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Heard On The Beat / California Economy

State's Farm Exports Hold Up Despite Asia

Agriculture: Strength of nuts, rice and wine help offset losses in other areas.

November 03, 1998|DON LEE | TIMES STAFF WRITER

The folks at Blue Diamond, the big almond growers cooperative in California, have been bracing for a year or so for Asia's economic contagion to spread to the farms of their 4,000 members. About one-fifth of Blue Diamond's almonds are consumed by Asia, including India.

But ask member Joe MacIlvaine about the Asian crisis, and the owner of one of the state's largest almond groves, Paramount Farming Co. in Bakersfield, merely shrugs. Thus far, he said, exports haven't been hurt at all.

"I'm gratified," he said the other day, entering into the last month of harvest, which this year is smaller and poorer because of the El Nino rains. Still, MacIlvaine and other growers in California--who provide most of the worldwide supply of almonds--have reason to be pleased. "I don't know what all to make of it," he said. "The numbers certainly look good."

So do the numbers for California pistachios, rice and especially wine--which helps explain why the state's agricultural exports overall have held up better than expected despite dramatic declines in shipments of cotton, citrus and some other goods to Asia. To a large degree, Asia's decline has been offset by sizable food export gains to Mexico, Canada, Britain and Australia.

One reason shipments of fruits and nuts haven't plunged is that, unlike golf clubs and computers, they are more basic items.

California vintners, meanwhile, have been benefiting from the "Japan paradox," as one expert put it, referring to the so-called French paradox that says the French have a low incidence of heart disease because they consume wine. Much as the French paradox spurred U.S. wine sales earlier in the decade, publicity about wine's health benefits is now boosting U.S. sales to Japan.

Moreover, California farm shipments overall have been boosted by a loosening of restrictions abroad and a simultaneous push by the U.S. government to help finance exports, said Vernon Crowder, an agricultural economist at Bank of America.

Certainly, California exports of commodities such as cotton--the state's biggest farm export--have been hit hard by Asia. And by no means are farmers out of the woods yet. But the latest data from California's Trade and Commerce Agency suggest surprising strength thus far. Overall, exports of agricultural crops combined with a bigger category called food and kindred products have increased by 3% in the first half of this year--to $4.16 billion. That contrasts with a 2% decline in the value of shipments of transportation goods, electronics goods and computer equipment and other industrial machinery--the big three that account for nearly two-thirds of all California exports of products, which last year approached $110 billion. For all goods, California exports were essentially flat from the first half of last year.

A separate look at just the second-quarter figures shows a sharper contrast between California's overseas sales of farm goods and other products. Agricultural and food exports in the May-June period rose by about 2% from a year ago, while overall exports fell by 6%.

Daniel Sumner, director of the University of California Agricultural Issues Center, views the data with some suspicion, partly because of the difficulty in determining the true origin of farm exports. In his recent analysis of the Asian crisis and its effect on agricultural goods, Sumner estimated that almost half of California's exports of the top 50 commodities goes to Asia.

Sumner said total U.S. agricultural exports in the first seven months of this year fell by 30% to Southeast Asia, 11% to Japan and 29% to South Korea. Although much of those losses were in feed grains and oil seeds, he said, exports of cotton and fresh fruit--two key California products--declined by 7% and 15% from a year ago, respectively. Sumner suggested that California and U.S. farm exports have just felt the initial effects from Asia, and he predicts agricultural sales abroad will remain depressed for another year or so.

But even in Asia, there are some bright spots--notably in Japan, which is the principal Pacific Rim market.

California wine exports overall jumped 37% in the first seven months of this year to $311 million. The main reason was Japan, where consumers bought more than $68 million worth of California wine through July--a whopping 225% jump from a year ago. Japan is now the California wine industry's second-biggest export market, after Britain.

Besides the recent media reports in Japan about wine's health effects, Gladys Horiuchi, a spokeswoman for the Wine Institute in San Francisco, said the advent of discount stores in Japan has helped make California wine more accessible to consumers. So they are buying more, even though the weaker yen makes U.S. wine much more expensive.

"We hope it's not just a passing fancy," she said.

Japan also is the major export market for California rice, along with Turkey. The state's 2,500 rice growers export about 40% of their crops, and Tim Johnson of the California Rice Industry Assn. said trade agreements in which Japan pledged to open its foreign rice market to 8% of total domestic consumption by 2002, from 2% in 1996, mean that figure is likely to grow.

Gordon Palmer, planning manager at the Port of Long Beach, the nation's busiest port, has been watching the flow of agricultural goods with a bit of bemusement.

From January to June, he said, Long Beach's outbound shipments of edible fruits and nuts by weight rose by 30% from a year ago, and vegetables were up by 34%. Cotton shipments were down 23% and grain and seed were off 20%.

Overall, he said, "What we have is a mixed message. Foodstuffs tend to be more of a basic item. They're probably less susceptible than luxury items."

*

Times staff writer Don Lee can be reached by e-mail at don.lee @latimes.com.

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