Some Insights on the N. American Fresh Produce Industry in ... · Rapid trade growth between all...
Transcript of Some Insights on the N. American Fresh Produce Industry in ... · Rapid trade growth between all...
Some Insights on the N. American Fresh Produce Industry in the Context of NAFTA Renegotiation
DR. ROBERTA COOK Dept. of Ag and Resource Economics
Emerita Faculty University of California, Davis
for NAFTA, H-2A, Immigration, and ALRB Conference
April 13, 2018 Copyright @2018 Roberta Cook
Agenda • US international trade in fresh produce (Note:
perishability, the need to harvest and ship daily, seasonality, and consumer demand for year-round availability all drive trade.)
• Changing N. American fresh produce trade landscape
• Fresh tomato sector • Fresh berry sector • Conclusions
US International Trade in Fresh Produce
7.2
1994
imp
1995
Imp
19
96 Imp
19
97 Imp
19
98 Imp
19
99 Imp
20
00 Imp
20
01 Imp
20
02 Imp
20
03 Imp
20
04 Imp
20
05 Imp
20
06 Imp
20
07 Imp
20
08 Imp
20
09 Imp
20
10 Imp
20
11 Imp
20
12 Imp
20
13 Imp
20
14 Imp
20
15 Imp
20
16 Imp
20
17 Imp
US Fresh Produce International Trade: Imports and Exports, by Key Category, Million US$, 1994-2017
Exports: Fresh Fruit 25,000 Exports: Fresh Veg 20,000 Imports: Bananas/plantains
Imports: Other Fresh Fruit 15,000
Imports: Fresh Veg 10,000
5,000
0
Source: US GATS online queries, BICO -10, February 2018 .
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
US Imports of Fresh Fruit and Vegetables from Mexico, 1993-2017 (excludes canned, frozen, juice and dried)
14,000
$11.6 total 12,000$5.5 Veg
10,000 Vegetables 8,000
6,000
4,000
2,000Fruit
-
Million
$
Source: USDA/FAS GATS online query February 2018.
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
0
200
400
600
800
1,000
1,200
1,400
1,600
Million
$ US Imports of Fresh Fruit and Vegetables from Canada, 1993-2017 (excludes canned, frozen, juice and dried)
1,800 $1.6B total
Fruit
Vegetables
Source: USDA/FAS GATS online query February 2018.
US Fresh Produce Imports • Imports usually uncontentious because either they are:
• Contra-seasonal. • US shippers often invested in offshore production and control the marketing to offer yr-round supply to buyers, MEET CONSUMER DEMAND.
• National check-off programs exist that assess domestic and foreign production (e.g. avocados, blueberries). Revenue promotes consumer demand.
• So, a high import share doesn’t necessarily mean contentious trade; tomatoes the main exception.
• Fresh imports often higher priced than domestic.
Fresh fruit and vegetable imports as a share of USfresh utilization/consumption, 2016
Item Vegetables, excl. melons and potatoes Potatoes Cucumbers Sweet Peppers Tomatoes
Fruit, all Melons Excluding Bananas Blueberries
% 31 10 74 60 57 53 38 38 57
Sources: Economic Research Service, USDA Vegetables and Specialties Yearbook, 2017; Economic Research Service, USDA Fruit and Tree Nut Yearbook, 2017.
Snapshot of US Fresh Produce Trade, 2016 • N. American fresh veg trade mainly intra-NAFTA! • Veg exports: 74% Canada, Mexico, 4%. Extra-NAFTA fresh veg exports fragmented.
• Veg imports: 69% Mexico, 16% from Canada. • In contrast to veg, fresh fruit trade is diverse. • Fruit exports: 36% Canada, 11% Mexico, 53% other. • Fruit imports: 44% Mexico, 2% Canada, 54% other. • Climate, agronomics and population size and location explain trade patterns, vs NAFTA.
Mexico’s Role in US Fresh Produce Imports • Tomatoes are Mexico’s #1 fresh produce export=18% of produce exports; 35% of veg exports in 2016. • Bell peppers, chile peppers, cucumbers, eggplant, green beans, asparagus, brussel sprouts, watermelon, limes, avocados, mangoes, grapes, papaya, green onions, berries, sugar snap peas, cilantro many tropical and specialty fruit/veg. • NOT important in leafy greens, broccoli, cauliflower, celery, onions, potatoes, apples, pears, cherries, kiwi, peaches/nectarines/plums, oranges, tangerines, grapefruit, bananas. • Climate/agronomic factors determinant. Examples…
Changing N. American Trade Landscape
Changing N. American Trade Landscape • Rapid trade growth between all countries with
which the US has FTAs, led by intra-NAFTA. • Trade flows represent a combination of various
factors of which FTAs are only one. Shouldexercise care in assigning causality. Examples…
• Exchange rates play a key role. The Trump anti-NAFTA agenda since 2016 has caused the Mexican peso to devalue rel. to US$, makingMexican exports cheaper and more competitive.
• Most US fresh produce tariffs were very lowprior to the implementation of NAFTA in 1994 and afforded little protection to US growers;tariff reductions played small role in import patterns; a few exceptions.
Changing N. American Trade Landscape • Mexico had sizeable tariffs and even more
importantly, quotas; US gained more market access. • Sectors with comparative advantages won. For US,
grains and oilseeds. For Mexico, fresh produce. • NAFTA gave rules of the game, fomenting
investment in Mexico. More important than tariffs. • Integrating produce supply chains are also key. • Technological progress in Mexico major contributor
to higher productivity and competitiveness. • Mexico has been a major beneficiary of growth in
US consumer demand for fresh produce due tohaving the right climates. Demand is the major contributor to export growth!
Changing N. American Trade Landscape • In many crops Mexico has permanent climatic
advantages relative to the US/Canada (due togeography) that are unrelated to trade policy.
• For Mexico and Canada it is greatly advantageousto have duty free and overland access to the largest high income consumer market.
• Mexico is the principal export market for USapples, pears and important for many other freshproduce crops.
• Duties are taxes on consumers, without much benefit to growers as any protection afforded byduties imposed by the US would be eroded byfurther depreciation of peso or $Canadian.
Changing N. American Trade Landscape • Duties against Mexico would incentivize
investment elsewhere as buyers would seek other sources of supply.
• However, for many products alternate supply sources aren’t readily available and shippingdistances limit options.
• Nor are alternate markets readily available.Most fresh produce trade is intra-NAFTA.Intense competition in global markets, andlong distance shipping costs for extra-NAFTA trade constrain trade diversion - anymajor shifts in export markets for all 3NAFTA countries.
Changing N. American Trade Landscape
• Mexico exports ~90% of fresh produce to USand Canada. Trade diversion of Mexican exportsto other countries difficult. Avocados, table grapes, limes are examples of crops that mayobtain more homes outside N. America.
• If the US erected barriers against Canadatrade diversion would also be difficult. Currently, the majority of Canadian produce exports go to the US.
• In many cases, much production is grownspecifically for export so broad consequences toprotectionism.
Changing N. American Trade Landscape
•The US has climatic advantages in several crops withlarge exports to Mexico, such as, tree fruit,potatoes, and more. Mexico may seek protection. •Consumers benefit by high quality, affordableproducts. Economies are most efficient when lesscompetitive industries are not artificially protected. Protectionism leads to tit for tat retaliations which impede overall trade and losses outweigh any benefitsaccruing to a small group. •Trade has winners and losers. Better for economic growth to compensate losers than protect lessefficient industries. Consumers are primebeneficiaries of produce trade and healthier for it.
Fresh Tomato Market
Bottom line: Case of non-homogeneous products, substitution, cannibalization, new varieties, and technological change led by protected agriculture. NAFTA plays almost no role in explaining current trade patterns. Hence, tariffs would have small impact on current locations of production.
0
1000
2000
3000
4000
5000
6000
7000
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
US Fresh Tomato Production, Consumption, Imports, andExports, 1990-2015p (includes hothouse, excludes canning and freezing)
million pounds
Consumption
Production
Imports Exports
Source: USDA/ERS, Vegetables and Pulses Yearbook #89011, March 30, 2016.
0 500
1000 1500 2000 2500 3000 3500 4000 4500
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
US Fresh (not for canning or freezing) Field Tomato Production,(excludes hothouse, tomatillo, cherry and grape) 1982-2017
million pounds
Florida
California
Sources: various USDA/NASS Vegetable Annual Reports, including Febuary 2018, and ERS Tomato Series through 2008 for US total.
US Fresh Tomato Imports, All Types, by Key Country, 2000, 2007 & 2011-17 (million pounds)
1,300
224 85
1,609
3,555
365
24
3,944
0 500
1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500
Mexico Canada Others Total
Millions
2000 2007 2011 2012 2013
2014 2015 2016 2017
Source: US Department of Commerce, GATS online queries, FAS/USDA website.
209
813
1,471 1,605 1,700
1,947 1,950 2,156 2,194
1,609
2,361
3,287 3,377 3,390 3,418 3,468
3,938 3,944
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
2000 2007 2011 2012 2013 2014 2015 2016 2017
Poun
ds (M
illions)
Cherry Grape Hothouse Roma Round Field Total
Total US Fresh Tomato Imports, by Key Tomato Type, All Countries, 2000, 2007 & 2011-17 (millions of pounds)
Source: US Department of Commerce, GATS online queries, FAS/USDA website.
US Fresh Hothouse Tomato Imports, by Key Country, 2000, 2007, 2009-17, (million pounds)
61 107 42 209
1,627
295
25
1,947 1,839
333
22
2,194
0
500
1,000
1,500
2,000
2,500
Mexico Canada Others Total
Millions 2000 2007 2009 2010 2011 2012
2013 2014 2015 2016 2017
Source: US Department of Commerce, GATS online queries, FAS/USDA website.
Estimated Area of Protected Culture/Hothouse Tomatoes in Mexico, 1980-2016, Acres (excludes other PC commodities)
34,580 35,000
31,910 31,925
25,807
16,429 13,500
11,479
8,145 5,813
4,603
1,425 2,429 3,109 593
1980 1999 2001 2002 2003 2004 2005 2006 2007 2008 2009 2011 2013 2014 2016
Sources: Evolucion de la Oferta Horticola en Mexico, 1989-2009, CAADES, Sept. 27, 2010 and various othersources, including: USDA/FAS GAIN Mexico Tomato Annual Reports, 6/8/14, and 6/1/16; and Cook’s adjustedonline queries from the SAGARPA website, SIAV for 2013 AND SIAPRO for 2011; and information from privatesources. Note: The 6/21/17 USDA GAIN report estimates 37,500 acres for MY 2016/17.
A protected culture operation in Sinaloa, Mexico: A “warm climate” greenhouse
1,479 980 1,283 3,741
1,700 100 200 2,000
35,000
12,194 7,741
54,935
38,179
13,274 9,224
60,677
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
Tomatoes Cucumber Peppers Total
Canada USA Mexico N. America
*In Mexico HH includes shade house with much lower yields than greenhouse. Sources: Stat Canada for Canadian area; estimates from AMHPAC and others for Mexico, as researched by Roberta Cook; estimates from Cook for US based on industry research. Note: Tomato share of total HH=63%; cukes=22% share; peppers=15% share of total HH.
N. America: Estimated Area Harvested of Hothouse* Tomatoes, Bell Peppers and Cucumbers, 2016 (acres)
Mexican Fresh Tomato Industry Trends • Total Mexican tomato area declining due to massive
productivity growth using PC. Tomato area: 1990, 85,500 hectares; 2000, 75,800; MY 2016/17, 52-53,000. (USDA/FAS Mexico Tomato Annual GAIN Report, 6/21/2017 and earlier GAIN reports.)
• Sinaloa has always been the primary exporter of fresh tomatoes (open-field and PC) and leads in PC. According to AMHPAC, about 22% of PC area is in Sinaloa, 15% in Jalisco, 12% in Baja CA, 41% in the remainder of Mexico. High tech greenhouses in central Mexico are another game changer.
• For field growers, PC gives food safety advantages, reduced water and labor use/acre, and reduced chemical inputs due to improved disease control.
Historical Perspective
Hydroponic production (coconut substrate) of tomatoes in a greenhouse in Sinaloa, Mexico
Potential Mexican Concerns •Security. •Institutional instability. •Trade disputes. •Partner risk. •Intellectual property right risks. •Corruption, legal structure, transaction costs. •Investment coming from outside the sector which is not market driven. •Water. •Social issues. •Labor.
Fresh Berry Sector
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
US Fresh Strawberry Production, Consumption(Disappearance), Imports, and Exports, 1990-20171 MT (1.232 MMT consumption in 2017)
Consumption
Production
Exports
Source: 2017 Fruit and Tree Nuts Outlook Report, FTS-366, ERS/USDA, March 29, 2018. Includes retail and foodservice.
Metric tons 1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
1Preliminary
Imports
US Fresh Strawberry Imports From Mexico andTotal, 2005-2017, (166,576 MT total in ‘17)
Metric tons Despite the growth, in 2017, imports were equivalent to only
Mexico
Total
60,000
90,000
120,000
150,000
180,000 15% of US production. 99% of Mexican straw exports go to the USA but Mexico exports only 1/3 of what it produces.
30,000
0 2005200620072008200920102011201220132014201520162017
Source: USDA/ERS Fruit and Tree Nut Yearbook, October 2014 and GATS online queries for 2014-2017.
US Fresh Raspberry Imports by Key Country of Origin,1990-2017, (88,109 total MT in ‘17) Metric tons 100,000
80,000 Mexico 60,000
40,000
20,000 Canada Guatemala/Others Chile 0 2016
2014
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
Source: GATS/FAS/USDA online data queries.
US Fresh Blackberry Imports by Source, 2006-2017, (70,089 MT in 2017) Metric tons
100,000 Total
20,000
40,000
60,000
80,000
0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Source: GATS/FAS/USDA online data query.
0
50,000
100,000
150,000
200,000
250,000
300,000 19
9019
9119
9219
9319
9419
9519
9619
9719
9819
9920
0020
0120
0220
0320
0420
0520
0620
0720
0820
0920
1020
11 2
012
201
3 2
014
201
5 2
016
2017
US Fresh Blueberry Production, Disappearance, Imports,and Exports, 1990-2017P, MT (263,993 MT in 2017) Metric tons
Consumption
Production
Imports
Exports
Source: 2017 Fruit and Tree Nuts Outlook Report, FTS-366, ERS/USDA, March 29, 2018. Includes retail and foodservice. 1Preliminary
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
USA Fresh Blueberry Imports by Key Country of Origin, 1990-2017, (145,394 MT in 2017) Metric Tons 80,000 70,000 60,000 50,000 40,000 30,000
Chile Canada Argentina Mexico Other Peru
0 10,000 20,000
Source: GATS/FAS/USDA online data queries.
Tabletop production of strawberries in Mexico
Conclusions •The US has a large fresh produce industry, andexcluding tropicals, produces most of what it consumes. •For some crops (leafy greens), shifting productionregions seasonally enables yr-rd supply within the US. •Traditionally, the strong competitiveness of the USfresh produce industry is because even more than beinglabor-intensive, fruit/veg are knowledge, technology,capital, and marketing-intensive. US advantages include much lower capital costs, infrastructure, R&D, legal system transportation. •Location advantage! US producers are located in oneof the most lucrative consumer markets in the world, and face no trade barriers. •But growth in protected culture and other advantages in Mexico is closing the technological gap in some crops.
Conclusions • Trade diversion would be difficult for all NAFTA
produce players if significant tariffs introduced.
• Benefits to US growers of across-the-board tariffs against Mexico would be eroded by depreciation of peso. Lose-lose for growers and consumers.
• Product-specific duties will cause each side to negotiate tariffs on their import-sensitive crops, transferring the burden from some grower groups to others.
• Each product has it’s own story to tell; cannot generalize.
Conclusions • US consumption growth often due to imports
making produce available yr-round or expansion in S & D of tropicals not grown in the US.
• Locations of production, seasonally, by crop, within each NAFTA country, unlikely to change since climate/agronomics and location and buying power of consumers are the primary contributors.
• Mexico will continue to dominate crops like tomatoes, cukes, bell peppers and US will dominate those in which it has advantages.
• Mexico’s role in berries will grow given natural advantages, technology, labor and US investment.