California Oranges Views

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When I asked the fellow at the cash register about the Chinese characters, he flew into a tirade. These oranges were grown in China, shipped 6,000 miles to the US, and sell for less than oranges grown in California, he said. How can that be? And, because we were in California, he added, think about the carbon footprint that comes from shipping this product all that way. California-grown navel oranges sold for $1.19 a pound in his store.

Then there are the input costs. At from one-half to three cents a pound, sending an orange to California from China is not expensive, but it's not free either. Water is pricey in California, but fertilizers and local trucking costs are pegged to global petroleum prices, making input costs roughly equivalent in China and California. In addition, at today's rates, capital costs in China and California, are not much different. What all this suggests is that navel oranges should cost roughly the same to produce in California and China.

My informal navel orange price comparisons, and back of the envelope calculations, indicate that the renminbi remains probably about 20 percent undervalued against the dollar, when measured by the price of oranges. If China's currency were 20 percent more expensive, not only would California orange producers be more competitive against their Chinese rival's fruit, so would American producers of computers, electronic components, automobile aftermarket products, TVs, solar cells and wind turbine blades. At a revalued rate, China's massive trade surplus with the United States would come more into balance along with its massive, and ultimately destabilizing, build up of foreign exchange.