An Arizona pistachio grower looks at some industry issues

Jim Graham, pistachio grower and former Iowa corn and soybean farmer, tends to 22,000 mature pistachio trees at the 160-acre Cochise Groves in Cochise, Ariz.

Issues surrounding worker documentation, access to irrigation water, food safety and tree and crop insurance are never far from the mind of Cochise, Ariz., Pistachio Grower Jim Graham. Graham, who has tended 22,000 mature pistachio trees in Arizona’s largest family-owned orchard for more than 10 years with his wife Ruth, previously spent 25 years growing corn and soybeans in Iowa. An active member of state and national agricultural organizations, Graham’s diverse experience and education (he holds a Master of Agriculture from Iowa State University) give him a unique perspective on the issues facing U.S. pistachio growers.

Politics promote pistachios

Prior to 1976, Iran and Iraq were the world’s leading growers and exporters of pistachios. That changed when the U.S. retaliated for OPEC’s 1976 oil embargo by banning the importation of Middle Eastern pistachios, a move that gave a boost to the fledgling U.S. pistachio industry. Before the oil embargo, California, the major grower of U.S. pistachios, produced about 1.5 million pounds a year and Iran produced 9.6 million pounds. By 2002, California’s production had grown to 302.4 million pounds, and the United States had 1,097 pistachio farms with 95,040 bearing acres.

Currently, about 50 percent of the world’s pistachios are grown in the United States, with about 97 percent of them being grown in California. About 2.5 percent of the U.S. crop is grown in Arizona, with the remaining .5 percent coming from New Mexico, Nevada and Texas. Most pistachios are sold as roasted-in-the-shell snack food, with a small amount of raw pistachios sold for puddings and ice cream.

Food safety—the aflatoxin issue

Pistachios are among the tree nuts, cereals, oilseeds and spices that may be affected by aflatoxin. Aflatoxins, naturally occurring mycotoxins that are produced by many species of the Aspergillus fungus, are toxic and carcinogenic. Favorable growth conditions include high moisture (above 7 percent) and high temperatures. The amount of aflatoxin permissible in food for human consumption varies by country, according to Graham:

Europe: 2 to 4 ppb (parts per billion)
United States: 20 ppb
Iran: 1,000 ppb

In 1997, Iran, then the world’s largest grower of pistachios, had a big problem with aflatoxin. As a result, European markets rejected their pistachios, its usual source. This opened up the European door to U.S. pistachio growers. At the same time, due to an acceptable aflatoxin rate five times that of Europe’s, the U.S. became a potential market for Iranian nuts. Imports to the United States, a free trade country, can be blocked only if they cannot meet U.S. product safety standards, says Graham. However, these standards may be waived upon petition to the U.S. Department of Commerce.

To ensure that U.S. pistachios meet high and safe standards, and that they are not bleached or blended, U.S. pistachio industry leaders such as Graham, a member of the board of the Western Pistachio Association, are working to require that all U.S. pistachios be tested by USDA-accredited laboratories. In addition to assuring a safe product, lab testing would also help ensure that U.S. pistachios remain at a level that other countries would find difficult to attain.

Currently, high food safety standards and a countervailing tariff help keep Iranian pistachios out of the U.S. market. Without that 318 percent duty, says Graham, Iranian pistachios could potentially enter the U.S. market at a price of less than $1 a pound, below U.S. producers’ cost of production.

Who can work?

Shortage of labor is not a new issue in most segments of the agricultural community, but Arizona growers have an additional problem. As a result of a newly enacted law, Arizona employers are accountable for their employees’ labor status and subject to penalties if they employ undocumented workers. Penalties may be suspension or revocation of state-issued licenses, including grower permits and pesticide applicator licenses. The law particularly impacts agriculture, hospitality and construction industries. Other states are considering enacting similar laws.

Speaking as president of the Arizona Pistachio Association and as a member of the Arizona Farm Bureau, Graham explains the situation. In 1996, Congress enacted the pilot program for what is now known as the E-Verify system. Operated by the Department of Homeland Security, the Internet-based E-Verify system is designed to ensure that new workers are in the United States legally by enabling employers to verify the employment eligibility of employees by matching their Social Security numbers with Homeland Security databases. According to the Department of Homeland Security, the program is “free and voluntary.” Only about 100,000 of the country’s 7 million employers use the E-Verify system, and estimates indicate that the E-Verify system error rate may be 4 percent for U.S. citizens and 10 percent for non-U.S. citizens.

Prior to the new Arizona law, employers checked workers’ federal government issued I-9 and compared it with a photo I. D. As long as a reasonable person could not detect a fraudulent document, it was deemed acceptable. In an effort to stem the tide of undocumented workers into the state, Arizona requires, as of January 1, 2008, that all its employers enter all new employees’ Social Security numbers into the E-Verify system. Failure to do so triggers severe penalties on any employer who knowingly hires illegal aliens. For the first offense, the employer’s right to do business is suspended for 10 days. For a second offense, the employer is out of business permanently.

Graham is very clear that he neither supports nor sanctions illegal immigration, but he does take issue with the new Arizona law and supports the suit the Arizona Farm Bureau, along with several other business groups, has filed to prevent it from taking effect. The suit argues that the statute is an attempt by the state to control immigration, a federal issue. The matter is before the 9th Circuit Court in San Francisco.

Connected to the problem of securing an adequate work force to grow crops within the United States is the issue of food safety, says Graham. If the United States is unable to produce enough food to feed its people, food will have to be imported. The United States cannot control how imported food is grown, and Graham worries about pesticides and agricultural practices used in some other countries. “It is really important to have food produced in this country under safe conditions,” he says.

Jim Graham of Cochise Groves in Cochise, Ariz., with a bearing pistachio tree.

In the West, “Whiskey’s for drinkin’ and water’s for fightin’”

In Arizona, as in many other western states, the state owns and controls water. Irrigation water for agriculture in the Sulphur Springs Valley, where Graham’s Cochise Groves are located, is pumped from an underground water resource within the Willcox Playa Watershed. Individuals have the right to pump water, but must secure a state permit in order to drill a well. Every five years, state inspectors measure the water level in the wells and reregister them. Within the Willcox Playa Watershed, the water table is decreasing. The water level in Graham’s wells have dropped 1 foot a year for the last 10 years.

As Arizona’s population—now almost 6 million—continues to increase, allocation of water has become a politically important issue. Currently, Arizona law prevents diversion of water from one watershed to another. As the law now stands, water cannot be taken from the Willcox Playa Watershed for use in one of Arizona’s fast-growing metropolitan areas. However, there is support among legislators for a change, and growers fear that water will be diverted or that local agricultural water will be reallocated to support local population growth.

Insurance

In 2007, adjusted gross revenue insurance was available to pistachio growers for the first time. This insurance protects against price fluctuations in gross revenue as reported on Form 1040, Schedule F. In 2006, for instance, Graham’s pistachios grossed $1.85 a pound; in 2007, only $1.25 a pound. Adjusted gross revenue insurance is available through a federal-private partnership program. Its premiums are subsidized by the federal government. As a first-time purchaser of adjusted gross revenue insurance, Graham does not yet know whether or not he would recommend it for others.

Adjusted gross revenue insurance does not, however, insure the crop itself. Many specialty crops, such as pistachios, are not included in crop insurance. Pistachio industry leaders would like to see this change. Multiperil crop insurance covers disasters due to drought, flood, insects, disease, etc. Private insurers do not offer it because of possible exposure to excessive losses affecting many of the people they insure at the same time. Because of the issue of excessive losses, multiperil coverage is usually government-subsidized.

Graham has shared four different issues concerning pistachio growers. While many of the problems they face, such as labor and water, are similar to those of growers of other crops, others are unique. All are important to the continuing success of the U.S. pistachio industry.

Kathleen Hatt is a freelance writer and editor, and a frequent contributor to Moose River Media. She lives in Henniker, N.H.