With the Strait of Hormuz sealed off due to the Iran war, California farms are taking a direct hit. Export routes for farm products bound for the Middle East have been blocked, and surging diesel and fertilizer prices are shaking production and distribution at the same time.
According to the French daily Le Monde, the large farm Sequoia Nut Company in Earlimart in California's Central Valley has effectively shut down. Le Monde said, "Factory workers have been placed on indefinite leave, and pistachios and raisins ready for shipment are piled up in warehouses," adding, "At this farm alone, the equivalent of 15 truckloads of pistachios has been stranded without being shipped."
Co-owner Vikram Hundal said, "Ahead of the Ramadan peak season, we sent 20 containers to Jebel Ali Port in Dubai, United Arab Emirates (UAE), but sea transport was halted by the war," adding, "We ended up choosing a detour by unloading the cargo at Fujairah Port before the Strait of Hormuz and moving it overland, which incurred an additional $10,000 expense per container."
The actual damage is also significant. According to the California Walnut Commission, at the outbreak of the war about 70,000 tons of shipments were headed to or in transit to the Middle East. That is about 10% of California's annual production. Some cargo was rerouted to Turkey, and some flowed into lower-demand markets such as South Asia, intensifying downward pressure on prices.
Along with falling prices, worsening cash flow is emerging as a serious problem. Robert Verloop, head of the California Walnut Commission, said, "Based on the current outlook, the price per pound is likely to fall by 5 to 10 cents," adding, "Volumes that did not sell in January to February are not made up later, and if deliveries are delayed, payments do not come in, so farmers' finances are deteriorating rapidly."
The expense burden is also growing. Diesel prices have topped $8 per gallon, and fertilizer prices have surged. Because most farm machinery and irrigation equipment rely on diesel, the structure inevitably increases production cost pressures.
An official at the Port of Stockton, California, said, "There is no physical supply shortage, but the problem is the price spike," adding, "Farmers cannot cut production, so they are shouldering the expense increases as is."
This situation is being viewed as another blow following COVID-19 and U.S.-China trade tensions. Le Monde assessed that U.S. farms, already facing shrinking sales channels due to reduced exports to China and India's high tariffs, are now confronting a triple burden with the war layered on top.