Economic Magnitude

1
Economic Magnitude Potential of Vegetables in
Georgia.

• Greg E. Fonsah
• Asst. Professor Ext. Economist Fruits
  Vegetables
  
• University of Georgia, Tifton
• June 2-5, 2003

2
OVERVIEW

• U.S. Agricultural Outlook
• Georgia Agricultural Outlook
• U.S. Performance in Japans Import Market
• Chinas Performance in Japans Import Market
• Growth And Competitiveness in Japan
• Trade And Policy implications for both countries

3
REASONS FOR INCREASE U.S. AG -TRADE IN 2002

• CHANGES IN MACROECONOMIC PERFORMANCE
• DEPRECIATION EURO OTHERS
• POPULATION GROWTH
• UNFAVORABLE WEATHER CONDITIONS U.S.
  COMPETITORS
  
• Source USDA/ERS

4
Effects of A Strong US Against The Yen Other
Foreign Currencies?

• NEGATIVE EFFECT ON THE OVERALL AGRICULTURAL
  TRADE BALANCES
  
• COMPROMISES THE U.S. LEADING POSITION AND
  COMPETITIVENESS IN THE MARKET.
  
• CHINA IS NOW THE LEADER IN THE FRESH FRUITS,
  FROZEN FRUIT AND VEGETABLES EXPORT TO JAPAN
  

5
Overall Benefits From NAFTA

• BOOSTED TRADE TIES B/W CANADA, MEXICO AND UNITED
  STATES
  
• CANADA IS NOW THE LEADING U.S. TRADING PARTNER.
• CANADA IS THE PRINCIPAL IMPORTER OF U.S. FRUITS,
  VEGETABLES, GRAINS, OILSEED AND MEAT.
  
• MEXICO REMAINS OUR MAIN COMPETITOR
• MEXICO EXPORTS 98 OF TOTAL U.S. SQUASH IMPORT

6
U.S. Benefits From NAFTA Deal
7
U.S. Vegetable Industry Production 2001-2003
8
U.S. Vegetable Industry Area Harvested 2001-2003
9
U.S. Vegetable Industry Crop Value 2001-2003
10
U.S. Vegetable Industry, Import
Trade2001-2003
11
U.S. Vegetable Industry, Export
Trade2001-2003
12
U.S. Vegetable Industry, Unit Value
2001-2003
13
U.S. Vegetable Industry, Per Capita Use
2001-2003
14
U.S Ag. Trade 1998-2003
Source usda, usdc (2003)AES-38 Outlook, May 27
15
GA U.S. Production Forecast for Selected
Fruits 2001-02
16
Excess Georgia Mkt. Potential
17
Excess GA Mkt. Potential, cont.
18
How can we get rid of the excess production from
Georgia?

• DEVELOP NEW EXPORT MARKETS
• IMPROVE EXISTING LOCAL MARKETS
• INCREASE PER CAPITA CONSUMPTION
• INCREASE POPULATION
• GROW ONLY CROPS WHICH WE HAVE COMPARATIVE
  ADVANTAGE, COST WISE.
  
• GROW ALTERNATIVE CROPS WITH HIGH MARKET VALUE
• BE CUSTOMER AND MARKET ORIENTED.

19
IS THIS THE RIGHT TIMING?

• YES
• SARS PROBLEM AROUND THE WORLD, (ASIA), CHINA,
  CANADA
  
• DEVALUATION OF U.S. DOLLARS AGAINST MOST FOREIGN
  CURRENCIES SHOULD RENDER OUR PRODUCTS AFFORDABLE.

20
U.S Vs. China Fresh Vegetable
Market Niche in Japan
21
U.S. Vs China Market share Value
in
22
Chinas Growth in Market Share
Source Economic Research Service, USDA
23
Five U.S. Processed Products to Japan Import
Market.

• Frozen Potatoes
• Other processed
• Frozen sweet corn
• Canned sweet corn
• Raisins
• 1990-1992 56 Market Share
• 1998-2000 62 Market Share

24
Major Suppliers in Japan Frozen Vegetable Import
Market
Source USDA Outlook VGS-292-01, Aug. 2002
25
Structural Changes in Japans Frozen Vegetable
Import
26
Japans Vegetable Policies
27
Japans Designated Vegetables

• Cabbage
• Carrot
• Chinese Cabbage
• Cucumber
• Eggplant
• Japanese radish
• Lettuce

• Onion
• Potato
• Spinach
• Sweet pepper
• Taro
• Tomato
• Welsh onion

Have special status as important vegetables.
Source Nagata, pp. 24, 27 and USDA/ERS Outlook,
vgs-293-01, 11/02
28
Japans Specified Vegetables

• Asparagus
• Bok choy
• Broad bea
• Broccoli
• Burdock
• Cauliflower
• Celery
• Chilli pepper

• Green soybeans
• Japanese butterbur
• J. hornwort (mitsuba)
• Komatsuna leaf
• Lotus roots
• Pumpkin
• Scallion (rakkyo)
• Shiitake mushroom

Source Nagata, pp. 24, 27 and USDA/ERS Outlook,
vgs-293-01, 11/02
29
Specified Vegetables Cont.

• Chinese chive
• Garland Chrysanthemum
• Garlic
• Ginger
• Green bean
• Green peas
• Other field melons

• Snowpeas
• Sweet Corn
• Sweet potato
• Turnip
• Wakegi green onion
• Yam
• Watermelon
• Strawberry

30
Japans Vegetable Policies, Cont.
31
Japans Vegetable Policies, Cont
32
Japans Vegetable Policies, Cont
33
Trend in Chinese Market Share in Japan Import
Trade 1990-2000
34
Trend in U.S. Fresh Vegetable Market Share in
Japan 1990-2000
35
Chinas Comparative Advantage over the U.S. In
Japan Market

• Direct Foreign Investment by foreigner in China.
• Chinas low cost of production
• Japan Geographic Proximity to China
• Japanese Trading Companies invested in China,
  providing seeds, spores, production, packing and
  harvesting techniques for Japanese retailers.
  
• Improved Ocean Freight Services from major
  Chinese ports to Japan

Source USDA Outlook VGS-292-01, Aug 02
36
China and Japan Trade War

• April 2001, Japan imposed import restrictions
  called temporary safeguard measures (art. 6 of
  the Agreement on Safeguard) on Chinese Welsh
  Onions and fresh shiitake mushrooms.
• 1st adoption of article 6, since Japan joined WTO
  in 1995.
  
• China immediately imposed 100 tariffs on
  Japanese cars, mobile phones and
  air-conditioners.
  
• A special panel to oversee bilateral farm trade
  was formed in December, 2001 but tension still
  remain.

37
Frozen Foods Consumption in Japan, USA and Europe
(weight)
38
Whats the Big Deal About Japans Import Market?

• Large market for fresh processed vegetables.
• It generated 23 billion (3 trillion yen) in 2000
  wholesale value.
  
• Japanese high per capita consumption of
  vegetables compared with other nations.
  
• Government policy encourages high prices

39
Whats the Big Deal About Japans Import Market
Cont.?

• Japanese Consume almost all of North America,
  European and Asian vegetables.
  
• Vegetable production is one of the most dynamic
  sectors of Japans agriculture.
  
• Japans vegetable industry government support
• widespread full time farming.
• Vegetable production is equally important as rice
  and livestock production.
  
• Although Japans domestic supply equal demand,
  import escalated in the 90s because of winter,
  good quality and lower prices from imported
  vegetables.

40
Implications for U.S. Chinese Competition in
Japans Market

• U.S. China tend to export different types of
  fresh vegetables
  
• Chinese increasing market share puts competitive
  pressure on the U.S.
  
• Either as direct competition on a specific
  product or,
  
• through substitution effect among
  vegetables.
  
• Chinese fresh vegetables influx is also a threat
  to Japanese farmers and it is creating tension
  between both countries.
  

41
THANK YOU

• ANY QUESTIONS?