Impact of Asian Crisis on U.S. Hort. Exports

THE IMPACT OF THE ASIAN ECONOMIC CRISIS ON U.S. HORTICULTURAL EXPORTS

COVER. THE IMPACT OF THE ASIAN ECONOMIC CRISIS ON U.S. HORTICULTURAL EXPORTS
-- I’d like to share with you a few statistics on the overall make-up of U.S. horticultural product exports, with a quick view of how the Asian economic situation may be affecting them
-- We’ll look at overall horticultural export performance in recent years -- fresh fruits and vegetables account for about one third of the total -- to gage the impact of the Asian situation on the horticultural sector
-- Then we’ll check exports by country for Fiscal Year 1998 when the impact of Asian currency devaluations really made itself felt in the export figures
-- And finally we’ll review a few comments on fresh exports by commodity

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, the first such decline in 13 years
– This relatively small decline for horticultural products – many other commodity sectors fell much more sharply – came about for several reasons

The strong U.S. dollar against many currencies; Japan’s economic recession; the economic crisis in other Asia; all were negative factors

-- On the other hand, record sales to Canada and Mexico partially offset lower exports to Asia
– For FY 1999, U.S. horticultural product exports are forecast to decrease
to $10.1 billion

-- Continuing to hamper exports to Asia will be the strong U.S. dollar; Japan’s economic recession; and continued weakness in other Asian

– On plus side, hort exports will continue benefitting from Uruguay Round and NAFTA tariff reductions and the USDA’s market promotion activities.

FIGURE 2. IMPORTANCE OF EXPORTS FOR SELECTED U.S. HORTICULTURAL PRODUCTS

-- Clearly foreign economic troubles, including those in Asia, affect U.S. horticultural producers and shippers

-- This chart shows how exports have become critical to the success of the U.S. horticultural industry, both fresh and processed

-- 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 3. CANADA REMAINS THE TOP MARKET FOR HORTICULTURAL

– 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) were $2.2 billion, down marginally from FY 1997

-- In FY 1998 MEXICO overtook Hong Kong, becoming the fourth largest market, with sales reaching a record $555 million, up 17% over 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

FIGURE 4. SPECTACULAR GROWTH CHARACTERIZED U.S. HORTICULTURAL EXPORTS TO SELECTED ASIAN COUNTRIES IN THE 5 YEARS TO FY 1997

-- Looking more closely at Asia, you can see that in the past 5 years to FY 97, exports to these countries had grown strongly; few countries outside this region had grown more swiftly

-- Note for example how exports to Indonesia more than quadrupled over this period; exports to Korea, the Philippines and Malaysia more than doubled

-- Much of the growth to Hong Kong consisted of unofficial exports to China proper

-- Naturally, with such dynamic growth in exports to Asia in recent years, the current situation will mark a sharp although probably temporary change in exports to this region

FIGURE 5. IMPACT OF ASIAN FINANCIAL CRISIS ON U.S. HORTICULTURAL EXPORTS

-- FY 1998 clearly marked a sharp retreat from the previous 5-year trend

– Exports to Japan, the third largest market, fell 8% or $152 million in FY 1998, the third straight annual decline, because of the strong U.S. dollar and weak Japanese economy

-- We’ve seen major reductions in FY 1998 exports to other Asian markets, including Korea, Hong Kong, Indonesia, Taiwan, the Philippines, Thailand, Malaysia, and Singapore; exports to these countries as a group were down 24% or $429 million

-- However, direct exports to the Republic of China, still a very small U.S. market, continued to rise; exports to this country were up 60% to $48 million

FIGURE 6. EXPORTS TO ASIA SHRANK IN FY 1998

-- Reduced exports to major markets in Asia in FY 1998 were partially offset by higher exports to the rest of the world

-- Asia’s share of U.S. horticultural exports fell to 30% from 34.5% the year before

-- Exports to these Asian markets in FY 1998 fell 15% or $563 million, while the rest of the world increased 4 percent or $283 million

FIGURE 7. JAPANESE HORTICULTURAL IMPORTS, MARKET SHARE 1991-1998 BY PRINCIPAL SUPPLIERS

-- Japan’s total imports from all origins are down because of a relatively weak economy

-- U.S. market share in Japan has been relatively flat; it decreased in the past 3 years because of:

the stronger U.S. dollar:

a somewhat exaggerated bump in 1995 exports due to drought
and increasing competition from China and other closer by countries, whose currencies have also depreciated against dollar, increasing their competitiveness

-- China’s market share in Japan has increased from 15% in 1991 to 20% in 1998 (January-November). Fresh vegetables led the way. Some of this growth has been at the expense of neighboring Philippine exports
FIGURE 8. U.S. FRUIT AND VEGETABLE EXPORTS TO KOREA DOWN SHARPLY FOR FISCAL YEAR 1998
-- In Korea, our seventh largest export market, U.S. horticultural exports in FY 1998 were down 40% or $110 million

-- Korea’s economic downturn and the strong U.S. dollar are the primary reasons for the reduced sales

-- Virtually all horticultural exports were adversely affected, with miscellaneous products (down $37 million), fresh and processed vegetables ($30 million), and fruit juices (down $15 million) accounting for the bulk of the decrease

-- USDA made funds available under GSM-102 for horticultural products to Korea; some citrus, dried fruit and almonds were sold under this program


FIGURE 9. TOP 10 U.S. HORTICULTURAL MARKETS FISCAL YEAR, OCTOBER-SEPTEMBER

-- The impact of the Asia crisis is of course not just direct, but also indirect

-- Lower demand in those countries translates into bigger world supply availabilities and thus lower unit prices for many commodities (for example, apples and citrus)

-- Overall, FY 1998 sales to the rest of the world (excluding important Asian markets) were up $283 million or 4% above the preceding year

-- We’ve seen Canada and Mexico make up a considerable amount of the reduced sales to Asia; exports to both North American neighbors were up significantly from the previous year

-- Other countries registering important increases included Venezuela (up $23 million or 67%), Russia (up $18 million or 25%), Saudi Arabia (up $8 million or 19%), Cayman Islands (up nearly $7 million or 37%); and Bermuda (up $6 million or 36%)

FIGURE 10. SELECTED U.S. HORTICULTURAL EXPORTS FY 1998

-- For fresh fruit, the largest horticultural products export sector, sales were down 11%; looking quickly at the largest fresh commodity exports:

-- For APPLES, sales to Indonesia and Thailand were particularly hard hit; note that it was not just the Asia crisis that affected overall exports, however; other factors were a smaller Washington state crop; reduced supplies of good quality fruit and higher U.S. prices because of lower supplies; and Mexican actions against imports

-- The economic problems facing countries in Asia, Eastern Europe, Russia and Latin America and the associated disturbance in world currency values will likely again constrain U.S. apple exports in FY 1999. However, exports for the first months of the current season, exports worldwide and to Asia are up substantially over last year

-- PEARS, notably were unaffected in FY 1998, except Taiwan and Indonesia; overall exports reached a record, up 14% over the previous year; exports could be down in FY 1999, due to reduced production and the economic problems facing Asia
-- GRAPEFRUIT suffered, since 5 of the top 10 destinations for U.S. grapefruit are in Asia, led by Japan; beyond the Asia crisis, Japan’s weak economy and the heightened competition from South Africa and Israel are other factors reducing exports

-- For ORANGES, although 6 of our top export destinations were in Asia, overall FY 1998 exports increased 12% from previous year; lower prices associated with larger crops offset the effects of the devaluation; a smaller California harvest and higher prices will adversely affect exports in FY 1999
-- For LEMONS, 4 out of the top 10 export destinations are in Asia; overall exports were down in FY 1998; the same is likely for FY 1999, due to the smaller U.S. harvest

-- For TABLE GRAPES, 6 of the top 10 markets are in Asia. Overall exports were down as sales to the Asian region were down 25%

-- For VEGETABLES, both fresh and processed, overall exports were up, although sales to Asia were down

-- For WINE, overall sales continue to hit record levels; Asian sales increased 67%; Japan became our second largest market

-- For TREE NUTS, overall exports were down 4% because of lower sales to the EU; for almonds, by far the largest nut exported by value, the affected Asian nations only account for 2 out of the top 10 U.S. export destinations; smaller U.S. almond, walnut and hazelnut crops and likely higher export prices will affect exports in FY 1999

-- For all fresh fruits and vegetables, competition from other countries, including those whose currencies haven’t risen as much as the U.S. dollar against the Asian countries, is definitely on the rise


FIGURE 11. SUMMARY AND OUTLOOK FOR ASIA IN FY 1999

– In summary, U.S. exports of horticultural products to Asia fell significantly last year, although overall exports were off only 3%, a better performance than most other commodity sectors

-- The hardest hit horticultural sectors were fresh non-citrus fruit and fresh vegetables

-- Regarding the most significant country declines:

Indonesia, Thailand, Korea, Malaysia, the Philippines and Singapore off more than 20%

Japan was down 8%, but with a much bigger loss in absolute value

China bucked the trend, but was up from a small base

-- What’s the outlook for sales to Asia? For the first 2 months of the current export year, exports are still down to many countries, but not as sharply, indicating some bottoming out

-- Japan, Korea and Singapore are down again, but not as much

-- Taiwan is actually showing a 9% gain over last year

-- Some anecdotal evidence also supports the idea of a possible turnaround

FAS Tokyo reports that Japanese consumer spending in November 1998 rose for the first time in 13 months, the first monthly gain since October 1997. In addition, the yen has appreciated sharply against the dollar in recent months

-- FAS Seoul reports that Korean importers are stepping up their purchases of U.S. grocery products. Korea's 75% dependence on imported food, the near exhaustion of imported food and beverage stocks, the recent steep appreciation of the won, are all factors indicating a possible improvement in outlook

For more information contact Joe Somers at (202) 720-2974.

Last modified: Tuesday, May 08, 2001