Economic Magnitude & Potential of Vegetables in Georgia.

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

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 Trade:2001-2003

11. U.S. Vegetable Industry, Export Trade:2001-2003

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. China’s 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 Japan’s Frozen Vegetable Import

26. Japan’s Vegetable Policies

27. Cabbage* Carrot Chinese Cabbage* Cucumber Eggplant* Japanese radish* Lettuce Onion* Potato Spinach Sweet pepper Taro Tomato Welsh onion Japan’s “Designated Vegetables” *Have special status as important vegetables. Source: Nagata, pp. 24, 27 and USDA/ERS Outlook, vgs-293-01, 11/02

28. 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 Japan’s “Specified Vegetables” Source: Nagata, pp. 24, 27 and USDA/ERS Outlook, vgs-293-01, 11/02

29. 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 “Specified Vegetables” Cont.

30. Japan’s Vegetable Policies, Cont.

31. Japan’s Vegetable Policies, Cont

32. Japan’s 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. 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. • 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. 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?