Transworld Traders
With 1997’s record exports, U.S. farm cooperatives prove their ability in the global marketplace
Tracey L. Kennedy
Ag Economist, USDA Rural Development
Editor's note: The first in an annual series of surveys of cooperative involvement in international markets began in 1997. Prior to that, cooperative exports and imports had been measured at five-year intervals. The new survey was also the first attempt to measure cooperative involvement in activities other than exporting and importing. These include foreign memberships and ownership of assets in other countries. An overview of survey findings for 1997 is presented here.
Co-ops set record for exports in 1997
Riding brisk sales in pre-recession Asian markets and sharp increases in sales of bulk
commodities, U.S. producer-owned cooperatives reported record agricultural exports in
1997. During 1997, 95 cooperatives reported exports of agricultural commodities and food
products valued at more than $7.8 billion, up from $5.6 billion in 1995 and accounting for
more than 13 percent of all U.S. agricultural exports. Seven cooperatives also reported
exports of non-agricultural products fishery and seafood products, fertilizer and other
farm inputs, equipment and machinery - valued at $227 million.
Seventy percent ($5.48 billion) of cooperative
exports in 1997 were bulk commodities: grains and oilseeds, cotton, pulses, and peanuts (figure 1). Consumer-oriented products - fresh and processed fruits
and vegetables, red meats and poultry, dairy products, and tree nuts -accounted for 25
percent ($1.98 billion). Intermediate products partially processed or intended for use by
other than the final consumer - such as feeds, oils, flours and meals, and sugars and
sweeteners, accounted for about 5 percent ($406 million) of the total.
While trends in U.S. exports point to the
increased importance of differentiated products relative to bulk commodities, cooperatives
have shown growth in both categories during the latter half of the 1990s (figure 2). Fueled by consolidations and alliances in grains and
oilseeds, cooperative exports of bulk commodities posted a sharp increase of 43 percent
from $3.8 billion in 1995. Similarly, sales of consumer-oriented products, which remained
relatively steady during the first half of the 1990s, rose 39 percent from 1995 to 1997,
largely on the strength of increased sales of horticultural products. Intermediate
products sales continued their consistent increase, rising 15 percent from 1995 to 1997.
Export sales concentrated among largest co-ops
Cooperative export sales continue to be heavily concentrated among a few large exporters. In 1997, only five cooperatives, each with exports of greater than $250 million, accounted for 76.7 percent of all export sales reported, roughly the same amount reported in 1995. Another 16 percent, or $1.3 billion, came from 14 cooperatives having export sales ranging from $50 million to $249 million. The largest number of cooperatives in any sales range was 34, selling between $1 million and $9.9 million but accounting for less than 2 percent of all export sales.
Record cooperative share
Cooperatives accounted for 13.8 percent of all U.S. agricultural exports in 1997, the largest cooperative share recorded since cooperative exports have been surveyed by USDA. Sharply higher levels of cooperative exports, coupled with a downturn in total U.S. export sales, are primarily responsible for this increase. In terms of commodity categories, cooperatives posted a 23.3 percent share of U.S. bulk exports, 9.5 percent of all U.S. consumer-oriented exports and 3.2 percent of intermediate export sales.
Export markets
Asian markets were by far the most important for cooperative exports in 1997, taking in $3.9 billion or 49.7 percent of the total, compared to 43 percent of all U.S. exports to those destinations (figure 3). European destinations followed with $1.39 billion or 17.7 percent of cooperative exports, while Latin American markets took in $796 million or a little more than 10 percent. Canada accounted for almost 9 percent of cooperative exports at $684 million.
Non-agricultural exports
Seven cooperatives reported
non-agricultural exports valued at $227 million in 1997. Non-agricultural products consist
mainly of farm inputs such as fertilizer, petroleum products, equipment and other
supplies, and forestry products as well as seafood and fisheries products.
Ninety percent of these exports ($204.7
million) are comprised of fertilizer, petroleum and chemical products (figure
4). Nine percent ($20.5 million) comes from other products, primarily fisheries and
seafood products, forestry products and some services. Machinery and equipment ($1.2
million) and miscellaneous farm supplies - mainly fencing and animal health products
($890,000) - account for less than 1 percent, respectively.
Canada was by far the leading market for
cooperative exports of non-agricultural products at more than $202.8 million, or 89
percent of the total. Asia was the second largest market at $15.2 million, or 7 percent of
the total, followed by Europe at $6.1 million, or 2.6 percent, and Latin America with $2.7
million, or about 1 percent.
Export tools
A variety of tools are
available to cooperatives to facilitate the sale of member product overseas. These include
GSM loans; Foreign Sales Corporations (FSCs), a tax incentive mechanism for U.S.
exporters; export trade Certificates of Review (COR), a provision providing limited
antitrust exemptions for joint export activities; and export promotion programs such as
USDA’s Market Access Program (MAP) or those available through various state and
regional organizations.
On the surface, survey results indicate that
only a relatively few cooperative exporters make use of these programs: 14 of 95 reported
using FSCS; three participate in the COR program; 13 have received MAP funds; nine use GSM
loans, and 13 participate in state, regional, or commodity-based export promotion
programs. However, some of these programs are limited to specific commodities and
countries, and virtually all are geared to exporters of a certain size and continuity in
terms of market presence. The survey did not attempt to measure cooperative awareness of
these programs.
Cooperatives import range of goods
Cooperatives source products
from around the globe for a variety of purposes. Farm supply cooperatives purchase
fertilizer, petroleum, feed, animal health products, twine, and equipment and machinery to
provide member-producers with the best value in farm inputs. Marketing cooperatives import
ingredients for further processing, complementary products to enhance their product lines
and occasionally to augment member production.
In 1997, 24 cooperatives reported more than
$507 million in imports. Seventy-two percent of cooperatives' imports were farm supplies
and other agricultural inputs such as petroleum, fertilizer, and machinery and equipment (figure 5). Twenty-three percent of cooperatives' imports were of
high-value food products, primarily fresh produce and juice concentrates. The remaining 5
percent consisted of intermediate agricultural products: feed components, sugars and
sweeteners, and bovine semen.
Countries of origin
U.S. cooperatives purchased
more than 61 percent of their imported goods from NAFTA partner Canada in 1997 (figure 6). Most of the Canada-sourced products consisted of farm
inputs such as fertilizer, petroleum products, and other farm supplies.
Latin American countries originated 22 percent
of cooperatives' imports in 1997, consisting mainly of fresh and processed fruits and
vegetables, as well as some farm supplies. Europe provided 7 percent of the total:
processed fruit products, farm supplies and machinery, and frozen bovine semen. The origin
of 9 percent of imports was not identified, while Asia, the Middle East and Oceania
(Australia, New Zealand) provided less than 1 percent of imported products.
Beyond exporting and importing
In the past, cooperative
involvement in international activities has largely been limited to exporting and
importing, though a few engaged in manufacturing, brand licensing and the like. Although
still relatively few, an increasing number of cooperatives within the last decade have
evolved into more truly international companies through a variety of other involvements in
world markets. Today, cooperatives increasingly seek foreign producer members, engage in
joint manufacturing or distribution with foreign firms, and seek out partnership and
investment opportunities abroad. Marketing cooperatives facilitate the sale of member
products and enhance the visibility and value of member-owned assets such as brand-names
through licensing and distribution arrangements. Farm supply co-ops have increasingly
integrated back into primary production through foreign member cooperatives or the
acquisition of foreign assets.
In 1997, six cooperatives reported having
producer-members in other countries, most in Canada, Mexico and South America. Five
cooperatives had member cooperatives outside the United States, primarily in Canada. A
majority of the co-ops with foreign producer-members are engaged in the production of
consumer-oriented products, while those with foreign co-op members are producers of bulk
commodities and farm inputs.
Twelve cooperatives - primarily producers of
consumer-oriented products reported licensing arrangements. Most of these cooperatives
were active in multiple markets if not worldwide.
Six cooperatives reported joint processing or
manufacturing arrangement overseas. Most were active in multiple locations, with the
heaviest concentrations in Europe and Asia. Though not asked to specify whether these
activities involved contractual arrangements (such as co-packing) or asset ownership,
three cooperatives reported ownership of assets in those countries where they also had
joint processing activities.
Thirteen cooperatives reported ownership of
foreign assets (excluding offices). These assets ranged from wholly owned processing and
manufacturing facilities to minority shares in other companies. Nine cooperatives had
assets in only a single overseas location, while four reported assets in multiple
countries.
Cooperatives have demonstrated, year by year,
that they can be effective players in a global marketplace and their 1997 results
illustrate that. However, as 1997 drew to a close, many of the markets on which U.S.
cooperatives most depend experienced a sharp decline in economic conditions from which
they still have not recovered. This, coupled with the maturity of markets for some
commodities in which cooperatives are basic, will continue to challenge the cooperative
presence internationally.
    |
