 | Exporting High-Value Food Commodities: Success Stories from Developing Countries (WB, 1993, 119 p.) |
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I. Introduction
1.1 Increased disposable incomes, urbanization, and growing health consciousness are among the major factors contributing to changing dietary patterns, both in industrialized and developing. While the pace and specific components of such dietary changes have varied between countries and among different income and residential groups within individual countries, there has been a general shift toward increased consumption of fresh fruit and vegetables, of protein-rich foods such as meats, fish, dairy products, and vegetable oils, and of prepared 'convenience' foods with high value-added.
1.2 Compared with traditional staple foods (such as foodgrains, legumes, roots, and tubers), these horticultural, livestock, fisheries, oilseed, and prepared foods have considerably higher unit values and face much higher income elasticities of demand. While representative world prices for sorghum, maize, and wheat in recent years have been in the range of $75 to $175 per metric ton, many fruits and vegetables, juices, meat and fish products, and animal feed products quote international prices of $500 or more per metric ton. Among industrialized market economies, the estimated income elasticity of demand for cereals is -0.22, compared with between +0.25 and + 0.38 for meat, eggs, and fruit and vegetables. For developing countries, the income elasticity of demand for cereals has been estimated at +0.16, compared with between +0.61 and + 1.00 for the noted high-value commodities.'
1.3 Compared with many traditional developing country agricultural crops, the noted high-value foods (HVF) have exhibited far more favorable trends in international trade over the past decade. For example, while developing country trade in coffee, cocoa, cotton, and sugar actually declined in value during the 1980s, de cloping countries as a group experienced annual export growth rates of 4 - 11 % over this period for such product categories as fresh and processed fruits and vegetables, fresh and processed fish products, feedstuffs, and oil seeds. For several categories of HVF, developing country trade performance matched or exceeded that of industrialized countries.
1.4 World and developing country trade in high-value food products--defined here to include meats, dairy products, fish products, edible horticultural products, spices, oilseeds, animal/vegetable oils, and animal feedstuffs-- is now considerable. In 1988/89, world exports in such products totalled approximately $144 billion. For comparison, this was the same value for world trade in crude petroleum that year and represented about 5% of total world commodity trade. World trade in edible horticultural products alone ($40.3 billion) exceeded that for cereals ($38.6 billion).
1.5 According to FAO trade statistics, the 1990 exports of high-value foods by middle- and low-income countries were valued at $52.5 billion, representing more than one-third of total world exports of these products. For comparison, the combined value of developing country exports of tropical beverage crops, sugar, cotton, and tobacco in that year was only $26.3 billion-- roughly one-half. Despite the quantitative significance of developing country high-value food exports, analyses of developing country agricultural trade and agro-industrial experience and prospects continue to focus primarily on the traditional export and industrial crops.
1.6 Many middle- and low-income countries have developed export trades in one or more categories of highvalue foods, either on a specialized basis or as an extension of domestic marketing activities. In fact, in 1990, twenty-four such countries had exports of HVF which exceeded $500 million. These countries, the majority of which are either Latin American or Asian, are listed in Table 1.
Table 1: Leading Middle- and Low-Income Exporters of High Value Foods (1990)a
|
Country |
Value ($ Millions) |
|
1. Brazil |
5,852 |
|
2. Argentina |
5,017 |
|
3. China |
4,825 |
|
4. Thailand |
4,301 |
|
5. Malaysia |
2,463 |
|
6. Taiwan (China) |
2,451b |
|
7. Turkey |
1,997 |
|
8. Chile |
1,919 |
|
9. Indonesia |
1,864 |
|
10. India |
1,723 |
|
11. Korea |
1,718 |
|
12. Mexico |
1,667 |
|
13. Hungary |
1,600 |
|
14. Poland |
1,338 |
|
15. Philippines |
1,294 |
|
16. Morocco |
1,075 |
|
17. Ecuador |
945 |
|
18. S. Africa |
855 |
|
19. Peru |
571 |
|
20. Costa Rica |
531 |
|
21. Senegal |
525 |
|
22. Colombia |
505 |
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23. Honduras |
504 |
|
24. Uruguay |
500 |
a Aggregate of exports of 1) meats/products, 2) dairy products, 3) fish/products, 4) fresh and processed fruits/vegetables/nuts, 5) feedstuffs, 6) oilseeds, 7) vegetable/animal oils, and 8) spices.b Data for 1989
Sources: FAO Trade Yearbook (1990), FAO Fisheries Commodities Statistics (1990), UNCTAD Handbook of International Trade and Development Statistics (1990); Mao (1991)
1.7 While many middle- and low-income countries have indeed developed HVF export trades, Table 1 indicates that a relatively small number of countries account for the bulk of this trade. In fact, only four countries--Brazil, Argentina, China, and Thailand--account for 40% of developing country exports for HVF. The leading ten countries account for two-thirds and the top twenty countries account for nearly 90% of the total. This implies that the remaining 100 plus middle- and low-income countries have played a very minor role in world HVF trade, except perhaps as importers or as suppliers of special products to relatively small niche markets.
1.8 This study provides a synthesis of notable "success" stories of demand-driven production, processing, and marketing of high-value foods and feeds among developing countries. It focuses on major cases of successful export development, which have either spanned many decades or have emerged only over the past decade in response to new market opportunities. In the majority of these cases, there have also been significant prior, parallel, or subsequent development of domestic demand and commodity distribution.
1.9 The review examines the development, organization, and performance of entire 'commodity systems', rather than the experience of individual companies. Primary attention is given to common patterns and crosscutting issues, rather than to the historical and microeconomic intracacies of particular cases. The study seeks to identify the common technical, institutional, policy, and other factors which have contributed to commodity system development and international competitiveness.
1.10 The desk research upon which this study is based was undertaken as part of a joint EMTAG/AGR review of "Non-Farm Private Activities in the Food Marketing System", designed to draw lessons from successful food processing and marketing experiences in OECD and relatively advanced developing countries for possible application within the countries of Eastern Europe and the Mediterranean Basin. This orientation strongly influenced the selection of case studies. First it led to a focus on temperate or Mediterranean-type commodities which are currently or which prospectively could be produced on a competitive basis within the focal regions. Hence, the sample of case studies was drawn from commodity systems involving tomato products, temperate and citrus fruits, tree nuts, value-added meat and fish products, and temperate vegetable oil/feed crops. No tropical food or feed products (e.g. pineapples, processed cassava) were included. Second, it was determined that the vast majority of case studies should be drawn from middle-income countries whose levels of human capital and infrastructure approximate those found in Eastern Europe and the Mediterranean Basin.
1.11 'Successful' commodity systems from twelve countries were selected for analysis. However, due to the availability of insufficient information for three cases, only nine countries were represented in the final analysis. These countries represent different geographical regions as well as low-income (Kenya, China), middle-income (Argentina, Brazil, Chile, Mexico, and Thailand), and high-income (Israel Taiwan(China)) countries. This sample of countries accounts for about 50 % of the total HVF exports of developing and centrally planned countries, with seven of the nine countries having HVF exports which exceed $1.5 billion.
1.12 For several countries only one commodity system was examined; for others, two or three different commodity systems were analyzed. A total of fifteen cases were examined, covering a range of horticultural, meat, fisheries, and oilseed products. Some of the focal commodity systems date back several decades or even to the 19th Century; others have emerged to a position of international competitiveness only during the past decade. The specific cases covered in the analysis are:
1) Mexico Fresh Tomatoes--the longest standing and most successful case of developing country 'offseason' fresh vegetable supply to the United States.
2) Kenya Fresh Vegetables-Sub-Saharan Africa's most successful trade in 'off-season' and specialty fresh vegetables to niche markets in Western Europe.
3) Israel Fresh Citrus Fruit--a long-term major player in the Mediterranean-Western Europe citrus trade. While the sub-sector's competitive position in this trade has recently declined, a domestic processing industry has developed which has absorbed the bulk of production and has undertaken competitive exports of various value-added products.
4) Brazil Frozen Concentrated Orange Juice-an industry which was transformed from a cottage industry to the dominant world exporter in a large international market in the space of only fifteen years.
5) Chile Temperate Fruits--the large-scale export of counter seasonal supplies of grapes, apples, and other fruits to previously developed Northern Hemispheric markets.
6) Chile Tomato Paste--a recent rapid expansion in production and trade in response to a market 'vacuum' generated by an trade dispute between the U.S. and the EEC.
7) Argentina Beef-- a long-standing commodity system which has supported the highest per capita consumption in the world and has remained internationally competitive for quality products despite macroeconomic instability and direct taxation at home and protected markets and subsidized production abroad.
8) Thailand Poultry--a cottage industry transformed by technological and institutional changes to bring about a rapid expansion in local consumption and a rising share of the Japanese market.
9) Thailand Tuna - a canning industry whose exports rose from zero in 1980 to nearly 50% of the rapidly expanding world market by the end of the decade.
10) Chile Fish and Fish Products - rapid growth and new product development for one of the major world exporters of fish products.
11) China Shrimp--the recent rapid development of the world's lowest cost and largest shrimp export industry.
12) Thailand Shrimp-the expansion and product diversification of a leading shrimp exporter which has recently shifted to aquaculture and which has taken advantage of an established infrastructure for food processing.
13) Brazil Soybean--a 1960s and 1970s boom in production, processing, and trade driven by favorable international markets and technological improvements.
14) Argentina Soybean--the rapid development of an internationally competitive industry within a climate of macroeconomic instability.
15) Taiwan (China) Agricultural Diversification and Food Processing-- the demand-driven restructuring of agricultural production, food processing, and agricultural trade away from rice and agricultural raw materials to value-added pork, fish, and fruit and vegetable products.
Structure of the Paper
1.13 The balance of this paper is organized as follows. Section Two provides a conceptual framework for examining the development, organization, and performance of food commodity systems. In this section, we define commodity system competitiveness and identify its major contributing factors. We also examine a variety of generic barriers to entry, efficiency, and coordination in food commodity systems and a countervailing range of technologies, institutions, and other mechanisms to overcome such barriers.
1.14 Section Three provides a synthesis of the focal 'success stories' of HVF export development. It examines selected indicators of commodity system performance, reviews the international market and domestic macroeconomic/ human capital/infrastructure environment in which these commodity systems developed, and reviews common and divergent organizational patterns. Among the cross-cutting issues addressed are the respective roles of the private and public sectors, the prevailing competitive structures, the roles of foreign capital and technology, and the prevailing institutional arrangements linking producers, processors/exporters, and foreign market distributors.
1.15 Section Four provides a summary of this analysis and suggests lessons for developing countries. The Appendix offers the individual case studies, reviewing historical patterns, major factors in development, etc.. Each case study is condensed into a few pages, with ample references provided for further study.