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New plant helps farmers handle increased hazelnut harvest, using lasers, steam and marketing savvy.

PHOTO: JESSIE DENOUDEN - In an Aug 15 ceremony, Hazelnut Growers of Oregon CEO Tim Ramsey, Customer Care Manager Debbie Hitchcock, Mark Nonnenmacher from Northwest Farm Credit Services, Operations Manager Jason Costa, Grower Relations Manager Tim Aman, VP Sales & Marketing Patrick Gabrish, Donald Mayor Rick Olmstead, and COO Randy Moore cut the ribbon for a state-of-the-art 120,000 sq ft hazelnut processing facility in Donald, OR.

If you eat an avocado in the US, there's a two-in-three chance that it came from Michoacán state in west central Mexico where 92 percent of that country's avocadoes are grown. The mid-Willamette Valley has a similar thing going on, only with hazelnuts. Ninety-nine percent of the hazelnuts consumed in the USA come from an area just south of Wilsonville.

Oregon was already filbert country, as old timers used to call them. Then a deadly frost in 2014 hit another big producer, Turkey, and sent prices soaring on the world market. Oregon farmers rushed to plant hazelnut trees, which don't produce for four to five years. Their time is now.

Founded in 1984 as a grower cooperative, Hazelnut Growers of Oregon has more than 180 growers who collectively own more than 20,000 acres of prime hazelnut orchards. As they get ready for a bumper 2018 harvest, HGO opened a new processing plant in Donald, Oregon, this August.

Patrick Gabrish, HGO vice president of sales and marketing, said, "The co-op has existed for 30 years. Two years ago it became evident that with coming growth, there just wasn't the space in that footprint. We did a search and found this location almost in the middle of the hazelnut country, convenient for the growers and customers."

Gabrish said the factory was designed in a collaboration between the farmers, the construction company, and the companies that make the hazelnut processing machinery, such as Beeler and American Agriculture. "You'll see a lot of American flags on most of the major pieces of equipment," he said.

Operations Manager Jason Costa recently led several tours of the 120,000 square-foot facility in Donald. Such places are no longer windowless boxes surrounded by hurricane fencing. This one sits on former farmland near Interstate 5 and has a spacious parking lot. The entrance is through the gift shop.

PAMPLIN MEDIA GROUP: JOSEPH GALLIVAN - The new OHG hazelnut processing plant in Donald, near Wilsonville. The global market is growing.

Cool nuts

Trailers of nuts are now offloaded three to four times quicker than they used to be, eliminating one major bottleneck. Half of the front of the building is a truck loading dock.

Hazelnuts are stacked in crates in the 30,000 square feet of white-walled storage areas, including one that is chilled to 55 degrees Fahrenheit. Costa explained that chilling means that from the first nut processed to the last, the quality will be the same.

Samples are constantly taken, which includes measuring for moisture. Nuts can be gently dried out if they come in soggy.

PAMPLIN MEDIA GROUP: JOSEPH GALLIVAN - A tour of the new HGO facilities, including a machine for grading hazelnuts.

Steam

On four sorting tables the different sizes are inspected. This is the only plant in the industry that uses steam pasteurization to kill microorganisms that cause food poisoning, such as listeria, salmonella and E.coli. Others use chemicals, usually PPO or propylene oxide, commonly used in the nut industry.

"We don't do that. Steam pasteurization gets a five-lock kill on the nuts. This gets it to 99.999 percent effective."

The plant can slice and dice in excess of 5,000 pounds of hazelnuts per hour, and roast more than 3,000 pounds of hazelnuts per hour.

When the shells are removed, they go to a tank outside. The plant sells them for energy production, but they are also considering selling them for use in garden beds.

PAMPLIN MEDIA GROUP: KIT MACAVOY - Patrick Gabrish, Hazelnut Growers of Oregon vice president of sales and marketing, said farmers came together to finance the new processing plant cooperatively to speed up production and satisfy a growing global market.  THIS PAGE: A silo at the plant in Donald, Oregon, near Wilsonville, where the nuts begin their journey. The plant officially opened with a ribbon cutting on August 15, 2018.

Clean kernels

The Chinese are the HGO's biggest customer. They like the extra large hazelnuts grown in Oregon. They roast them and cover them in sweet and/or salty solutions, and then eat them out of the shell like pistachios. They are a big Chinese New Year treat so the rush was on to get the plant finished to take in the 2018 harvest, start processing and get them on ships to China by the end of 2018.

The plant wasn't cheap.

"A little north of $20 million," Costa said it cost. "It's financed with the farmers' equity. There's bank financing and farmers' equity financing to complete the build out." There were also some proceeds from the sale of the land and equipment of the 30-year-old plant in Cornelius.

PAMPLIN MEDIA: KIT MACAVOY - Hard hats wait for workers at the HGO plant.

"Since it's a co-op they own it, it's their money invested. Every year their equity grows. They get paid for their crop, plus they are entitled to a portion of the future profits of the co-op, based on the amount of product they bring. And some of those profits are paid out over time. It's that money that's used for current operations and ultimately it's paid out as profits."

The farmers pooled their resources knowing they are going to up their hazelnut game.

HGO expects to produce 55,000 tons of hazelnuts in 2018, compared to 31,000 tons in 2017. They project 90,000 tons in 2025.

"We designed the plant for the growth of the industry. We're expecting a record crop (in 2018) and also output to grow in the next five years. So we'll need additional storage."

PAMPLIN MEDIA GROUP: KIT MACAVOY - Jason Costa, the plant's operations manager, walks through a predominately empty section of the
facility's storage area on Wednesday, August 15. The facility has been built with plenty of space to grow.

Value add

But the farmers are also benefitting from controlling the means of production. Through the portholes of vinyl doors in a food-grade clean room, Costa points out the "value-add" section.

"Having a cooperative allows the farmers to benefit all the way from harvest through value add, such as slice and dicing and nut butters, and capture a share of that margin in addition to the field price of the crop."

In here they can package kernels into one-, five- and 25-pound packages for retail. They make hazelnut paste and butter, and they will also package product under certain brands, such as Oregon Orchard, which is sold at Wilco farm stores. They also do co-packaging for grocery stores.

PAMPLIN MEDIA GROUP: KIT MACAVOY - Various hazelnut products line the shelves of the Hazelnut Growers of Oregon's new processing facility in Donald, Oregon.

Trump

In August Congresswoman Susan Bonamici, Senators Ron Wyden and Jeff Merkley, and Representatives Peter DeFazio, Earl Blumenauer, and Kurt Schrader called on the Trump Administration to work with China to reduce or eliminate Chinese tariffs that are harming Oregon's hazelnut farmers and making it difficult for them to compete with growers in other countries.

In a tit-for-tat move, China imposed an additional 25 percent tariff on U.S. hazelnuts, bringing its applied tariff rate on U.S. in-shell and shelled hazelnuts to 65 percent and 50 percent, respectively.

PAMPLIN MEDIA GROUP: JOSEPH GALLIVAN - Farmers, media and marketing people tour the new  hazelnut processing plant which has ample cold and room temperature storage space.

No one from the HGO would officially comment on the effect more tariffs could have on the Oregon hazelnut market, if President Trump's U.S.-China trade war escalates.

When asked on the factory tour, however, Costa said "Tariffs are a little bit concerning but not as much as they're making out...They (the Chinese) want nuts, at a competitive price."

The competition is other places at the similar latitude, 45 degrees, such as Turkey, Italy and the country of Georgia. But Costa stressed that Oregon's especially large hazelnuts made them more desirable, "Coveted by the Chinese."

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PAMPLIN MEDIA GROUP: JOSEPH GALLIVAN - Don Mantie, hazelnut farmer from near Salem, who has seen his friends switch from grass and peas to hazelnuts lately.

Don Mantie farms 40 acres of hazelnuts east of Salem.

He has other crops - grass seed and pea seed, and his son has blueberries – but hazelnuts are 90 percent of his income.

"It's real important," he told the Business Tribune at the grand opening. "I'm retired, but I'm still a member of the coop. Whatever I have in the coop will support this (building)." He sees the new plant in his long-term business model.

"Definitely! I'm old and I'm not looking that far ahead. 20 years or so?" But he is sure his kids will be growing hazelnuts in the future. (Mantie likes to eat them dry roasted.)

"Probably, (they) should be. It's state of the art, and there's a lot of new acres of hazelnuts coming on, so they're going to need it. A lot of grass came out, the market's been depressed. And the row crops – beans, corn, things like that, there used to be a lot of that in the (Willamette) valley. It's been diminished a lot."

He says those plants have moved to cheaper areas, such as the Midwest and the Columbia basin. Farmers ask each other all the time what they should be growing.

"But you can't switch to hazelnuts in a year from grass. (A farmer would) need to be able to go about five years without getting any income off that property. They'd have to put a lot of inputs into it – buy the trees, fertilizer, chemicals, drip irrigation. It's a big investment. But not as much as blueberries," he adds.

New farming methods should help. The harvesters now pick the nuts of the ground and blow out leaves, sticks, stones, broken glass, any debris, in the field, making processing a lot oeasier.

Mantie says old varieties like he has have been afflicted by Eastern filbert blight. "But there are new ones bred with a resistant gene in them. So hopefully we don't get a mutation in the disease. But you never know."


Joseph Gallivan
Reporter, The Business Tribune
971-204-7874
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