Losing the Garlic War
"...if we continue on the path that we are on,
the American farmer is going to be out of business."
By Robert Rodriguez
The Fresno Bee
Sunday, March 28, 2004
FIREBAUGH -- As head of one of the region's largest onion and garlic dehydrating companies, Frank De Francesco fought for more than a decade against the influx of cheaper Chinese garlic.
The family-run company proudly used U.S.-grown garlic, placing American flag stickers on its 55-gallon fiber drums.
But its battle over Chinese imports is nearing an end.
This summer, De Francesco & Sons will begin buying less-expensive Chinese garlic to supplement its local supply of the pungent vegetable. De Francesco says he tried to hold off as long as possible, but
a sudden drop in price, rising costs and continued pressure from buyers for cheaper product pushed the company to the inevitable.
"It was either buy Chinese garlic or sell the company," De Francesco says. "And I couldn't undo what has taken us 35 years to build."
Across California's garlic country, China's dominance as a major agricultural producer is forcing some in the industry to reduce their work forces, farm fewer acres and push for greater consumer awareness about foreign-grown produce.
California produces 85% of the nation's garlic supply, while China grows 66% of the world's supply.
"I don't think the American consumer wants to be in the same situation that we are with oil," says John Vessey, part owner of Sequoia Packing, a fresh-garlic packer in Coalinga. "But if we continue on the path that we are on, the American farmer is going to be out of business."
Vessey has sliced the number of garlic acres he farms in garlic-rich Fresno County from 1,000 to 500. The county's vast west-side farms boast 27,210 acres, the largest concentration of garlic acreage in the nation. In 2002, the county's garlic crop was valued at $131 million.
Vessey says cheaper imports and the shrinking number of buyers may cause him to cut operations in half at his west-side packinghouse. The company hires about 400 employees from July through November.
Sequoia Packing has two shifts during the harvest season. The company is a joint venture between Vessey and Spice World Inc. of Orlando, Fla.
"Spice World has been in business for 50 years, but they could be out in a couple of years if this continues," Vessey says.
Analysts don't see the tide turning any time soon, if at all.
China is moving away from growing bulk commodities such as corn, wheat, and soybeans and into specialized, higher-value crops.
"Unfortunately, a lot of what they are discovering is what San Joaquin Valley farmers are doing, including garlic," says Mechel Paggi, director of the Center for Agricultural Business at California State University, Fresno.
While China is broadening its agricultural base, California farmers are dealing with a shrinking number of buyers who possess greater leverage over prices.
"Buyers are saying we want product for our stores so we can supply our consumers seven days a week with consistent production and at a certain quality," Paggi says. "And they want it at the lowest price possible."
Also frustrating California's fresh-garlic growers is that China's harvest nearly coincides with its own, making the temptation to buy cheaper Chinese garlic more alluring.
Don Christopher, founder of Christopher Ranch, one of the nation's leading makers of fresh garlic products, also has succumbed in the battle over Chinese garlic. The Gilroy company began buying Chinese garlic last year.
Like the De Francescos, the decision for Christopher was not an easy one. The Gilroy company has spent hundreds of thousands of dollars for lobbyists and attorneys to try to block Chinese imports that were being shipped for less than the cost to produce, also known as dumping.
Christopher Ranch and other companies were successful in getting the United States to tack a 367% tariff on Chinese fresh garlic. But the flow of garlic only slowed.
And while some processors may argue over the quality of Chinese garlic, no one debates the price difference. In some cases, Chinese garlic is about half the cost of American-grown garlic.
"I suppose I can't blame the buyers too much when you are talking about a product that may taste a little different but is sold at a much lower price," Christopher says. "It is getting to the point where I couldn't compete anymore without the Chinese garlic. "
Christopher Ranch also has reduced its garlic acreage from 4,300 two years ago, to about 3,000 last year, a bulk of the acreage in Fresno County.
"And we expect to cut that again next year, by about another 500 acres," Christopher says.
At 69, Christopher is close to retirement. He marvels at the changes he has seen in the industry, including China's rise as a worldwide agricultural force.
"We used to sell to Japan and all of sudden we got dropped," Christopher says. "We didn't think anything of it, until Europe dropped us and then Australia. After a while there was no export market left. Little by little, we could see China coming."
At Gilroy Foods, a division of ConAgra Foods, company officials say they remain committed to U.S.-grown garlic, adding that "virtually all the garlic that we are handling is being grown in California."
Greg Estep, senior vice president for Gilroy Foods' dehydration division, acknowledges that China's role as a major supplier of dehydrated garlic grew during the late 1990s when California's crop fell short.
And while Gilroy Foods bought garlic from offshore sources during that period, "we wanted to move back to buying California garlic as fast as we could," Estep says.
De Francesco realizes that in today's global market China can easily be criticized but it can't be ignored.
It was a hard lesson for the family. The company's steadfast commitment to U.S.-grown garlic may have been the right thing to do, De Francesco admits, but it wasn't realistic in a price-sensitive market.
Dehydrated Chinese garlic can sell for 70 cents a pound, while California garlic is $1.25 pound.
"The fact is our customer list is shrinking and we needed to do something to remain competitive," says David Musson of De Francesco's sales and marketing department. "We didn't want to be a good-looking corpse wrapped in the American flag."
As part of its new selling program, De Francesco & Sons will offer customers three products: a Chinese dehydrated product, a blend of American and Chinese and solely American garlic.
The De Francescos' customers include spaghetti sauce makers to spice companies.
For the moment, the De Francescos don't anticipate reducing their work force. During its late summer harvest, the company has 500 employees, pulling people from Firebaugh and as far away as Los Banos. It has about 250 year-round workers.
Mario De Francesco III, vice president of sales and marketing, says that because Chinese garlic does not require processing, the company could increase its production of local garlic and potentially land larger clients.
"This is a whole new ballgame," says Mario De Francesco. "We didn't anticipate we would be doing this, but this is where we are at."
The reporter can be reached at brodriguez@fresnobee.com or 441-6327.
