Aspects of import competition and export development for major Florida commodities

Material Information

Aspects of import competition and export development for major Florida commodities some preliminary results
Series Title:
Staff report
Shonkwiler, J. S ( John Scott )
Mathis, Kary, 1936-
Place of Publication:
Gainesville Fla
Food and Resource Economics Dept., Institute of Food and Agricultural Sciences, University of Florida
Publication Date:
Physical Description:
v, 22 p. : ill. ; 28 cm.


Subjects / Keywords:
Vegetables -- Marketing -- Florida ( lcsh )
Beef -- Marketing -- Florida ( lcsh )
Vegetable trade -- Florida ( lcsh )
bibliography ( marcgt )
non-fiction ( marcgt )


Bibliography: p. 22.
General Note:
"August 1979."
Staff report (Florida Agricultural Market Research Center) ;
Statement of Responsibility:
by J. Scott Shonkwiler, Kary Mathis.

Record Information

Source Institution:
University of Florida
Holding Location:
University of Florida
Rights Management:
All applicable rights reserved by the source institution and holding location.
Resource Identifier:
022898036 ( ALEPH )
18891327 ( OCLC )
AFE9619 ( NOTIS )


This item has the following downloads:

Full Text

U II u





J. Scott Shonkwiler
Kary Mathis

Staff Report 6 August 1979

Staff Papers are circulated without formal review
by the Food and Resource Economics Department.
Content is the sole responsibility of the author.

Food and Resource Economics Department
Institute of Food and Agricultural Sciences
University of Florida, Gainesville, Florida 32611

The Florida Agricultural Market Research Center is
a service of
the Food and Resource Economics Department
of the
Institute of Food and Agricultural Sciences.

The purpose of this Center is to provide timely, applied research

on current and emerging marketing problems affecting Florida's agri-

cultural and marine industries. The Center seeks to provide research

and information to production, marketing, and processing firms, groups

and organizations concerned with improving and expanding markets for

Florida agricultural and marine products.

The Center is staffed by a basic group of economists trained in

agriculture and marketing. In addition, cooperating personnel from

other IFAS units provide a wide range of expertise which can be applied

as determined by the requirements of individual projects.





Import Competition . .

Fresh Vegetables. . .
Trends in Vegetable Product
Preliminary Model Results .
The Effects of Beef Imports

Export Markets . . .

Fresh Vegetables. . .



ion, Imports

on Florida

. . .

. .

. .

. .

and Prices. .

Cattle Prices.

. .o .

. .o .

. o. .












Table Page

1 Average Florida FOB vegetable price measures, 1966-68,
1970-72, and 1974-76. . . . .. 12

2 Price and import equations for tomatoes and green
peppers . . . . . . 15

3 Mean structural elasticities. . . .. 16

4 Florida agricultural exports: total value and share of
cash receipts from farm marketing, fiscal 1968, 1970,
1972, 1974 and 1977 .. . . . 18

5 Florida agricultural exports: Leading product groups
and share of total Florida agricultural export value
fiscal 1970, 1974 and 1977. . . . .. 19

6 Florida agricultural exports: share of the U. S.
exports, fiscal 1970, 1974 and 1977 . . 20


Figure Page

1 Fall tomato production and imports for specified
three year periods. . . . .. 6

2 Winter tomato production amd imports for specified
three year periods. . . . . 7

3 Spring tomato production and imports for specified
three year periods. . . . . 8

4 Fall pepper production and imports for specified
three year periods. . . . . 9

5 Winter pepper production and imports for specified
three year periods. . . . .. 10

6 Spring pepper production and imports for specified
three year periods. . . . .. 11


J. Scott Shonkwiler and Kary Mathis


It appears that the competitive position of Florida agriculture in

interregional and international markets will largely determine the

future prosperity of the state's agriculture industry. In the area of

international trade and marketing the Florida Agricultural Market Re-

search Center is directing its attention to two major areas: Import

competition and export market development. The first area requires

careful evaluation of the effects of competing imports on the state's

agriculture and economy. The second major area permits the identifi-

cation and analysis of opportunities for expanding commercial sales of

Florida agricultural products in foreign markets. Attention will be

directed toward summarizing Florida's position with respect to import

competition and export market development for the commodities of great-

est current concern. Commodities of particular interest are fresh

winter vegetables, limes and avocados, beef, and cut flowers.

The present study presents some short-term research results for

certain fresh winter vegetables and beef. Cut flowers, limes and

J. SCOTT SHONKWILER is assistant professor and KARY MATHIS is professor
of food and resource economics, University of Florida.


avocados will be addressed in later reports. Specifically, attention is

directed towards the effects of import competition on two tomatoes and

peppers, and on the state's beef cattle industry. Then, emphasis will

shift to the importance of the export market for Florida agricultural

commodities. In both cases major impediments were encountered due to

lack of complete and detailed data on Florida's agricultural trade. For

this reason the current report will be used for presenting preliminary

results with the intention of expanding and refining the Market Center's

international agricultural trade program.

In forthcoming reports major competitors will be identified and the

degree and nature of competition quantified as far as possible for each

commodity. Efforts will be directed toward measuring the impact of this

competition on each major commodity sector and on the regions of the

state affected by the competition. Concomitantly, the potential for

expanded sales of Florida products will be investigated. Attention will

be focused on determining the extent of foreign demands and will in-

dicate the magnitude and composition of expected increases in export

shipments. Finally, the consequences of both expanded demands and

changes in import competition for Florida products and the abilities of

the producers to adjust to them will be analyzed.

Import Competition

Fresh Vegetables

Tomatoes and green peppers are important Florida vegetable crops

which face strong import competition during the October to June crop

year. In the 1977-78 growing season the value of these crops amounted

to $224 million and represented 10 percent of total returns for all

Florida vegetable crops. But the growth and nature of import competition

suggest depressed returns for Florida producers in the future unless

domestic demand expands rapidly enough to accommodate increasing supplies

without price deterioration.

Analyzing Florida's competitive position vis-a-vis Mexican vegetable

exports requires an understanding of how prices, production, marketing

and imports evolve both within the crop year and across crop years.

Pronounced seasonality in production and import movements means that

annual averages may mask important price variations affecting seasonal

supply responses. To investigate the forces responsible for seasonal

price fluctuations a quarterly price determination model has been specified.

Particular interest currently is focused on how the timing and magnitude

of vegetable imports impact on Florida wholesale vegetable prices.

The first phase of this study is aimed at quantifying short-run

(quarterly) supply response and price determination mechanisms for

Florida and Mexican vegetables marketed in the United States. Acreages

planted to vegetables in Florida and Mexico are treated exogenously

since it is presumed that producers base their planting decisions on

previously observed factors extending one or more years in the past. The

short-run component of supply response recognizes that domestic market-

ings and imports depend on current prices as well as numerous non-market

phenomena. Higher prices should act to encourage more thorough harvest-

ing practices and act to ease any restrictive grading procedures. To

this extent harvesting and shipping rates are varied during the quarter.

However, increased supplies should act to moderate price increases thus,

in turn reducing harvesting and shipping rates. Clearly this type of

simultaneity calls for a model which can take account of supply-demand

conditions and determine equilibrium prices. The preliminary models

developed treat short-run imports, domestic supply and demand endogen-

ously so that market operation may be portrayed realistically.

The second phase of the analysis then will examine the longer run

supply response of Florida producers and attempt to elicit their re-

actions to expected prices, costs, returns and perceived risk (Just,

Lin, Hammig). Data for Mexican long-run vegetable supply response is

exceptionally weak (Brooker and Pearson, Simmons et al.) with some

indication that planting decisions are made autonomously by the powerful

Mexican growers' association, Union Nacional de Productores Hortalizas

(UNPH) (Meyers). Thus, some aspects of Mexican production will probably

be treated exogenously. A further problem is that climatic factors

cause yields and costs to vary across years so that without time series

data on these variables for Mexican producers certain simplifying assump-

tions will be necessary. In any event, the models created in this phase

will be capable of simulating production levels and projected returns to

parametric changes in domestic demands, tariffs, costs of production,

and import volumes.

Trends in Vegetable Production, Imports and Prices

Imports comprise a substantial part of non-summer vegetable market-

ings and there is mounting concern that their share of the winter vegetable

market will continue to expand (Simmons et al., Meyers). Mexico's rapid

development of their share of U.S. vegetable market was ostensibly

triggered by high relative prices in the late 1960's and early 1970's

caused by poor growing conditions in the U.S. (Simmons et al.). How-

ever, Meyers has implied that Mexican producers and shippers are con-

spiring to gain substantial U.S. market power via the coordination and

control of the UNPH over Mexican production activities.

To illustrate both the trends and seasonality in vegetable production

and imports Figures 1 through 6 are included. These figures show three-

year averages of imports and domestic production for three periods

spannning 11 recent years. The data conform to the Crop Reporting

Boards' Vegetables: Annual Summary and represent intra-seasonal compari-

sons based on quarterly designations. All values are expressed in terms

of 1,000 hundredweight units with zero levels being denoted by an asterik

(*) to indicate that production in commercial quantities does not occur

during the period.

Inferences based on Figures 1 through 6 must be tempered by re-

cognizing that returns to Florida producers depend on demand conditions

as well as aggregate supplies of vegetables from the various sources.

Table 1 presents average wholesale Florida vegetable prices for the same

periods analyzed in Figures 1 through 6 so that production and import

levels may be linked to demand conditions. Prices are all in terms of

dollars per hundredweight and nominal prices are, of course, the actual

values reported. Real prices are obtained by dividing nominal prices by

the average value of the consumer price index (1967 = 1) for each corres-

ponding period. The price-cost index measures the ratio of nominal

prices to total per acre growing and harvesting costs (.Brooke) for each

commodity with 1967 costs normalized to equal one.

Figure 1.--Fall tomato production and imports for specified three year
S= Average Florida production
3000 -
= Other U.S. production

0 = Imports
2500 -

S 2000 \


\\ \\_

1970 1072 1974 1976

1966 1968

Figure 2.--Winter tomato production and imports for specified three
year period.

[M = Average Florida production







1966 1968

1970 1972

1974 1976

* No other U.S. winter production

Figure 3.--Spring tomato production and imports for specified three
year period.

3500 = Average Florida production

0D = Other U.S. production

3000 \X \ 7"'-"-v
\3\ 0= Imports \\

2500 -

S2000- \co

1500 /

1000 -\

500 \ \

1970 1972 1974 1976

1966 1968

Figure 4.--Fall pepper production and imports for specified three year
year period.

S= Average Florida production

= Other U.S. production

= Imports

1970 1972






1966 1968

1974 1976

Figure 5.--Winter pepper production and imports for specified three
year period.

M = Average Florida production

1000 -
S= Imports

I- 750 -



250 -

1966 1968 1970 1972

No other U. S. winter production

1974 1976


Figure 6.--Spring pepper production and imports for specified three
year period.

10 = Average Fl,orida production

= Other U.S. production

7= Imports

S 500 -

250- \ -

1970 1972

1966 1968

1974 1976

Table l.--Average Florida FOB vegetable price measures, 1966-68, 1970-72, and 1974-76.

Nominal price Real price Price-cost index
66-68 70-72 74-76 66-68 70-72 74-76 66-68 70-72 74-76

--------------------------------Dollars per hundredweight------------------------------


Fall 10.7 15.0 19.9 10.9 12.2 12.1 11.3 11.1 6.6
Winter 14.7 14.1 19.0 14.9 11.9 12.8 15.5 10.4 6.6
Spring 10.4 13.2 17.0 10.4 10.9 10.8 11.0 9.8 5.6


Fall 14.8 12.6 20.4 15.1 10.2 12.4 14.8 10.0 8.8
Winter 12.7 18.7 21.0 12.8 15.7 13.6 12.7 14.8 9.1
Spring 12.6 19.6 20.1 12.6 16.2 12.7 12.6 15.6 8.7

The data on prices presented in Table 1 provide an approximate

representation of relative returns to Florida producers during the 11

years spanned because average yields per acre have been fairly steady

during most of the period. Although relative prices have been subject

to some erosion in more recent years, such results are not totally

explained by changing levels of Mexican imports as implied by Meyers.

A more sophisticated approach is called for in order to separate the

effects of numerous forces which influence Florida vegetable prices.

Preliminary Model Results

Tomatoes and green peppers rank first and second in terms of market

value for these Florida vegetables which encounter stiff import competi-

tion during the crop year. Using data for the fall, winter and spring

quarters for the 1968-76 crop years, econometric models for these veget-

able crops were estimated using two stage least squares. For expositional

purposes Florida and other U.S. production variables will be exogenized

so that partial reduced form multipliers and elasticities may be present-

ed. The key eouations then for each crop are the price determination

and import supply relations. The estimated parameters for these equations

are shown in Table 2 along with t-values in parentheses below their

respective coefficients.

Since all quantity variables are expressed in units of 1 ,000 hundred-

weights the coefficients in Table 2 can be interpreted as multipliers in

terms of this quality measure. Thus, the effect of a 10 million pound

increase in Florida tomato production causes prices to fall by (-.0026 *
10,000,000 1,000 100 = -.26) 26 cents per hundredweight and imports

to drop by (-.256 10,000,000 1,000 100 = 25.6) 25.6 thousand

hundredweight or 2,560,000 pounds. Typically though, interest is focus-

ed on percentage changes in prices and quantities. These elasticities

associated with the structural estimates in Table 2 may be found in

Table 3. Here percentage changes about the means of the price and

import variables are related to one percent changes in five exogenous


The elasticities in Table 3 are relevant only in terms of structural

analysis, not for prediction, since the reduced form representation is

required for prediction. Further, it should be remembered that Florida

production is actually an endogenous variable in the complete model so

that the structural elasticities presented imply only a partial equilib-

rium. Nonetheless, several interesting observations may be drawn from

Table 3.

The direct price elasticities of demand at the wholesale level may

be approximated by inverting the elasticities of price with respect to

Florida production. They are -2.85 for tomatoes and -1.20 for green

peppers. This elasticity of demand for tomatoes appears to be overstated

compared to other studies (Jesse and Machdo) thus, some caution is

warrented in interpreting these preliminary results. Although it appears

that income elasticities are exaggerated note that in each case they are

only about 40 percent greater than the corresponding elasticity on CPI,

the implicit deflater in each price equation. Perhaps the most interesting

feature of the results summarized in Table 3 is that Florida prices are

much more sensitive to imports than to other U.S. production. Thus, it

appears that Mexican imports have a direct and substantial impact on the

prices Florida vegetable producers receive.

Table 2.--Price and import equations for tomatoes and green peppers

Tomato price FOB Florida

TPR = 19.33 .0026 TPDF

- .0028 TPDE .0033
(3.9) (3.8)

TM + .04 TDI

- 18.3 CPI

+ 2.54 Q1

+ 7.22 Q2

Tomato imports

TM = 680.6 -

.256 TPDF .416 TPDE +
(1.2) (1.3)

1.22 TDI +

Pepper price FOB Florida

PPR = 24.7 -

.031 PPDF -

+ 16.5 Q1 + 9.82 Q2
(2.2) (2.1)

Pepper imports

PM = 82.7

- .38 PPDF -

.013 PPDE -

.287 PPDE +

.049 PM

.427 TDI

+ .07 TDI

+ 239 Q1

- 33.5 CPI

+ 83.4 Q2

Variable definitions

TPR Price FOB Florida in $/cwt
TM U.S. imports in 1,000 cwt
TPDF Florida production in 1,000 cwt
TPE U.S. production excluding Florida in 1,000 cwt
TDI U.S. total disposable income in billion $
CPI U.S. consumer price index, 1967 = 100
Q1 Intercept shifter, 1 in winter quarter only
Q2 Intercept shifter, 1 in spring quarter only

Peppers: PPR

Price FOB Florida in $/cwt
U.S.imports in 1,000 cwt
Florida production in 1,000 cwt
U.S. Production excluding Florida in 1,000 cwt
U.S. total disposable income in billion $
U.S. consumer price index, 1967 = 100
Intercept shifter, 1 in winter quarter only
Intercept shifter, 1 in spring quarter only

1634 Q1

+ 262202


Table 3.--Mean structural elasticities.


With respect to


Change in variable

-.35 -.29
-.24 -.29
2.16 .54




Change in variable

-.83 -.74
-.29 -.48
3.32 1.49

The Effects of Beef Imports on Florida Cattle Prices

In January 1978 Florida ranked second for states east of the

mississippi River in the number of beef cows on farms. The state

typically ranks in the 10 largest in terms of beef cow numbers nation-

ally. Florida beef cow prices have been postulated to depend both on

national conditions and more specific Florida conditions given its

geographic distance from the major beef cattle states in the central

U.S. In determining the influence of U.S. beef imports on Florida cow

prices these factors were taken into consideration first by specifying a

national beef cow price determination model and then relating it to the

Florida price series.

By using quarterly observations for the years from 1970 through

1978 an econometric model was estimated. On average it was found that

Florida cow prices were 3.06 percent less than the national prices used

in the model, yet on a quarterly basis the national price was able to

explain abcut 90 percent of the variation in Florida cow prices. It was

determined that beef imports had a slightly stronger impact on Florida

prices versus national beef cow prices. In particular a one-quarter

increase of 100 million pounds of beef imports was estimated to reduce

Florida cow prices by $0.65 per hundredweight. A sustained increase of

imports by the same amount for a year was estimated to reduced Florida

cow prices by $1.23 per hundredweight. These point to somewhat larger

effects than reported by Freebairn and Rausser whose results suggested

that 100 million pound increase in beef imports over an entire year

would reduce national cow prices by only $0.47 per hundredweight.

Export Markets

Agricultural exports from Florida have grown substantially in the

past 10 years. For example, total value of Florida agricultural products

exported grew from $101 million in 1968 to $390 million by 1977 (Table

4). Exports were only 8 percent of total cash receipts from farm marketing

in 1968, but were over 15 percent of farm sales by 1977.

Citrus and citrus products, representing virtually all of the

"fruits and preparations" class shown below, accounted for the largest

share of Florida agricultural trade in recent years. Other products,

particularly vegetables, have grown in relative importance, however

(Table 5).

Table 4.--Florida agricultural exports: total value and share of cash
receipts from farm marketings, fiscal 1968, 1970, 1972, 1974,
and 1977.

Exports as share
Fiscal year Export value of farm sales

Million dollars Percent

1968 101 8.2
1970 115 8.8
1972 148 8.8
1974 223 10.3
1977 390 15.3

Source: "Foreign Agricultural Trade of the United States", ESCS,

Florida ranked second in the U.S. in exports of fruits and pre-

parations 1977 with 22 percent of the nation's shipments. The state

was fourth in the nation-'s exports of vegetables and preparations,

with 9 percent (Table 6).

The Florida share of all other products and of total exports was

considerably smaller, due primarily to the large shipments of grains and

oilseeds from other states.

Fresh Vegetables

Canada is Florida's largest foreign customer for fresh vegetables.

Significant percentages of several important Florida vegetables are

shipped to Canadian markets. Most vegetable exports other than those

destined for Canada go to Northern European markets. Radishes make up

about three-fourths of the value of European shipments, with carrots,

celery, sweet corn, eggplant, peppers, tomatoes and watermelons also

being shipped.

Table 5.--Florida agricultural exports: Leading product groups and share of total Florida agri-
cultural export value, fiscal 1970, 1974, and 1977.

1970 1974 1977
Million Million Million
Product dollars Percent dollars Percent dollars Percent

Fruit and preparation 65 60 117 53 178 46
Vegetables and preparations 12 10 25 11 65 17
Soybeans 4 4 13 6 24 6
Feed grains 2 2 8 3 23 6
Tobacco, unmanufactured 9 8 15 7 20 5
Peanuts --a -a -a -a 8 2
Poultry products 2 1 3 1 7 2
Hides and skins 2 1 5 2 7 2
Lard and tallow 2 2 7 3 7 2
Protein meal 1 1 4 2 5 1
Meats and products 1 1 4 2 5 1
Other 10 9 23 10 41 10

Total 145 100 223 100 390 100

Not available.

Source: "Foreign,Agricultural Trade of the United States," ESCS, USDA.

Table 6.--Florida agricultural exports: share of U.S. exports, fiscal
1970, 1974 and 1977.

Product 1970 1974 1977

------------ Percent ---------
Fruits and preparations 20.1 20.0 22.1
Vegetables and preparations 5.9 6.1 9.3
Other products 0.5 0.4 0.7

Total exports 1.7 1.0 1.6

Exports can have important effects on prices for Florida vegetables.

The analysis discussed earlier under "Import Competition" can also be

used to evaluate those effects. Export of 10 million pounds of tomatoes

would increase Florida prices by 26 cents per hundredweight, for example.


Tomatoes and green peppers are important Florida vegetable crops

which face strong import competition. The growth and nature of import

competition suggest depressed returns for Florida producers unless

domestic demand keeps pace with expanding supplies. Imports comprise a

substantial part of winter vegetable marketing and there is mounting

concern that their share of the U.S. market will continue to expand.

Prices received by Florida producers for these winter vegetables have

eroded in comparison to rapid production and harvesting cost increases.

An econometric model using quarterly data on Florida production and

prices and other U.S. production as well as imports has been developed.

Preliminary results suggest that Florida producer prices for tomatoes

and green peppers are strongly influenced by Mexican imports. Given
that tariffs on these commodities represent a substantial marketing cost

to Mexican producers, further analysis is planned to determine how the

volume of imports would react to changes in tariff levels.

Florida is important nationally for its beef cow herds but it is

geographically isolated from the major cattle markets of the central

United States. While Florida cow prices are strongly influenced by

national conditions, beef imports appear to reduce Florida prices slightly

more than the national average. In particular it was found that a 100

million pound increase in quarterly beef imports will lower Florida cow

prices by about 65 cents per hundredweight.
Finally, the impact of foreign export demands on Florida's agri-

cultural producers will become more pronounced in years to come. Potential

for future export market development is largely unknown due to the lack
of information on the composition and ultimate destination of many of

the state's agricultural exports. However, current trends strongly

suggest that export developments may shape the future prosperity of

Florida agriculture.


Brooke, D. L. "Costs and Returns from Vegetable Crops in Florida",
Food and Resource Economics Department, University of Florida,
1965 through 1976 seasons.

Brooker, John R. and James Pearson. The Winter Fresh Tomato Industry -
A Systems Analysis, ERS, USDA, Agricultural Economic Report No.
330, April 1976.

Hammig, Michael. "Regional Acreage Response by Quarter for Fresh Tomatoes,"
Contributed paper to the Southern Agricultural Economics Association
Meeting, February 1979.

Jesse, E. V. and M. Machdo. Trends in Production and Marketing of
California Fresh Tomatoes, Division of Agricultural Sciences
Bulletin No. 1871, University of Calffornia, 1975.

Just, Richard. "An Investigation of the Importance of Risk in Farmers'
Decisions," American Journal of Agricultural Economics, February 1974.

Lin, W. "Measuring Aggregate Supply Response under Instability",
American Journal of Agricultural Economics, December 1977.

Meyers, Glenn D. "Centralized Planning of Mexican Winter Vegetable
Exports and its Impact on the U.S. Market and the Florida Industry",
Unpublished Report, June 1978.

Sirmmons, Richard L., et al., Mexican Competition for the U.S. Fresh
Winter Vegetable Market, ERS, USDA, Agricultural Economic Report
No. 348, Augus.t 1976.

Staff Report

,J. Scott Shonkwiler
Staff Report 6 Augus. 1979




Institute of Food and Agricultural Sciences

University of Florida

Gainesville, Florida 32611