December, 1998

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

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

-- Emerging markets for U.S. horticultural products are foundeverywhere in the world, both in developing countries that havenewly opened to U.S. products

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-- 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 tonew products or in which U.S. companies are beginning to marketnew products:

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

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

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

*Unless otherwise noted, fiscal years used*

FIGURE 1. **U.S. HORTICULTURAL EXPORTS IN FY 1999 FORECASTDOWN SLIGHTLY**

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

-- Record sales to both Canada and Mexicopartially offset lower exports to Asia

-- Booming sales to Mexico made that countrythe fourth largest market 

-- Sales to the European Union, the secondlargest 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 economicrecession; and continued weakness in other Asian economies willcontinue to hamper exports to Asia 

-- On the positive side, horticultural exportswill continue benefitting from Uruguay Round and NAFTA tariffreductions and the USDA's market promotion activities

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

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

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

-- These high value products now account fornearly 40% of total U.S. agricultural exports, compared to lessthan 25% a decade ago

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

-- Bulk and intermediate products haveincreased, but not as fast

-- Nearly every time we show this chart, peopleare surprised by the shifts that have occurred in the compositionof U.S. agricultural exports ... especially horticulturalproducts!

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

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

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

-- The share of the export market ofconsumer-ready products increased sharply in FY 1998, due inlarge part to increased world demand as noted in the previouschart

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

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

-- Although this declined slightly to 17.2% in1996, the trend has clearly been up

-- Market share percentages of the UnitedStates' top competitors either fell or remained practically flatfor the same period

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

FIGURE 5. **U.S. FRUIT AND VEGETABLE EXPORTS ARE RISING ATA FASTER PACE THAN PRODUCTION**

-- The structure of the U.S. horticulturalindustry is changing

-- Exports are becoming ever more important tohorticultural 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 productionincreased from 17% to 38%

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

-- Here's a more detailed look at how exportshave become critical to the success of the U.S. horticulturalindustry 

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

-- If this trend continues as expected, exportswill become even more important to U.S. producers of these andother products

FIGURE 7. **FRESH FRUITS ARE LARGEST HORTICULTURAL EXPORT**

-- FRESH FRUIT (including citrus) exports fell11 % in FY 1998, canceling out increases in most other majorcategories. Nevertheless, fresh fruits continued to be thelargest component of U.S. horticultural exports, representing 18%($1.9 billion) of all horticultural exports;

-- Next were PROCESSED VEGETABLES ($1.7billion), 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 FORHORTICULTURAL PRODUCTS**

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

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

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

-- Sharp decreases characterized sales to otherAsian countries due to the economic crisis

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

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

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

-- Exports to the UNITED KINGDOM, at $574million, have increased the most dramatically in percentage overthe 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 1998exports valued at a record $558 million

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

-- Exports to INDIA continue to increase,reaching a record $44 million in FY 1998. Sales have increased by143 % over the last 4 years. Almonds currently account for mostof the U.S. sales, but other commodities have tremendouspotential once trade barriers come down

-- Direct exports to CHINA have increased bynearly 230 % since FY 1994, reaching a record $48 million in FY1998. China is a huge potential market for fruits and vegetablesonce phytosanitary barriers and high tariffs are overcome 

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

-- Exports to the CAYMAN ISLANDS were up morethan 250%, making that country one of the largest growth marketunder $100 million. 

FIGURE 11. **THE TOP 10 HORTICULTURAL EXPORTS IN VALUE INFY 1998**

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

-- WINE at $511 million is up 31%, thatcommodity'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 up6% 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 inAsia

FIGURE 12. **MARKET ACCESS PROGRAM (MAP) STAR PERFORMERSAROUND THE WORLD**

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

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

-- The following charts depict the greatest5-year percentage gains in value for specific commodities underMAP in selected countries around the world 

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

-- The 5-year gain is based on the differencebetween FY 1994 - FY 1998 and does not represent averagegrowth

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

FIGURE 13. **CANADA: OPPORTUNITIES CONTINUE TO EXIST IN ATRADITIONAL MARKET**

-- Despite a weakened Canadian dollar againstthe U.S. dollar, MAP-supported horticultural products registeredincreased exports

-- Star performers over the last 5 yearsinclude:

-- 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 WEATHERECONOMIC DOWNTURN**

-- Although Japan is experiencing an economicrecession, some MAP-supported horticultural products havesuccessfully increased exports during this turbulent time

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

-- PRUNE exports increased to $37.6 million, up16%

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

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

-- Market promotion efforts under the MarketAccess Program, coupled with increased consumer demand driven bystudies highlighting health benefits of drinking wine, havehelped to spur U.S. wine exports 

-- Red wine exports, in particular, are up toJapan

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

FIGURE 15. **PEOPLE'S REPUBLIC OF CHINA: U.S. HORTICULTURALPRODUCTS MAKE INROADS**

-- FRENCH FRY exports reached $2.5 million, up643%

-- TABLE GRAPE exports reached $3.5 million, up48 fold

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

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

-- FAS will continue to work to reduce China'shigh tariff on U.S. table grapes; ongoing World TradeOrganization accession negotiations offer an excellentopportunity to address this issue

FIGURE 16. **MORE MAP SUCCESSES**

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

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

 

| Commodity      | Country        | Increase | Value*         Millions $ |
|----------------|----------------|----------|---------------------------|
| WINE           | United Kingdom | 259%     | 132.3                     |
| WALNUTS        | Israel         | 31%      | 10.3                      |
| KIWIS          | Canada         | 12%      | 5.2                       |
| PEARS          | Russia         | 21 Fold  | 2.5                       |
| DATES          | United Kingdom | 147%     | 2.3                       |
| SWEET CHERRIES | Mexico         | 860%     | 0.5                       |

** Fiscal Year 1998*

FIGURE 16. MORE MAP SUCCESSES CONTINUED 

-- WINE. Not only did U.S. wine exports to theUnited Kingdom reach a record $132.3 million in 1998, but totalU.S. wine exports reached $511 million in 1998, their 14thconsecutive record-breaking year, and a 31% gain over thepreceding year

-- Growth in U.S. wine exports has acceleratedfor the 5th consecutive year

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

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

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

-- CHINA - A potential market for manyproducts, particularly in the booming economic centers in theSouth, especially FRESH FRUITS and even certain highquality VEGETABLES once phytosanitary barriers and hightariffs are overcome

-- INDIA - Only products allowed in noware almonds, bulk pistachios and raisins! The sky's the limit ifbarriers come down!

-- JAPAN - Potential for expanded salesas remaining access barriers are overcome (MORE APPLE/STONEFRUIT/TOMATO VARIETIES/STATES; LETTUCE/PEPPERS, EGGPLANTS)

-- KOREA - Many products continue toface 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 marketpotential for a range of U.S. fruits (TABLE GRAPES. STONEFRUIT, FLORIDA CITRUS, CHERRIES FROM MORE STATES) oncephytosanitary-based import bans are overcome 

-- MEXICO - NAFTA helping to improveaccess, but several high potential export commodities remainbanned (FLORIDA CITRUS) or restricted (CHERRIES, STONEFRUIT, APPLES, SEED POTATOES) 

-- SE ASIA - Excellent prospects asMalaysia, Indonesia, and the Philippines (a decision on FLORIDACITRUS is pending) come out of recession (FRESH andPROCESSED FRUITS AND VEGETABLES) 

-- VIETNAM - Only recently opened toU.S. products (APPLES, GRAPES, CITRUS), OTHERHORTICULTURAL PRODUCTS to follow

-- THAILAND - Excellent furtherpotential, once current recession ends. Recent phytosanitaryagreement opened a new market for U.S. CITRUS. Tariffs on TREENUTS and RAISINS were cut sharply in 1996 in responseto USDA/industry initiative

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

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

-- SOUTH AMERICA - Recent technicalagreements with Brazil and Chile ensure continued market accessfor DECIDUOUS FRUITS; Argentina pending (STONEFRUIT, CITRUS)

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

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

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

 

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| *Last modified: Monday, February 01, 1999* |