Economy, Domestic Economy

Pistachio Market Faces Return of Iran

Pistachio Market Faces Return of IranPistachio Market Faces Return of Iran

It is not just the world of oil which is bracing for the impact of Iran’s return to the market after the recent lifting of US sanctions.

International pistachio traders are watching and wondering how the move will impact export flows from Iran and whether it will have a crack at the hitherto closed US market.

The US and Iran, which account for 70-80% of the world’s production, have been vying for the top producer and exporter spot for the past few years. as demand has risen thanks to the growing trend for healthier eating around the world, wrote the Financial Times.

Chuck Nichols, president of Nichols Farms in California, which grows, processes and ships pistachios, says the Iran issue has been on the US growers’ minds.

“People have been thinking about this,” he said.

Iran’s industry executives are confident exports will increase, thanks to the sanctions relief.

“The transactions will definitely be easier and works are done smoother,” said Mahmoud Abtahi, deputy head of Iran’s Pistachio Association.

“Iran’s pistachio has been exported over 100 years and has secured a foothold in the world market.”

Iran, which has been a pistachio producer since the 5th century BC, managed to regain the position of top producer last year for the first time since 2008, after record crops in the two years to 2015.

In sharp contrast, the 2015 harvest in California, which accounts for most of the US output, almost halved to about 124 million tons—the lowest in almost a decade—due to adverse weather.

The fall in supply has pushed up Californian pistachios above $10 a kilogram, allowing Iran to offer discounts to its overseas buyers, especially in China—the largest import market.

“Iran has been selling into China between 80 cents to $1 lower than the US product, replacing California as the top exporter,” says Richard Matoian, executive director of the American Pistachio Growers.

Europe is another large market where Iran could make inroads, thanks to sanctions relief. Although pistachios had not been subject to European sanctions, restrictions on banking and shipping had made trade difficult.

Even with such challenges, “Iranian pistachios have a strong following [in Europe] because of the taste,” says Niel Hyde, a veteran nut trader who is now at Brazil’s cashew processor Iracema.

Kees Blokland, trader at Global Trading in the Netherlands, says: “I personally think the pistachios from Iran are more tasty and more flavorsome.”

The big question is whether Iranians can make inroads into the US. Even before US sanctions were implemented, Iranian pistachio imports were subject to duties of about 300%. With the sanctions removed, a review is to be conducted by the US trade authorities on whether to retain the tariff.

“Our industry will vigorously defend our position” to retain the duties, says Nichols.

There are a lot of practical and historical issues surrounding Iran sending their nuts to the US.

Even if the duty is dropped, ambiguity around banking and payment remains as a result of a set of US sanctions remaining in place, say legal experts.

One main challenge that both pistachio rivals face is the changing weather affecting productivity and water availability.

California’s production was hit by the lack of “chilling hours” or cold days during the 2014 winter, as well as the prolonged drought that has hit groundwater levels.

Iran’s pistachio growers, who are mostly private and small-scale farmers, have also suffered water shortages that have raised costs.

Hassan Tabatabaei, a leading pistachio grower, said Iran’s problem was more domestic than international.

“Lifting of sanctions will for 100% bring about stability in transactions, but what is more affecting pistachio production is that precipitation is declining each year,” he says.