Export Share of Production
The importance of exports in sustaining market opportunities for U.S. agriculture is a topic of interest for public and private sector decisionmakers. The share of agricultural production (based on value or volume) sold outside the country indicates the level of U.S. agriculture’s dependence on the foreign market as well as the overall size of the market for U.S. agricultural products. Over the past two decades, the share of production value that was exported rose from 13 percent in 1990 to 20 percent in 2013, while the share based on volume increased from 18 to 22 percent over the same period. Our analysis presents current estimates of both ratios, describes the methodologies used to calculate them, and assesses the difference between measuring production by value or by volume.
The units of measurement must be consistent to ensure that the computed ratios are valid. Either export share measure—value or volume—includes export amounts that are aggregated and then divided by corresponding aggregate production estimates. More than half of U.S. agricultural exports consist of products with value added from processing, such as wine and cheese. Their dollar values thus include the cost of processing beyond the farmgate. Their corresponding production value estimate should then account for both the cost of materials and value added (cost of processing).
Export volume or quantity, on the other hand, is recorded in product weight (as opposed to farm weight) by U.S. Customs and Border Protection. Product weight is the weight of a product as it is sold at the retail level. Farm weight is the weight of a commodity as measured on the farm before further processing. These differences have to be reconciled and weight units made consistent with production volume to avoid measurement errors in estimating export share.
The total volume of U.S. agricultural exports is aggregated from exports of all food and nonfood agricultural products, measured in farm weight equivalents. Food export data are from USDA’s Economic Research Service (ERS) Food Availability Data System, and nonfood export data are from USDA’s Foreign Agricultural Service (FAS) Production, Supply, and Distribution (PSD) online database, as well as from the Global Agricultural Trade System (GATS) database.
Exports of food products are grouped into animal and plant products. Animal products include red meats, poultry meat and eggs, dairy products, and fish/shellfish. Plant or crop food products include food grains, vegetable oils, fruits, nuts, vegetables, sweeteners, tropical products (coffee, cocoa, spices), wine, and beer. Nonfood exports include all feed grains, field and garden seeds, feeds and fodder, miscellaneous horticulture products, cotton, tobacco, wool, and other inedible animal products.
The dollar value of food exports is obtained from the trade database (TradeStats Express) of the U.S. Department of Commerce’s International Trade Administration. The processed food groups are identified according to the North American Industry Classification System (NAICS codes 3112 to 3119, 3121), which are grouped under “Non-Durable Manufactures” as “Food Manufactures” and beverages. Nonmanufactured food products are identified under “Non-Manufactures” as agriculture and livestock products (under NAICS code 111, 112, and 114).
Starting in 1990, the farm-weight volume of U.S. agricultural exports has grown by 2.1 percent annually, on average. The corresponding export value increased 5.8 percent annually from 1990 to 2013. Thus, export unit values for farm products rose by about 3.7 percent annually over the past two decades. The volume of nonagricultural exports, which are largely bulk commodities, climbed 3.8 percent annually on average after 1990, indicating that U.S. food exports, which are largely processed products, grew at a slower pace of 1.2 percent. Based on annual export volume growth of 1.1 percent for processed foods and 2.4 percent for unprocessed foods since 1990, export unit values for processed foods increased 6.1 percent per year on average, while unprocessed food prices climbed 3.7 percent per year. Thus, the 7.2-percent annual growth of processed-food export value is attributed largely to higher prices. Given that processed food exports are mostly high-value products and unprocessed foods have a large bulk component of food grains and oilseeds, their relative growth patterns favor processed food exports.
We estimated the volume of U.S. agricultural production as the sum of food and nonfood farm output. Like exports, total food production is aggregated from the production volumes of all food groups in the ERS Food Availability Data System. Nonfood production figures are from both PSD data and USDA’s National Agricultural Statistics Service (NASS) commodity database (Quick Stats 2.0). U.S agricultural production volume expanded 1.1 percent annually from 1990 to 2013, or a weighted average of 1.5-percent growth for animal products and 1.1 percent for plant (crop) products. Processed food production increased 1.4 percent annually over the past two decades, whereas nonfood agricultural production grew at a 0.7-percent pace per year.
The overall value of U.S. farm and food production is estimated by the sum of total farm cash receipts and the value added by food manufacturers. We accounted for the cost of raw materials used in food manufacturing in terms of farm cash receipts. Farm sales receipts are from the ERS U.S. Farm Income database, and the value-added amounts for food manufacturing are from the U.S. Census Bureau’s Annual Survey of Manufactures (ASM). The growth rate of total farm cash receipts averaged 3.8 percent from 1990 to 2013, indicating that agricultural prices at the producer level increased 2.7 percent per year over the past two decades. Processed food production, as measured by the value added by food processors and manufacturers, expanded at an annual rate of 3.8 percent, which indicates that producer prices of processed foods have climbed 2.4 percent per year on average since 1990.
Estimating Export Share
We estimated the share of exports in U.S. agricultural production based on both volume measures and dollar values of exports and production. Since agricultural and food exports consist of unprocessed commodities and processed products, production estimates must include both farm products and food manufacturing output. The volume of agricultural production can be measured from the physical weight of total farm output, which include the raw materials used by manufacturers. The corresponding value of agricultural production reflects both total farm cash receipts and the value added in manufacturing. The cost of raw materials used by the manufacturers and processors is already accounted for in farm cash receipts.
The export share of agricultural production in 2013 was 22.2 percent when estimated in volume terms. By comparison, the export share based on value was 20.3 percent in 2013. The export share estimated from volume would be similar to that based on value if two major farm commodities could be measured in volume terms. Farm production of live animals cannot be converted easily from number of head to million pounds. Similarly, nursery and greenhouse crops are not measured in physical weights. For this reason, these two large farm commodity groups are excluded from total farm production volume and from total export volume. As a result, their exclusion from aggregate export and production volumes effectively inflates or overstates overall export shares based on volume because of their comparatively small export quantities.
The 22.2-percent volume-derived export share estimate for 2013 represents a weighted average of the 24.3 percent export share for all farm crops and products and the 10-percent export share for animal products. The upward trend for animal products reflects larger volumes of red meat and poultry meat exported relative to their production levels. These trends appear to be related to the declining export shares for feed grains in recent years as a larger portion of domestic feed grain production was used to raise livestock and poultry and to produce ethanol. By contrast, export shares of oilseeds, especially soybeans and soybean residues, have increased in recent years as a result of strong foreign demand from China, particularly since 2003 when the dollar started to depreciate in exchange value. In addition, exports of grain products, such as distillers’ dried grains (DDGs), increased as more residues from starch manufacturing and the brewing and distilling industries were shipped abroad.
The 20.3-percent overall export share in 2013 based on value is a weighted average of the 24-percent export share for processed food products, 21 percent for unprocessed foods, and 5.2 percent for nonfood farm commodities. That is, 20.3 percent is the ratio of total value of U.S. agricultural exports relative to total farm cash receipts and value-added in manufacturing, including value added for pet food, animal feeds, beverages, and tobacco products. Export shares for both processed food products and unprocessed foods were on a long-term upward trend through 2013. In contrast, the export share of nonfood agricultural production appears to be on a downward trend over the past decade.
The volume-derived export share uses a physical weight measure for exports that is consistent with the farm weight measure used for production output. This requires that the product weight of processed exports be converted to farm weight. For the value-based export share, calculations must account for the additional value of manufactured or processed agricultural products beyond the farmgate without double-counting the value of raw materials used in their production. Adding the value of shipments of processed products to farm cash receipts would count the cost of raw agricultural materials twice. Thus, only value added by manufacturers should be added to farm receipts when estimating the total value of U.S. farm and food production.
There are advantages and disadvantages to using either a value-based calculation or a volume-based ratio. The value calculation is preferable over a purely physical measure when making an economic or financial assessment of agriculture’s dependence on the foreign market. That is, value can account for all agricultural and food products produced domestically that are exported, whereas some products difficult to measure by weight are not included in volume-based calculations. However, dollar values can change when prices fluctuate, even in the absence of any volume change. Thus, value-based export shares may change as commodity prices change, even though the volume exported remains the same relative to domestic production. Export shares estimated from volumes are not directly influenced by price fluctuations, at least not in the short run because of lags of one to two quarters between ordering and shipment for export.
In general, using volume to calculate export shares by commodity group is preferable to using value because data is readily available from both ERS and FAS. Export and production values based on NAICS codes are more cumbersome to obtain, requiring access to four online databases. Nevertheless, production values cover all commodity groups, whereas production volumes exclude live farm animals and nursery crops, among other products whose unit measures cannot be accurately converted to a weight unit. When commodities are excluded from total production, the production measure will be underestimated, and, as a result, the corresponding export share may be overestimated even if these commodities are not included in exports.
Characteristics of Estimates
Aggregating physical weight units based on farm or fresh weight introduces a bias for commodities with high moisture content, such as water-laden produce. For example, grain ingredients needed to produce a gallon of beer weigh 1.2 pounds on average, whereas wine grapes needed to produce a gallon on wine weigh 12.5 pounds. Some commodities with high unit values, such as tree nuts or planting seeds, have very low physical weights, which determine their relative contribution to aggregate export share based on value (higher) as opposed to volume (lower). That is, when there are more high-value exports, such as processed meat, cheese, wine, nuts, and dried fruit, than lower value exports such as bulk commodities, the aggregate export share based on value will likely exceed the export share based on volume.
Over the past two decades, overall export shares based on volume fluctuated in a stable pattern of around 20 percent. This generally flat behavior largely reflects the comparatively heavier weight of crops and their products. Despite the export share rise of livestock products from 2.3 percent in 1990 to 10 percent in 2013, the export share of crops and products averaged 22 percent over the same period. On the other hand, the aggregate export share based on value increased from 13 to 20 percent from 1990 to 2013, largely reflecting the upward trends of export shares of processed and unprocessed foods, which more than offset the apparent declining trend of export shares of nonfood agricultural products. These trends indicate that the dollar value of exports was climbing relative to production value, or the unit value of exports was rising faster than that of their domestic counterparts. This is in part the result of the dollar’s long-term depreciation from 2003 to 2011, which raised foreign demand for high-value U.S. products.
Half of the $150-billion value of U.S. agricultural exports in 2013 was for processed foods and beverages. Unprocessed foods, which include oilseeds, were about a third of total exports, and nonfood exports had a 21-percent share. In volume terms, animal products comprised 6.6 percent of total exports, while the share of plant products was 93.4 percent in 2013. Among crops, the export share of feed grains since 2008 averaged 14 percent compared to 21 percent from 1990 to 2007. This indicates that more of these grains were used domestically as feedstock and for fuel production in recent years. At the same time, U.S. exports of red meat, poultry meat, and dairy products all showed significant gains starting in 2007. Thus, instead of exporting lower valued feed grains, the United States boosted exports of higher valued livestock and processed grain products, resulting in larger export share gains.
While volume-based export share reduces variations resulting from product price changes, the value measure better reflects product quality, such as the price difference between a pound of steak and a pound of hamburger. Although both U.S. export volume and value increased as foreign purchasing power strengthened after 2003, foreign demand for high-value processed products in particular (such as premium foods and produce) raised U.S. exports of processed foods by 7.1 percent annually, from $27.4 billion in 2004 to $74 billion in 2013. This export growth of processed foods has overshadowed the 5.4-percent growth of unprocessed foods and the 0.6-percent growth of nonfood exports since 2004. Nevertheless, the value-based export share measure is expected to track the volume-based measure more closely as a more stable dollar lowers price fluctuations.
In recent years, the declining export share of feed grains, which comprised 26 percent of total export volume in 2013, has slowed the overall export share of U.S. agricultural production. The significant export share expansion of feed grains to almost 15 percent in 2013, however, helped raise the overall export share to a record 22.2 percent. With respect to total crops and crop products, the export share has remained relatively stable around an average of 22 percent due to the strong performance of food grain exports, which comprised 17 percent of total U.S. agricultural export volume in 2013. The export share growth of oilseeds, fruits and nuts, vegetables, and sweeteners in recent years helped keep exports of high-value products at elevated levels even as the dollar strengthened after 2011.
Value-based export shares are more pertinent than volume-based shares when assessing the contribution of export earnings to incomes of U.S. farmers and food manufacturers. To determine how much of the domestic supply of farm commodities and products exceeded domestic demand, however, volume-based export shares provided the more relevant measure. As value-based export shares rose, largely as a result of higher export prices, dependence on foreign markets as sources of sales earnings increased even as volume-based export shares remained relatively flat. The higher the volume of exports relative to production, the more that available supply (in excess of domestic demand) can be diverted abroad, and thus the larger the total market size. Ultimately, the larger the portion of crop harvests or livestock supply that captures foreign markets, the greater the income potential of farmers and processors, whether in terms of shipment volume or sales receipts.
Data and Methodology
Data for U.S. agricultural production and export volume came from the ERS Food Availability Data System and the FAS Production, Supply, and Distribution database (PSD), and commodity data are obtained from USDA’s National Agricultural Statistics Service (NASS) Quick Stats data portal. We used the ERS database for food commodity and product data, and the FAS and NASS portals for other agricultural commodities. Units of measurement that were not provided in physical weight units were transformed using USDA conversion factors. Commodity production and export volumes were aggregated into two sectors: farm animal products and plant products (crops). Summing the two sectors provides an overall estimate of the share of exports in U.S. agricultural production, which is equivalent to the weighted average of the two sectors’ export shares.
We calculated export share for a food or commodity group by dividing export volume into production. Export share in terms of value is estimated from ERS farm cash receipts and value-added by manufacturers, which came from the U.S. Census Bureau’s Annual Survey of Manufactures. Calendar-year export values as well as volumes came from the FAS Global Agricultural Trade System (GATS). For processed food products, export values by NAICS code came from the U.S. Department of Commerce’s International Trade Administration data.
For tropical products that are not produced domestically—coffee, cocoa, and tea—some imports are processed and then re-exported. In this case, imports are used in place of production volume. Another caveat in analyzing and comparing export shares involves how nonagricultural uses of some crops, such as tobacco and cotton, are treated. Although cash receipts for these farm commodities are included in total farm production value, exports in the form of cotton fabric or cigarettes are not defined as agricultural by USDA. Hence, industrial products manufactured from farm commodities are not counted as part of agricultural exports. These exclusions lower exports, introducing a downward bias on export shares that include these commodities in production estimates.
Classifications of processed and unprocessed products used in the analysis are listed as follows:
To calculate the total production value, the value added by manufacturers was summed from the following commodity groups and their NAICS codes:
- Animal food (code 3111)
- Grain and oilseed milling products (code 3112)
- Sugar and confectionery products (code 3113)
- Fruits and vegetable preserves and specialty foods (code 3114)
- Dairy products (code 3115)
- Meat products (code 3116)
- Bakeries and tortilla products (code 3118)
- Other foods (code 3119)
- Beverages (code 3121)
Fish and marine products produced offshore are excluded because they are defined as nonagricultural by USDA.
ERS farm cash receipts were used to estimate the production value of these unprocessed commodities:
- Meat animals
- Dairy products (milk)
- Poultry and eggs
- Miscellaneous animal products
- Food grains
- Feed crops
- Oil crops
- Cotton and tobacco
- Fruits and nuts
- Other crops
The sum of value added for processed products and farm receipts of unprocessed commodities represents total U.S. agricultural production value to which export value is applied in calculating the overall U.S. export share.