Trans-Pacific Partnership free trade deal an exciting prospect for U.S. peanut growers

They won’t be the biggest interest group at the table, but U.S. peanut growers are salivating at the prospects of new markets and consumers as the U.S. and 11 Pacific Rim nations weigh the fate of the massive Trans-Pacific Partnership free trade deal.

Just ask Richard Rentz.

An award-winning peanut farmer from Branchville, South Carolina, Mr. Rentz grows an average of about 400 tons a year of runner and Virginia peanuts, which typically end up in the in-shell market and in jars of peanut butter.

“We have such an awesome ability to produce a quality peanut product that we have overrun the domestic market — resulting in prices paid to the farmer well below his cost of production,” Mr. Rentz said.

In a nutshell, America’s peanut growers are big fans of the TPP. They hope to introduce millions of Vietnamese, Malaysian and Japanese consumers to the joys of chunky peanut butter and fluffernutters. But they represent just one test case for the trade deal, which supporters say will lower tariffs and trade barriers on thousands of goods from shoes to Chevrolets, enhance the booming trade in services such as banking and law, and set rules of the road on environmental and labor practices that, backers contend, will serve as a model for more trade agreements.

The traditional Thanksgiving feast also will be well-represented in the TPP. According to Obama administration officials, the trade deal will expand export markets for American poultry producers, potato, corn and vegetable farmers, winemakers and apple growers.

But President Obama, who made another pitch for the trade deal at last week’s Asia-Pacific Economic Cooperation summit in Manila, Philippines, faces a difficult ratification battle at home. Many pro-trade Republicans in Congress have yet to endorse the TPP, labor unions are mobilizing against it and many of the 2016 presidential candidates — including Republican front-runner Donald Trump and Democratic front-runner Hillary Rodham Clinton — strongly oppose the agreement.

America’s peanut producers are just one interest group among thousands with a stake in the TPP, but they say they are hoping for big returns from the trade-expanding deal, especially with Japan.

“Anything we in the U.S. could do to find more consistent and loyal customers would be a boon for growers,” Mr. Rentz said.

The U.S. peanut industry exported $708 million worth of peanuts worldwide last year, $319 million to countries that are part of the TPP. Under the agreement, tariffs on peanuts will be phased out or, in some cases, dropped to zero immediately, opening the doors to other markets and giving the U.S. a competitive edge over China.

Right now, Japan imposes tariffs as high as 23.8 percent on prepared and preserved peanuts, but these tariffs would be eliminated in eight years under the TPP. The Japanese tariff of 12 percent on U.S. peanut butter would be reduced to zero in six years.

Vietnam’s tariffs ranging up to 30 percent on U.S. peanuts and peanut products would be eliminated within eight years.

The peanut industry contributes over $4 billion annually to American gross domestic product, and the U.S. exports 200,000 to 250,000 metric tons of peanuts yearly. Canada, Mexico, Europe and Japan account for more than 80 percent of American peanut exports.

“For the U.S. peanut farmers, the TPP means improved access to important markets such as Japan and developing markets such as Vietnam,” said Don Koehler, executive director of the Georgia Peanut Commission.

China, Argentina and India are the top competitors with the U.S. for peanut exports in the TPP region, especially for Japan’s market. Last year, Japan imported 26 million in peanuts and peanut products from the U.S.

Under the TPP, tariffs on products such as peanut oil, peanut butter and processed peanuts would be phased out in time spans ranging from six to eleven years. Peanut exports to Japan could double or triple, said Richard Pasco, counsel for American Peanut Product Manufacturers Inc.

Japan is only one piece of the puzzle; export markets to other Asian countries such as Vietnam and Malaysia have potential for growth. Vietnam has tariffs as high as 34 percent, which it has agreed to eliminate over eight years, and Malaysia, which imposes import tariffs of up to 5 percent, would end them immediately. If China joined the TPP, the country could create a greater export market.

“The elimination of Japan’s tariffs on U.S. peanuts in eight years and the additional elimination of peanut oil tariffs in 11 years will enable American companies to significantly enhance their exports to this major export market,” Bill Brown, chairman of the American Peanut Product Manufacturers, said in a statement last month.

“This agreement will provide new opportunities for the entire peanut industry, including growers, shellers and manufacturers.”

Global rivalry

The country that gave the world peanut butter, the U.S., now ranks as the third-largest peanut producer in the world after China and India — neither of which is a signatory to the TPP.

Peanuts can be pressed for oil, stirred into trail mix, or seasoned and packaged for snacking. Various flavors include salty and savory barbecue, chipotle, sweet caramel, honey roasted, and pumpkin spice. Despite allergy fears and competition from other snack categories, peanuts remain the top snacking nut in the U.S.

But peanut butter is the most popular use for peanuts in the U.S., attaining status as a food staple and consumed in 94 percent of American homes.

It takes about 540 of Mr. Rentz’s runner peanuts to make a 12-ounce jar of peanut butter. Peanut butter accounts for about half of peanut production in the U.S., and Americans spend almost $800 million a year on the spread, which can be bought creamy or chunky, natural or sugary, and in sizes from 12-ounce jars to 64-ounce tubs.

Although the rest of the world has not embraced peanut butter, countries have found other uses for American peanuts.

In Japan, the top imported peanuts from the U.S. are shelled peanuts. Japan has not adopted peanut butter the way Americans have, but peanuts feature in kakipea, a snack of puffy rice crackers and peanuts, and as filling for mochi balls, a dessert.

It is a long process before peanuts buried a few inches deep in American soil find their way into Japanese kakipea snacks.

April, May and June are the best months for planting, when thawing temperatures and calcium-rich soil cradle the plants and slowly acclimate them to summer heat. In the fields, seeds are placed 2 inches into the ground, 3 to 4 inches apart, forming long rows stretching out in parallel lines 3 feet apart. One acre could yield enough for 30,000 peanut butter sandwiches.

Four to five months later, the peanuts are ready to be harvested.

U.S. agricultural interests more generally, eyeing tens of millions of customers across the booming Asian region, are expected to be major players in the TPP debate.

“Agricultural trade is notoriously difficult to negotiate, as any diplomat who has tried will acknowledge,” Tim Burrack, who raises corn, soybeans and hogs on his northeastern Iowa family farm, wrote in a recent blog post on the Farm Journal Media’s AgWeb.com website.

The TPP, he wrote, “accomplishes something that many so-called experts thought was impossible: It helps us break into Japan’s closed market. Japan’s beef tariff, for example, can soar as high as 50 percent. TPP lowers it to just 9 percent and wipes out tariffs entirely on many other agricultural products, including apples, cherries, french fries, peanuts and poultry.”

Those provisions are already proving controversial in Japan, where powerful agricultural interests have long enjoyed high trade barriers to outside producers. A former Japanese agricultural minister joined a group of anti-TPP activists to sue the government in September, citing the peanut provisions as one reason to reject the deal.

American peanuts, former Agriculture Minister Masahiko Yamada said, are sprayed with pesticides that Japan has not approved, and consumers will have no warning labels.

“We will have to show scientific evidence that the pesticides are bad for health and, meanwhile, people will be consuming them,” he said.

U.S. producers say any move to a freer market in peanuts will benefit them.

“We can definitely compete on quality, and now this agreement will help us compete on price ,” said the Georgia Peanut Commission’s Mr. Koehler. “We strongly encourage Congress to approve the TPP.”