By Ed Flanagan, NBC News
Courtesy Hammons Products Company
The American black walnut making waves in China.
BEIJING – In the small U.S. town of Stockton, Missouri, Brian Hammons believes he and his family have struck black gold – of the edible kind.
Brian and his family run Hammons Products Company, a purveyor of black walnuts – known by some aficionados as “the aristocrat of American nuts.” The company has been in the business of harvesting the wild nut for more than 60 years. Native to the United States, the black walnut is known for its rich nutty flavor and is commonly used for baking and making ice cream.
“It’s a great ingredient to mix with things like fruits, chocolate and cookies…. One of my favorites is chocolate walnut brownie cheesecake,” said Hammons, who spoke to NBC News last week while visiting Beijing with a trade delegation.
And if all goes according to plan, their tasty product will not just be gracing American kitchens but supermarkets all over China – potentially creating badly needed jobs back home.
China market plunge
Hammons knows a thing or two about black walnuts.
Around 65 percent of the annual wild harvest in America – most black walnuts are not planted in traditional orchards but foraged wildly – come from Missouri. And the largest walnut processing plant is operated by none other than Hammons Products Company.
Even so, Hammons has been looking overseas for future growth opportunities.
“Certainly a few years ago we recognized that China was an area that was more open to American products, and more companies were looking to China for trade,” said Hammons, who went to Shanghai three years ago to attend a food show at which the state of Missouri was hosting a booth.
“After 2008, we did some consumer surveys to see if the Chinese liked black walnuts,” he said. “Some people really liked the flavors, others didn’t. But that’s OK, we have a niche product.”
In fact, Hammons would simply be nuts not to try to crack into the Chinese processed food market.
In 2009, China bought 83 million pounds of American-grown pecans, surpassing all of the U.S. exports of pecans to the rest of the world during the same year. And in 2010, China became the top foreign buyer of American almonds. In all, China purchased $737 million in tree nuts from the U.S. in 2009, according to the U.S. Department of Agriculture.
Tree nut sales are just one small indicator of a growing trend in America’s trade relationship with China. With an estimated 300 million-strong middle class in China developing new and more Western-centric eating habits, U.S. companies seem poised to grow their 25 percent market share of what China alone purchased in 2010: $71 billion worth of agricultural imports.
It’s also good business for China, which is dealing with the worst sustained food price inflation in recent memory. In a country where the average household spends 20 percent of income on food, inflation on foodstuffs was running at an astounding 10.3 percent in January 2011 compared with 3.7 the year before. As a result, the Chinese government has turned to food imports from abroad as an effective tool to curb inflationary trends at home.
All of this makes for an ideal time to make the plunge into China. Hammons has enlisted the help of his son, David, to head up strategy as the company’s international marketing director.
“The flavor is unique. I’ve heard a wide assortment of people who’ve compared the taste of black walnuts to wine to grapefruit to truffles. Me? I say it tastes like a black walnut,” said David, who is convinced Chinese consumers will grow to love the utility of the nut.
Courtesy Hammons Products Company
Brian Hammons oversees black walnut inspectors back in Missouri.
“Because it has such a rich palate, you’ll see a lot of combinations with chocolate and other rich flavors that make black walnuts a very upscale gourmet item that … can be a good complementary item to Chinese cuisine.”
Hammons said he hopes to sell half a million pounds of black walnuts to China during their first year of exporting – calling that a “nice volume.”
Niche it may be, but the numbers in the black walnut business would be huge not just for the Hammons, who rang up $11 million in sales in the U.S. and China last year, but also for his community in Missouri.
More than 190 independent buying/collecting stations are already contracted out by Hammons to forage the nut – most of which Brian says employ at least 100 employees. His Stockton processing plant currently employs 85 people.
Increased Chinese demand for the nut would mean increased planting and foraging of black walnuts and more jobs in Cedar County, where Stockton is located. The agricultural community of fewer than 14,000 people currently has an unemployment rate around the national average of 9 percent.
“We’re right now discussing our buying season back home, because we’re buying black walnuts now,” said David. “If we in the future had big business in China, we could extend that buying season, go to buying in more places and that means more money in the local economy and more people we have to hire to crack those nuts.”
‘Missourians feed and clothe the world’
The Hammons’ black walnut business is just one small cog in a larger economic export engine Missouri Gov. Jay Nixon envisions his state evolving into in the near future. Like many states, Missouri state leaders realized that job creation goes hand in hand with boosting exports.
In 2010, Missouri exported $987.4 million worth of goods to China. Through August 2011, Missouri exports totaled nearly $773 million, a year-on-year increase of 25 percent from the same period last year.
But those figures are expected to change dramatically.
Just this past week, Nixon and a delegation of more than 60 Missouri business and agricultural leaders signed a $4.4 billion trade deal with China that they expect will see the state’s exports surge to the mainland over the next three years.
The agreement reflects an ongoing upward trend: From 2000 to 2010, Missouri exports to China grew 1,199 percent, making it the state’s third-biggest trade partner, after Canada and Mexico.
“Missouri farmers, growers and producers feed, fuel and clothe the world,” Nixon said last week at a luncheon hosted by the American Chamber of Commerce in Beijing. “And Missouri makes and grows what the Chinese need.”
While the trade agreement reportedly provides for $3.2 billion in manufacturing exports to China, Nixon emphasized that the deal was designed to highlight the agricultural products the state could supply China. “This agreement recognizes the important role Missouri agriculture plays in our export growth,” said Nixon. “And it will open new doors for Missouri’s agricultural businesses to sell their goods to China.”
‘Missourians know how to grow things’
Indeed, China could benefit massively from the agricultural expertise. Missouri-based biotech firms like Monsanto and Novus International offer technical advancements in genetically engineered crops that the Chinese government, obsessed with food supply self-sufficiency, has not failed to notice.
China knows that rising local incomes and increased demand will only exacerbate existing food supply problems and that genetically modified foods is one possible solution. To that end, Chinese state-owned enterprise Sinochem and Monsanto have been in talks to further broaden ties and cooperation in the seed business; since 2001, the two have collaborated on a hybrid corn project.
Equally appealing is Missouri’s position as an innovation hub for the animal health industry – so much so the U.S. federal government even bases its Animal Health Association in Missouri.
Chinese farmers who are slowly transitioning from backyard farms to U.S.-model large-scale farms have found themselves consumed with the issue of how keep their animals healthy and disease-free.
Just how much the Chinese have struggled with this and maintaining a clean, healthy supply is evident in surging imports of pork.
Pork exports from the United States to China have gone up six fold from January through July of this year to meet ravenous demand for the other white meat.
However, those good times might be slowing. A U.S. Department of Agriculture report shows China’s production is forecast to recover by 4 percent next year, helped in part by healthy government subsidies and a push towards expanding small-scale operations.
Nevertheless, as long as China remains committed to food self-sufficiency, states like Missouri stand to reap the financial reward by providing the medical and animal-rearing expertise required to keep modern farms stable, growing, and free of disease.
Or as one Missourian in the delegation put it, “We have over 100,000 farms and hundreds of companies working in the agricultural industry… Trust me, Missourians know how to grow things.”
Finding the ‘strike zone’
However, it’s important to note that Missouri’s relationship with China has not always proven so fruitful.
As the Economic Policy Institute noted in a report on the consequences of trade with China, the state has lost nearly 40,000 jobs to the mainland since it entered the World Trade Organization in 2001.
Major Missouri agricultural and pharmaceutical multinationals like Monsanto and Sigma-Aldrich may target China as a potential major growth target, but as long as Chinese regulation prevents major foreign investment in agriculture, that potential may not translate to the major financial windfall hoped for.
Meantime, much of Missouri’s short-term export hopes lie with the small and medium-sized enterprises like the Hammons and their black walnuts.
That’s just fine with Nixon, who in an interview with NBC News underscored the importance of businesses like Hammons Products Company as part of his vision of Missouri as an export engine.
“Hammons is the leading black walnut organization in the country and a very interesting business model,” said the governor. “They are a good example…We want to sell black walnuts around [China] and plus get more people to plant those trees in Missouri.”
“The bottom line is that those small and medium-sized businesses, we see them as a real strike zone here,” the governor added. “Trips like these open doors for small businesses that otherwise would not be open.”
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