Growing Magazine - October, 2012

FEATURES

Targeting Foreign Markets

What you need to know about exporting
By Dorothy Noble

At the USDA's Agricultural Outlook forum this year, their economists projected horticultural crops exports to reach $38.7 billion by 2021. Fruits, vegetables and nuts account for two-thirds. Beer, wine and oils make up the remaining third.


These Taiwanese schoolkids have fun showing off their pears before eating them.
PHOTO COURTESY OF USA PEARS.

Over the past decade, tree nuts continued to achieve strong gains in exports, providing over 20 percent in the horticultural crops category. Produce accounts for slightly less than half of the total projected, with fresh and processed almost evenly split. Fruit exports exceed vegetable exports, contributing over a quarter of horticultural crops expected by 2021.

On August 30, USDA Secretary Tom Vilsack announced that U.S. agricultural export forecasts for the 2012 and 2013 fiscal years show a level unmatched in the nation's history. Vilsack said, "Exports of U. S. food and agricultural products are expected to reach $143.5 billion in fiscal 2013, well above the record set in 2011." The USDA also revised its fiscal 2012 forecast upward to $136.5 billion.

In his late August statement, Vilsack urged Congress to pass a comprehensive, multiyear Food, Farm and Jobs Bill.

Known as the Farm Bill, the 2008 act provided support for specialty crops, which include horticultural crops. Its provisions reauthorized programs designed to promote exports and combat trade barriers of specialty crops. These included the Market Access Program (MAP) and the Technical Assistance for Specialty Crops (TASC) Program. The USDA's Foreign Agricultural Service administers these programs. As of this writing, both the House and Senate versions of the Farm Bill continue funding for specialty crops export promotion, but the final bill has not yet been passed.

Although horticultural crop exports have increased over the past decade, and projections show continual increase, horticultural crop imports overtook U.S. exports by 1995, and this trade deficit has been widening. Of American specialty crops, only tree nuts show a net export balance.

Several factors contribute to the specialty crops trade deficit. Increasing domestic consumer zeal for out-of-season produce and new exotic produce and preparations have contributed to demand for imports. At the same time, most of these products enter American markets duty-free or at preferential rates.

Lower production costs in many foreign countries also place the U.S. at a competitive disadvantage. What's more, a number of foreign governments subsidize their fruit and vegetable production and/or implement support policies. The U.S. Trade Commission (USTC) investigates dumping claims (incidences in which foreign countries' exports are alleged to be priced below their costs). The U.S. can negotiate relief or assess higher tariffs against those countries.


The U.S. pavilion was one of the largest at the recent FOODEX Japan show. U.S. Ambassador John V. Roos, right, discusses American-produced organic onions with a Japanese buyer.
PHOTO COURTESY OF THE U.S. EMBASSY IN TOKYO.

Increased market sourcing in foreign countries by U.S. companies has played a role as well.

The fluctuating value of the dollar relative to foreign currencies influences trade. When the dollar depreciates, American products become less costly in foreign countries compared to domestic prices. This is favorable at times, but exchange rates fluctuate, creating less stability in the market. Plus, the state of foreign countries' economies affect their purchasing power. Their political environment is another factor.

Tariffs and nontariff trade barriers limit U.S. exports. The latter, which can be protectionism in disguise, frequently include standards and inspection and packaging requirements that appear to change rapidly and indiscriminately. More stringent organic requirements and lower allowable pesticide levels than in the U.S., plus sanitary and phytosanitary requirements, have been used to restrict trade.

Finally, the market is becoming more global, making trade more competitive, but that also enhances opportunities.

President Obama created the National Export Incentive program in 2009 with the goal of doubling exports by the end of 2014. Government efforts have implemented trade agreements with South Korea and Columbia, and have expanded organics trade by negotiating organic equivalency standards. Plus, numerous trade barriers have been removed. MAP and other programs have funded organizations and cooperators that instruct and train prospective exporters and provide a plethora of promotional materials and events.

These programs have expanded trade with a wider range of countries, particularly the emerging market countries. Since Canada and Mexico remain our top two export countries, new opportunities exist. Vilsack often says, "U.S. agriculture is the envy of the world."

Free trade agreements strive for competitive advantages by reducing or eliminating tariffs and nontariff trade barriers and other preferential treatment for certain goods. In 2010, over 40 percent of our exports went to free trade agreement partner countries. In addition, exports to those countries are increasing at a faster rate than those with the rest of the world.

The U.S. currently has free trade agreements in force with Australia, Bahrain, Chile, Columbia, DR-CAFTA (Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras and Nicaragua), Israel, Jordan, Korea, Morocco, NAFTA (Canada and Mexico), Oman, Peru and Singapore. In addition, an agreement has been negotiated and signed with Panama; at this writing it is not yet in force.

The U.S. is also negotiating a regional free trade agreement, the Trans-Pacific Partnership, with Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore and Vietnam.

Although the North American Free Trade Agreement with Canada and Mexico (NAFTA) opened more trade in many sectors, fruit and vegetable producers have reported market share losses in several categories. The U.S. International Trade Commission (USITC) has resolved a few import injury cases.

Most export development resources advise self-assessment to determine if the individual and company stand ready to export. In addition, they urge planning and market study. Dr. Parr Rosson, head of Texas A&M's department of economics, has studied international trade extensively. He advises, "Understand the market well, understand the consumer, and understand the logistics of shipping U.S. products to international markets." He further suggests developing a good relationship with a bank with an international department. "They can prepare a letter of credit correctly," he says. Rosson also notes that freight forwarders can properly document cargoes.

Foreign Agricultural Service specialists say that potential exporters should identify their best products to export and the best foreign markets. Perishability, weight and counter-seasonality may be considered in market determination. In general, high-value crops are preferable. Studying trade data and market reports can help evaluation. For instance, demand for semi-processed items is usually greater. Keeping abreast of import restrictions and changes is imperative.


Jeff Correa, international marketing director for USA Pears, says its pears reach over 60 countries.
PHOTO COURTESY OF USA PEARS.

A sampling of success

Those who have found export success share a common thread; they've done planning and research on several levels and continuously monitor the dynamics of revolving markets. They also develop contacts and lobby for positive policies to enhance their marketing positions. Some of these are USDA FAS cooperators who participate in their market development programs.

Persistence can play a role. For example, the American Soybean Association spent 16 years in China before selling a single bean. Today, China buys almost one-fourth of the U.S. crop, more than $11 billion annually. Companies often use marketing representatives or consultants inside the foreign country or region to facilitate the exporting process, including marketing. The California Asparagus Commission uses a multipronged approach. Nearly a fifth of the crop is exported, with Switzerland, Japan and Canada being the top markets. The Cranberry Marketing Committee and other organizations maintain a presence in their foreign markets.

Foreign countries have enjoyed U.S. pears for decades. The current top four markets are Mexico, Canada, Brazil and Russia. India's pear imports are rapidly increasing. Jeff Correa, international marketing director, advises prospective exporters to take advantage of export readiness seminars and trade shows to determine the market and buyer preferences.

Many agricultural products produce seasonally, and the production schedule sometimes disrupts a competitive window of time advantage. This necessitates keeping abreast of world markets. Correa notes that overly restrictive limits on pesticide residue implemented by some foreign retailers have influenced their marketing strategy.

He credits the Northwest Horticultural Council with their work on the phytosanitary, sanitary and trade barrier work they perform on behalf of the U.S. pear industry. The council also works with apples, sweet cherries and stone fruit growers and shippers. The council's website includes an export manual with up-to-date country alerts and tariff barriers plus general information, a fruit labeling manual, and data on the U.S. and the European Union's maximum pesticide levels, plus the Codex maximum residue levels and the countries that accept it.

A grower-shipper of apples, Fred Hess, president of Hess Brothers Orchard Co. in Leola, Pa., qualifies exporting. "It doesn't come without risk," he says. His advice to would-be exporters: "Try it. The number one rule is: If you're going to sell something, don't misrepresent it." He cautions, "Realize that many foreign buyers are very well-educated, and some are trying to be opportunistic." Hess recognizes that profitable exporting depends on the importing country's economy and the exchange rate of the U.S. dollar. Factors such as this season's lighter supply also count. Price pressure affects export competition.

Hess works with the U.S. Apple Export Council (USAEC), which represents 40 percent of U.S. production. Members produce apples in California, Michigan, New England, New York, Pennsylvania and Virginia. In addition to developing and disseminating promotional materials, the USAEC participates in the yearly Asia Fruit Logistica in Hong Kong, ANTAD in Mexico, Fruit Logistica in Berlin and other shows such as World Food in Moscow.

Seventy percent of Idaho, Montana, North Dakota and Washington dried pea and lentil production is exported, according to the USA Dry Pea and Lentil Council. In addition, foreign markets claim 50 percent of their chickpeas. If kept cool, dark and dry, they have a long shelf life, adding to their export appeal. Pete Klaiber, director of marketing, reports that growers work with their processors in the exporting endeavor. Established in 1965, the council develops new product launches and promotions. A contracted team of international representatives covers markets worldwide. Klaiber recognizes that growers new to exporting should determine market needs and may desire to work with processors.

An importer-exporter of fruit and vegetables, Multi Fruit USA, headquartered in Haddon Heights, N.J., maintains offices in California, Florida and Washington. Specializing in shipping American-grown citrus, grapes and tree fruit, and vegetables including squash and sweet potatoes, their cold storage and warehouse facilities enable orderly distribution to all regions of the globe. Most shipping is by refrigerated containers via sea freight; highly perishable products receive air freight treatment. President Greg Palmer says the business is market driven. When the European Union's organic standards became cumbersome, he concentrated on Japan and Mexico. He notes, "Growers grow the best crop available with due diligence, and it's sometimes more difficult to export."

California's Central Valley supplies 80 percent of the world's almonds. With a mild climate, rich soil, abundant sunshine, and research-backed techniques and specialized equipment for growing, harvesting, processing and packaging, production continues to rise. The Almond Board of California promotes export trade through market access programs and works to mitigate trade barriers. Exports account for 70 percent of California almond shipments. Shelled, in shell or manufactured, they reach every region of the world.

Resources

International trade is complicated, and changes in countries' economic and political environments occur rapidly. To the uninitiated, much of the information in these resources may seem overwhelming. Dedicating time to study and evaluate the information, however, should aid in understanding the export process, pitfalls and rewards. The following Web resources provide basic and specific information about exporting. The data in many of these references contain highlights - the sites include more information than that cited. Because many government agencies link to others, some overlap occurs. In addition, frequent updates are the norm. See page A12 for a link to a list of resources.

As part of the National Export Initiative program, four regional organizations were created to foster agricultural exporting of value-added food and agricultural products: Food Export USA Northeast, Food Export Association of the Midwest USA, Southern United States Trade Association (SUSTA) and Western United States Agricultural Trade Association (WUSATA). These differ somewhat in services, but all offer market research, promotional programs, trade events, and educational seminars and/or webinars. The branded programs, through MAP, provide matching funds to eligible small and midsized businesses for eligible promotional activities. The programs are geared to specific topics covering many facets of exporting, plus informative data on specific countries and regions. One-on-one counseling is part of the services.

One database of AgExport Links directs current and potential exporters to multiple companies that specialize in export services. These include custom brokers, export agencies, freight forwarders, government experts, international bankers and lawyers, and shipping and trade associations. Among the services these companies can supply are consolidated shipping, export documentation, label management, letters of credit, promotional services, warehousing and consulting services.

Managed by the U.S. Dep-artment of Commerce's Inter- national Trade Administration (ITA) in collaboration with nine other U.S. government entities, the site provides a range of information or links to resources regarding export trade. It covers basics, finance, logistics, licensing and regulations and trade problems. Export training webinars include archived sessions.

The U.S. Commercial Service's market research library contains more than 100,000 industry and country-specific market reports. They are accessible through the "Doing Business In" guides. The Country Commercial Guides, available for more than 100 countries, contain detailed information on the political and economic environment, leading sectors for exporters, trade and project financing, business travel and contacts, market research and trade events. For example, the 2012 guide for China includes an agricultural sector overview, which reports that bulk commodities dominate their imports, but also that consumer-oriented foods of high value-added products also sell well. Processed fruits and vegetables and nuts had sales of $200 million each last year. The specialists authoring the report advise exporters to carefully check import regulations due to China's changing regulatory environment.

The Commercial Country Guide for Canada notes that Canada continues to hold the record as the U.S.'s largest export market, buying 20 percent of exported products. Due to Canada's shorter growing season and relatively high per capita consumption of fresh vegetables, Canada is the number one market for U.S. fresh vegetables.

U.S. exporters to Canada capture half of the Canadian import market for fresh fruit. Strawberries, other berries, grapes and citrus maintain strong sales. While still only about 2 to 2.5 percent of total sales, Canada's organic retail market is growing at 15 to 20 percent annually. Canadians rely on U.S. organic food suppliers for the majority of their fresh and processed organic foods. Soy drinks, bagged salads, ready-to-eat cereals, refrigerated yogurt and bagged broadleaf vegetables represent the largest segment. Canada's organic products must be certified according to their National Standard for Organic Agriculture. However, in 2009, the U.S. and Canada signed an organics equivalency agreement that facilitates U.S. organic exports.

In addition to market reports, the U.S. Commercial Service offers customized support and individualized guidance to target the best markets, promote the product, meet the best agents and distributors, overcome challenges, and access export training and trade financing.

Companies may be listed at no charge in ITA's official catalog of U.S. suppliers, which is sent to nearly 400,000 international companies. Exporters can advertise in its sponsored magazine, Commercial News USAwhich reaches more than a quarter million readers in 178 countries.

In addition, has specialized links to food and agricultural products. These include the USDA's Foreign Agricultural Service's data links to about 30 trading countries; a searchable World Trade Organization (WTO) tariff database; plus its Global Agricultural Information Network (GAIN), which provides timely information on foreign countries' economies, products and issues that affect U.S. production as well as trade. Furthermore, this site leads to data from other government agencies involved in international trade.

The Foreign Agricultural Service (FAS) provides export statistics and administers numerous agriculture-specific market development programs. The Cooperator Program partners with industry producers and processors to create, expand or maintain long-term exports. The Market Access Program helps finance overseas promotional activities. The Emerging Markets Program directs funding of export activities to the world's emerging markets. The Quality Samples Program assists trade organizations with product sampling to potential emerging market buyers. The Technical Assistance for Specialty Crops Program funds trade organizations that address sanitary, phytosanitary and technical barriers that limit U.S. specialty crops exports. These programs are often geared to small and midsized businesses.

FAS databases include attaché reports, detailed trade data, directory of experts, maximum residue limits (MRL) data, U.S. supplier listings, events calendar, WTO tariff schedules, food price data and analysis tools. Reports such as FAS market access reports consolidate data on foreign country requirements of food laws, labeling and import procedures. FAS events include information on agricultural trade shows to promote American exports. The March show in Japan attracted 76,000 throughout Asia. USDA-endorsed shows provide dedicated space for U.S. products plus Internet access and a lounge for conferring with prospective buyers.

The Office of the United States Trade Representative's website, in its trade toolbox section, lists trade acronyms, includes a glossary of trade terms and provides links to U.S. trade laws and to the U.S. State Department's background notes on individual countries. It also reports on trade barriers.

While large businesses export higher volume, most U.S. exporters are classified as small or midsized businesses. The Small Business Administration reports that 96 percent of consumers live outside the U.S. and have two-thirds of the world's purchasing power. To help small businesses capitalize on foreign markets, they provide a questionnaire to assess export readiness, conduct trade fairs, assist with business planning, and provide counseling and information on financing and their loan programs. Its Export Express program works with the Export Import Bank and other banks to facilitate loans.

The Census Bureau offers training, including seminars and workshops, to instruct exporters in automated export compliance. Mandatory filing requirements, common foreign trade regulation violations, mitigation guidelines, how to avoid penalties and cargo seizure, the commodity classification Schedule B codes, and export controls and enforcement are covered.

State and regional produce-specific organizations offer export information as well as lobbying efforts to enhance marketing of fruit, nut and vegetable products. National produce groups, including Western Growers and United Fresh and the Produce Marketing Association, provide extensive assistance to members. Some state departments of agriculture have export programs; prospective exporters should contact theirs for guidance or referrals.

The Produce Marketing Association (PMA) represents its 2,500 members in 40 countries and provides contacts through U.S. and global events, offers critical industry and marketing information, and works on behalf of members on vital issues such as food safety and traceability. President and CEO Bryan Silbermann says, "We lead with courage, with character and with our global community." PMA provides a valuable global tool under the PMA Resources heading of its website, namely links to navigating government agencies. In addition, Nancy Tucker, PMA's vice president, global business development, says, "We provide access to good contacts throughout the entire supply chain, from growers and exporters through shipping, freight forwarding, and specialized agents and on to supermarket and food service buyers."

The author is a writer/researcher specializing in agriculture. She currently resides in central Pennsylvania.

Online Resources

For an extensive list of online resources, visit www.growingmagazine.com/blog-3520.aspx.