Global Trade in fruits and vegetables
A World Bank Report
Trade in fruit and vegetable products has been among the most dynamic areas of international agricultural trade. Trade in fruits and vegetables are stimulated by rising incomes and growing consumer interest in product variety, freshness, convenience, and year-round availability.
Advances in production, postharvest handling, processing, and logistical technologies—along with increased levels of international investment—have played a facilitating role.
For developing countries, trade in these products has been attractive in the face of highly volatile or declining long-term trends in the prices for many traditional export products. Many developing-country suppliers have entered the field, relatively few have achieved significant, sustained success, reflecting the fact that the industry is highly competitive and rapidly changing. Still, the aggregate picture is favorable.
This chapter highlights major global, regional, and product-specific trends in the trade in fruit and vegetable products, and examines the major policy and other factors that have affected this trade over the past two decades.1 Particular attention is given to the performance and position of developing countries in this trade and the policies, institutions, and infrastructure they need to succeed.
World trade in fruits and vegetables, fresh and processed, has increased by 30 percent since 1990, reaching $71.6 billion in 2001 (table 13.1). This followed even more robust growth in the 1980s, when trade in fruits and vegetables doubled.
Production and Trade Growth
For the purpose of this study, we group fruits and vegetables in four main categories: fresh fruits, fresh vegetables, processed fruits, and processed vegetables. These categories comprise all SITC (Standard International Trade Classification) except nuts, roots, and tubers. They correspond to most products, edible vegetables and certain roots and tubers, edible fruits and nuts; peel of citrus fruits or melons and preparations of vegetables, fruit, nuts, or other parts of plants.
China and India
For example, in China and India, where strong domestic demand is fueled by growing income and a large and rapidly growing urban population, only a small percentage of fruit and vegetable production is exported. In contrast, Latin American countries (such as Mexico, Chile, and Costa Rica) are among the world’s leading exporters of fruits and vegetables, mainly because of their proximity to the large U.S. market.[hidepost]
30 per cent rise
World trade in all categories of fruits and vegetables has grown strongly, with only slight changes in its broad composition. In 2001 fresh produce accounted for 63 percent of the total, whereas processed products accounted for 37 percent. The complexity of these definitions must be kept in mind, however. Both in Europe and the United States, one of the fastest-growing product segments is semi-prepared and packed fresh produce, including preassembled salads, vegetable dips, and sliced or mixed fruit products.
Taking all fruit and vegetable products combined, the value of world imports grew at 2–3 percent a year during the 1990s, a sharp deceleration from the 7–8 percent annual growth during the previous decade. As elaborated below, the slower growth in world imports during the 1990s reflects two primary factors: a decline in world prices for many important fruit and vegetable products in the latter half of the 1990s, and stagnation in EU import demand due to market saturation.
Within the fresh fruit category, the deceleration has been sharpest for apples, grapes, and citrus. Comparatively more dynamic trade has remained for various tropical fruits (especially papaya, mango, and pineapple), with average annual growth in the 1990s remaining at 8 percent.
Bananas, citrus, grapes, apples
Still, these latter products represent a relatively small proportion of world fresh fruit trade (7 percent in 2001), which is still heavily concentrated in particular lines, including bananas (25 percent of the total), citrus fruit (20 percent), grapes (11 percent), and apples (10 percent). A large number of other fresh fruits, not separated in the statistics, collectively represent 28 percent of world fresh fruit imports. Prominent items in this category include melons, various types of berries, and other temperate fruits.
World import values for fresh vegetables grew at 6.9 percent a year during the 1980s, yet decelerated to 2.4 percent a year in the 1990s (figure 13.3). The deceleration affected most individual commodities. World vegetable trade is fragmented among a large number of individual items. The largest single item is tomatoes, which account for 17 percent of the total. The category of beans, peas, and lentils accounts for another 14 percent. Other relatively major commodities in the fresh vegetable trade include onions, potatoes, asparagus, mushrooms, and various types of sweet and pungent peppers.
The evolution of trade in processed fruit and vegetable products mirrors that for fresh produce. The annual growth rate in trade value was 8.3 percent a year during the 1980s, yet only 3 percent during the 1990s. All categories of processed products saw a deceleration in trade expansion, although fruit and vegetable juices and preserved fruits and jams fell most sharply. Processed vegetables (such as canned mushrooms, dried mushrooms, and tomato paste) account for 55 percent of world trade in all these products, fruit and vegetable juices for some 20 percent, and several smaller categories for the balance.
Price played a role in the observed trends. The unit values of fresh fruit and of fresh and prepared vegetables dropped sharply in the second half of the 1990s after an extended period of increase dating from the early 1980s. These trends suggest that price factors played a very significant role in the declining rate of growth in the value of fruit and vegetable imports during the 1990s.Indeed, for each of the most important traded fresh fruits and vegetables, the rate of import volume growth was modestly higher in the 1990s than in the 1980s.
Part of the decline in world prices is a statistical matter. The data above are recorded in U.S. dollars. During the latter half of the 1990s, the U.S. dollar appreciated vis-à-vis the yen and most European currencies, deflating Japanese and European import values upon conversion into U.S. dollars. For some commodities, however, the unit import values into Japan, Europe, and elsewhere actually did decline in local currency terms—in some cases substantially. For example, from 1996 to 2001, the average unit value of Japanese fresh vegetable imports fell by 25 percent, while that of processed vegetable imports fell by 8 percent.2 A major factor in this decline was the rapidly expanding supply of low-cost production in China.
Trends in World Production and Trade
World production of fruit and vegetables grew by 30 percent between 1980 and 1990 and by 56 percent between 1990 and 2003, reaching 1,274 million tons by 2003.Much of this growth occurred in China, where production grew by 134 percent in the 1980s and by 200 percent in the 1990s. China is currently the world’s largest producer of fruits and vegetables, with a share of 34 percent, followed by Latin America and the Caribbean (11 percent), India (10 percent), and Africa and the European Union (EU) (both at 9 percent).
The structure of world trade in fruits and vegetables does not fully mirror that of production. Many of the largest producers are not significant traders due to a combination of domestic demand and geographical and logistical factors.
During the 1990s China accounted for virtually all of the incremental expansion in Japan’s vegetable trade, taking market share from other suppliers. Declining unit import values for various products in Europe can be attributed to at least three factors: the slow economic growth in the region (especially in Germany, the leading importer); competitive and structural changes in fruit and vegetable distribution systems, which put downward pressures on trader and manufacturer margins; and greater availability of product and intensified international competition.
EU, USA, dominate
Exported Fruits and Vegetables The European Union, NAFTA (North American
Free Trade Agreement), and a few middle-income countries dominate trade in fruits and vegetables.
Eight categories of countries are distinguished. China, India, Japan, and the European Union are singled out. The United States, Canada, and Mexico are grouped together in the NAFTA category. The developing-country group minus China and India is split between low-income countries and middle-income ones.
EU: World’s largest market
The European Union is the world’s largest market and supplier of fresh and processed fruits and vegetables. In 2001 its 15 member countries accounted for $37 billion in imports, or 51 percent of world imports, while exports stood at $28 billion, or 39.5 percent of world exports.3 EU trade in fruits and vegetables is, however, largely intraregional.
Intra-EU imports represent 64 percent of EU imports, while 83 percent of EU export trade occurs among its 15 member states.
How fruits and vegetables exports more important than traditional agri exports?
Fresh and processed fruit and vegetable products accounted for 16.7 percent of total agricultural exports fromdeveloping countries in 1980–81. By 2000–01, this share had increased to 21.8 percent. Fruit and vegetable exports from developing countries are now more than double exports for tropical beverages, three times exports of grains, three times exports of livestock products, five times exports of sugar, and seven times exports of textile fibers.
Still, with its affluent and aging population, its high factor costs, and its cold winters, this region represents one of the largest fruit and vegetable markets for non-EU countries ($13.2 billion), especially for low- and middleincome countries, which exported $1.08 and $9 billion, respectively, to the European Union in 2001. Major middle-income suppliers to the European Union market include banana-exporting countries (mainly Colombia, Costa Rica, Côte d’Ivoire, Ecuador, and Panama4) and counterseasonalsupplying countries such as Argentina, Chile, and South Africa. Led by South Africa, the latter three countries dominate exports of apples, grapes, and pears to the European Union.
Intraregional trade is also significant in NAFTA, the world’s second-largest fruit and vegetable market. Trade between Mexico, Canada, and the United States accounted for 49 percent of NAFTA’s imports and 53 percent of its exports in 2001. Intra-NAFTA trade is most important for fresh vegetables. For this commodity group, 90 percent of exports and 86 percent of imports occur within the trade group (Huang 2004).
Still, middleincome countries (excluding Mexico) have a strong foothold in this market. By securing 71 percent of the $7.25 billion extra-NAFTA import market in 2001, middle-income countries are major players.
Interestingly, thanks to growing incomes in the 1990s, middle-income countries have seen their own market become a major destination of fruit and vegetable exports from other countries, with import demand totaling $11 billion in 2001. South-South trade—trade between developing countries, excluding China and India—totaled $5.4 billion in 2001, accounting for 45 percent of developing countries’ imports.
Japan has also emerged as a significant market for fruits and vegetables over the 1990s, with import demand culminating at $5.8 billion in 2001. China has emerged as a major supplier of horticulture to Japan with its market share doubling from 16 percent in the 1980s to 33 percent in the 1990s.
While import penetration increased in the United States and other regions, EU import
demand grew little in the 1990s.As table 13.3 shows, a salient feature of world import dynamics is the sharp increase in imports of developing countries (6 percent a year) and NAFTA (5 percent a year), and the stagnation of EU imports (1 percent a year) over the 1990s.
Focusing on the United States, the import penetration ratio has increased steadily over time for fresh produce (figure 13.6). In contrast, extra-EU import demand grew by just 0.2 percent a year between 1990 and 2001, indicating that the bulk of the small increase in the European Union’s horticultural trade, shown in table 13.3, occurred internally. This is a major change from the 1980s, when EU imports almost doubled. Closer examination of the data shows that the European Union’s import deceleration is largely driven by Germany, which represents 25 percent of the EU’s fruit and vegetable market.
Germany’s imports dropped by1.4 percent annually over the 1990s, reflecting its slow pace of economic growth during this decade.
Income and population composition and dynamics are the major drivers of import demand. Demand for fruits and vegetables—derived from a combination of broad demand dynamics, domestic supply trends, and trade policies—is relatively income elastic. Higher incomes typically induce increased expenditures on a broader array of fresh and processed fruit and vegetable products.
In addition to income, other important factors include the size, age, ethnic composition of the population, cultural and religious factors, lifestyle factors (including work patterns and urbanization), and consumer education about health matters.
Although not all of these factors can be examined statistically, we attempt here to quantify the importance of most of the factors that explain the observed cross-country differences in growth in imports of fresh fruits, fresh vegetables, and processed fruits over the 1990s. The analysis, based on a sample of 49 major importers, uses the standard imperfect substitutes model, which assumes that imports are not perfect substitutes for domestic goods for the countries under consideration.
Average Annual Growth Rates in World Import Volumes, 1980–2001
Commodity 1980–91 1990–01
Bananas 3.45 3.96
Oranges 1.11 1.68
Apples 1.42 2.33
Grapes 4.31 4.34
Tomatoes 3.11 4.45
Onions 3.50 4.17
Green beans 4.59 5.98
Why fruits and vegetables?
It is well known that economic growth strongly stimulates imports of fruits and vegetables, whereas inflation reduces them helps to reduce the logistical and transaction costs to service demand from international sources, especially if the major cities are located in close vicinity to major ports or along efficient transport nodes.
Second, with urbanization, there is greater demand for convenience in meeting food needs.
Many fresh and processed fruit and vegetable products can be consumed with little or no further household preparation.
Plus, these products feature heavily in menus of restaurants and catering services, most of which are in urban areas. Third, urban populations tend to be more heterogeneous in ethnic and other composition than is typical in any single rural setting. This mixing of populations increases consumer exposure to new or even exoticproducts, some of which may only be sourced in large quantities from abroad.
As expected, tariffs negatively affect fresh fruit trade, but the elasticity is not significantly different from zero.
In sharp contrast, tariffs have a negative and statistically significant effect on processed fruit trade, highlighting the high degree of tariff escalation affecting trade in fruits and vegetables.
Concentration of Fresh Fruit and Vegetable Exports among Developing Countries, 2001
Product Leading Suppliers Joint Percentage of
World Exports (value)
Asparagus Peru, Mexico, Thailand 94
Mangoes Brazil, Mexico, Philippines 62
Pineapples Costa Rica, Côte d’Ivoire 61
Bananas Ecuador, Colombia,
Costa Rica 60
Avocados Chile, Mexico 53
Tomatoes Mexico, Syria 52
Grapes Chile, China, Mexico 38
Green beans Jordan, Kenya, Mexico 49
Green peas Guatemala, Kenya,
Ndiame Diop and Steven M. Jaffee
Source : Agriculture & Industry Survey[/hidepost]