meat in there or not.”

However, the biggest challenge for California’s pistachio farmers might still be drought.  Even though the nut is among the most profitable perennial crops, with tree life expectancy at over 40 years, each plant consumes about 3 acre feet of water every year.  And as surface waters shrink away, the agricultural industry has tapped other resources.

California is one of few western states lacking a comprehensive statutory framework for groundwater regulation.  As such, the current predicament has ignited legal battles over state authority and all manner of historic water rights. 

But recent state and federal legislative moves have convinced Pieruci voluntary conservation efforts will yield the best possible outcome in a state battling for every available drop.

Roy Pierucci/Farm Manager/California Pistachios, Incorporated: “We need some control on our groundwater.  We don’t want the state involved.  They’re allowing us to make our own plan.”

For Market to Market, I’m Josh Buettner.

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