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130 to lose jobs as Green Valley Pecan plant grinds to halt

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130 to lose jobs as Green Valley Pecan plant grinds to halt

  •  Crews harvest at Green Valley Pecan in December 2018.
    Bobby Joe Smith/Special to the Green Valley News Crews harvest at Green Valley Pecan in December 2018.

The pecan processing plant operated by FICO in Sahuarita will be closed by the end of the year, with 130 employees to be laid off. The Green Valley Pecan Company store will also close, company representatives said, but the farming operation will continue.

"Another U.S. processor will shell" pecans from the farm south of Tucson because operating the plant here is "unsustainable," the company said.

Farmers Investment Co is "taking this action because of a challenging global pecan market resulting from tariffs, low-cost competition from Mexican pecan processors, and the financial impacts from COVID-19."

"There's not a single factor here," spokesman David Steele said.

About 130 of FICO's 270 employees will lose their jobs. "Those employees have been notified and will be provided a severance package," the company announced Wednesday, the same day that three shifts of employees were given the news.

The plant will run for several months, into December, with orders being shipped through January and February of next year, the company said.

"FICO will continue growing pecans on its farms in the Santa Cruz Valley and San Simon," the company said in a news release Wednesday. "FICO continues to make significant investments in its farming operations. These investments include a pipeline to increase groundwater recharge and completion of the second phase of the new pecan cleaning plant."

The present plant will be used to store pecans still in their shells before shipping them to other processors. Steele said processing will be done at a U.S. plant but declined to immediately identify it.

"We're going to focus on the farm, growing the best quality pecans in the world and let someone else, exclusively a processor, do that work," Steele said.

The 140 remaining workers mostly include farm employees.

"We're still going to be growing and cleaning and processing pecans and shipping them to be shelled," he said.

The company's retail store will close in early 2022.

The company is in the process of filing the WARN (Worker Adjustment and Retraining Notification) Act notice required by federal law, officials said. Companies planning mass layoffs must provide workers with at least 60 days' notice under the law.

The company has publicly discussed the possibility of cutbacks for years, citing tariffs on exports to China in particular.

FICO, owned by the Dick and Nan Walden family, operates farms in the Santa Cruz Valley and San Simon, on Interstate 10 about 10 miles from the New Mexico border.

Three years ago, the Trump administration imposed the first big round of tariffs on Chinese goods, launching a U.S.-China trade war.

When China slapped "retaliatory tariffs" on a range of U.S. products, including pecans, "that cut off a significant part of our market. Other places that grow pecans were able to fill those markets," Steele said.

The tariffs started out at 7 percent and reached 57 percent, Steele said. They currently are 24 percent for U.S. pecans and remain at 7 percent for other nations.

The trade dispute and devastating storms were "having a major impact on us as pecan farmers and producers," company president and CEO Dick Walden said in 2019.

Then, in-shell pecan prices were about 40 percent lower than a year before, Walden said. China had increased the pecan import tax from 7 percent to 47 percent in 2018 in retaliation for tariffs announced by the U.S.

Well before the pandemic's effect on international trade, American pecan exports were down almost 70 percent in December 2018 from the previous month, industry trade publication Pecan Report said. China has been looking to South Africa and Mexico to supplement its large pecan imports amid the trade war. About 60 percent of Green Valley Pecan's product has been exported.

Steele told the Green Valley News on Wednesday that the pecan market has been tough for several years, and COVID made the business all the more difficult and costly.

"It's hard keeping an operation running in this," he said of the pandemic.

"Europe, which is a big part of our market, basically shut down, which had an impact on prices. Our customers weren't buying what they were before," he said.

Pecan production in Arizona dropped about 16 percent in 2020, compared to the previous year.

But a "phase one" trade deal has offered some relief from Chinese tariffs, and pecan production across U.S. has boomed, with demand up 21 percent this year over 2020, the Pecan Report said.

"U.S. pecan growers are planting new orchards, but the growth in supply is not expected to catch up with demand in the foreseeable future," the trade publication said last month. "American pecan growers are leaving a significant amount of money on the table and allowing others in the market to fill the gap. As China continues to increase purchases, the supply gap is only expected to grow."

Steele said Wednesday that 15 to 20 percent of the total U.S. pecan market once went to China. Today, it's a fraction of that.

China, long a big market for FICO, was able to buy pecans cheaper elsewhere, he said. Locally, the tariffs dealt a blow on a smaller level when the popular Pecan Festival was canceled in 2019; it was canceled in 2020 and 2021 due to COVID. Steele said they will look at options "when things recover" and that no decision has been made on the future of the festival.

Steele said a tight labor market didn't make things easier.

"It was getting hard to find people to fill critical positions, that was certainly a factor," he said.

Steele said the savings that come with outsourcing processing would be difficult to quantify.

While he didn't see staff reductions being on the table when interviewed by the Green Valley News in 2019, CEO Walden said the company would scale down investments in equipment for the foreseeable future because of those reduced prices and production.

"We normally plan out five years ahead, and we expect to reduce capital spending significantly for the next three or four years," he said then.

He wouldn't rule out new investments, but said then that, "everything will be looked at very closely, we will have much more intense management of all expenses."

FICO has about 8,100 acres of pecans under cultivation at its Sahuarita and San Simon farms. The company has also farmed about 1,000 acres in Georgia.

The company began planting pecan groves in the Santa Cruz Valley south of Tucson in 1965, growing what became the largest irrigated pecan orchard in the world, with about 6,000 acres of trees stretching across Sahuarita and Green Valley.

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