December, 1998

COVER IMAGE. SLIGHT FY 1998 DECLINE IN U.S. HORTICULTURAL EXPORTS IS ONLY FIRST IN 13 YEARS

-- Despite horticultural exports declining for the first time in 13 years, horticultural exports were still strong relative to the decline in agricultural exports overall

-- Emerging markets for U.S. horticultural products are found everywhere in the world, both in developing countries that have newly opened to U.S. products

-- for example, U.S. cherry sales to Taiwan and carrot exports to the United Arab Emirates

-- Or in developed country markets that are just opening up to new products or in which U.S. companies are beginning to market new products:

-- for example, tomatoes into Japan and grapefruit into New Zealand

-- We will take a quick look at the overall export picture for U.S. horticultural exports, including fresh produce

-- Next we'll take a quick look at export prospects for both kinds of emerging markets

Unless otherwise noted, fiscal years used

FIGURE 1. U.S. HORTICULTURAL EXPORTS IN FY 1999 FORECAST DOWN SLIGHTLY

-- In FY 1998, U.S. horticultural exports decreased 3 % to $10.3 billion, due to the strong U.S. dollar against many currencies, Japan's economic recession, and the economic crisis in other Asian countries

-- Record sales to both Canada and Mexico partially offset lower exports to Asia

-- Booming sales to Mexico made that country the fourth largest market

-- Sales to the European Union, the second largest market after Canada, stayed even

-- Exports to Japan, the third largest U.S. market, fell 8 %, the third straight annual decline For 1999, U.S. horticultural product exports are forecast to decrease to $10.1 billion

-- The strong U.S. dollar; Japan's economic recession; and continued weakness in other Asian economies will continue to hamper exports to Asia

-- On the positive side, horticultural exports will continue benefitting from Uruguay Round and NAFTA tariff reductions and the USDA's market promotion activities

-- For FY 1999, the early outlook is for another slight decline in overall exports

FIGURE 2. HIGH VALUE PRODUCTS HAVE LED U.S. EXPORT GAINS

-- Looking at the arrowheads on this chart, you can see how the high value products -- horticultural, livestock, poultry, dairy, and other consumer products -- have seen the greatest increases over the past 13 years

-- These high value products now account for nearly 40% of total U.S. agricultural exports, compared to less than 25% a decade ago

-- In world trade, high value products now account for an even higher 45% share of total agricultural trade

-- Bulk and intermediate products have increased, but not as fast

-- Nearly every time we show this chart, people are surprised by the shifts that have occurred in the composition of U.S. agricultural exports ... especially horticultural products!

FIGURE 3. HORTICULTURAL PRODUCTS AND OTHER CONSUMER FOODS PLAY AN IMPORTANT ROLE IN TOTAL U.S. EXPORTS

-- In FY 1997, the consumer-ready category, into which most horticultural exports fall, experienced sharp gains, tying those of bulk products for the first time

-- Horticultural exports have risen from 13% to nearly 20% of all agricultural exports in just 8 years!

-- The share of the export market of consumer-ready products increased sharply in FY 1998, due in large part to increased world demand as noted in the previous chart

FIGURE 4. WORLD MARKET SHARE HOLDS STRONG FOR U.S. FRUITS, NUTS, AND VEGETABLES

-- The world market share for U.S. products grew from 13.3% in 1986, to an all-time high of 18.2% in 1994

-- Although this declined slightly to 17.2% in 1996, the trend has clearly been up

-- Market share percentages of the United States' top competitors either fell or remained practically flat for the same period

-- Smaller competitors, however, like Chile and Australia, are growing steadily, as is China (not shown)

FIGURE 5. U.S. FRUIT AND VEGETABLE EXPORTS ARE RISING AT A FASTER PACE THAN PRODUCTION

-- The structure of the U.S. horticultural industry is changing

-- Exports are becoming ever more important to horticultural producers' overall sales

-- From 1985 through 1997, U.S. fruit, nuts, and vegetable PRODUCTION rose 80%, while EXPORTS jumped 287%

-- Moreover, during the same period, fruit, nuts, and vegetable exports as a percentage of production increased from 17% to 38%

FIGURE 6. IMPORTANCE OF EXPORTS FOR SELECTED U.S. HORTICULTURAL PRODUCTS

-- Here's a more detailed look at how exports have become critical to the success of the U.S. horticultural industry

-- More than 70% of almonds go into export, while high percentages for many other fruits, vegetables and nuts are also shipped

-- If this trend continues as expected, exports will become even more important to U.S. producers of these and other products

FIGURE 7. FRESH FRUITS ARE LARGEST HORTICULTURAL EXPORT

-- FRESH FRUIT (including citrus) exports fell 11 % in FY 1998, canceling out increases in most other major categories. Nevertheless, fresh fruits continued to be the largest component of U.S. horticultural exports, representing 18% ($1.9 billion) of all horticultural exports;

-- Next were PROCESSED VEGETABLES ($1.7 billion), up 7% from FY1997

-- TREE NUTS ($1.2 billion), down 4%

-- FRESH VEGETABLES (at $1.1 billion), up 4%

-- WINE and BEER ($892 million), up 11%

-- PROCESSED FRUIT ($691 million), up 3%

-- JUICES ($685 million), no change

-- ESSENTIAL OILS ($533 million), down 14%; and

-- OTHER ($1.6 billion), down 9%

FIGURE 8. CANADA REMAINS THE TOP MARKET FOR HORTICULTURAL PRODUCTS

-- At $3.1 billion, CANADA continues to be the top market for U.S. horticultural exports in FY 1998, up from $2.9 billion in FY 1997

-- Exports to the EUROPEAN UNION (EU) are $2.2 billion to date, about the same as in FY 1997

-- Exports to JAPAN decreased again for the third straight year to $1.7 billion in FY 1998

-- Sharp decreases characterized sales to other Asian countries due to the economic crisis

-- In FY 1998 exports to MEXICO reached a record $555 million, up 17 % over FY 1997

FIGURE 9. THE TOP FIVE GROWTH MARKETS: 1994-1998 (OF MARKETS OVER $100 MILLION IN U.S. HORTICULTURAL EXPORTS)

-- EUROPE had the most countries with the highest percentage increase over 5 years, among the already big U.S. markets with over $100 million in sales

-- Exports to the UNITED KINGDOM, at $574 million, have increased the most dramatically in percentage over the last 5 years

-- OTHER EUROPEAN COUNTRIES on the list are: the NETHERLANDS ($547 million), SPAIN ($130 million), and ITALY ($108 million)

-- MEXICO rounded out the list with FY 1998 exports valued at a record $558 million

FIGURE 10. THE TOP 5 GROWTH MARKETS: 1994-1998 (OF MARKETS UNDER $100 MILLION IN U.S. HORTICULTURAL EXPORTS)

-- Exports to INDIA continue to increase, reaching a record $44 million in FY 1998. Sales have increased by 143 % over the last 4 years. Almonds currently account for most of the U.S. sales, but other commodities have tremendous potential once trade barriers come down

-- Direct exports to CHINA have increased by nearly 230 % since FY 1994, reaching a record $48 million in FY 1998. China is a huge potential market for fruits and vegetables once phytosanitary barriers and high tariffs are overcome

-- Sales to COLOMBIA and the DOMINICAN REPUBLIC have more than doubled since FY 1994

-- Exports to the CAYMAN ISLANDS were up more than 250%, making that country one of the largest growth market under $100 million.

FIGURE 11. THE TOP 10 HORTICULTURAL EXPORTS IN VALUE IN FY 1998

-- ALMONDS are number one again at $773 million, even though down 12% from last year

-- WINE at $511 million is up 31%, that commodity's 14th consecutive record-breaking export year

-- ORANGES, at $361 million, are up 12%. Japan, Canada, and Hong Kong were the main destinations

-- At $328 million, APPLES are down 20%. Reduced shipments to Asia characterizes FY 1998

-- FROZEN FRENCH FRIES at $313 million are up 6% from last year

-- ORANGE JUICE have decreased to $293 million, down 3%. The EU accounts for most of the decrease

-- GRAPES decreased to $279 million, down 10%. Exports have been adversely affected by the economic situation in Asia

FIGURE 12. MARKET ACCESS PROGRAM (MAP) STAR PERFORMERS AROUND THE WORLD

-- The private sector and FAS conduct Market Access Program (MAP) activities all over the world for over 40 different horticultural commodities

-- The countries shown on this map are those countries where we have experienced the most success with expanding sales through MAP in the past few years

-- The following charts depict the greatest 5-year percentage gains in value for specific commodities under MAP in selected countries around the world

-- The following charts do not necessarily depict the commodities with the highest export levels

-- The 5-year gain is based on the difference between FY 1994 - FY 1998 and does not represent average growth

-- We will look at a large traditional market, a large recently-growing market in temporary decline, and a developing market

FIGURE 13. CANADA: OPPORTUNITIES CONTINUE TO EXIST IN A TRADITIONAL MARKET

-- Despite a weakened Canadian dollar against the U.S. dollar, MAP-supported horticultural products registered increased exports

-- Star performers over the last 5 years include:

-- PISTACHIO exports, up 100% to $10.8 million

-- CLING PEACH exports, up 123% to $7.5 million

-- WINE exports, up 77% to $85.5 million

FIGURE 14. JAPAN: PRUNES, WINE AND FRENCH FRIES WEATHER ECONOMIC DOWNTURN

-- Although Japan is experiencing an economic recession, some MAP-supported horticultural products have successfully increased exports during this turbulent time

-- Star performers in Japan over the last 5 years:

-- PRUNE exports increased to $37.6 million, up 16%

-- WINE exports reached $90.5 million, up 299%

-- In 1998, Japan replaced Canada as the second largest export market for U.S. wines

-- Market promotion efforts under the Market Access Program, coupled with increased consumer demand driven by studies highlighting health benefits of drinking wine, have helped to spur U.S. wine exports

-- Red wine exports, in particular, are up to Japan

-- FRENCH FRY exports reached $163.4 million, up 66%

FIGURE 15. PEOPLE'S REPUBLIC OF CHINA: U.S. HORTICULTURAL PRODUCTS MAKE INROADS

-- FRENCH FRY exports reached $2.5 million, up 643%

-- TABLE GRAPE exports reached $3.5 million, up 48 fold

-- By May 1998, all table grape producing regions of California gained market access to mainland China

-- The Market Access Program helped to fuel demand for U.S. table grapes and boost sales despite China's high tariff -- 40%, plus 30% VAT

-- FAS will continue to work to reduce China's high tariff on U.S. table grapes; ongoing World Trade Organization accession negotiations offer an excellent opportunity to address this issue

FIGURE 16. MORE MAP SUCCESSES

-- Not all the horticultural export successes over the past 5 years show up in the previous charts

-- The following chart includes some additional horticultural products that scored major export gains:

* Fiscal Year 1998

FIGURE 16. MORE MAP SUCCESSES CONTINUED

-- WINE. Not only did U.S. wine exports to the United Kingdom reach a record $132.3 million in 1998, but total U.S. wine exports reached $511 million in 1998, their 14^th consecutive record-breaking year, and a 31% gain over the preceding year

-- Growth in U.S. wine exports has accelerated for the 5^th consecutive year

-- PEARS. Total U.S. pear exports reached a record $87 million in 1998, up 17% since 1994

-- In addition to Russia, other MAP growth markets for U.S. pears include Costa Rica, Israel, and Sweden

FIGURE 17. THE LONG TERM FUTURE FOR U.S. HORTICULTURAL PRODUCTS IS BRIGHT: NEW MARKETS AND MARKET NICHES TO CONQUER

-- CHINA - A potential market for many products, particularly in the booming economic centers in the South, especially FRESH FRUITS and even certain high quality VEGETABLES once phytosanitary barriers and high tariffs are overcome

-- INDIA - Only products allowed in now are almonds, bulk pistachios and raisins! The sky's the limit if barriers come down!

-- JAPAN - Potential for expanded sales as remaining access barriers are overcome (MORE APPLE/STONE FRUIT/TOMATO VARIETIES/STATES; LETTUCE/PEPPERS, EGGPLANTS)

-- KOREA - Many products continue to face phytosanitary-based import bans (APPLES, STONE FRUIT) and/or high duties, although certain vegetables can enter; virtually no U.S. products available outside Seoul area

-- AUSTRALIA - Excellent market potential for a range of U.S. fruits (TABLE GRAPES. STONE FRUIT, FLORIDA CITRUS, CHERRIES FROM MORE STATES) once phytosanitary-based import bans are overcome

-- MEXICO - NAFTA helping to improve access, but several high potential export commodities remain banned (FLORIDA CITRUS) or restricted (CHERRIES, STONE FRUIT, APPLES, SEED POTATOES)

-- SE ASIA - Excellent prospects as Malaysia, Indonesia, and the Philippines (a decision on FLORIDA CITRUS is pending) come out of recession (FRESH and PROCESSED FRUITS AND VEGETABLES)

-- VIETNAM - Only recently opened to U.S. products (APPLES, GRAPES, CITRUS), OTHER HORTICULTURAL PRODUCTS to follow

-- THAILAND - Excellent further potential, once current recession ends. Recent phytosanitary agreement opened a new market for U.S. CITRUS. Tariffs on TREE NUTS and RAISINS were cut sharply in 1996 in response to USDA/industry initiative

-- RUSSIA, EASTERN EUROPE - Already an important growth region, particularly the Russian Far East. Eastern Europe has good potential for future economic growth and market development (FRESH AND PROCESSED FRUITS AND VEGETABLES)

-- GULF COOPERATION COUNCIL (GCC) - Kuwait leads the 6-nation Gulf Cooperation Council in growth (PROCESSED VEGETABLES/FRUIT)

-- SOUTH AMERICA - Recent technical agreements with Brazil and Chile ensure continued market access for DECIDUOUS FRUITS; Argentina pending (STONE FRUIT, CITRUS)

-- TAIWAN - New opportunities for FRESH VEGETABLES as vegetable farmland shrinks in that country

-- WORLDWIDE - The demand for ORGANICS is increasing strongly, especially in Japan and France

For more information contact FAS' Horticultural and Tropical Products Division at (202) 720-6590.

Last modified: Thursday, April 06, 2000