Pistachio market: increased market share for the US in European and Asian markets.
Pistachio is produced in many countries, including the US, Iran, Syria, China, Greece, Italy, and Afghanistan. However, the top global pistachio producers are the US and Iran, accounting for most worldwide production and exports.
The US and Iran traditionally have accounted for more than 70% of total global exports, and Iran, as the origin of pistachio trees, had established itself as the number one pistachio exporting country. However, pistachio exports have significantly been affected by highly fluctuating yields and geopolitical conflicts in recent years. Climate has played its part in the decrease in Iranian production with a severe drought that lasted for four years. The Trump administration has also imposed strict sanctions against Iranian exports following the 2015 Iran nuclear deal.
These dynamics have created a situation in which the largest importer of pistachios, China, has no choice but to continue to rely on the United States even amidst a trade war for most of its supply. However, little else about the market has been stable in recent years. Reflecting on these issues, the US has positioned itself as the number one pistachio exporting country since 2013 and has widened the gap between itself and Iran.
The US sanctions on Iran are not directly applied to Iran’s pistachio exports, as food exports are generally exempted from the measures. However, pistachio exports have significantly been affected because of the restrictions imposed on Iranian merchants’ use of international financial and credit tools. In theory, European authorities have designed a financial procedure to help skirt US sanctions against Iran to facilitate the trade of medical and food products. However, the device, the Instrument in Support of Trade Exchanges (INSTAX), still has not been successfully implemented. In the process, Germany, previously the largest importer of Iranian pistachios, has seen its trade with Iran reduced to a trickle. Recent reports state that Iran’s large food markets have large supplies of unsold pistachios due to the impact of sanctions and related economic downturns.
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Production & Exports Trend
In the last year, Iran’s production was hampered by water shortages, and the country’s yield fell by more than 75% from the previous year. Lack of water is an endemic problem in the industry and one especially severe in Iran, where groundwater levels have drastically been reduced in Iran’s agricultural regions. This climatic situation, combined with the geopolitical tensions, has let the US, which started producing pistachios only in 1976, overtake Iran as the world’s leading producer in 2014, and the production gap between the two countries is widening
According to the Iranian Pistachio Association, Iran’s production is forecasted to recover to 205,000 tons following last year’s weather shock that slashed output by over 75 percent. Although shipments in the first few months of the marketing year have been slow, the pace is expected to accelerate to top markets pushing total exports to 125,000 tons. Despite healthy domestic consumption, ending stocks are forecast to jump to 25,000 tons following last year’s reduced output and stocks drawdown. Pistachio growers in the US have been protected for decades by duties of 241% against Iranian pistachios. In addition, in August 2018, Donald Trump re-enacted US total sanctions against Iranian pistachios, three years after the Obama administration had scrapped them. Intensive marketing efforts by US producers and US trade restrictions against Iran have led to an increased market share for the US in European and Asian markets.