I met an investor about a year ago who was searching Chile to buy an almond farm, as the California government recently enacted laws that made it difficult or impossible to profit as an almond farmer, where most almonds in the USA are grown. He said Chile is a good place to grow almonds.
Almonds are nutritious, expensive, and profitable, but so are other crops. David Wessel reminded me of the investor in an informative article he wrote in the Wall Street Journal (WSJ) about pecans. The USA grows and eats the majority of the pecans in the world, which can be grown in many places, and even grow wild. Walnuts and almonds are grown mainly in California, and cartels fix the price of nuts, but not in the pecan market.
China Jolts the Pecan Market
Pecan prices have doubled in the last 3 years mainly due to demand from the Chinese, who developed a taste for pecans after a bumper crop in 2007 drastically reduced the price. The Chinese never ate pecans before their economy boomed, but now consume 25% of the USA output because pecans are very nutritious. The value of pecan orchards has increased 50%, and new trees are being planted, that must grow 8-10 years before producing fruit. Food comprises 20% of the goods that China buys from the USA.
The Chinese have a charming tradition of eating leftovers during New Year to prove that the previous year had been so prosperous that surplus food is available. Another effective way to flaunt wealth is to eat expensive food such as pecans, and given the shortage of women caused by the tyrannical Chinese government, it is essential for men to prove wealth and market themselves aggressively to attract a wife.
Opportunities for Farmers in Chile
The Fresh Fruit Portal (FFP) reports that Chilean farmers produce better nuts than California, exports are booming, and that they intend to break California’s lock on the Asian market, but the WSJ and FFP agree that California has developed better technology for harvesting and processing:
Machines have been developed to shake nuts from the tree at harvest, and others sweep them off the ground. In shelling plants, nut crackers, conveyer belts, mechanical sorters, laser and infrared inspectors are joined in a Rube Goldberg contraption. These machines bathe nuts in hot water to kill bacteria, crack them, separate meat from shell, segregate intact halves from smaller pieces, skim out tiny worms, roast nuts and then chop and sort pieces by size and color.
Blueberries are a healthy fruit high in antioxidents, and FFP reports that Chile has opportunities to sell blueberries due to high demand all over the world, and Chile is gaining share in the fresh and frozen blueberry markets.
Should Chile Specialize or Diversify into New Industries?
I question whether the Chile government should subsidize and incur debt to diversify into new industries when there are so many opportunities to gain market share in traditional markets, especially when California is mired in debt, oppressive government, and a decaying economy. Am I wrong? Are there expensive food crops or processing that Chile could sell to the Chinese?
Australia is an isolated country with dry warm climates similar to central and northern Chile; they export metals and food. Will Aussies exploit any markets that Chile ignores or serves badly? Will China grow their own pecans and prohibit imports in 8-10 years when the trees mature?