Native Born, Global Bound
Cranberries have a storied history in North America. Native Americans put them to service as a staple food, medicine, preservative, and dye. They taught early settlers about the super fruit’s versatility. Mariners toted cranberries on voyages to prevent scurvy. Wild cranberries were domesticated in the early 1800s in Massachusetts and they are still grown there, but more than half of the 100 varieties now produced commercially in North America come from acreage in the northern U.S. states of Wisconsin, Minnesota, and Michigan.
The end of the harvesting season coincides with Thanksgiving, when Americans pay homage to cranberries and we are reminded that fresh cranberries are pretty delicious in a variety of forms – sauces, jellies, relishes, spreads. But we already consume nearly 400 million pounds of cranberries per year – 20 percent of that during Thanksgiving week alone – so it’s a logical growth strategy to share our love of cranberries with global eaters and because cranberries are so easily preserved and processed, their consumption can be promoted year-round, not just as a Fall comfort food.
A Sweet Future in Overseas Markets
American producers sold 9.8 million barrels of cranberries in 2016, according to the U.S. Cranberry Marketing Committee. About two-thirds of the cranberries were sold domestically (5 percent in fresh form and the other 95 percent was made into concentrate or otherwise processed); the other third was exported, primarily for processing in other markets. The thirst for cranberry juice has waned slightly in recent years, and somehow a lack of appeal for fresh uses for cranberries has yet to catch on with Millennials. But the increased popularity for dried, sweetened cranberries has made up for that slack to drive both domestic sales growth and export growth for U.S. producers.
Europe, where cranberries were introduced centuries ago, is a historical market for U.S. cranberry growers, as is Canada where cranberries also grow natively. Mexico, South Korea, and China are among the more promising new markets. Emerging markets in general are ripe opportunities as per capita income grows and the use of dried cranberries as ingredients in a wide variety of sweet and savory foods piques global culinary interest.
Not the Only Side Dish on the Plate
While American cranberries dominate global sales, we aren’t the only producer. Wild cranberries were native to North America, so Canada is a capable producer as well. Chile has also increased its production for global markets. Small amounts are also grown throughout Eastern Europe in Belarus, Ukraine, Azerbaijan, and Romania.
The European Union (EU) represents a large and growing market for American cranberries (recorded as exports to the Netherlands), but Canada and Chile would like to grab a bigger share of the European import market. Whereas U.S. producers sold 26,074 metric tons of dried cranberries to Europe in 2015, Canada sold just over 5,000 metric tons. Europe imported 4,514 metric tons of cranberry concentrate in 2015; Canada sold 2,861 metric tons to Europe.
Tart Future for U.S. Cranberry Exports?
When price sensitive commodities like cranberries compete for foreign market share, a tariff can make all the difference. Europe isn’t a strong producer of cranberries but European food manufacturers add them to processed foods such as cereal bars, baked goods, breakfast oatmeal and other mixtures, and artisan cheeses.
Given the high demand and lack of domestic competition, the EU decided to temporarily waive or suspend its 17.6 percent import duty for processed or dried cranberries in 2011, which opened the door for a precipitous and sustained increase in U.S. exports. The following year, the EU also waived its 16.8 import duty on cranberry concentrate.
The problem for U.S. exporters is the lack of certainty in this arrangement. The EU must periodically extend the temporary duty waiver, a decision that has come due for processed cranberries by December 31, 2017. Free trade agreements, on the other hand, provide long-term certainty that the tariff will be zero. Since the duty waiver was initiated, Canada and Chile both entered into free trade agreements with the EU. If the EU were to choose to end the duty waiver, that tariff would go back into place only for U.S. cranberries, not cranberries from Canada or Chile.
Cautionary Trade Tale
The EU may be unlikely to end its duty waiver, so American cranberry growers will have more for which to give thanks this year. Whatever the EU decides, the situation U.S. cranberry exporters are facing demonstrates the peril of relying on preferential tariffs through bilateral trade agreements when you don’t have an agreement in place with a major trading partner – but your competitors do. The same scenario could play out well beyond cranberries if the United States decides to withdraw from its existing trade agreements such the one with South Korea, or the biggest one, the North America Free Trade Agreement (NAFTA).