Wooden totes are filled with hazelnuts harvested in 2021 at Aman Bros. LLC in Mt. Angel.

A tariff hike on hazelnuts recently imposed by China is expected to reduce the bonuses Oregon farmers will receive for last year’s crop.

Growers have already received 80 to 90 cents per pound for hazelnuts they harvested last year, but are expecting additional payments based on the industry’s final sales results.

“We need to understand where this market is headed before that can happen,” said Terry Ross, executive director of the Hazelnut Growers Bargaining Association.

The new 35% Chinese tariff on hazelnuts, which became effective at the beginning of the year, has scrambled expectations for exports to that country.

Bonuses will still be paid for last year’s crop but the outlook isn’t as positive as it once was, he said. “It will be good, just not as good as we hoped.”

Hazelnut buyers in China may seek to change contract terms due to the new tariff, which effectively increased their price by 35 cents or more per pound, Ross said.

“They can actually renegotiate prices on what’s been delivered,” he said Jan. 20 during the Nut Growers Society’s annual meeting in Grand Ronde, Ore.

Normally, processors could simply send shipments back from China and process the in-shell crop for kernels.

However, lower kernel prices in Turkey, the predominant global hazelnut producer, and congestion in the shipping industry have precluded that possibility.

“There’s no way I can afford to bring that container back,” said Larry George, president of the George Packing Co.

Retaliatory tariffs and taxes of 81% were significantly decreased under waivers that China granted under the phase one trade deal struck in 2020, he said.

The exact tariff rate depended on the waiver, but the reductions were substantial, George said. At the beginning of January, though, China suddenly slapped another 35% tariff on top of those rates.

“Immediately, it just created chaos in the market,” he said.

The tariff increase likely pertains to broader trade posturing and political discussions between the U.S. and China, but “Oregon got hardest hit by it,” George said, adding that it’s possible that by April, China will again impose the full 81% in tariffs and taxes.

“There’s a message being sent with these tariff increases,” he said.

Farmers who produce in-shell varieties for the Chinese market, such as the Barcelona and Jefferson cultivars, will be the most hurt by the tariff, George said.

“It will affect growers of certain varieties more than growers of other varieties,” he said.

Fortunately, China consumes only about 20-25% of Oregon’s hazelnut crop, down from roughly 60% at times in the past, George said.

“We’re considerably less dependent on the Chinese market than we were a decade ago,” he said.

However, the new Chinese tariff isn’t the only problem faced by the hazelnut industry.

The value of Turkish currency has plummeted, making hazelnuts from that nation cheaper on the global market and depressing kernel prices elsewhere, Ross said.

Turkey has about 1.7 million acres of hazelnuts, compared to about 92,000 acres in Oregon, he said. While the state’s industry is much smaller, it’s nearly tripled in acreage over the past decade.

“We’re on our way but we’ve got a little bit of a ways to go,” Ross said.

Transportation problems are hindering sales of hazelnuts, as they are for other crops and products, George said.

Whether the “chaos continues” in 2022 is unpredictable, as are geopolitical factors such as tensions with China, he said.

“It can change in a matter of days,” he said of the market outlook.

While processors are dealing with an unprecedented amount of stress, they still expect healthy sales of the 2021 crop, George said. Low inventories would bode well for the prospects of hazelnuts harvested later this year.

“We’ll get it all out the door,” he said.