Category: Trade

  • Expanded U.S.-Mexico Trade in Avocados Benefits U.S. Consumers

    Expanded U.S.-Mexico Trade in Avocados Benefits U.S. Consumers

    Approximately 90% of the avocados consumed in the U.S. are imported from Mexico. However, before last year, the U.S. only allowed the importation of avocados from one Mexican state—Michoacán—due to phytosanitary concerns about seed weevils and fruit flies. The Michoacán avocado industry is heavily controlled by the cartel, which has sometimes led to shaky trade relations with Mexico

    In late 2021, the U.S. Animal and Plant Health Inspection Service (APHIS) and the Association of Avocado Exporting Producers and Packers of Mexico (APEAM) reached an agreement to allow avocado imports from an additional Mexican state—Jalisco (see Figure 1). The first shipments of avocados from Jalisco entered the U.S. in August 2022. 

    This regulatory change is the focus of some of my current research with co-author Irvin Rojas at the Centro de Investigación y Docencia Económicas (CIDE) in Mexico City. We investigate the economic impacts of expanding this phytosanitary exclusion zone to include Jalisco on U.S.-Mexico avocado trade. We have also collected price information from 37 markets around Mexico to see the impacts of the policy change on local Mexican markets. 

    What did we find? 

    We find that this policy change was unequivocally beneficial from the perspective of U.S. avocado users and consumers. Authorization of avocado imports from Jalisco led to about a 10% reduction in the border price for Mexican avocados (see Figure 2), relative to what prices would have been had we continued to source only from Michoacán. The policy change also had a dramatic effect on U.S. access to Mexican avocados. The volume of avocado imports increased by almost 35% relative to a scenario in which the U.S. continued to source exclusively from Michoacán. In total, we estimate that the policy change leads to an economic welfare gain of approximately $229.5 million per year for U.S. avocado users and consumers. 

    Economic outcomes in the Mexican domestic market are slightly more nuanced. We find that—among the 37 markets studied—the policy led to a price increase for avocados sourced from Jalisco, but only for the range of avocados that were already being priced highest in the market. We did not detect a price impact for the “average” avocado sourced from Jalisco. Mexican domestic prices fell for avocados sourced from Michoacán. This result held across all ranges of avocado price tiers. 

    The trade and domestic market impacts we measure certainly change the incentive structure within (and outside) the Mexican avocado industry. Time will tell what these shifting incentives mean for cartel activity in Michoacán and Jalisco. 

    Figure 1: Location of Michoacán and Jalisco in Mexico

    Figure 2: Avocado Imports from Jalisco and U.S.-Mexico Trade Outcomes


    Schaefer, K. Aleks. “Expanded U.S.-Mexico Trade in Avocados Benefits U.S. Consumers.Southern Ag Today 3(14.4). April 4, 2023. Permalink

  • What Might Climate Change Mean for U.S. Grain Exports?

    What Might Climate Change Mean for U.S. Grain Exports?

    Climate change represents a threat to future food security. There has been plenty of recent research on the effects of climate change on agricultural yieldsproductivity, and cropping decisions. In the agricultural trade domain, researchers have shown that trade can serve as a climate adaptation device, buffering the effects of shocks in importing regions where domestic agricultural systems are negatively affected by adverse weather shocks and climate change. But how will climate change affect the trade flows of exporting countries?

    This question is the focus of our recent working paper with co-authors Kjersti Nes and Dan Scheitrum. We assess the impacts of growing-season extreme weather events on agricultural trade outcomes in the short run, as well as the trade implications of long-run shifts in climate expectations and variability. Our analysis focuses on trade in three crops—corn, rice, and soybeans. Together, these crops account for approximately $12.4 billion in U.S. exports and about 50% of calorie consumption worldwide. 

    What did we find? 

    We find that—in the short-run—extreme weather events can be extremely disruptive to agricultural trade. A growing-season weather shock with about a 1-in-100-year odds reduces corn and rice exports by more than 60%. Figure 1 shows the average annual losses in U.S. corn and rice exports associated with weather variability, evaluated as a percentage of potential exports. (Note that soybean trade appears to be less sensitive to extreme weather events.) As shown in Figure 1, on average, the U.S. loses approximately 4% of potential corn exports and 8.5% of potential rice exports due to weather variability. A 10% increase in weather variability would increase these average losses to 6.5% for corn and 10.8% for rice. 

    In the long run, we find that climate change may have large impacts on U.S. grain exports, as production shifts to regions with more temperate climates, like Canada or Argentina. Figure 2 shows our estimates of the long-run impacts of climate change on U.S. grain exports under +2°C and +4°C climate change scenarios. Under a +2°C climate change scenario, U.S. corn exports are projected to fall by as much as 44%. Things may be even more bleak if warming temperatures are accompanied by an increase in climate variability. When we simulate the +2°C climate change scenario with a 15% increase in climate variance, U.S. corn exports are projected to fall by 50%. U.S. rice and soybean exports may be hit even harder than corn. 

    Figure 1: Short-Run Impacts of Weather Variability on U.S. Agricultural Exports

    Figure 2: Long-Run Impacts of Climate Change on U.S. Agricultural Exports


    Gammans, Matthew, and K. Aleks Schaefer. “What might climate change mean for U.S. grain exports?” Southern Ag Today 3(12.4). March 23, 2023. Permalink

    Photo by Guillaume Falco: https://www.pexels.com/photo/icebergs-2229887/

  • U.S. Wood Pellet Exports Continue to Reach Record Levels

    U.S. Wood Pellet Exports Continue to Reach Record Levels

    Woody biomass now accounts for a major share of renewable energy in the European Union (EU) and United Kingdom (UK) due to recent climate and renewable energy policies. Imports of wood pellets – often used in converted coal fueled power plants – in the EU and UK have reached record levels, with imports mostly coming from the southeastern region of the U.S. Consequently, wood pellets are now the leading forest-product export for the U.S., surpassing oak lumber, pine lumber, and other major exports (USDA, 2023). This article is not about the efficacy of European climate policy or the use of woody biomass in reducing carbon emissions. The overall goal of this article is to simply document the phenomenal rise in U.S. wood pellets exports over the last decade, mostly due to demand in the UK and EU, and the potential for increased exports in the future.

    Since 2012, U.S. wood pellet exports have increased from $258 million to $1.5 billion, which is an increase of 498%. According to USDA (2023), Louisiana, Georgia, North Carolina, Virginia, and Florida have been leading states. Figure 1 shows U.S. wood pellet exports (in million metric tons [MT]) from 2012-2022 by destination (UK, EU, and Rest of World). Note that the UK has accounted for the major share of the overall rise in exports since 2012, while the EU has accounted for the major share of growth in more recent years (2021 and 2022). Since 2012, U.S. wood pellets exports have increased from 1.9 million MT (35% shipped to the UK and 57% shipped to the EU) to nearly 9.0 million MT by 2022 (59% shipped to the UK and 31% shipped to the EU). During this period, the UK accounted for as much as 90% of total U.S. exports (see 2016). The demand for wood pellets in Europe has significantly outpaced domestic production over the past ten years. This has resulted in increased imports from mainly the U.S., Russia, Belarus, and Ukraine. With the Russian invasion of Ukraine, wood pellet imports from Russia, Belarus, and Ukraine have been significantly impacted (Flach and Bolla, 2022), which likely explains the recent increase in U.S. exports to the EU and the increase in export prices from an average of $124/MT (2012-2020) to well over $150/MT in 2021 and 2022 (USDA, 2023).

    Figure 1. U.S. wood pellet exports by destination: 2012-2022

    Source: U.S. Department of Agriculture, Global Agricultural Trade System

    References

    USDA (2023) Global Agricultural Trade System. Foreign Agricultural Service. https://apps.fas.usda.gov/gats/default.aspx

    Flach, B., and S. Bolla (2022) EU Wood Pellet Annual. Report Number: E42022-0049. USDA, Foreign Agricultural Service.


    Muhammad, Andrew. “U.S. Wood Pellets Exports Continue to Reach Record Levels.Southern Ag Today 3(10.4). March 9, 2023. Permalink

  • Fresh Produce Imports from Mexico Continue to Rise

    Fresh Produce Imports from Mexico Continue to Rise

    Mexico is the largest agricultural trading partner for the United States totaling $71.9 billion (imports plus exports) in 2022.  U.S. agricultural exports to Mexico totaled $28.5 billion while imports from Mexico totaled $43.4 billion.  The main agricultural products imported from Mexico are fruits and vegetables, in fact 44 percent of the fruits and 48 percent of the vegetables imported by the U.S. are from Mexico. The United States imported $18.7 billion of produce from Mexico during 2022, including fresh, frozen, and processed fruits, vegetables, and nuts. Just over 98 percent of these imports entered the United States by land ports between Mexico and Texas, New Mexico, Arizona, and California. When considering only fresh fruits and vegetables, which is nearly 89 percent of total produce, imports totaled $16.6 billion. These imports were shipped in 590,906 forty-thousand-pound truckloads. About 55 percent of U.S. fresh fruit and vegetable imports from Mexico entered through Texas land ports, arriving in 325,467 truckloads and worth $11.6 billion. The most active single port for fresh produce import from Mexico in 2021 was Pharr, Texas with 197,253 truckloads followed by Nogales, Arizona with 144,027 truckloads. Laredo, Texas (75,409 truckloads) and Otay Mesa, California (73,580 truckloads) rounded out the top four. Although there was a small drop of the number of fresh produce trucks crossing from Mexico in 2022, the expectation is that the positive trend seen over the last decade will continue as U.S. consumers continue to demand year-round supply of fresh produce.

    Figure 1. U.S. Imports of Fresh Produce from Mexico by Truck, 2012-2022

    Source: Agricultural Marketing Service (AMS), USDA

    Photo by PhotoMIX Company: https://www.pexels.com/photo/vegetables-stall-868110/

    Ribera, Luis. “Fresh Produce Imports from Mexico Continue on the Rise.” Southern Ag Today 3(8.4). February 23, 2023. Permalink

  • U.S. Agricultural Exports Set Another Record in 2022, but Higher Prices Appear to be the Cause

    U.S. Agricultural Exports Set Another Record in 2022, but Higher Prices Appear to be the Cause

    The 2022 data on U.S. agricultural exports are now available and it looks like another record year. U.S. agricultural exports were $196 billion in 2022, up $20 billion (up 11%) when compared to the previous year. Note that 2021 was also a record year for U.S. agricultural exports ($177 billion). It appears that record sales were more so due to higher commodity prices and global inflation than an increase in real export sales. That is, the U.S. did not necessarily sell more soybeans, grains, meats, or other products to the world, we simply sold the same or even lower volumes at higher prices.

    Figure 1 shows both the agricultural export value ($ billion) and volume (million metric tons [MT]), as well as the average export price or unit value ($/MT) for the U.S. Given the broad range of exported products, a total volume measure is clearly a representative equivalent. However, as long as the U.S. Department of Agriculture is consistent every year with how volumes are measured, comparisons over time can reveal what is driving recent export growth. In 2021, U.S. agricultural exports increased from $150 to $177 billion, which was an 18% increase. However, the export volume during this period increased by only 2%: 226 million MT in 2020 to 230 million MT in 2021. Given the larger increase in value, clearly, the record in 2021 was more so due to prices. However, albeit relatively smaller, the volume did increase. In 2022, however, the volume of U.S. agricultural exports (216 million MT) was down by 6%, despite the value being up by 11% to a record level. Note that the average export price or per-unit export value in 2022 ($906/MT) was up 18% when compared to the previous year ($768/MT). Thus, the most recent record is all due to higher prices.

    In closing, record export sales in the last two years being more inflationary than representative of real export growth is not necessarily a bad thing and is in fact, quite laudable. Most important, higher values do suggest higher revenues for U.S. producers regardless of the quantities being sold. When taking a longer view, there is another positive takeaway. Note that export volumes significantly decreased with rising prices in past years (e.g., 2010 – 2013), resulting in negligible increases in export values. Whereas in the last two years, export volumes have remained relatively stable despite significantly higher prices.

    Figure 1. U.S. Agricultural Exports (Volume, Value, and Unit Value): 2010-2022

    Source: USDA, Foreign Agricultural Service, Global Agricultural Trade System (GATS) (2022)

    References

    US. Department of Agriculture. 2023. Global Agricultural Trade System (GATS). Foreign Agricultural Service, Washington, DC.


    Muhammad, Andrew. “U.S. Agricultural Exports Set Another Record in 2022, but Higher Prices Appear to be the Cause.Southern Ag Today 3(6.4). February 9, 2023. Permalink