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 Japan’s Import Market China’s Performance in Japan’s 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 U.S. EXPORTCANADAMEXICO Processed Potatoes > 15% Increase Fresh Apples> 15% Increase Fresh Pears> 15% Increase Processed Tomatoes < 15% Increase Snap Beans 66 % Increase Cucumber 90 % Increase

7. U.S. Vegetable Industry: Production 2001-2003 Item Unit 2001 2002 2003 Veg. ProdMil.cwt 1,264 1,331 1,371 Fresh Mkt.Mil.cwt 474 470 477 ProcessingMil.cwt 303 341 335 PotatoesMil.cwt 438 462 503 Dry beanMil.cwt 20 30 27 OthersMil.cwt 29 28 31

8. U.S. Vegetable Industry: Area Harvested 2001-2003 Items Unit 2001 2002 2003 A. Harvt. Vegetable 1,000 ac 6,370 6,988 6,946 Fresh Mkt.1,000 ac 2,070 2,050 2,075 Processing1,000 ac. 1,330 1,356 1,340 Potatoes1,000 ac. 1,222 1,268 1,325 Dry bean1,000 ac. 1,249 1,740 1,605 Others1,000 ac. 500 573 601

9. U.S. Vegetable Industry: Crop Value 2001-2003 Item Unit 2001 2002 2003 Veg.Value$ mil 14,998 15,570 15,610 Fresh Mkt.$ mil 9,012 9,150 Processing$ mil 1,340 1,505 1,520 Potatoes$ mil 3,058 3,170 3,175 Dry beans$ mil 393 495 520 Others$ mil 1,195 1,250 1,245

10. U.S. Vegetable Industry, Import Trade:2001-2003 Items Unit 2001 2002 2003 Import$ mil 4,528 4,620 4,665 Fresh Melon$ mil 2,597 2,475 2,515 Canned, frozen$ mil 828 900 865 Potatoes$ mil 523 585 635 Dry beans$ mil 51 70 55 Others$ mil 580 590 595

11. U.S. Vegetable Industry, Export Trade:2001-2003 Items Unit 2001 2002 2003 Export$ mil 3,211 3,377 3,455 Frsh Veg & melon $ mil 1,197 1,205 1,220 Canned, frozen $ mil 686 675 695 Potatoes$ mil 700 680 705 Dry beans$ mil 176 182 190 Others$ mil 452 635 645

12. U.S. Vegetable Industry, Unit Value: 2001-2003 Item Unit 2001 2002 2003 Fresh-Mkt.$/cwt 19.00 19.49 19.20 Processing$/cwt 4.42 4.41 4.54 Potatoes$/cwt 6.99 6.86 6.32 Dry beans$/cwt 22.10 16.42 19.62 Others$/cwt 40.85 44.57 40.27

13. U.S. Vegetable Industry, Per Capita Use: 2001-2003 ItemsUnit 2001 2002 2003 Per CapitaPounds 446 448 452 Frsh veg & melon Pounds 173 175 ProcessingPounds 119 121 122 PotatoesPounds 138 136 139 Dry beansPounds 7 7 7

14. U.S Ag. Trade: 1998-2003 Item1998‘992000‘01‘0202/0305/0 3 Export$bil53.649.150.752.753.357.056.0 Import$bil36.837.338.939.041.043.045.5 Balanc e Trade $bil16.811.811.913.712.314.010.5 Source: usda, usdc (2003)AES-38 Outlook, May 27

15. GA & U.S. Production Forecast for Selected Fruits: 2001-02 CropsGeorgia 2001/(02) Georgia 2001/(2002) U.S. 2001/ (2002) Apples (Lbs) 9 million 10 million + 11.1 %9.6 billion 8.92 billion Grapes (tons) 3,200 3,600 +12.5 %6.55 million 7.27 million Peaches (Lbs) 140 million 115 million - 17.9 %2.44 billion 2.53 billion Pecans (Lbs) 111 million 50 million - 54.9 %338.5 bill 201.7 bill

16. Excess Georgia Mkt. Potential Fresh Produce Per Capita consum (Ib) 2002 popu (mill) Market Pot.(mil lions) Prod. (million Ibs) Excess Market. Pot. (Mill) Onion 18.30 8.19149.8316.2+166.4 Water- Melon 15.90 8.19130.2468.0+337.8 Cabbage 8.50 8.19 69.6248.5+178.9 Cucum 6.90 8.19 56.5176.0+119.5

17. Excess GA Mkt. Potential, cont. Fresh Produce Per Cap consum ption (Ib) 2002 popu (mill) Market Pot.(mil lions lbs) Prod. (million Ibs) Excess Market. Pot. (Mill) Bell Pepper 6.80 8.19 55.5 90.1+34.6 Peaches 5.30 8.19 43.4 115.0+71.6 S Bean 1.90 8.19 15.5 86.8+71.3 E.plant 0.50 8.19 4.2 48.4+44.2 Pecans0.398.19 3.280.0+76.8

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 YEARS CHINA U.S.A. 1990-92 6% 14% 1992-94 N/A 29% 1996-2000 35% 21%

21. U.S. Vs China Market share: Value in $ Countries 1990-1992 2000 CHINA$50 MILLION$311 MILLION U.S.A.$72 MILLION$205 MILLION

22. China’s Growth in Market Share 1990-19921998-2000 Crops 5% 37%Frozen Vegetables (sweet corn, potatoes) 6% 35%Fresh Vegetables 24% 50%Processed products (potatoes) 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 Country1990-921998-02Crops China 5% 37%Frozen Veg Taiwan 34% 6% F. Vegetable U.S.A. 44% 39%F. Vegetable Others: Canada, Thailand, N. Zealand, Mexico < 5% Frozen Vegetables Source: USDA Outlook VGS-292-01, Aug. 2002

25. Structural Changes in Japan’s Frozen Vegetable Import Country1990-92Crops1998-00Crops China 40%Beans peas 42%Legumes Spinach U.S.A. 73% 15% Prepared Potatoes Sweet Corn 87% 80% Prepared Potatoes Sweet Corn

26. Japan’s Vegetable Policies Domestic Policy ObjectiveCrop coverage Production, processing and Market Subsidies Increase scale, efficiency, quality and supply All Vegetables Compensation to producers if market price falls Compensate part of price fall from historically average market Price 14 “designated” 28 “specified” vegetables

27. Japan’s “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. Japan’s “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. Japan’s Vegetable Policies, Cont. Domestic Policy Goals Commodity coverage Rice diversion payments Encourage substituting. Vegetables for rice All Vegetables Disaster insurance subsidies Reduce risk of vegetable farming Potatoes; kidney and Azuki, red beans, vegies grown in covered structure

31. Japan’s Vegetable Policies, Cont Import Policy ObjectiveCrop coverage Tariffs (0-12.8%)Raise domestic Market price All vegetables Gate price systemRaise import prices to a threshold level Onions Tariff-rate quotaRaise domestic market prices Dried beans

32. Japan’s Vegetable Policies, Cont Import PolicyObjectiveCrop coverage Temporary safeguard measures Temporarily raise domestic prices Welsh onions & shiitake mushrooms Phytosanitary regulations Protect against plant diseases and pests All fresh vegetables

33. Trend in Chinese Market Share in Japan Import Trade 1990-2000 Crops 1990-92 1998-00 Mushrooms 20% 65% Radishes 3% 76% Peas 46% 99% Leeks 82% 91% Garlic 92% 99% Edible Brassicas 2% 11% Onions 0% 16% Carrots & Turnips 3% 76% Spinach 17% 64%

34. Trend in U.S. Fresh Vegetable Market Share in Japan 1990-2000 Crops 1990-92 1998-00 Edible Brassicas 80% 84% Onions 28% 52% Asparagus 28% 20%

35. China’s Comparative Advantage over the U.S. In Japan Market Direct Foreign Investment by foreigner in China. China’s 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. 1 st 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) CountryVegetablesPotatoes Others Total Japan 22.5 13.6 N/A 36.1% USA 10.6 22.4 N/A 33.0% Europe 21.0 21.8 N/A 42.8%

38. What’s the Big Deal About Japan’s 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. What’s the Big Deal About Japan’s Import Market Cont.? Japanese Consume almost all of North America, European and Asian vegetables. Vegetable production is one of the most dynamic sectors of Japan’s agriculture. Japan’s vegetable industry & government support widespread full time farming. Vegetable production is equally important as rice and livestock production. Although Japan’s 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 Japan’s 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?