Michigan cherry industry sour over Turkish imports

Breana Noble | The Detroit News

A small industry that helps attract hundreds of thousands of visitors to northern Michigan could be at risk.

Growers of Michigan tart cherries, which represents 75 percent of U.S. production, have seen their prices cut in half over the past few years. They blame it on what they call "dumping" of cherry products by Turkey.

As a result, some farmers in the northwest Lower Peninsula have ripped old trees from the ground and delayed plans for expansions, a sour note for an industry that every summer attracts throngs to the National Cherry Festival in Traverse City. If market conditions continue, the industry worries some growers will end their tart-cherry operations completely within the next year.

"It won't take long," said Phil Korson, executive director of the Cherry Marketing Institute. "We’re going to lose our industry if we don’t find a way to combat this."

According to the Dewitt-based institute, imports of tariff-free, subsidized tart-cherry juice concentrate from Turkey are sinking growers' prices and flooding a market the industry has poured millions into building. An upcoming decision from the Trump administration, however, could help turn the tide.

"American farmers can compete," said Mike DeRuiter, a cherry grower and producer in Hart. "But the key is a level playing field."

Turkey participates in the United States' Generalized System of Preferences, which grants duty-free trade access for developing nations. But following a petition filed in December by the Cherry Marketing Institute, the federal government's trade office is reviewing whether to remove cherry juice from the list. The ultimate decision would be made by President Donald Trump. Korson hopes to have an answer by the end of the year.

Ben LaCross, a 39-year-old, second-generation cherry farmer in Cedar, hopes recent efforts by the Trump administration to ensure fair trade are an indicator that the government will support their cause.

"We hope they will help us with this unfair situation," he said, "even for a small industry like tart cherries that is so important to the country, so important to this state, so iconic to this region."

The U.S. charges most countries one-half cent per liter on imported cherry juice, which people can drink or is used by the food industry as flavoring in beverages, ice cream and other products. Turkey, on the other hand, has a 58-percent tariff on U.S. cherry imports.

The marketing institute would like to see the half-cent tariff applied to cherry juice from Turkey.

"It doesn’t really solve our problem," Korson said of the possible levy. "But the idea they have duty-free status, there ought to be a duty, even if it’s small. It brings it up to what everyone else is paying. It’s still not fair, but at least it’s a step in the right direction."

'Bulldozers and brush fires'

Growers have seen their prices fall from 35 cents per pound in the early part of this decade, to as low as 10 cents per pound this year — well below the approximately 25 cents needed to break even.

"The farmer is the last person to get paid," LaCross said. "We pay our suppliers, fuel guys, tractors, land, crop-protection guys. We get anything that's left over. A lot of us have not been able to pay ourselves. Some have taken out loans that decrease their farm's equity. Others are tapping into their retirement accounts. That’s sad to see."

In 2008, the cherry industry doubled its marketing efforts, touting Montmorency tart-cherries' health benefits. Following a freeze in 2012 that killed nearly all U.S. cherries, however, Turkey's Morello cherry industry found a foothold in the States that has continued to grow. According to the Food and Agriculture Organization of the United Nations, Turkey is the world's top producer of cherries and the largest importer of tart-cherry juice concentrate to the U.S.

Turkey pours its tart cherry juice concentrate into the United States at an average price of $4.59 per gallon compared to $28 per gallon for domestic concentrate, according to the Cherry Marketing Institute.

Between 2013 and 2017, according to the U.S. Commerce Department, American imports of Turkish tart cherry juice concentrate increased 89 percent to $8.2 million. The Cherry Marketing Institute reported Turkish tart-cherry juice concentrate represented nearly 55 percent of all U.S. consumption in 2016 compared to just over 12 percent for domestic production.

The trade group claims Turkey subsidizes fuel, fertilizer and pesticides for its cherry growers, allowing them to sell below production value. Such information is supposed to be reported to the World Trade Organization, but Turkey has not submitted its trade data since 2014, which has triggered a separate U.S. investigation into completely revoking Turkey's duty-free trade status.

John King has 160 acres of tart cherries on his 400-acre farm in Central Lake. He said King Orchards received about 15 cents per pound this year. He has let go of land he was leasing with older trees that do not produce as much as his younger ones.

"There seems to be no correlation to how low they go," King said of cherry prices. "We were in the red the last few years. It puts a strain on everything, what we pay for labor, what we need to renew, buying new equipment."

DeRuiter, a 36-year-old who took over the farm his grandfather started in 1968, has 850 acres of cherries. He said his area is full of "bulldozers and brush fires," as cherry farmers remove old trees. His own farm has lost money the past two years. A pilot crop-insurance program included in the 2014 Farm Bill, he said, has helped, though the money he receives is based on revenue from the previous year.

"With two low-revenue years together, it pulls your guarantee down," DeRuiter said. "It becomes less and less effective. It'll be real serious in a year or two."

Legal options

Industry leaders have spoken to elected officials and Commerce Department leadership about their woes. They also are exploring legal options.

Ludington-based CherrCo Inc., the largest tart-cherry processing cooperative in North America, earlier this year began looking at organizing an anti-dumping case against Turkey to implement a countervailing duty.

It, however, would require growers to open their books and share financial information with the industry. They also would have to prove injury by foreign competition and that Turkey is selling its juice concentrate for more in other markets.

"I wouldn’t say there’s no interest," CherrCo President Ed Surber said, "but there's a lot of intra-industry debate going on to see if we want to work together on this."

Surber said the case could easily cost a couple million dollars and take more than a year, a stretch for an industry that represents less than 5 percent of the U.S. juice industry. He said some industry leaders are doubtful they could win and would prefer to invest in marketing and sales. Surber is working with the Cherry Marketing Institute to see if a case could be feasible.

"It’s really frustrating to know that we’re growing this thing that’s so incredible and full of nourishment and deliciousness," said LaCross, the second-generation cherry farmer from Cedar, "but we can’t make a living doing it because of bad economic policies."

bnoble@detroitnews.com