Farm exports rebound from last year's lows

Exports of California farm products increased in May by 25 percent over May of last year. It was the seventh month of increased exports, but the increases are magnified somewhat by the lower export volumes of last year.

Jock O’Connell, international trade advisor for Beacon Economics in Sacramento, said he expects a slowing of exports over the next several months, but predicted that the upward trend will continue.

“We will still be going in the right direction, but by the end of the summer, instead of running we’ll be slowed to a walk,” he said.

Governments around the world are adopting some austerity programs, cutting back on public programs and, coupled with sluggish demand from the private sector, it will cause a much slower rate of growth in the export trade, he said.

Some of this is because the value of the dollar has been in fluctuation, especially in respect to the euro, over the last several months. The euro went from $1.50 to the dollar down to below $1.20 and now it is up to $1.26, he said, adding that this fluctuation makes traders nervous, which in turn makes people more conservative in their purchases.

Wine exports are up 12 percent in volume and 25 percent in value, according to Jon Fredrikson of Gomberg Fredrikson and Associates of Redwood City, a professional wine sector consulting firm. That is tempered by the 2009 exports, which declined 15 percent because of the economy.

Fredrikson said China is now California’s third largest wine customer, and shipments to Hong Kong and the Chinese mainland continue to increase. Many European Union nations are also beginning to import more wine than they did last year. Other nations are also increasing their wine purchases. The Philippines has imported 20 percent more wine, Taiwan 91 percent and Germany 19 percent.

O’Connell said there was strength in dairy exports in May. Bill Schiek, an economist for the Dairy Institute of California, said, “Exports are the bright spot in the markets for California producers.”

Exports of all dairy products have increased from last year and for the five-year average. Butter, cheese, dry milk and powder, and other dairy products have all seen export increases.

Oakland is the port from which Northern California farm goods are typically sent. Some of the farm produce sent from Oakland includes almonds, dairy products and rice, which is also shipped from Stockton and Sacramento. Farm goods from the southern San Joaquin Valley are more often shipped from Los Angeles and Long Beach.

O’Connell said there has been an uptick in shipments of hay grown in Southern California counties to Middle Eastern countries. He said he expects increases in hay shipments to continue. Farmers in the Middle East are using hay to feed livestock. Water to grow hay in the Middle East is of poorer quality, so farmers are importing hay from California.

The bulk of farm goods are sent by ship, but some crops are sent overseas by air. O’Connell said he did a study and found that about three-quarters of a billion dollars worth of farm products were shipped by air in 2007. While that is a very small percentage of the state’s total farm exports, perishable products like cherries and asparagus must be sent to market as quickly as possible. That year, the total California farm export value was $10.9 billion.

Cherry exports were strong this year, according to the California Cherry Advisory Board. Demand was good, according to board executive manager Jim Culbertson.

“We could have exported even more if we had not had that rain event that reduced production,” he said.

Typically, about 17 percent of the California asparagus crop is exported to Switzerland, Canada and Japan. Final numbers will not be available for some time, but Cher Watte Angulo, executive director of the California Asparagus Commission, said the exports were consistent. She said the domestic market was unusually strong this year.

Dave Baker, member relations director for Blue Diamond Growers, said China is quickly becoming the top export nation for California almonds. He is bullish on almond exports and predicts overall that shipments of almonds this year will be well over a billion pounds.

O’Connell suggests Chinese buyers are shrewd and may have purchased more almonds last year than they needed at a lower price. If the price is higher this year, they would used the stored nuts.

O’Connell said he believes that long-term markets in Asian nations such as China, India, Vietnam and others will be emerging markets. Right now they are good markets for non-perishable products, but it is a different story when talking about perishables. The problem is maintaining the cold chain. It is necessary to keep produce refrigerated from the point of origin to the point of sale. There are some huge problems moving product into China and other similar nations, he said.

O’Connell said he prepared a study for the California Department of Food and Agriculture about the cold chain in China. Right now it is OK to ship to cities like Shanghai and Beijing, where there is adequate refrigeration, especially if shipments are made by air. Trying to get out to some of the second tier cities in China is problematic.

As he was gathering data in China, O’Connell said he noticed a nonrefrigerated truck loaded with cabbage that left a produce terminal headed for a city about a thousand miles away. He asked one of the terminal managers how much of a loss there would be in that cabbage and was told about 30 percent. California growers wouldn’t want that kind of loss, he said, plus once consumers see spoiled fruits and vegetables, they are turned off and might not buy produce from that source again. Thus, until refrigeration catches up, California growers are better off not trying to ship to those markets, he said.

There are improvements being made in developing the cold chain in all Asian countries. As the infrastructure improves there may be a need for some cultural changes. O’Connell related a story no exporter wants to hear. There are some refrigerated trucks available. However, some drivers try to save money. They load the truck and when they are out of sight of the loading dock will turn off the coolers. Then, when near the destination, they turn the cooler back on, but in a climate similar to the southeastern United States, the produce carried in those trucks will display the effects of heat.

(Ron Miller is a reporter for Ag Alert. He may be contacted at rmiller@cfbf.com.)

Permission for use is granted, however, credit must be made to the California Farm Bureau Federation when reprinting this item.