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Charles Safley Department of Agricultural & Resource Economics North Carolina State University Forces that Move the Worldwide Market for Berries.

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Presentation on theme: "Charles Safley Department of Agricultural & Resource Economics North Carolina State University Forces that Move the Worldwide Market for Berries."— Presentation transcript:

1 Charles Safley Department of Agricultural & Resource Economics North Carolina State University Forces that Move the Worldwide Market for Berries

2 Presented at the Fruit Processor Meeting of the Chilean Food Industry Association (Chilealimentos) Linares, Chile July, 2007 Forces that Move the Worldwide Market for Berries

3 Worldwide Production of Strawberries (Metric Tons) Country % Change % of World USA862,8281,053, %29.1% Spain344,865308, % 8.5% Russia160,000217, % 6.0% Korea180,501200, % 5.5% Japan205,300200, % 5.5% Poland171,314180,0005.1% 5.0% Turkey130,000160, % 4.4% Mexico141,130150,2616.5% 4.2% Italy195,661147, % 4.1% Germany104,276146, % 4.1% Chile21,00025, % 0.7% World3,299,2873,615,7239.6%77.1% Source: FAS, USDA

4 Frozen Strawberry Production (Metric Tons ) Country01/0202/0303/0404/0505/06 % Change (01/02 to 05/06) USA216,908229,209230,950232,048240, % China ,50072,00090,72082, %* Poland125,80090,000130,50080,00075, % Mexico51,00053,20050,32052,00052, % Spain35,25030,40025,03638,00040, % Italy10, % Canada2,6002,700 2,9002, % Japan8701, % Source: FAS, USDA* China: 02/03 to 05/06

5 Frozen Strawberry Exports ( Metric Tons) Country01/0202/0303/0404/0505/06 % Change (01/02 to 05/06) Poland127,30084,20090,093119,64691, % China ,96875,96794,96086, %* Mexico40,20443,35740,07643, % Spain25,27133,12634,89021,99820, % USA20,58110,3979,9719,94110, % Canada1, % Italy2,3981, % Japan % Source: FAS, USDA* China: 02/03 to 05/06

6 Strawberry Production, 2007  Canada:  Area planted decreased due to low profitability  Increased fresh consumption primarily supplied by U.S.  Poland:  Area planted has decreased due to low profits caused by increased frozen imports from China  Effects of this decrease should show up in 2007/08  Japan:  Big investment in China strawberry industry  China has a big cost advantage  Demand for frozen berries is decreasing as China exports more readymade jams

7 China Strawberry Production, 2007  Increased acreage in 2007: 70,800 A (+25%)  Yields expected to increase due to increase use of labor, fertilizer and water.  Industry wants to increase use of summer varieties to fill gaps in July and October

8 Frozen Strawberry Production and Distribution in China (Metric Tons) 2005 Revised 2006 Estimate 2007 Forecast % Change Deliver to Processors94,40099,300103,0003.7% Beginning Stocks Production85,00089,30093,0004.1% Imports7,9667,2007,5004.2% Total Supply92,96696,500100,5004.1% Exports70,20668,00070,0002.9% Domestic Consumption 22,76028,50030,5007.0% Ending Stocks Total Distribution92,96696,500100,5004.1% Source: FAS, Annual GAIN Report

9 China Frozen Strawberry Industry, 2007  Frozen imports are expected to decreased as domestic production increases  EU anti-dumping tax: 34.2%  Potential Impacts: Increase domestic consumption Use a third country as a “bridge” to the EU Increased competition in Japan  However the EU is not enforcing the tax in 2007 due to decreased production in Poland

10 Frozen Strawberry Production and Distribution in Spain (Metric Tons) 2005 Revised 2006 Estimate 2007 Forecast % Change Deliver to Processors44,48088,50055, % Beginning Stocks0015, Production`35,52070,58344, % Imports15,11415,23015, % Total Supply50,63485,81375, % Exports22,86921,87524, % Domestic Consumption27,76548,53851, % Ending Stocks015, Total Distribution50,63485,81375, % Source: FAS, Annual GAIN Report

11 Spain Strawberry Industry, 2007  Environmental Activists claim strawberry growers are:  Over using water from Donana Park (marshes harbor migratory birds)  90% of Spain’s domestic production surrounds Donana Park  Water level has dropped 50% in recent years  Use of harmful pesticides  Herbicides and Pesticides  Methyl Bromide  Improper disposal of plastics used to cover tunnels and greenhouses

12 Spain Strawberry Industry, 2007  Worldwide Wildlife Fund is attempting to use “Economic Persuasion” to get growers to change their practices.  Asking Consumers to boycott Spanish strawberries from the Donana Park region  One Netherlands supermarket chain is cooperating and encouraging British supermarkets to also cooperate

13 Strawberry Demand  United Kingdom  Demand for strawberries has increased the last two years  Strawberry sales increased 34%  Suppliers struggled to keep up with demand  Consumers are beginning to demand berries year-round

14 Strawberry Demand  Germany  Demand for strawberries keeps increasing  Includes conventional and organic berries  Organic food sector is “ripe” for development  Consumption per household doubled in March 2007 compared to March 2006  The domestic industry cannot supply enough berries

15 Strawberry Demand  China  Domestic Consumption increasing  Increasing purchasing power and quality of life, especially among the Middle Class in urban areas  Middle Class consumers are looking for more products on grocery store shelves  Urban consumers are unsure about food safety

16 Opportunities for Chile?  Frozen Strawberries  China:  Growing middle class consumers  FAS, USDA Report (2007): Chile, Morocco and Argentina are expected to seriously threaten US exports to China  Europe:  UK and Germany?  Organics – Organic food sales continue to strengthen  Europe has a very large and sophisticated organic market  What will happen in China and Spain?

17 World Production of Raspberries: (Tons) Country % Change % of World Russia130,000170, %36.8% Serbia56,05990, %19.5% Chile51,25650, %10.8% Poland39,72742, % 9.1% Germany33,70020, % 4.4% Ukraine19,72320, % 4.3% Canada16,24713, % 3.0% Hungary19,80410, % 2.2% France8,7438, % 1.8% Great Britain9,5008, % 1.7% Total Production:408,115461, %93.6% Source: International Raspberry Association

18 U.S. Imported Fresh Raspberries* (US$1000) CountryCalendar Year January – April Comparisons % Change Mexico 20,46834,86116,48526, % Chile 10,07410,2567,3909, % Canada 1,5331, % Switzerland Peru Total 32,07846,64524,43635, % Source: DOC, US Census Bureau, Trade Statistics * Raspberries imported from 9/1 to 6/30 the following year.

19 U.S. Imported Frozen Raspberries (US$1000) CountryCalendar Year January – April Comparisons % Change Chile 31,03037,43522,64522, % Canada 8,7757,3721,1482, % Mexico 1,9712, , % Serbia China 2,3212, % Argentina % ROW 6,6353,9901, % Total 50,86254,41926,20727, % Source: DOC, US Census Bureau, Trade Statistics

20 2007 Raspberry Production  Spain  Area planted has increased 41.2%  Estimated area planted is 1,200 hectares, or 350 hectares more than in 2006  Serbia  Total area planted is around 15,000 hectares  Hungry:  Production is increasing

21 2007 Raspberry Production  Europe  Supply of berries to the processing industry increased from 2002 to 2004  But volume of imports decreased  China:  Domestic production increasing  No domestic market, so production will be exported to Europe

22 2007 Raspberry Production  Oregon and Washington, USA  Some growers are switching to fresh market raspberries due to: Increased consumer demand for fresh raspberries Increased competition in the processed market  Rest of the World  Relatively stable production

23 Raspberry Demand, 2007  United States  Raspberry demand increasing  Ranked as the third most popular fruit behind strawberries and blueberries  United Kingdom  Increased demand for berries & berry flavors has created a new market for raspberries  Raspberry sales increased 62% in last two years & suppliers struggled to keep up with demand Source: DOC, US Census Bureau, Trade Statistics

24 Opportunities for Chile?  US  Continued growth in fresh consumption and IQF  Fresh shipments in the off production season  Caution: Mexico deal is projected to increase( start in October and provide good volume into December)  Europe - Organic market  Frozen berries  United Kingdom  Germany

25 Worldwide Area Planted and Production of Blackberries, 2005 Region Area Planted (Acres) Production (Tons) Europe19,007 47,386 North America17,690 65,154 Central America 4,053 1,752 South America 3,946 7,031 Asia 3,830 29,038 Oceania 734 4,022 Africa World Total49,507154,603 Source: Bernadine Strik, Dept. of Horticulture, OSU

26 Projected Growth in Blackberry Area Planted  Potential of 66,797 acres of Blackberries planted worldwide by 2015  Potential 35% increase over the 2005 level  Does not include harvested wild plantings

27 Countries with the Greatest Projected Increase in Blackberry Area Planted by 2015 Country Percentage Increase 2005 Area Planted (Acres) Projected Increase (Acres) Projected Area in 2015 (Acres) Romania900 % 2502,250 2,500 Poland200 % Mexico117 % 5,6836,64912,332 Chile 76 % 1, ,955 Hungry 50 % 3,9501,975 5,925 China 42 % 3,8301,609 5,439 USA 20 %11,9052,38114,286 Source: Bernadine Strik, Dept. of Horticulture, OSU

28 U.S. Blackberries  East Coast  Production is primarily for the fresh market  North Carolina  Sunny Ridge Farms, Inc.  Goal is for 600 acres  Currently about 120 acres  Dole Foods  Expressed interest in blackberries  Not certain if interested in fresh or frozen berries

29 Demand for Blackberries  United Kingdom  Blackberry sales broke all sales records in Suppliers struggled to keep up with demand  Consumers are beginning to demand berries year-round

30 Demand for Blackberries  United States  Some industry experts believe that fresh blackberry consumption could equal or surpass raspberries Increased taste for blackberries Growing recognition of their healthful benefits

31 Opportunities for Chile  US  Continued growth in fresh consumption  Fresh shipments in the off production season  Caution: Mexico is gaining strength in the U.S. market Now estimated to have about 10,000 acres planted Could seriously damage Chile’s fresh market in the U.S.  Europe:  Organic market  Frozen berries?

32 Market Trends – Why has Demand Increased? 1.Health 2.Convenience: Year-round availability More supermarkets carrying berries 3.Globalization 4.“Fast” and reliable Refrigerated Transport 5.Forgiving Customers?

33 Health  Baby Boomers are aging  In 2011, the oldest will turn 65, and, on average, can expect to live to 83.  Many will continue well into their 90s.  Obesity has reached epidemic proportions globally (World Health Organization)  Estimated 65.8% of the adult population is obese  Major concern for children  Berries have profited from better health consciousness  Reduce fat and increase vitamin & nutrient intake  Low in calories and high in antioxidants

34 Health – Recent Studies  Cancer research  Berries may help cut risk of pancreatic cancer (American Association for Cancer Research, March 2007)  Black raspberries show promise in preventing cancer of the esophagus and colon ( American Cancer Society, March 2007 )  2006: oral, prostrate, breast and colon cancer.  Antioxidant content per serving (American Journal of Clinical Nutrition, July 2006)  Blackberries: 1 st  Strawberries: 3 rd  Raspberries: 7 th  Blueberries: 9 th

35 Market Trends  Convenience  Year-round availability No longer a seasonal item  Consumer look for and plan on using them  Demand increased in both retail and foodservice High quality, reasonability priced berries  More supermarkets now carrying berries

36 Market Trends  Globalization  More sources of fruit in the world market  Chile, Mexico, China  Fast and Reliable Transportation  Improved infrastructure to maintain the cold chain  Result: Firm Berries for the consumer  Not soft, runny fruit

37 Market Trends  “A lost in taste does not seem to matter as long as the fruit looks good.”  Are the customers really this forgiving?  Industry experts: Raspberries  There is evidence that consumption is decreasing due to poor, or decreasing, flavor (i.e. low sugar content) relative to blueberries. Blackberries  One reason blackberry consumption has been increasing is because the newer varieties are sweeter. In some cases the Brix has increased 50%.

38 Industry Challenges 1. Food Safety 2. Labor 3. Transportation 4. Increasing consumption

39 U.S. Confidence in Food Safety Down  Safety concerns prompted 38 percent of consumers to stop purchasing certain foods in previous 12 months, +9% in 2006 survey.  The items most often mentioned were  Spinach: 71 %  Lettuce: 16 %  Bagged salad: 9%  Survey was conducted in January 2007, when the outbreak linked to spinach was still in the news and illnesses associated with other foods were starting to make headlines. Source: FMI Consumer Trends 2007

40 Negative Impacts of Pesticides Products in Europe  Pesticides in fruit, vegetables and grain is a major concern for European consumers (Cited by 63%of the consumers surveyed.)  Survey of consumer opinion on pesticides in Germany  Survey made on behalf of Greenpeace  Interviews in February and April, 2007  Highest priority for consumers is no/low pesticide residues  Products listed as frequently exceeding limits and showing multiple residues:  Strawberries  Berries(red/blackberries, raspberries, gooseberries)

41 Food Safety: China  Reports of  Tainted foods  Pesticide misuse  Lack of inspections  “The Growing Dangers of the China Trade” (Time, July 7, 2007)  Farmers are using more chemical fertilizers and pesticides to increase quantity, not quality.  The government says the worst pesticides are banned, but farmers can actually still buy them and so they use them.  “…food contamination problems will likely get worse before getting better as more get-rich-quick entrepreneurs move into food and agricultural products” (NY Times, 6 June 2007)  Regulatory philosophy – Its OK “if no one is getting sick or dying”

42 Food Safety  Is it a “potential time bomb”?  E. Coli scares have also led to concerns about Water Quality Sanitation Traceability Good Agricultural Practices (GAP) certifications Good Manufacture Practices (GMP)  Nearly 69% of the U.S. Manufacturers either have or will implement stronger safety practices and are employing superior safety protocols (2007 Annual Food Manufacturing Survey)

43 Industry Challenges  Labor – Concerns about illegal labor in the U.S.  Grower have concerns about production and harvesting  Fresh Del Monte Produce processing plant in Portland, Oregon Immigration raid on 12 June employees were taken into custody  Transportation  Increased costs of air freight makes it harder to compete with ground transportation - especially in the fresh market

44 Increasing Consumption  “There’s room for growth!” U.S. Data by Commodity Consumption (% of Consumers trying fruit in last 12 months, 2007) Expenditures (% of Consumer dollar spent of fruit, 2006) Per Capita Consumption (2005) Strawberries69% 21.7%1.84 Raspberries26% 3.8%0.29 Blackberries18%<2.0%0.11 Source: USDA and The Packer Consumer Surveys

45 International Food Information Council  Consumers want to embrace the latest trends related to improving their nutrition....,BUT they are inundated with information that falls short of clearing confusion.”  Focus on information tailored to boost consumer knowledge and support targeted behavior modification.  Suggested tips: 1)Use plain talk about food and health 2)Cite study specifics 3)Affirm scientific research is continual and rarely final 4)Carefully create meaningful communications 5)Examine all the relevant facts – be objective

46 Cooperative Market Development in the Red Raspberry Industry  A generic Research and Promotion (R&P) Program  The intended purpose of the R&P Program  Balance supply and demand  Grow the market in aggregate for all suppliers  Increase the value of processed raspberries  Steps: 1)Analyze existing information and conduct new research on the benefits of raspberries 2)Convey the message to consumers, food processors, and the food industry 3)Increase the number of new products and the use of existing products

47 New Processed Products

48 Food Processing: 2007 Trends  Teens and Baby boomers remain two major consumer groups for specialized marketing efforts  Teens: Snack foods  Boomers: Products combining specific needs together with easy-to-handle packaging  Snacks are believed to be the most innovative category in the healthy food and drink group  Input prices continue to be a critical issue!

49 New Process Products  Numerous companies are looking for ways to incorporate berries in order to market them as a health platform  Ice Cream  Fruit Smoothies  Low-Fat Yogurts  Baked Products  Snack Products  Juices

50 Organic beverages are a hot category Organic beverages continue to make their way into the mainstream as a consumer desire for healthier beverage options fuels double-digit growth for the segment. R&D professionals report that beverage manufacturers increasingly are requesting tropical and so-called "super fruit" flavors in organic form.

51 Snack Foods Frito-Lay’s goal “create convenient, great- tasting snack crisps made with real fruits and vegetables.” Frito-Lay North America introduces Flat Earth fruit crisps and veggie crisps

52 Kellogg Co. adds Rice Krispies with Real Strawberries Kellogg’s research shows that “Moms are demanding more real fruit in their children's foods, while today's kids want more taste. So adding real, delicious fruit to a cereal mom has loved since she was a child was a natural fit."

53 Muscadine Grape Products “Thinking Outside the Box”  Independent laboratory tests show that Muscadine grape seeds contain the highest levels of natural antioxidants.  Muscadine grape seeds and byproducts from juice and wine production are very high in antioxidants.  Used to make Dietary Supplements

54 Thank you for your attention!

55 Back-up and Additional Slides

56 Fresh Strawberries Exports (Metric Tons) Country % Change Spain225,119207, % US 58,108103, % Mexico 30,910 70, % Belgium 33,682 38, % France 18,725 34, % Netherlands 16,057 29, % Poland 20,945 24, % Italy 33,308 22, % Germany 10,086 15, % Turkey 23 11,319> 1,000% The Top 10 Countries accounted for 96.1% of the world exports in 2004 Source: Global Trade Atlas

57 Strawberries: Fresh Imports (Metric Tons) Country % Change Germany % France % Canada % US % UK % Belgium % Italy % Austria % Netherlands % Mexico % Top 10 Countries accounted for 85.2% of the world imports in 2004 Source: Global Trade Atlas

58 Worldwide Area Harvested of Strawberries (Hectares) Country % Change % of World Poland 61,967 53, %21.3% Russia 22,000 36, %14.3% USA 19,283 21,1209.5% 8.4% Germany 9,619 12, % 4.9% Turkey 9,465 10, % 4.2% Serbia 8,686 10, % 4.0% Ukraine 7,500 8,0006.7% 3.2% Spain 11,055 7, % 3.0% Japan 7,450 7, % 2.9% Korea 7,090 7, % 2.8% Chile 777 1, % 0.4% World 248,321251,7181.4%69.4% Source: FAS, USDA

59 Strawberry Production and Distribution in Spain (Metric Tons) 2005 Revised 2006 Estimate 2007 Forecast % Change Area Planted7,6117,4007, Area Harvested7,6117,4007, Production308,000335,500275, Imports, Fresh6,0144,7355, Total Supply314,014338,235280, Exports, Fresh237,534207,974185, Fresh Domestic Consumption 32,00041,76140, Processing44,48088,50055, Total Distribution314,014338,235280, Source: FAS, Annual GAIN Report

60 U.S. Red Raspberry Cold Storage Holdings MONTH % August76,31978,9933.5% September78,14764, % October72,80960, % November66,00756, % December55,80152, % January50,82046, % February46,12239, % March39,47234, % April34,75233, % May30,98931,3231.1% Source: USDA Cold Storage Reports

61 U.S. Imported Frozen Berries* (Values in US$1000) CountryCalendar Year January – April Comparisons % Change Chile 1,6616,0353,9705, % China 1,7882, % Serbia 1, Columbia % Canada % Denmark ROW % Total 5,64110,2684,6086, % Source: DOC, US Census Bureau, Trade Statistics, 6-Digit Imports * Berries = Blackberries, Mulberries and Loganberries

62 U.S. Blackberry Cold Storage Holdings MONTH % August33,66932, % September32,44131, % October31,37130, % November27,87428,3101.6% December25,67726,7434.2% January25,36725,6040.9% February23,09724,7267.1% March19,57522, % April18,02320, % May15,82518, % Source: USDA Cold Storage Reports


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