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Q&A: Growing Exports to China

Randy Hudson is the founder of Hudson Pecan Company, a grower and exporter of pecans with 1,500 acres and 10 full-time employees that's based in Ocilla, Ga.

He began exporting pecans to China in 1998 when a bumper crop cut domestic prices from $1 to 50 cents per pound. For the past 15 years, he has run an international business and his exports to China have grown to $15 million in annual export sales.

It's been a long journey, he says, and it took a lot of commitment and capital to make it work.

Chinese customers want to get to know you as a friend. They need to have confidence in you and your family to build that relationship before they want to do business with you.

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What do you see as the biggest challenge when you export to China?

Hudson: The language and the culture. If you are going to do business in China, it's very important to have someone on your team who speaks and understands the language. We hired a woman in New York who was raised in China and speaks Cantonese, Mandarin and Shanghainese - the dialect spoken in Shanghai - to represent our business.

Even so, I still go to China regularly. Chinese customers want to get to know you as a friend. They need to have confidence in you and your family to build that relationship before they want to do business with you.

Do you rely on direct or indirect exporting?

Hudson:We prefer to go direct because the margins are better, and our customers prefer to deal with us directly. They know that when they work directly with farmers they are going to get good, fresh, high-quality pecans, whereas the brokers are more focused on quantity and price.

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However, if we are long on something and a broker offers us a good price, we'll take it.

Do changes in currency value impact your business?

Hudson: The majority of our industry exports come directly from farmers who only understand their prices in terms of dollars. They don't take the currency market into their decision-making process, and that's wrong.

This year, for example, the renminbi is strong, so we are getting a lower price because of the currency difference. The Chinese are getting more nuts for the same money, but the farmers here aren't negotiating based on currency value.

Until we start taking currency value into account, nothing will change because the Chinese customers know that if you push back, they can go down the road to another farmer and get a cheaper price.

What types of financing have you used to help grow your international business?

Hudson: You don't want to go into exporting underfinanced because you need adequate capital to support the business.

We started with an export loan through SBA [U.S. Small Business Administration], which had a cap of $2 million, and now we have a loan with the Ex-Im Bank [Export-Import Bank of the United States] made through a large commercial bank in Atlanta.

The loan provides up to a 90 percent guaranty on the sale, and will take the bill of lading [a document that shows the goods have been shipped] as collateral. The Ex-Im Bank guarantees to the lending bank 90 percent of the value of the exported transaction and uses the commercial paper as collateral. Obviously, the lending bank will underwrite a portion of the exposure through a personal guarantee by the borrower, as well.

That means on a $100,000 transaction, we only need to come up with $10,000 in equity, and the loan guarantees the rest. That's all you need to leverage up.

What advice would you offer other small business owners about getting started in the export business?

Hudson: The best way to learn is to do it. But start small, because you will make mistakes. 

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