U.S. processed foods trade surplus over $4.5 billion in 1995 - includes related article on processed food industries - Annual Spotlight on the U.S. Food System - Industry Overview

The U.S. processed food industry reached a net trade surplus of $4.6 billion in 1995 - an 87-percent increase from 1994 (table 1). In 1995, the United States exported $29.4 billion and imported $24.8 billion worth of processed foods, continuing a processed foods trade surplus begun in 1992.

Four food processing industries - meatpacking, poultry processing, soybean oil milling, and wet corn milling - generated $1 billion trade surpluses in 1995. Together, these industries reflect the strength of U.S. competitiveness in field crops and meat and poultry production.

But despite overall growth in the processed food categories, 18 industries experienced a decline in export sales between 1994 and 1995, and 12 other industries grew more slowly than their average annual growth rate between 1990 and 1994.

This article covers exports and imports of Standard Industrial Classification code 20 (known as SIC-20) - processed foods, beverages, and related products. SIC-20 is comprised of 49 food processing industries (see box). By aggregating trade data into SIC-20 industries, researchers are able to summarize the data and evaluate trends in trade within each processed food industry.

Meatpacking and Poultry Processing Head the List of Trade Surpluses

The two industries most responsible for the surplus in food products trade were meatpacking and poultry processing, with $3.6 billion and $2.1 billion trade surpluses during 1995. Animal and marine fats posted a trade surplus of $925 million, and rice milling had a $773 million surplus in 1995. Salted and roasted nuts followed with a $573 million trade surplus.

All four food processing industries with billion-dollar trade surpluses were among the top-10 exporters. Meatpacking, at $6.1 billion in export sales, accounted for nearly 21 percent of the exports for all U.S. food processing industries (table 2). Poultry processing, soybean oil milling, and prepared and frozen fish had export sales of $2 billion or more. Together with wet corn milling and animal and marine fats and oils, these six industries accounted for more than half of total U.S. processed food exports during 1995. Sixteen industries were responsible for nearly 80 percent of U.S. processed food exports.

Table 1

U.S. Processed Food Trade Surplus Grows

                                  Million dollars

Item             1990     1991     1992     1993     1994     1995

Exports         18,922   20,277   22,805   23,412   26,249   29,390
Imports         20,578   20,560   21,751   21,815   23,801   24,821
Trade balance   -1,656     -283    1,054    1,597    2,448    4,569

Canada was the leading exporter of processed foods to the United States, commanding a 19-percent share of U.S. processed food imports during 1995. The two dominant U.S. imports from Canada - meatpacking and prepared and frozen fish - were the same two industries that led U.S. exports to Canada. For example, in 1995 the United States imported $903 million worth of prepared and frozen fish from Canada, while at the same time exporting $322 million worth of prepared and frozen fish to Canada. Salmon and lobster are the principal imports and exports. The United States imports both Atlantic and West Coast salmon, but exports only West Coast salmon. U.S. lobster imports consist of both American and spiny lobster, but exports are principally American lobster.

For Thailand, Mexico, France, and Italy, exports to the United States were concentrated in one or two industries. Processed fish products, from the prepared and frozen fish industry and the canned and cured fish industry, made up 75 percent of U.S. processed food imports from Thailand. Over half of U.S. imports of Mexican processed food products were prepared and frozen fish, frozen fruits and vegetables, and malt beverages. Wines, brandy, and brandy spirits constituted 62 percent of U.S. imports from France. More than half of Italy's exports to the United States were the vegetable oils and the wines, brandy, and brandy spirits industries.

Rapid Growth in Developing Countries Continues

Many of the fastest growing destinations for U.S. processed food exports are small, developing countries. U.S. export data for these countries may include some U.S. food aid in addition to commercial sales. However, food aid accounts for less than 2 percent of processed food exports. Among those nations importing at least $1 million worth of U.S. processed foods in 1994, 14 more than doubled their purchases in 1995. Countries with the largest percentage increases were: Estonia, Pakistan, Vietnam, Burkina Faso, Moldova, Syria, Mozambique, Bulgaria, Papua New Guinea, China, The Gambia, Ivory Coast, Haiti, and Tajikistan.

The fastest growing market for U.S. exports from 1994 to 1995 was the former Soviet Union (table 5). U.S. processed food exports grew by more than 50 percent for six countries in the former Soviet Union. Export growth was particularly strong in Estonia, Russia, Moldova, Georgia, and Tajikistan. The growth was mainly due to an increase in poultry meat exports, particularly in Estonia, Ukraine, and Georgia. The United States has become a primary supplier of poultry for countries of the former Soviet Union.

Outlook for U.S. Processed Food Exports

Trade in value-added products is generally more sensitive to changes in income levels, changes in demographics, and westernization of diets in importing countries than is trade in raw commodities. Increasing incomes in the newly industrialized countries of East Asia make them among the fastest growing destinations for U.S. processed food exports. This income growth is crucial for the United States to increase processed food exports to the more highly populated, lower income countries like China, Vietnam, Indonesia, and India.

Table 5

Former Soviet Union Was the Fastest Growing U.S. Export Market in
1995

Region                                             Growth in 1995
                                                  U.S. export sales

                                                       Percent

Former Soviet Union                                     57.5
Asia, excluding Japan                                   33.2
Latin America and Caribbean, excluding Mexico           24.3
Western Europe                                           9.7
Eastern Europe                                            .9
Africa                                                    .4
Oceania                                                 -8.8

Despite a slowing of the growth rate for many processed food industries in 1995, the outlook for processed food continues to be good. Growth in export sales of poultry and meats should remain strong, especially in the former Soviet Union. U.S. and Russian officials reached an agreement in March 1996 to settle a dispute over the ability of U.S. poultry producers to meet Russian sanitary standards. Ongoing discussions are addressing whether Russia will join the World Trade Organization (WTO). If Russia becomes a member of the WTO, current Russian tariff and nontariff barriers that affect U.S. exports of poultry and meats could be reduced or eliminated.

The negative impact of the peso devaluation on U.S. exports to Mexico is likely to be temporary. Improvements in the Mexican economy in 1996 should increase U.S. exports. Preliminary indications suggest strong growth in U.S. processed foods exports to Mexico.

The "Processed" Foods Industries

Researchers with USDA's Economic Research Service (ERS) have classified import and export data collected by the U.S. Customs Service into industries according to the U.S. Standard Industrial Classification (SIC). The SIC assigns U.S. establishments or plants to an industry category based on their principal activity.

Processed foods, beverages, and related products are assigned to SIC-20. The industries within SIC-20 are further defined by four-digit SIC codes. For example, 2011 identifies meatpacking. The first two digits of this code place the industry within SIC-20, the third digit indicates the industry is a part of meat products, and the fourth specifies meatpacking. Forty-nine food processing industries within SIC-20 are identified at the four-digit level.

Many of the products from the 49 SIC-20 industries can be referred to as "value-added" - meaning that some combination of labor, technology, and materials has been applied to a raw commodity input, such as wheat, in order to transform it into a product like pasta. The processing may be minor, as in the case of canned or cured fish, or it may be quite extensive, as in the conversion of flour, tomato sauce, pepperoni, and spices into a frozen pizza.

Many processed foods are brandname products from well-known companies, such as Pillsbury or Hershey. However, a number of processed food products reflect very little product differentiation between various suppliers, such as milk, soybean oil, or animal feed.

References

Ruppel, Fred J., and J. Michael Harris. "U.S. Trade Surplus in Processed Foods Expected To Continue," FoodReview, USDA, Economic Research Service, May-Aug. 1995, pp. 43-47.

Harris, Michael J. Processed Food Export and Import Values, Data product No. 95010, USDA, Economic Research Service, 1995.

J. Michael Harris and Margaret Malanoski are economists with the Food and Consumer Economics Division, Economic Research Service, USDA.

COPYRIGHT 1996 U.S. Department of Agriculture
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