Category: Trade

Introduction

Increased attention among consumers to the healthfulness and environmental footprint of their diet has expanded opportunities for organic products both in the U.S. and abroad. These developments have major implications for international trade. In just a little over a decade, the total value of imported organic products has nearly tripled from $667 million in 2011 to about $2 billion 2023 (Figure 1). Over this same time period, U.S. exports have increased from $412 million to $582 million. 

Figure 1. The US Organic Trade from 2011 to 2023

What are the most highly traded products? 

On the export side (Figure 2.a), the majority of organic trade is in fruits and vegetables. These products accounted for about 60% and 30% of exports in 2023, respectively. Things have evolved differently on the import side (Figure 2.b). In 2011, U.S. organic imports were dominated by coffee and tea. These products accounted for about 84% of imports at that time. Today, coffee and tea represent only 34% of U.S. organic imports. This is not to say that these imports have disappeared. In fact, the value of coffee and tea imports has increased from $563 to $673 million over the time period. So, the decline in the import share of coffee and tea is actually due to the rapid expansion in the import of other organic products—namely fruit, which accounted for about 50% of organic imports in 2023. 

Figure 2. Product Composition of U.S. Organic Trade

(a) U.S. Organic Exports

(b) U.S. Organic Imports

Who do we trade with? 

Canada is the largest market for U.S. organic products (annually importing $7 million), followed by Mexico ($4 million), Japan ($0.9 million), Taiwan ($0.7 million), and South Korea ($0.4 million). In terms of organic imports, Mexico is our largest trade partner (sending $11 million worth of organic products to the U.S. per year). Peru, Colombia, and Honduras are the second, third, and fourth largest players, annually sending about $9 million, $7 million, and $7 million worth of organic products to the U.S. per year, respectively. 

One major driver of organic trade is the negotiation and implementation of Organic Equivalency Agreements (OEAs) with many of our trade partners. These OEAs are essentially “two-for-the-price-of-one” agreements from the perspective of organic producers. OEAs allow producers who are certified to produce organic products in their home country to label their products as organic in the U.S. (or vice versa) without going through the extra hassle and cost of the additional certification process. As of March 2024, the U.S. has OEAs with Canada, European Union, Japan, South Korea, Switzerland, Taiwan, United Kingdom, New Zealand, and Israel.

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Choi, Jungman and K. Aleks Schaefer. “What’s the Lay of the Land in U.S. Organics Trade?” Southern Ag Today 4(12.4). March 21, 2024. Permalink

The United States had a total supply of 105.51 billion pounds of fresh produce in 2022. Fruit availability in the United States totaled 42.26 billion pounds in 2022, or 40.1 percent of fresh produce. The total supply of fresh fruit can be split into U.S. production and imports which are, respectively, 19.11 and 23.15 billion pounds.  Fresh vegetables are also broken into production and imports, some products also include beginning stocks which contributed an additional 1.30 billion pounds in 2022. Vegetable production totaled 42.92 billion pounds with imports at 20.32 billion.

The main fruits produced domestically were apples, oranges, strawberries, grapes, and lemons while the main fruits imported were bananas, avocados, pineapples, grapes, and limes.  The main vegetables produced domestically were potatoes, onions, leaf and romaine, head lettuce and sweet potatoes, while the main imported vegetables were tomatoes, cucumbers, bell peppers, potatoes, and onions. While production values are still unavailable for 2023, information on trade indicates that U.S. imports for fresh fruits increased by 2.13 percent from 2022. Fresh vegetables decreased by a third of a percent from one year to the next.

Moreover, during 2023, Mexico was the largest exporter of fresh produce to the United States totaling an estimated 25.1 billion pounds, worth an estimated $17.96 billion. Of that 10.25 billion pounds, or 40.9 percent, was fresh fruit and the other 14.84 billion pounds were fresh vegetables. Mexico is the largest source of U.S. imports for a large variety of products. Mexican exports are dominated by tomatoes with 4.29 billion pounds of exports followed by avocados (2.48 billion pounds) and peppers (1.85 billion pounds). U.S. import volume for each of these three products from Mexico is larger than the total volume of fresh produce imported from any market outside of the top five.

Guatemala and Costa Rica followed Mexico as the two next largest exporters of fresh produce to the United States. Guatemala was the source of 6.17 billion pounds of fresh produce with 4.44 billion pounds from Costa Rica. Over 90 percent of the total fresh produce exported to the United States for both countries was fresh fruit with the volume heavily concentrated to a few products. Of the 6.17 billion pounds of produce exported from Guatemala 4.38 billion pounds were bananas. Similarly, Costa Rica leads exports of pineapples to the United States with 2.46 billion pounds of the 4.44 billion.

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The Panama Canal, a linchpin of global maritime trade, faces its most severe drought in history, resulting in unprecedented restrictions on vessel transits. Currently, hundreds of cargo vessels and tankers are stuck in front of the channel, with average wait times exceeding three weeks. This crisis is a major engineering challenge and a stark reminder of how vulnerable the global trade system is to weather shifts. At the heart of the Panama Canal drought lies the El Niño weather phenomenon, exacerbated by the broader issue of climate change. El Niño induces substantial weather anomalies, including reduced rainfall in Central America, directly affecting the water levels crucial for the canal’s operation. Climate change amplifies these effects further, resulting in more frequent and severe drought conditions.

Under normal circumstances, the Panama Canal can accommodate about 35 ship crossings daily. However, the drought has caused a more than 30 percent reduction in vessel transits, limiting daily crossings to around 24 ships, as shown in Figure 1. This reduction is not just a logistical challenge but a substantial economic setback for Panama. Canal administrators anticipate a staggering loss of $500 million to $700 million in revenue for fiscal year 2024. The first quarter of fiscal year 2024 alone witnessed a 20 percent decrease in cargo volume, leading to 791 fewer ships than the previous year.

Figure 1: Daily vessel transit through the Panama Canal plummets by 30 percent.

The United States heavily relies on the Panama Canal for its agricultural exports, especially to Asian markets, facing profound repercussions due to this crisis. Figure 2 shows that grains and oilseeds are the major agricultural transit goods in volume. Last year, about 26 percent of U.S. soybean and 17 percent of corn exports passed through the Panama Canal. Due to the disruptions, U.S. agricultural exporters grapple with rising shipping costs and extended transit times. These additional expenses will translate into higher prices for agricultural products in Asian markets. For some perishable goods, shipping delays can impact market value due to compromised quality.

Figure 2: Panama Canal handles over 26 percent of U.S. soybean and 17 percent of corn exports.

The trajectory of the Panama Canal’s operational capacity in 2024 hinges mainly on environmental factors that are out of human control. While the impending rainy season might offer temporary relief, broader concerns surrounding climate change and the persistence of El Niño suggest the possibility of recurring droughts. In response, the Panama Canal Authority started to explore different water management techniques and new water sources to sustain both the canal’s functionality and Panama’s domestic needs.

Looking into the future, U.S. agricultural exporters may need to reassess their logistical strategies, including exploring alternative shipping routes, adjusting shipping schedules, and potentially diversifying export markets to mitigate risks associated with the canal’s reduced capacity. The situation unfolding in the Panama Canal shows the vulnerability of global trade to environmental changes. It underscores the necessity for resilience and adaptability in international trade practices in the face of climatic challenges. This challenge calls for collaboration among global trade stakeholders to alleviate the impacts of these disruptions and strengthen the resilience of the international trading system.

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Lim, Sunghun, Sandro Steinbach, and Xiting Zhuang . “Panama Canal Traffic Delays Threaten Southern Ag Global Supply Chains.” Southern Ag Today 4(8.4). February 22, 2024. Permalink

Rising U.S. agricultural imports, especially fruits and vegetables (F&V), have recently captured the attention of domestic producers. Between 2014 and 2023, U.S. agricultural exports increased from $152 billion to $179 billion, while imports grew to $195 billion from $109 billion (USDA Agricultural Trade Outlook, December 2014 and November 2023). During the same period, F&V exports remained stagnant ($24 billion), but their imports nearly doubled ($27 billion to $50 billion). Volume growth has been higher than the growth in value, e.g., the volume of blueberry and bell pepper imports increased by 194 and 110 percent, respectively, between 2011 and 2022. The import volume growth in the last decade has increasingly occurred during the harvesting windows for U.S. fresh produce (April through September, see Exhibit 1 for the case of blueberries).

While American consumers enjoy a healthy diet and lower prices from the growth of F&V imports, domestic growers are challenged in protecting revenues already stressed by labor costs and weather events. In response to U.S. Trade Representative’s request in 2021, the U.S. International Trade Commission (USITC) examined import competition in specific F&V industries but provided mixed results. In the case of cucumbers and squash, the USITC reported that American growers could actually do better if imports were lower than current levels. However, in blueberries and spring table grapes, the USITC found that imports did not harm the domestic industry. 

A recent study at the University of Georgia (UGA) examined the impact of imports on American growers’ revenue for four fresh produce: asparagus, bell peppers, blueberries, and strawberries. The study used an economic framework similar to that in USITC’s cucumber and squash investigations. Unlike the USITC, the UGA study tracked additional revenues from lowering imports between 2011 and 2021/22 for all four commodities by state and harvesting seasons.

Turns out, growers could have made quite a bit more revenue if above-average import growth of fresh produce did not occur. Exhibit 2 shows that the additional revenues ranged from 1.7% (strawberries) to 28% (asparagus) of actual grower revenues, totaling $134 million, in 2021/22. The results did not change much when using prices at different marketing stages (farm-gate, terminal markets and shipping points). 

The U.S. trade laws do not offer remedies to regional injuries, especially in the Southeastern states.  The F&V industry is critical to state and rural economies since it supports millions of jobs and raises a significant amount of revenue through crops produced and sold. American produce growers critically need risk management strategies such as revenue protection offered to program commodities in the Farm Bill and new technologies to stay competitive.

Exhibit 1: Monthly Blueberry Imports, 2011-2022

Exhibit 2: Actual and Counterfactual Revenues for 2021/22

Commodity	Actual Revenue (mil $)	Counterfactual Revenue* (mil $)	Share of Additional Revenue in Actual Revenue (%)
Asparagus (2022)	45.78	58.79	28.42
Bell Peppers (2022)	612.57	658.72	7.53
Blueberries (2021)	604.47	631.58	4.48
Strawberries (2022)	2781.69	2829.83	1.73

*Revenue when above-average growth in imports is removed.

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Munisamy, Gopinath, Ajit Khanal, and Dixit Poudel. “Creeping Imports and Hidden Costs to U.S. Fresh Produce Growers.” Southern Ag Today 4(6.4). February 8, 2024. Permalink