FRUIT AND TREE NUTS                                          March 30, 1998
March 1998, FTS-282  
              Approved by the World Agricultural Outlook Board
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Summary

Prices received by growers for fruit and nuts have been lower during January
and February 1998 than the same period of the last couple of years. Lower
prices for oranges, grapefruit, and lemons pulled down the overall average.
Retail prices for most fresh fruit in January and February were below a year
ago. 

The 1997/98 orange crop is expected to produce a record 14.2 million short
tons, decreasing grower prices. Because of the large size of this year's
crop, rainstorms caused by El Nio appear to have had little noticeable
effect on the market.

California's orange production is forecast to increase 9 percent from a year
ago to 2.8 million tons. With the high quality and quantity of oranges this
year, shipments to domestic and export markets have been up.

Florida's orange crop is expected to produce 6.4 million tons of the early-
to mid-season varieties, and 4.9 million tons of Valencia, both records.
Orange juice production is also forecast to set a record at 1.6 billion
single-strength equivalent gallons. 

Grapefruit production is forecast at 2.6 million short tons, 9 percent below
last year's crop. Grapefruit grower prices have been lower than the previous
year for most of the 1997/98 marketing season. 

Lemon production is estimated to be 935,000 tons, up 9 percent in 1997/98
from the previous year.  Specialty citrus crops, such as tangerines,
tangelos, and temples are expected to be smaller than a year ago.
Tangerines, the largest crop among the specialty varieties, are expected
down about 17 percent to 347,000 tons.

El Nio-related storms which brought heavy rains, flooding, and windy
conditions to some regions, especially Florida and California, have hampered
production and harvesting activities and damaged strawberry crops.
Strawberry growers in both States have experienced variable fruit quality
and delayed marketing.

The preliminary 1997 estimate of utilized production of noncitrus fruit
(apples, grapes, and berries, for example) increased to about 18 million
tons, up 10 percent from 1996 and the largest on record. A relatively mild
winter and generally dry, mild spring, in the western portion of the United
States, was ideal for pollination and conducive to rapid crop development.

Production increased sharply in 1997 for all six of the major tree nuts
(almonds, hazelnuts, walnuts, pistachios, pecans, and macadamias) to a
record 1.16 million tons, in-shell equivalent, up 39 percent from the
previous season. The value of production for these six tree nut crops also
reached a record of $2.0 billion.

Fruit and Nut Prices Lower Than a Year Ago

The index of prices received by growers for fruit and nuts has been lower in
January and February 1998 than for the same period during the last couple of
years (table 1). Lower prices received by growers for oranges, grapefruit,
and lemons have been depressing overall prices. February prices improved
over January as the strong movement of fresh oranges and increasing prices
for processing oranges offset lower prices for the other domestic winter
fruit. The index's annual average grower price for 1997 was about 8 percent
lower than 1996. Large orange, grapefruit, grape, stone fruit, pear, and
berry crops in 1997 put downward pressure on grower prices for these
commodities, lowering the overall price below the previous year.

Retail prices for January and February 1998 were below a year ago for many
fresh fruit. The large crops of navel oranges and lemons in California, and
grapefruit in Florida, helped bring down retail prices for fresh citrus
(table 2). The heavy rains and winds this winter had little effect on citrus
production because the citrus crops had already been established before the
storms began. While the storms may have hampered harvesting, delays have not
been great enough to seriously affect marketing. While there have been some
crop losses in both California and Florida, the very large crops this year
have minimized the effects of these losses.

Strawberry production, however, has been adversely effected by winter
storms. Most of the strawberries in the market during January come from
central Florida and southern California. While citrus fruit is protected by
its outer skin and the trees, strawberries are fragile fruit that grow close
to the ground, making the fruit susceptible to water damage. Also, the
strawberry plant is susceptible to diseases and root damage that can be
brought on by the present weather problems. As a result, strawberry retail
prices this January and February were above any month over the last several
years.

Retail prices for frozen concentrated orange juice (FCOJ) began falling
below year ago levels in July, after being higher than the previous year for
most of the 1996/97 marketing year (beginning in December 1996). The retail
price, which reflects the price of a 12-ounce can of FCOJ, remained high
despite a record crop of oranges in Florida during 1996/97.

Citrus Outlook

Another Record Orange Crop Expected for 1997/98

The 1997/98 orange crop is expected to provide a record 14.2 million short
tons (table 3). Larger crops in most producing areas, but particularly in
Florida and California, are responsible for production increasing 11 percent
over last year. California's orange production is expected to increase 9
percent from a year ago to 2.8 million tons; Florida's production is
expected to increase 11 percent to 11.3 million tons. Texas' crop is up to
66,000 tons as production has continued to increase over the last few years.
Arizona's crop is projected to remain stable, at 38,000 tons.

The record-size orange crop has put downward pressure on grower prices so
far in 1997/98 (table 4). California grower prices have declined as much as
12 percent from November through February over the same period last year.
Price declines have been even greater in Arizona and Texas. With California
dominating the fresh market, its large crop lowered demand for oranges from
these other States. Florida grower prices are about 34 percent lower than
last year, however, the monthly variation in price between this year and
last appears to be lessening since December.

California Production Up, Fresh Orange Prices Lower in 1997/98

The California orange crop accounts for about 20 percent of U.S. orange
production. Almost all the oranges go to the fresh market. California's
navel oranges are marketed from November through mid-June, while Valencia
oranges are marketed from mid-March to December. In this way, there are
fresh oranges in the market throughout the entire year. About 59 percent of
California oranges are the navel variety. Production of both varieties has
been growing steadily over the last several years. Because of the large crop
this year, the effects of El Nio on California's production have been
minimal, according to industry sources. While there has been some fruit
losses, especially in the southern San Joaquin Valley, due to wind damage
scarring the fruit, overall production is high. In most cases, the
incidences of wind scarring are said to be less than for last year's crop.
Due to the large quantity of fruit and its good quality, movement in the
domestic market has been strong.

Exports have also been up this marketing year. The lower price of this
year's orange crop somewhat offset higher prices due to exchange rate
difficulties in Japan and Hong Kong. Because U.S. oranges are generally
higher priced in these markets than their domestic oranges, the U.S. product
is marketed to the upper income classes in these countries. The slightly
higher price this year did not seem to deter these consumers. Orange
shipments to Canada, the largest export market, however, were down less than
1 percent for November through January.

Florida Production Expected To Set Another Record

Florida's orange crop is expected to produce 6.4 million tons of the early-
to mid-season varieties, and 4.9 million tons of Valencia, both records.
Almost all of the oranges will be used for processing. On average, about 5
percent of Florida's oranges go to fresh use.

Florida marketed fewer oranges for fresh use through mid-February compared
with the same period last year. California oranges entered the market
earlier this year than last, reducing Florida's window of opportunity for
fresh sales. As a result, Florida's fresh marketings completed during this
period were down 7 percent from the previous year.

Orange juice production is forecast to set a record at 1.6 billion single-strength equivalent (sse) gallons (table 5). Coupled with very high
beginning stocks, orange juice supplies for 1997/98 are projected to reach
2.2 billion sse gallons.   With this year's crop, there will be 2
consecutive years of record production, making it difficult for processors
to drawdown their stocks. Orange juice demand is also said to be inelastic.
Therefore, lower juice prices in response to the expected large supply would
have little impact on increasing demand. As a result, ending stocks for this
year are estimated to be a record 465 million sse gallons, equal to over a
quarter of this year's production.

About 64.5 percent of the crop is expected to go to frozen concentrated
orange juice, down fractionally from last year (table 6). While a slightly
larger proportion of the crop is expected to go towards making chilled
juice, the overall quantity expected to be used for chilled could be more
than 14 percent over last year due to the larger crop and increasing demand.
The increasing popularity of chilled orange juice could help boost overall
orange juice sales. The industry has reported that retail sales of chilled
juice have been strong during the first few months of this marketing season.

Brazil, the world's largest orange juice producer, also had record juice
production in 1997 (table 7). Brazil mostly markets its juice outside the
United States, and Florida has the largest share of the U.S. market. The
large world juice supplies, however, helped depress Florida grower prices
for processing oranges below the already low prices during this same period
in 1996/97. Reports over the last several months that Brazil's orange crop
may be down in 1998, however, have boosted Florida grower prices in January
and February. While prices for these 2 months are still below the last
several years, continued increases over the next several months should
continue to improve grower returns (table 8).

Orange juice exports, at 147 million sse gallons, rose 14 percent in 1996/97
over the year before. Exports were higher to Canada, the Netherlands, and
Belgium, but fell to Japan, the United Kingdom, and France.

Grapefruit Production Expected Lower in 1997/98

Grapefruit production is projected at 2.6 million short tons, 9 percent
below last year's record crop (table 9). Production in Florida, which
accounts for just over 80 percent of the U.S. grapefruit crop, is expected
to be 10 percent below last year. Smaller crops are also forecast for
Arizona and Texas. Only California is expected to produce more grapefruit
this year, up 10 percent over last year.

The smaller crop is a welcome relief to Florida growers after the
difficulties marketing last year's crop. By the end of 1996/97, growers had
to abandon about 255,000 tons (6 million 85-lb. boxes) of grapefruit due to
lack of demand. Consumption of both fresh grapefruit and grapefruit juice
has been stagnant over the last several years, and demand from the fresh
market and processors was not sufficient to utilize such a large crop. High
retail prices throughout Florida's marketing season running September 1996
through July 1997 did not help matters. The smaller crop this year was a
result of growers abandoning groves or removing trees, as well as lower
yields. If realized, Florida's 1997/98 crop of 2.1 million tons of
grapefruit would be the lowest since 1991/92. Fresh shipments as of mid-February have been about 6 percent below the same time last year, according
to industry statistics. Red-seedless grapefruit are being harvested faster
than white seedless because of the popularity of red varieties. As of mid-February, less than half the red seedless but about three-quarters of the
white-seedless grapefruit remained to be harvested. About the same quantity
of grapefruit has gone to processing during this period compared with a year
ago, even though stocks are high. More of this year's fruit, however, was
being made into chilled juice.

Grapefruit grower prices have been lower than the previous year for most of
the 1997/98 marketing season (table 10). Prices began to pick up, however,
beginning in December, when the Florida fresh market price was 16 percent
above December 1996. Grower prices for all fresh grapefruit from September
until about June strongly reflect prices received by Florida growers because
they are doing the bulk of the harvesting and marketing at this time. Texas
growers, unlike those in Florida, California, and Arizona, have received
higher prices through most of the early part of 1997/98 because they produce
mostly ruby-red grapefruit and market their fruit mostly to niche markets.

Grapefruit exports were down 4 percent from September to January 1997/98
from a year ago. Exports were down to the two major markets, Canada and
Japan, but increased to France and the United Kingdom. The lower shipments
to Japan also partially explains the slower movement of white grapefruit
this year. Japan is a big market for white grapefruit.

Larger Lemon Crop Lowers California Grower Prices

Lemon production is estimated to be 935,000 tons in 1997/98, up 9 percent
from the previous year (table 11). California's larger crop is responsible
for all the increase, Arizona's crop size remains unchanged from 1996/97.
The crop was reported to be of good quality. Industry sources estimate about
half the lemon crop had been harvested by the end of February.

Lemon grower prices in California for 1997/98 have averaged about 15 percent
below a year ago (table 12). After starting out strong earlier in the year,
when supplies were low, prices have been seasonally declining as the large
crop is being harvested. Arizona's grower prices were generally above last
year's monthly prices, except in February when Arizona's harvest was nearly
completed.

Specialty Citrus Crop Lower in 1997/98 

Specialty citrus crops, such as tangerines, tangelos, and temples are
expected to be lower this year than last. Tangerines, the largest crop among
the specialty varieties, is expected down about 17 percent to 347,000 tons.
Florida, which produces about 69 percent of the U.S. tangerine crop, is
expected to have a
20-percent smaller crop this year. The smaller crop is due to fewer trees
and lower yields. The winter rainstorms hitting Florida this year affected
tangerines more than any other citrus crop. The thinner skin on tangerines
is probably the major reason for increased droppage during January. The
rain, however, has also resulted in near-record fruit size. California and
Arizona each expect crop size to decline by 8 and 9 percent, respectively.
Harvesting of Florida early tangerine varieties was completed by January.
The smaller Florida crop has allowed for increased marketing of California
tangerines.

Noncitrus Outlook

Effect of Winter 1998 Conditions on Noncitrus Crops Mixed

Winter conditions in many parts of the United States have been generally
mild this year, with relatively warm temperatures and no major snowstorms.
However, for much of the winter,
El Nio-related storms brought heavy rains, flooding, and windy conditions
to some States, especially Florida and California. Additionally, the storms
have hampered production and harvesting activities of certain noncitrus
crops and also resulted in some crop damage, particularly to strawberries.

Florida's winter strawberry crop has consistently received
above-normal rainfall since September 1997. According to the Florida
Strawberry Growers Association, about 5 percent of Florida's strawberry
acreage was washed out by heavy rains in September. Fortunately, growers
only had to rebed the fields and not replant, because there were no
strawberry plants in the fields at that time. This, however, caused
disruptions to the crop's production schedule. Heavy rains in late December,
around Christmas, resulted in a lower than expected volume for the first set
of strawberries that were ready for harvest, pushing prices higher. Florida
strawberry fields generally receive an average of 2 inches of rain during
the month of December, but in December 1997 strawberry fields received close
to 16 inches of rainfall. More rainstorms again in February reduced expected
harvest 20 to 25 percent. Florida ships most of its strawberries from
December through May or even June, with the largest shipments in March. As
of March, about 40 percent of the crop remained to be harvested which is
about the average expected for the State's strawberry marketing season.

Strawberry shipments from California, the largest producer for fresh and
processing markets, are heaviest from April to June. California's 1998
strawberry crop is behind schedule, interrupted mainly by heavy rains during
the planting period. This delay will likely provide a market window for the
remainder of Florida's winter crop. Despite a 7-percent increase in planted
acreage in California, there is an upward movement in strawberry grower
prices during the first 2 months of 1998, and prices have remained stronger
than a year ago thus far because overall supplies have been down from last
year (figure 1). Strawberry production in California's Oxnard area in
Ventura County have been damaged by persistent rains. In February, a large
proportion of berries intended for the fresh market have been diverted to
processors. Growers were also busy stripping moldy and decayed strawberries
off the plants. With favorable weather conditions in April, fresh-market
supplies could pressure prices, as all strawberry-growing areas in the State
will be harvesting at the same time, along with the remainder of Florida's
winter crop. A seasonal strengthening of demand during the Easter season,
however, could moderate any price declines.

The heavy rains in California have had very little impact on its peach,
nectarine, and plum crops thus far. While some of the early stone fruit
varieties had bloomed by mid-February, the critical pollination period came
around early March when most of the varieties bloomed. According to the
California Tree Fruit Agreement, the blooms were coming in strong. Rains
hampered pollination of some of the early varieties, but dry weather around
the second week of March allowed for bees to pollinate most of the
varieties. By the end of the third week of March, fruit were expected to
begin to emerge. Even though below average, the tree fruits received more
than the minimum required chill hours this winter, which raises the
likelihood of achieving a stronger fruit which is less susceptible to pest
and disease problems, and a fruit with longer shelf life. If favorable
weather conditions prevail through much of April, then it is likely that
California stone fruit will be in abundant supply and available at average
prices this summer.

Meanwhile, three consecutive days of freezing temperatures during the second
week of March are having an impact on this year's Southeast peach crop,
particularly in South Carolina, Georgia, and North Carolina. Earlier than
normal blooms for early-variety peaches in the region, induced primarily by
this year's relatively mild winter, were most heavily affected by the frigid
temperatures. The full extent of the region's crop damage is unknown at this
point, but early indications point to significant damage to the early-variety 
peach crop. There is still potential for the mid-and-late varieties to have a 
full crop. However, if another freeze hits the region by the end
of March or early April, crop losses for peaches could be similar to 1996
when the region's peach production was completely devastated. 

Early Estimates Indicate Reduced Avocado Production in 1997/98

While the National Agricultural Statistics Service (NASS) releases the
official avocado crop estimate for the 1997/98 season May 12 and July 7
1998, Florida and California have preliminary estimates for their crops.
According to the California Avocado Commission, the 1997/98 California
avocado crop is estimated to be 4 percent smaller than last season. While
the rains this winter have helped the fruit to size well, winter harvest
schedules were interrupted by rainy weather. Windy conditions also caused
some fruit to fall off the trees. Over 85 percent of avocado production in
the United States is grown in California, where harvest usually begins in
November and continues into the following November. More than 50 percent of
California's shipments, however, usually occur between March and August.

The Florida Agricultural Statistics Service estimates certified shipments
from the Florida 1997/98 crop to be 23,750 tons, up 3 percent from the
previous season. The summer varieties matured well ahead of schedule and
because of good market demand in the summer and fall of 1997, winter variety
shipments were nearly depleted. Commercial avocado varieties in Florida
typically mature from June through March, but about 80 percent of the
shipments take place from August to December. As of the second week of
February, only about 1 percent of estimated certified supplies remained to
be shipped, compared with the same period in 1996/97 when about 3 percent
was left to be shipped.

The first season for the import of Mexican avocados to a larger portion of
the U.S. market has come to a close. Shipments of Mexican fresh avocados had
been banned from entering into the United States since 1914 and were only
allowed into Alaska since July 1993. USDA's Animal and Plant Health
Inspection Service (APHIS) approved, on January 31, 1997, imports of fresh
Mexican Hass avocados from the Mexican State of Michoacan into the District
of Columbia and 19 northeastern States (Maine, New Hampshire, Vermont,
Massachusetts, Connecticut, Rhode Island, New York, New Jersey,
Pennsylvania, Delaware, Maryland, West Virginia, Virginia, Ohio, Michigan,
Wisconsin, Illinois, Indiana, and Kentucky). The current ruling requires
that Mexican shipments of fresh avocados entering the approved States must
meet stringent pest control requirements and will only be allowed into these
States from November through February. Harvesting of Mexican avocado groves
started in early November with shipments to the United States arriving after
November 10. About 10 to 15 million fresh avocados were expected to be
shipped to the approved zone this season and through January 1998, U.S.
imports of Mexican avocados totaled 9.4 million pounds (4,285.6 metric
tons).

New Agreement Reached On U.S. Fresh Apple Exports to Mexico 

On March 19, 1998, the U.S. apple industry and Mexican commerce officials
agreed to suspend an anti-dumping investigation on U.S. apples launched on
March 6, 1997. This investigation has led to the Mexican Government imposing
a 101.1 percent compensatory import duty, since September 1, 1997, on Red
Delicious and Golden Delicious varieties, effectively curtailing U.S. apple
exports to that market. Under the terms of a new agreement, the high import
duty was removed but U.S. shipments of Red and Golden Delicious varieties
should comply with a price floor based on Washington Growers Clearing House
Association's 3-year average f.o.b. price for those two varieties starting
with crop year 1995/96 through March 16 of the current crop year. Effective
March 20 through October 31, 1999, the minimum f.o.b. price is $13.72 per
standard 42-pound carton and 32.67 cents per pound for bagged or bulk
apples. Beginning next year, the minimum price will be adjusted every
November 1, using the average of the preceding three crop years.

Mexico is the third largest market for U.S. fresh apples, next to Taiwan and
Canada. Red and Golden Delicious varieties predominate U.S. shipments to
Mexico. Cumulative apple exports (in volume terms) from September to
December 1997 declined 73 percent from the same period in 1997 and the 
1990-96 average. Although this new agreement with Mexico could still prevent
smaller and lower grade U.S. apples from being exported there, the absence
of the high import duty will likely return export volume to more normal
levels in 1998.

Record Noncitrus Production in 1997 Yielded the Highest Output Value 

The preliminary estimate of utilized production of noncitrus fruit
(including berries) increased in 1997 to about 18 million short tons, up 10
percent from 1996 and the largest on record. A relatively mild winter and
generally dry, mild spring in 1997, particularly in the western portion of
the United States, was ideal for pollination and conducive to rapid crop
development. Utilized production increased for apricots, bananas, berries,
sweet and tart cherries, cranberries, figs, grapes, kiwifruit, nectarines,
peaches, pears, plums and prunes (produced in Idaho, Michigan, Oregon, and
Washington), and strawberries. Utilized production declined for apples,
dates, olives, papayas, pineapples, and prunes (produced in California).

The preliminary estimate of the value of noncitrus fruit production in 1997
is a record $7.8 billion, up 8 percent from the previous year. Increases in
production more than offset declines in prices for some of the noncitrus
fruit crops such as apricots, Hawaiian bananas, berries, sweet cherries,
grapes, and peaches. The season-average grower price for strawberries was
also up despite a larger crop. In addition, increased prices offset output
declines for crops such as apples, dates, and papayas.

Tree Nut Outlook

Acreage, Production, and Value Reach Records

Acreage of five major tree nut crops (almonds, hazelnuts, walnuts,
pistachios, and macadamias) reached a record 703,000 bearing acres in 1997,
3 percent higher than 1996. (Estimates are not available for bearing acreage
of pecans.) Production increased sharply in 1997 for all six of the major
tree nuts to a record 1.16 million tons, in-shell equivalent, up 39 percent
from the previous season. The value of production for these six tree nut
crops also reached a record of $2.0 billion, up 23 percent over the 1996
combination of all tree nut values. Since the value of the 1997 walnut crop
is not currently available, the total tree nut value estimate includes a
carry-forward estimate from the 1996 walnut crop.

Almond Acreage, Production, and Value Hit Records

Bearing acres of California almonds continue to rise and hit a record of 
420,000 acres. Yield per bearing acre in 1997 increased sharply to 1,790
pounds, which boosted production to a record 750 million pounds, shelled
basis. The 1997 crop was 47 percent higher than the 1996 output and twice as
large as the small crop harvested in 1995. Beginning stocks on August 1,
1997, were at a very low 48.3 million pounds, partially offsetting the
higher new crop supply for the 1997/98 season.

Due to the record high production, grower prices fell to $1.50 per pound
compared with $2.08 during the 1996/97 season and $2.48 in 1995/96. Even
though grower prices were down substantially, the higher production pushed
total almond cash receipts for growers to $1.08 billion, up 6 percent from
1996 and 23 percent more than in 1995.

The February 1998 almond industry report, by the Almond Board of California,
showed domestic shipments from August 1, 1997 to February 28, 1998, totaled
106 million pounds, up 21 percent from the same period last year, while
export shipments totaled 307 million pounds to date, up 3 percent. The
computed inventory as of February 1, 1998, stood at 387 million pounds, of
which 157 million pounds were commitments (sold, but not delivered). If
almond demand continues to be good in domestic and international markets,
then ending stocks could be about 111 million pounds. The stocks would be
higher than the two previous seasons, but less than one-half of ending stock
levels in the late 1980's and very reasonable for this large supply
situation.

So far this season, shipments have been higher to North American markets
(Canada and Mexico), South America, Eastern Europe, Asia, the Middle East,
and Africa. However, shipments to most major markets in Western Europe have
been lower because of the plentiful almond supply in this region. U.S.
almonds should continue to be very price competitive in major markets due to
much lower prices this season and higher quality. However, early season
forecasts for the 1997 harvest indicated better than average crops in Spain,
Greece, Italy, and Morocco. This large world supply will greatly affect
demand, price, and competition for U.S. almonds in Europe and other major
markets.

The 1998 almond harvest in California is likely to be significantly lower
due to less than favorable weather this spring during the bloom period,
reducing pollination, as well as to the alternate-bearing nature of the
almond tree. The first forecast for the 1998 California almond crop will be
issued in USDA's May 12, 1998, Crop Production report.

Pistachio Acreage, Production, and Value Set Records

California pistachio-bearing acreage in 1997 increased to a new high of
65,400 acres, while yields reached 2,750 pounds per acre. The result was a
record crop of 180 million pounds, in-shell basis. Together with the grower
price decreasing only slightly to $1.13 per pound, a record crop value of
$203 million was realized. In 1998, the pistachio harvest is likely to be
substantially lower since the trees will be in the "off-year" of the
production cycle. The pistachio tree is very
"alternate-bearing" in its physiological nature, producing heavy yields one
year and then "resting" or building reserves and producing a light crop the
following year.

According to the California Pistachio Commission (CPC), in-shell domestic
shipments through February 28 are higher this season than the two previous
seasons, but are lower than 1994/95. Domestic in-shell shipments to date are
nearly 45 million pounds, 58 percent of the total, and export in-shell
shipments to date are more than 40 million pounds, 42 percent of the total.
Export in-shell shipments have been strong and are well ahead of previous
seasons. Shipments of loose kernels and shelling stock to export markets are
generally higher, but sluggish to domestic markets.

The CPC reports an in-shell inventory of 70 million pounds on hand as of
February 28, 1998, about twice the quantity on hand the previous year, but
43 million pounds of the inventory is reportedly committed at this time. The
projected carryover stocks of 27 million pounds would help to moderate a
smaller expected crop in 1998.

In 1997, production of pistachios in foreign countries was expected to be
above average in Greece, Italy, and Syria. Iran, the world's largest
producer, suffered a freeze in April 1997, which cut production sharply by
as much as 50-70 percent. Turkey also expected a decrease due to cold
weather. There is no further information available at this time on the final
outcomes of harvested production in these countries.

Pecan Production and Price Up

The preliminary estimate for pecan production in 1997 is 272 million pounds,
in-shell basis, substantially higher than the small crop of 222 million in
1996, and slightly above the 1995 crop of 268 million pounds. Production of
improved pecans increased 15 percent to nearly 199 million pounds, while
production of seedling and native pecans jumped 50 percent to about 73
million pounds. Production was higher in all 14 commercial pecan producing
States, except Alabama, Georgia, and Louisiana.

Grower prices also increased for improved pecans to a preliminary estimate
of $1.08 per pound in 1997/98, in-shell basis, compared with $0.69 in
1996/97 and $1.12 during the 1995/96 marketing season. The preliminary
grower price estimate for the native and seedling pecans is $0.56 per pound
for the 1997/98 season, in-shell basis, compared with $0.46 the prior season
and $0.73 in 1995/96. These prices resulted in a total crop value in 1997 of
$257 million compared with $141 million in 1996 and $272 million in 1995.
These preliminary production, price, and value estimates will be updated and
published in the USDA's Noncitrus Fruit and Tree Nuts Summary report to be
issued on July 7, 1998.

The beginning stocks for all pecans on July 1, 1997, were 60 million pounds,
shelled-equivalent basis. Combined with a new crop supply of about 122
million shelled pounds and 25-30 million pounds of imported pecans, supply
will total 210 million pounds, nearly unchanged from the previous two
seasons. Cold storage stocks of pecans in all warehouses on January 31,
1998, were 27 million pounds shelled, moderately lower than the previous
year, but in-shell pecan stocks were much higher at 170 million pounds. The
net result is that the shelled equivalent of all pecans in storage was 104
million pounds, 23 percent higher this January compared with January 31,
1997. This result may indicate that domestic and export markets are slow to
absorb the larger new crop supply at higher prices, even though the 1997
crop is of higher quality than the 1996 crop. Also, it may indicate
increased competition with walnuts in domestic markets due to the large
walnut supply.

Walnut Acreage and Production Increases

Bearing acreage of California English walnuts increased slightly in 1997 to
170,000 acres. Yield per bearing acre was the second highest on record at
1.58 tons per acre, well above crop yields in recent years. Harvested
production was 269,000 tons, in-shell basis, the highest on record.

In-shell shipments from August 1, 1997, to January 31, 1998, totaled 110
million pounds, down 21 percent from the same period a year ago. Both
domestic and export shipments of in-shell walnuts are lower. Shelled
shipments during this period totaled 88 million pounds compared with about
86 million the previous year. Domestic shelled demand has been a little
better this marketing season, while exported shelled demand has been off
slightly. The net result of all shipments shows 162,079 tons,
in-shell equivalent, has been shipped to all markets compared with 173,035
tons last season. Domestic demand has been 94,303 tons, up 3 percent, while
export demand has been 67,776 tons, down 17 percent. The lower export demand
is the result of large world supplies. Demand should improve as the season
progresses and the supply decreases. The available supply from other
countries, like China, is a "short-lived" situation in the
fall-winter that can create a temporary glut. Generally, most countries do
not have the same storage and shipping capabilities as the United States,
nor is the walnut quality as high as U.S. product.

The 1997 walnut production in China was expected to be up slightly to a
record of 240,000 metric tons, in-shell basis. Other walnut producing
countries such as Turkey, India, Italy, France, and Chile were expecting
normal production. No updates are yet available on foreign production.

Hazelnut Acreage, Production, and Value Reach Records

U.S. hazelnut production reached a record 44,100 tons, in-shell basis, as
the result of record bearing acreage of 28,475 acres and an all-time high
yield of 1.55 tons per acre. Grower prices were also strong, estimated at
$894 per ton for the 1997/98 marketing season compared with $859 in 1996/97,
and $913 for 1995/96.

Somewhat surprising, in lieu of the large available supply, is that domestic
in-shell shipments to date (July 1, 1997-January 31, 1998) have been lower.
However, export in-shell shipments have been substantially stronger this
season. Likewise, exports of kernels have been much stronger, but domestic
shipments of kernels have been slightly lower to date.

Turkey, the world's largest producer of hazelnuts, was expecting a large
crop of about 524,000 short tons. Large crops were also forecast in Italy at
about 110,000 tons, and Spain at about 20,800 tons. No data are currently
available on actual harvested tonnage.

Macadamia Nut Yield and Production Higher

The Hawaiian macadamia nut production hit a record 58 million pounds, in-shell 
wet basis, due to an improved yield of 3,020 pounds per acre. Bearing
acreage in 1997 held steady at 19,200 acres. The yield was not a record, but
was the highest since 1986. The estimated grower price fell to $0.74 per
pound compared with $0.78 in 1996 and $0.74 in 1995.

Economic Trends in the U.S. Pecan Market With An Overview of 
The U.S. and World Tree Nut Complex by Doyle C. Johnson 1/

-----------
1/ Agricultural economist, Market and Trade Economics Division, Economic
Research Service
-----------

Abstract: The United States is the world leader in production and exports of
tree nuts. Pecans are a major tree nut commodity in U.S. markets, accounting
for one-fourth of the U.S. tree nut diet. Total use, domestic consumption,
and exports increased  8 percent from the 1980's to the 1990's. Acreage and
production are expected to trend upward in the coming years. Imports from
Mexico have continued to climb and have boosted total supply and stock
levels. Imports are about one-fourth the size of the U.S. crop. Unlike other
tree nuts, pecan exports have experienced slow growth and are a minor share
of supply. The value of the U.S. pecan crop and grower prices have risen
moderately.

Keywords: Tree nuts, pecans, production, supply, imports, demand, prices.

The Nature and Importance of Pecans in American Agriculture

The pecan is the only tree nut native to North America. It is produced
commercially in 14 southern States from the West Coast to the East Coast.
The United States is the world's largest producer of pecans, with an
estimated 75 percent of the total, followed by Mexico, with about 20
percent, and the remaining 5 percent are from small commercial plantings in
several countries such as South Africa, Australia, and Israel. Pecans
account for about one-fourth of U.S. total tree nut consumption. About
21,000 farms grow pecans worth $250 million annually. Most pecan growers are
part-time and many grow other crops, such as cotton, peaches, and peanuts,
or raise livestock for income diversification.

Recent World Production and Export Trends for Tree Nuts

World tree nut production for the 1997/98 marketing year is estimated at
5.32 million metric tons, about 5 percent higher than the previous marketing
season. World production and exports of tree nuts have trended up since
1989, but exports are still only 16 percent of production (figure 1). In
many countries, the majority of tree nut production is consumed within the
country where it is produced. In the case of the United States, about two-
thirds of its total tree nut production is exported. Although pecan exports
are growing, the quantity exported is still less than 20 percent of U.S.
production.

The United States is the world's leading producer of tree nuts and commands
about 18 percent of the total, followed by Turkey (14 percent), China and
Iran (each 8 percent), and Spain and Italy (each 5 percent), all other
countries account for about 41 percent (figures 2 and 3). The U.S. share of
world tree nut supply grew in 1997 with large crops of almonds, pistachios,
hazelnuts, and walnuts. Likewise, moderate increases were noted for U.S.
production of macadamias and pecans last season. The largest crop in world
tree nut supply is almonds, with about 23 percent of the total, followed by
walnuts (20 percent), cashews (16 percent), hazelnuts (13 percent),
chestnuts (10 percent), pistachios (8 percent), and all others about 10
percent (figure 4). Pecans account for 4-to-5 percent of the total. Most of
the world's almonds and pecans come from the United States, and the United
States also produces a substantial share of the world's walnuts, pistachios,
and macadamias.

The Major Tree Nut Markets in the World and Which Tree Nuts Dominate

Although India leads as the world's largest importer of tree nuts with
nearly 15 percent of the total, Europe remains as the more traditional
market for U.S. tree nuts (figure 5). Germany is the most important European
market, with 12 percent of the world's total imports of tree nuts. Other
important markets in Europe include Spain, France, the United Kingdom,
Belgium, and the Netherlands.  Major markets in Asia include Japan with 10
percent of the world total and Hong Kong with 6 percent. Other significant
markets include Singapore, Taiwan, and Korea. China has increased its market
share and could rapidly become a substantial consumer market. The United
States itself is a major importer of tree nuts, with 7 percent of the world
total. Other important world markets include United Arab Emirates, Syria,
Canada, and Russia--the latter is quickly becoming a major buyer.

In 1995, hazelnuts were the most important tree nut commodity, in terms of
quantity, traded in world markets with 30 percent of the total (figure 6).
This was followed by almonds (23 percent), cashews (16 percent), walnuts (12
percent), chestnuts (5 percent), pistachios (4 percent), and Brazil nuts (1
percent), and the remaining 9 percent were all other tree nuts. The all
other tree nut category includes pecans, pignolias or pine nuts, macadamias,
kola nuts, and areca nuts. Pecans comprise about 5 percent of total world
tree nut imports.

The United States exports pecans primarily to Canada, Mexico, and Europe;
however, some of the exports to Mexico are shipments to maquiladoras which
shell-out pecans and re-export to the United States. Mexico exports its
pecan production principally to the United States and Canada, but it is also
expanding exports to Europe and South America.

Trends in U.S. Pecan Production, Supply, Consumption, and Imports

U.S. pecan production climbed moderately during the late 1970's and early
1980's, peaking in the mid-80's, then declined during the late 1980's and
early 1990's. Pecan production is now experiencing somewhat of a resurgence
since the mid-90's due to plantings in the 1980's. New bearing acreage
partly explains this phenomenon as yields increase. Total pecan acreage
expanded about 4 percent between 1987 and 1992, with the number of 
bearing-age trees increasing 11 percent. Nearly all of this increase occurred in the
Southwest and for improved pecan varieties. There have been steady declines
in the population of native pecan trees and a slight decline in acreage in
the Southeast. It is expected that these trends have continued since 1992,
but more recent data on farm numbers, acreage, and tree numbers are
unavailable until publication of the 1997 Census of Agriculture.

U.S. pecan imports were mostly insignificant during the 1970's, rose
moderately during the 1980's, and then rose substantially during the 1990's
(figure 7). Imports are now about one-fourth of U.S. pecan production.
Generally, pecan supply and consumption have tracked very similar
curvilinear trends over the past 20 years; however, during the mid-1990's
there appears to be a departure from the normal consumption/supply
relationship (figure 8). Perhaps one explanation for this phenomenon is the
substitution of pecans by cereal manufacturers and other industry users for
lower priced tree nuts whenever pecan quality is low and/or prices are high.

Economic Implications of Pecan Supply and Demand on Grower Prices

Total U.S. pecan supply (production+imports+beginning stocks) has had a
strong upward trend over the past 20 years, and this has been especially
true in the most recent 5 years (figure 9). Pecan supply has outpaced pecan
use or demand (domestic consumption+exports) which has gradually resulted in
higher stock levels. This change has occurred in spite of a general downward
trend in production. Pecan use in the 1990's has averaged 135 million
pounds, shelled basis, or about 8 percent higher than the 1980's. In
comparison during the same time period, walnut use has jumped 20 percent,
mostly due to higher exports.

It is notable that pecan grower prices (season average of all sales) have
trended upward modestly while pecan use has made stronger gains (figure 10).
Prices are nearly flat for the period prior to 1990 and also for the period
after 1990. However, prior to 1990 prices were significantly lower, but also
more stable. This fact may indicate that a more uncertain supply/price
situation has occurred since 1990, perhaps shellers bidding up prices, more
open market sales, and direct marketing, or other economic factors
influencing market conditions.

Statistically, pecan prices regressed on pecan supply have a low correlation
coefficient or, in other words, supply explains only a part of the year-to-year
variation in prices. Pecan growers must sell their crops in a short
time period (September-December) in an "oligopsonistic" market where there
are relatively few buyers involved. If shellers invested heavily in the
previous crop or "cost of goods inventory," they will have less propensity
to invest heavily in the current crop, even though it may be smaller in size
and of higher quality. However, other economic factors will impact price
determinations such as size of the Mexican pecan crop, current availability
of improved vs. native pecans, stocks, and supplies and prices of competing
tree nuts, especially California almonds and walnuts.

Trends in pecan and walnut grower prices have been very similar with the
recent exceptions of 1993 and 1996, when shelled walnut prices were
significantly higher than pecans (figure 11). This shift was primarily the
result of low quality pecans that reduced grower prices. The 1991 crop was a
record high combined with below average quality, but the low prices in 1996
occurred when a small crop was produced, also with quality problems.

The 1994 walnut crop quality was poor due to extensive sunburn damage which
caused prices to fall substantially; however, prices were high for the
relatively small available supply of light halves, the highest quality
product-type demanded by the trade. Since 1995, walnut prices have improved
and been more stable. The short supply of quality walnuts bolstered pecan
prices in 1994 and helped to stabilize prices again in 1995. Similar quality
problems occurred with pecans in 1993 when a significant portion of the
crop, especially in the Southwest, was heat damaged, causing shriveled
kernels. The lower quality pecans not only adversely impacted prices, but
yielded much lower kernel shell-out and pounds harvested, reducing grower
revenue even further.  However, prices were excellent for good quality,
fancy-grade pecans, when and where available.

Again in 1996, crop production, quality, and prices were adversely impacted.
Lower demand resulted because users did not want the low-quality product nor
did they want to pay high prices for a limited supply of the high-quality
product. Imports increased because there was not sufficient quantity of
high-quality domestic product. Pecan use or demand then can be dampened
whenever there is disparity in domestic product quality, availability, and
price, and imports are likely to increase to fill the void in supply.

Figure 12 compares some sheller wholesale and grower prices for the past 6
years.  The sheller prices are mid-points of price range quotes, f.o.b.
fancy-grade pecans, Southwest, during October, November, and December when
most of the crop is sold. The grower prices are season average prices for
all sales; however, again most of the crop is sold during the fall months.
It is apparent that sheller/grower price margins can increase or decrease
year-to-year depending on supply, crop quality, and other economic factors.
A further review of sheller wholesale prices over the past three seasons,
reveals that prices vary considerably within a season as well as year-to-year (
figure 13).

Pecan production has actually trended lower and has been more than offset
with higher imports, but is now re-surging to levels experienced in the mid-
1980's. Also, since total use or "apparent disappearance" has not kept pace
with an upward trend in supply spurred by imports, ever-higher stock levels
can be a continuing problem for growers and shellers. Industry experts
indicate that a major cause for this long-term production decline is due to
lower yields rather than tree numbers. Average yield levels for mature
improved groves have in many cases reportedly dropped from historical or
typical levels of 1,000-1,200 pounds per acre to 800-900 pounds. A reason
for the general yield decline could be a shift in the age structure of the
trees. Trees planted in the 1980's are just now beginning to bear
significant commercial quantities, and yields will continue to increase with
maturity.

Anecdotal data and interpretation of  information about pecan growers, many
of whom are part-time, indicate that many growers may not be expending the
necessary inputs (chemicals, fertilizers, water, etc.) to maintain yields at
higher levels, rather, they are perhaps opting to attempt to cut costs to
maintain profit margins. These cost-cutting decisions can result in short-term
and long-term effects. Not only does it appear that this general
cutback in production inputs may be affecting current crop yield and
production levels in terms of pounds per acre and meat yields, but the long
term viability and vigor of the trees may be affected. Also, implied is that
if prices and returns are not sufficient to maintain adequate input levels
then they are also not sufficient to replace lost trees and plant new
acreage.

Another reason for the long-term production decline is the removal or loss
of older trees to urban development, wind damage, drought, disease,
abandonment, or other causes. Some of the trees have been replaced or
replanted with newer, higher yielding cultivars, but these trees have not
yet matured to their peak yield potential.

Effects of Pecan Production on Pecan Grower Prices

Increases or decreases in pecan production can inversely affect prices;
however, supply is altered not only by changes in production, but also
stocks and imports. Pecan crop quality is also an over-riding price factor.
In 1996, pecan production was down for mostly weather-related causes and
there were significant quality problems. Record high stocks carried over
from the previous season and imports more than offset the smaller new crop.
Like pecans in 1996, most tree nut commodities experienced an "off-year" in
the production cycle. The California walnut crop was down substantially and
the reduced total supply pushed grower prices there to record highs. Pecan
prices should have strengthened, but, conversely, pecan prices fell sharply.

Since we know there is some complementarity as well as some substitutability
among  pecans, walnuts, and almonds, it appears that competing nut
supplies/prices may be only a limited factor in pecan prices as prices for
the different crops moved in opposite directions. Manufacturers in many
instances base their purchase decisions on quality more so than price and
are willing to pay higher prices for commodity x (say walnuts) for excellent
quality, even if commodity y (say pecans) prices are much lower and quality
problems exist. Therefore, both supply and crop quality appear to be
significant price-determining factors.

The pecan supply and price situation for the 1997/98 season is very similar
to the situation in 1995/96. However, prices this season are reportedly a
little lower, owing to several factors including the record U.S. walnut crop
and lower prices. The large walnut crop will likely boost walnut exports,
but only modestly since world supplies are very high due primarily to
another record harvest in China. This situation will likely cause a build-up
in U.S. walnut stocks since domestic use is not expected to absorb the
additional supply. Likewise, there could be a rise in ending pecan stocks if
domestic use does not increase from last season.

Interaction Between Improved Vs. Native Pecan Supplies/Prices

Production of native and seedling pecans is more erratic than improved
pecans, mostly due to a more accentuated cyclical nature, but also partly
due to geographic concentration, less irrigation, and lower management
intensity, and the inherent, inferior biological characteristics of native
and seedling trees  (figure 14). Often native pecan prices are fairly
inelastic to changes in supply, but close examination of the data reveals
that native prices are highly correlated to improved pecan prices and are
much less dependent on the native pecan supply (figure 15). In fact, the
trend in native prices is nearly in perfect parallel to the trend in
improved pecan prices. Native and seedling prices are typically established
at a basis 25-30 percent below improved pecan prices to reflect the
difference in processing costs. Shelling ratios are much lower for native
and seedling pecans; thus, a "higher count" of pecans is required to yield a
pound of nut meats, which results in higher shelling costs.

Since the native price is a direct function of the improved price, almost
1:1, where an increase or decrease in the price for improved pecans result
in a proportional increase or decrease in the price for native pecans; i.e.,
the native price is virtually always within a fixed-range or margin below
the improved price (figure 16). Therefore, the native pecan price can be
predicted from the improved pecan price with a high degree of statistical
reliability. Since the price for natives is a function of the improved price
and not the supply of natives, one should attempt to forecast initially the
improved price, then the native price, and then the combined overall price.
Grower gross crop cash receipts are the sum of the improved pecan receipts
plus the native pecan receipts.

Future Perspectives for the U.S. Pecan Industry

Pecan prices are likely to remain weak unless domestic and international
demand rises significantly to boost pecan use to much higher levels. With
the development of new products and markets, the pecan industry could
enhance sheller and grower price and profit positions and greater total
returns that can be used to re-invest in improving production capabilities,
efficiencies, and better long-run industry viability.

The Role of Trade in U.S. Horticulture

by Agnes Perez 1/

---------
1/ Agricultural economist, Market and Trade Economics Division
---------

Abstract: The long-term prospects for U.S. horticultural trade appear good.
Exports will continue to be a primary source of growth for the industry,
driven mainly by world economic growth, particularly in developing regions,
and by international trade agreements to liberalize global trade. The Asian
financial crisis will likely result in diminished demand for a number of
U.S. fruit and vegetable products in that region in the short run. But
because of the strong export growth to Asia during most of the 1990's and
projections of higher than world average economic growth there, Asia will
likely remain an important market for U.S. fruit and vegetables, especially
with the emergence of new markets, like China. Similarly, increased economic
growth in other developing regions, such as in South America, will help
expand market opportunities for U.S. fruit and vegetable exports. Imports,
particularly of fresh-market produce, will likely continue to be a growing
share of domestic consumption.

Keywords: Horticulture, exports, imports, fruit, vegetables, long-term,
short-term.

International trade has become increasingly critical to the success of the
U.S. horticulture sector. In calendar year 1998, U.S.exports of 
horticultural products

----------
2/ Horticultural products include fruit and nuts (including juice and wine),
vegetables (including potatoes, pulses, and mushrooms), and greenhouse and
nursery products.
----------

are forecast to reach a record $10.8 billion, up 7 percent from the previous
year and nearly double the level of 1990 (figure ). The share of U.S.
horticultural production that is exported has grown from 20 percent in 1990
to 27 percent in 1997, and is forecast to reach 28 percent in 1998. Even
with the large growth in exports over the last 8 years, the United States
remains a net importer of  horticultural products, with imports rising from
$8.2 billion in 1990 to a forecast of $12.8 billion in 1998. Exports expand
markets for domestically produced products, and imports generally fill
seasonal voids in domestic production. Fresh and processed fruit and
vegetable imports, including nuts and wine, account for more than 80 percent
of the value of U.S. horticultural imports (the remainder attributed to
purchases of greenhouse and nursery products). Nearly one-sixth of all fruit
and vegetable consumption in the United States comes from imports.

U.S. horticultural producers are projected to post 3 to 4 percent annual
gains in production value after 1998, based on slight increases in domestic
consumption and 1 to 2 percent increases in output and price. Income growth
of trading customers and increased market access are some factors affecting
the long-term outlook for horticultural trade. Horticultural exports are
projected to increase 5 to 7 percent annually, with fruit and vegetable
exports accounting for 98 percent of total export value, while import value
is  projected to grow at a steady rate of 4 percent per year. With these
anticipated long-term projections, net horticultural trade could favor
exports by the end of the next decade.

Factors Affecting U.S. Horticultural Trade Prospects

The outlook for U.S. horticultural trade is shaped by long-term and short-
term factors. Some of the underlying long-term factors are the income growth
of trading customers and increased market access stemming from trade
liberalization. Any deviations from the long-term trend are a result of
short-term factors that can intermittently hinder or help trade prospects of
U.S. producers. Examples of these short-term factors are changes in the U.S.
dollar exchange rates in foreign markets and fluctuations in world supplies.
Other factors, such as trade barriers and productivity changes from
technological innovations may have a long-term or short-term effect.

There is significant evidence to show that global economic growth will fuel
export demand for U.S. fruit and vegetables through the turn of the century
(figure ). As a country's income grows, their demand for most commodities
are expected to increase. Table 1 further demonstrates the strong
relationship between income and U.S. export volume. The first row in this
table reports a measure of this correlation (the correlation coefficient)
for the period 1970 to 1982, while the second row reports the same measure
for 1984 to 1996. In the latter period, all regions represented in the table
are wealthier, and almost uniformly show a slightly diminished (but still
strong) correlation between income and imports of U.S. fruit and vegetable
products. This result helps explain why long-run forecasts for U.S. export
growth are higher than for U.S. import growth in fruit and vegetable
products. Wealthier countries, such as the United States, are likely to
spend diminished shares of increasing incomes on food items, while
developing countries (increasingly important customers for U.S. exports) are
expected to continue to spend larger shares of new income on food items.
This result, combined with projections that most developing countries are
going to experience higher than average economic growth through the next
decade, will be good for U.S. export prospects.

Global economic growth is projected to average over 3 percent annually over
the next decade, well above the growth during 1990 to 1996. Average real
gross domestic product (GDP) growth for the U.S. fruit and vegetable
industry's top export markets--Canada, the European Union, and Japan--are
projected higher during 1997 and beyond. Despite current financial problems,
smaller markets in East Asia such as Hong Kong, Taiwan, South Korea,
Indonesia, Thailand, and the Philippines will continue to remain important
markets. They have shown  promise with stronger growth during the 1990's
(figure ). As soon as financial conditions turn around in these countries,
U.S. fruit and vegetable exports there will likely continue strong. Real GDP
growth in East and Southeast Asia is projected to average 6.8 percent for
1997-2001, down slightly from 8.6 percent during 1990-1996. South America is
another developing region where growth in fruit and vegetable exports has
been strong in the 1990's, and economic growth there is projected to double
in 1997 and beyond.

As global trade agreements are reached, increased market access for specific
horticultural products will stimulate future export growth in the U.S. fruit
and vegetable industry. Examples of these new markets are the opening up of
mainland China last year to California fresh table grapes and Washington
cherries and the opening up of Japan to most major varieties of U.S. fresh
tomatoes.  China continues to ban the importation of most U.S. fruit due to
phytosanitary concerns. The exceptions are Pacific Northwest apples,
Washington cherries, and California table grapes. A positive development,
however, is that China has already taken steps to reduce import duties for a
wide range of horticultural products, including most fresh vegetable items,
tree nuts and fresh fruit, processed fruit and vegetables, and juices,
effective October 1, 1997. Similarly,  Japan prohibited fresh tomato
shipments from almost all countries since 1951 due to phytosanitary 
concerns over the disease tobacco blue mold. Since June 1997, about 
302 metric tons of U.S. fresh tomatoes were exported to Japan. While 
tariffs for these commodities still remain high and these new markets still 
need to be developed, China's projected per capita GDP growth of over 
8 percent annually and its large population base and Japan's rapidly 
growing "Western style" food service industry are indicators of their 
market potential.

In the short-run, the outlook for U.S. horticultural trade is clouded by
currency devaluations in Asia since late summer 1997, particularly in
Southeast Asian countries such as Thailand, Indonesia, Malaysia, and the
Philippines, and to South Korea and Japan as well. Generally, exports of
U.S. goods to markets with declining currencies result in U.S. products
priced relatively higher than their domestic goods, diminishing the demand
for U.S. products in those countries. Meanwhile, exporters from these same
countries will be in a more price competitive position in the U.S. market
and third country markets. Since many U.S. horticultural product exports are
not staple items in the diets of most developing Asian countries, Asian
consumers are more likely to substitute U.S. products with local goods or
possibly do without, particularly for commodities such as fresh fruit, wine,
and nuts. For example, U.S. exports of fresh apples, fresh grapefruit,
raisins, and fresh onions to Asia during September to December 1997 have
declined from the same period a year earlier (figure ). Exports of fresh
grapes, almonds, and frozen potatoes, however, increased. To a certain
extent, record U.S. production of grapes and almonds in 1997 pulled down
prices for these commodities and, along with good fruit quality, helped the
United States maintain competitiveness in the Asian market. The Japanese 
yen had depreciated even before the financial crisis began in Southeast Asia 
and has largely contributed to reduced U.S. exports to that country. In 1996,
U.S. fruit and vegetable exports to Japan fell 6 percent in value from the
previous year and in 1997, exports have gone down 3 percent. Despite the
weaker yen, Japanese demand for french fries remains strong. Imports of U.S.
frozen potatoes, the top export item of the U.S. fruit and vegetable
industry to this foreign market, are still up 6 percent in value terms from
1996 and are also up 8 percent in volume terms.  While Southeast Asia is a
relatively small market for U.S. fruit and vegetables, the region's share of
U.S. fruit and vegetable exports (in value terms) has increased from 3
percent in 1990 to about 5 percent in 1997. South Korea is also a relatively
small market, making up 2 to 3 percent of total export value. Japan, on the
other hand, is a large market, accounting for approximately 17 percent of
total export value.

Fluctuations in world supplies also affect the demand for U.S. exports and
U.S. demand for imports in the short-run. The U.S. share of the global
market increases when domestic supplies are large and/or traditional
suppliers in the world market experience a decline in production. In
contrast, U.S. demand for imports rises when domestic production is low
and/or traditional suppliers experience a bountiful harvest. These supply
factors are generally unpredictable, caused in most cases by unusual weather
(either favorable or unfavorable), such as the effects of the El Nio
phenomenon. The overall impact of El Nio on 1998 fruit and vegetable
production could generate some downward adjustment in the export forecast.

A number of barriers, both natural and artificial, diminish export
opportunities for U.S. producers. Depending on the nature of the barrier,
the impacts to U.S. exports could either be long term or short term.
Examples of these barriers include costly transportation of products to far
off markets and legal trade barriers such as government protectionist
policies. Liberalization of trade through multilateral, bilateral, and/or
regional trade agreements are important in relaxing many of these existing
legal trade barriers either by tariff reductions or harmonizing technical
barriers to trade (TBT).

Technical barriers to trade, such as phytosanitary requirements and labeling
issues, are an example of a legal trade barrier. TBTs are not necessarily
associated with developed or developing countries, but rather involve
importing countries setting standards of quality or requirements which
potential trade partners must meet. For example, Japanese imports of U.S.
apples, banned until 1994, are limited to Red and Golden Delicious apples
from Washington and Oregon. Because the Japanese are very concerned 
about the spread of fire blight, codling moths, and apple maggots, their
government imposed rigorous and costly import requirements for U.S. apple
shipments. As a result, none of the growers in Washington and Oregon have
registered for the 1997/98 export program, resulting in no U.S. apple
shipments to Japan for this season.  Another example is Brazil's mandatory
fumigation at origin requirement for all U.S. fruit entering their market,
effective June 1997. This requirement was imposed following the detection of
Pacific spider mite and thrips in recent earlier shipments. By the end of
July, Brazil agreed to void this fumigation requirement except for U.S.
shipments of peaches, nectarines, and apricots. Fresh fruit exports to
Brazil increased sharply in the 1990's, attributed mainly to increased
exports of key items such as apples, pears, peaches, and plums. Prospects
for future stonefruit exports to this foreign market could be dampened if
this mandatory fumigation-at-origin requirement remains in effect for
peaches, nectarines, and apricots.

Technological innovations can lead to achieving a larger share of the world
market through a competitive advantage--either a higher quality product for
the same price, or a lower price for a product of comparable quality.
However, these technologies can be exported as well, and so any gains in
export market shares may be short lived. The benefits of technology adoption
for an exporting country are usually larger with proximity to major export
markets. For example, Mexico's tomato export sector, concentrated primarily
in the Sinaloa and Baja California regions, have successfully adopted
technologies such as drip irrigation, fertigation, plastic mulch, and most
importantly, extended shelf-life varieties (ESL), which have boosted yields, 
decreased area planted, and lowered cost of production in the last few years. 
Florida had used the same technology package for the last 20 years, but ESL 
varieties seem to adapt well in Mexico and not in Florida. As a result, Mexican 
export capacity rose significantly, and the United States had since seen 
increased imports from these two regions. In addition, the peso devaluation in 
Mexico beginning in December 1994 provided these two regions additional 
incentives in the short run to export to the United States.

The Increasing Importance of U.S. Fruit and Vegetable Exports 

Export markets for U.S. fruit and vegetables continue to be an important
source of growth in the U.S. horticulture sector.  Total fruit and vegetable
exports doubled in value in the past 9 years, from $4.3 billion in 1989 to
over $9 billion in 1997, and is forecast to reach $10.5 billion in 1998.
Fruit and vegetable export share also has risen from 11 percent of U.S.
agricultural export value in 1989 to 17 percent in 1997. Over the last 12
years, sales to foreign markets have also accounted for a growing proportion
of U.S. fruit and vegetable supplies. This increasing share is most
significant in the U.S. tree nut industry, where the export share of
domestic supplies grew from an average of 24 percent in the 1970's to 29
percent in the 1980's and to 40 percent in the 1990's. Almonds are the
leading horticultural product export for the United States. Almond exports,
which account for 70 percent of all tree nut exports, have increased from 48
percent of supplies in 1975 to 66 percent in 1996.

In the fresh produce industry, export gains were much more gradual (figure). 
Fresh vegetable and melon exports as a share of domestic supplies
averaged about 5 percent in the 1970's, 7 percent in the 1980's, and 8
percent in the 1990's. Fresh fruit exports, on the other hand, averaged 14
percent in the 1970s, 15 percent in the 1980's, and 16 percent in the
1990's. In the fruit and vegetable processing sector, the share of processed
fruit exports (including wine) rose from an average of 6 percent of domestic
supplies in the mid-1970's to 8 percent during the 1990's, while exports of
processed vegetables, including potatoes and mushrooms, increased from an
average of around 1 percent in the 1970's, 3 percent in the 1980's, and 6
percent in the 1990's.

Export markets will likely continue to expand through the turn of the
century, particularly as international trade agreements are reached and
barriers to trade are slowly relaxed around the world. Projections of slight
increases in domestic fruit and vegetable consumption point to the continued
importance of export demand in realizing higher prices and revenues. For
domestic fruit producers especially, domestic consumption (fresh and
processed fruit) is projected to be relatively flat over the next decade.
Bananas and other tropical fruit, particularly mangoes, are projected to be
the leading source of increased domestic fruit consumption during 1998-2007.
However, supplies of these fruit come mostly from imports. Per capita
consumption of other fresh noncitrus fruit, such as apples, grapes, pears,
and peaches, is projected to increase less than 1 percent annually, while
fresh citrus consumption is projected to remain flat through 2007. Per
capita consumption of processed citrus products, mostly juice, as well as
other noncitrus fruit products are projected to increase only by a fraction
through 2007.

The Role of Fruit and Vegetable Imports in Domestic Consumption

While growth in exports has been strong, the United States has remained, for
most years, a net importer of fruit and vegetables. During 1997, U.S.
imports of fruit and vegetables reached $10.1 billion (up 6 percent from
1996), down from the nearly 16-percent increase in 1996, but consistent with
the 1990 to 1996 average increase. Increased production from U.S. farms and
Mexico's strengthening peso were some factors that have led to the slower
growth in 1997. Imports are projected to grow at an annual rate of 4
percent, increasing to about $10.4 billion in 1998. Part of the slowdown in
growth may be attributed to Mexico's economic recovery and their expected
lower production of winter vegetables due to a freeze in December 1997.

U.S. imports of fruits and vegetables have become increasingly important to
domestic consumption. Taking into account import categories that are most
significant in volume (at least 1.0 billion pounds), imports as a share of
domestic consumption has risen most significantly during the 1990's for
fresh-market fruits and vegetables and canned fruit (figure ). The share of
fresh-market vegetable and melon imports to total vegetable import volume
rose from 46 percent in 1990 to 54 percent in 1996.  At the same time, the
share of fresh-market fruit imports also rose from 35 percent to 46 percent
of total fruit and nut imports. Excluding imports of bananas, the share of
fresh-market fruits increased from 9 percent to 13 percent, respectively.
Canned fruit imports are mostly tropical fruit like canned pineapples.

Increased efficiency in the vegetable processing sector has provided the
domestic industry  a competitive advantage with foreign competitors, and
this could explain why canned vegetable imports are showing declining
importance in domestic consumption. Juice imports make up a large portion of
fruit imports, but in the last few years, juice imports have declined due
mostly to lower orange juice imports. This trend will likely continue in
1998 as orange juice production in the United States is forecast to reach
another record.

Latin America is the largest supplier of fruit and vegetables to the United
States--about 50 percent of the total value in 1997. Mexico is the United
States' largest supplier of fresh produce (fruits and vegetables),
accounting for over 60 percent of the value of all fresh vegetable imports
and 35 percent of the total value of fresh fruit imports. Other major
suppliers of fresh produce are Canada for fresh vegetables and Chile for
fresh fruits. Key examples of fresh produce imports are tomatoes, sweet
peppers, onions, cucumbers, melons, limes (citrus), mangoes, and pineapples
from Mexico; grapes, stone fruit, avocados, kiwifruit, and apples from
Chile; and potatoes from Canada. For bananas, the major suppliers to the
United States, accounting for over 90 percent of import value, are Costa
Rica, Honduras, Guatemala, and Panama in Central America and Ecuador,
Colombia, and Venezuela in South America. Western Europe supplies close to a
quarter of the value of U.S. fruit and vegetable imports, with processed
products such as wine and fruit juices making up over 90 percent of the
total value.

Open trade with Mexico, in line with the implementation of the North
American Free Trade Agreement in 1994, and the transportation cost advantage
associated with the proximity of the two markets, help Mexico remain as a
major source of fresh vegetables for the United States. Meanwhile, the
counter seasonality in fruit production between the United States and Chile
has encouraged the presence of Chilean fruit in the U.S. market. Most
Chilean fruit enter the U.S. market without much domestic competition during
November through March, after the U.S. noncitrus harvest is completed, and
extends choices to U.S. consumers beyond the domestic winter fruit of
citrus, apples, and pears. During the 1990's, Chilean fresh fruit averaged
over 25 percent of U.S. fresh fruit imports.

Unlike in the fresh fruit sector, imports of Mexican fresh vegetables
directly compete with domestic production, particularly from Florida, and to
a much lesser extent, California, Texas, and Arizona. During the peso
devaluation in Mexico in 1994, U.S. imports of Mexican fresh vegetables rose
20 percent and 15 percent in value for the following 2 years, respectively,
with increases in volume as well. U.S. fresh vegetable exports, meanwhile,
declined over 60 percent in value in 1995 but rose in 1996.  Since its
recovery from the peso crisis, U.S. imports of Mexican fresh vegetables had
dropped 6 percent in 1997, while U.S. fresh vegetable exports to Mexico
continued to increase.

END_OF_FILE