NFAPP's Newsletter January 1997

Featured Articles :

"What's Happening to Export Markets?", by Pamela Mischen
Topic: Trends in Fruit and Vegetable Export Markets

"Legislative Update.....NFAPP's Winter Warm-Up", by Pamela Mischen
Topic: Industry's Top Priorities Legislative Agenda 1997

"Market Watch.....Cabbage", by Pieter van Ispelen
Topic: Cabbage Market

If the first half of 1996 is an indicator of the remainder of the year, the value of fruits and vegetables going to export markets in 1996 will be down slightly from 1995 (Figure 1). The 10.9% average increase in value of exports per year of the early 1990s fizzled to a mere 2.4% increase from 1994 to 1995 and now appears to be heading for a 1.5% decline. Two years ago during a presentation of the NFAPP Baseline, four commodities were touted as "Big Winners in Export Markets" (Figure 2). For this year's Baseline Review in Kansas City which was held from January 15 - 17 and sponsored by the Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri, an updated slide for exports of these commodities was presented (Figure 3). Again, using January - June 1996 figures as an indicator for second half of the year value of exports, frozen potato exports are holding steady at 1995 levels, broccoli values are down from 1994 as are apples and asparagus. Although there are still export markets in which U.S. fruit and vegetable products are gaining ground, such as fresh grapes and wine, other commodities, such as the ones depicted in Figures 2 and 3 are not. Why? Increased competitiveness, decreased funding for foreign market development, and falling export prices have decreased the total value of many products. For example, although the volume of apple exports has continued to increase, falling world prices have led to a decrease in the value of exports. Furthermore, competition from China has also hurt Pacific Rim apple markets for U.S. exporters.

It is important to keep in mind that although the focus on export growth is Asia, Canada remains the largest importer of U.S. fruits and vegetables. With lower unit value vegetable sales, the value of exports to Canada was down slightly in fiscal year (FY) 1996 from FY 1995. Exports to Japan decreased slightly and exports to the European Union increased 12%, making the EU the second largest export market and Japan the third. Exports to Mexico continued to decline due to the lingering effects of the 1994 peso devaluation.

Does the flattening of the growth curve for value of exports for fruits and vegetables in 1996 portend bad times ahead for the produce industry? NFAPP models predict healthy growth in exports over the next ten years for many items. USDA's Economic Research Service predicts a 42% increase in value of vegetable exports from 1996 to the year 2000. The Foreign Agricultural Service expects a 4.2% increase in horticultural exports for 1997. Driving these predictions are increasing consumer incomes, reductions in barriers to trade and a forecasted economic recovery in Mexico.

The legislative news for the month comes from NFAPP's first annual Winter Warm-Up, a meeting designed to identify areas of interests in the fruit and vegetable industry for research and discussion for the upcoming policy year. The Winter Warm-Up replaces the annual presentation of NFAPP models, which this year was incorporated into the Food and Agricultural Policy Research Institute (FAPRI) Baseline Review Conference in Kansas City, January 15 - 17, 1997.
Representatives from United Fresh Fruit and Vegetable Association, Western Growers Association and Florida Fruit and Vegetable Association presented their top policy priorities for the upcoming legislative year. Many common themes emerged including implementation of the Food Quality Protection Act, Immigration Reform Act, trade issues, and microbiological contamination. Three topics were chosen for more detailed discussion during the afternoon session: (1) Foreign market access, (2) Reform of estate taxes and the phase out of suspense accounts, and (3) Food safety/nutrition and per capita consumption. These topics were chosen because of the need for research in these areas.

With regard to foreign market access, discussion centered around the Supplier Credit Guarantee Program, the Market Access Program, and technical barriers to trade such as phytosanitary regulations. Participants indicated the need for research into what competitor nations were doing with regard to export promotion as well as looking into our own export promotion returns.

In order to discuss the impact that tax reforms will have on the fruit and vegetable industry, NFAPP, in conjunction with Texas A&M, is seeking funding to build representative farm/firm models for the fruit and vegetable industry. These models utilize input from growers from various counties in the U.S. in order to "construct" representative farms for those counties. Information is collected on crops, management practices, debt load, equipment and other farm assets. These models enable researchers to estimate the impact that various policies will have at the farm level. These policies may include changes in pesticide availability, environmental regulations, water cost/availability, Farm Bill "flexibility" and double cropping practices, as well as changes in tax policy. This type of analysis enables policy makers to see what the impacts of policy are on people, not just markets, in various areas of the nation.

John Love from the Economic Research Service of USDA began the last discussion session of the day by discussing trends in per capita consumption for fruits and vegetables. Although consumption has flattened out over the first half of this decade, prices at the retail level have increased 8% in 1995 with a projected 3% increase in 1996. With programs such as Five-A-Day aimed at increasing demand, questions regarding the impact of an increase in consumption on the grower level were raised. Other factors that may influence the retail-grower price margin are imports and exports, consolidation of retailers and the availability of produce on a year-round basis. Additionally, the Food Quality Protection Act could have consequences for the availability of crop protection tools, affecting the ability of U.S. growers to compete against imports for the domestic market. Five research priorities were identified as a result of the meeting. These were: (1) the development of fruit and vegetable representative farm models to analyze farm level impacts of various policies, (2) research into the best uses of Market Access Program funding as the total amount available has been declining, (3) an investigation into the market promotion policies and funds of export competitor nations, (4) cooperation between NFAPP, the Foreign Agricultural Service and the Economic Research Service to identify and quantify technical barriers to trade including phytosanitary regulations, and (5) research into the effects various policies and marketing behaviors have on the retail-farm price margins.

For a complete set of the proceedings for the Winter Warm-Up, please contact Pamela Mischen at (602) 965-5503.

U.S. annual per capita use of cabbage is higher than per capita use of any other cruciferous vegetable, including broccoli, cauliflower, kale, brussels sprouts, and turnips. In 1996, per capita consumption is estimated to be 10.6 pounds, of which 9.4 pounds was consumed as fresh and the remaining 1.2 pounds was sold in the form of sauerkraut. Consumption levels per capita of both fresh and sauerkraut have been stable over the last ten years.

Production of cabbage has been slowly increasing over the years mainly due to population increases. Fresh production in 1996 is estimated to be about 2500 million pounds, compared to 2150 million pounds in 1986.

Trade forms a small part of the cabbage market. Imports in 1996 are expected to be approximately 65 million pounds, or 2.5% of total supply. Since 1991, the U.S. is a net exporter of cabbage with about 90 million pounds of shipments in 1996, or 3.6% of domestic supply.

Worldwide, the U.S. is the 7th largest producer of cabbage. In the last five years, China has convincingly taken over as the world's leading producer after the decline of the former Soviet Union. With 14 million metric tons, China produces more than twice as much cabbage as the Russian Federation (2nd largest producer), or about 30% of total world production.

U.S. fall fresh market acreage or harvest is forecast at 7,700 acres, up 1% from 1995 and 22% greater than in 1994. The increase in fall acreage is driven by increases in acreage in the leading fall producing state, Georgia. From 1994, Georgia's harvested acreage increased by about 25% to 4,900 acres in 1996. Favorable growing conditions benefitted the crop in New Jersey, which harvests over 1100 acres, making New Jersey the second largest fall producing state. Water shortages reduced acreage in the Texas Rio Grande Valley leaving total Texas acreage 300 acres less than 1995 levels. From August through December shipments totaled 495 million pounds as compared to 552 million pounds during the same period during 1995. This decrease is mainly due to lower yields and a 8% reduction in summer acreage. For example in New York, which is not added to the fall acreage, shippers are able to move cabbage all year around thanks to special storage facilities.

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