Export Share of Production
Estimating Export Share
Characteristics of Estimates
Data and Methodology
The importance of exports in sustaining market opportunities for U.S. agriculture is a topic of interest for public and private sector decision makers. 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 based on value rose from 13 percent in 1990 to 18 percent in 2009, while the share based on volume remained relatively stable at around 20 percent over the same period. Our analysis presents current estimates of both ratios, describes the methodology used to calculate them, and assesses the differences between measuring production by value or by volume.
The units of measurement must be consistent to ensure that computed ratios are valid. Both export measures-value and volume-include amounts that are either added to or subtracted from the original measure for production at the farmgate. More than half of U.S. agricultural exports consist of products with value added from processing, such as honey, wine, and cheese. As such, their dollar value includes the 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 conditioning and processing. If these differentials are not accounted for, the percentage of exports as a share of production will be incorrectly calculated, resulting in under- or overestimates.
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 came from USDA's Economic Research Service (ERS) Food Availability Data System, nonfood export data came from USDA's Foreign Agricultural Service (FAS) Production, Supply, and Distribution (PSD) online database and the Global Agricultural Trade System (GATS) database.
Nonfood exports include all feed grains, oilseeds, field and garden seeds, fodders, miscellaneous horticulture products, cotton, wool, and other animal products. Exports of food products are grouped into animal and plant products. Animal products include red meats, poultry meat and eggs, dairy products, animal fats, and fish/seafood. Plant or crop food products include food grains, vegetable oils, fruits, nuts, vegetables, sweeteners, tropical products (coffee, cocoa, spices), wine, and beer.
The dollar value of these food exports came from the trade database of the U.S. Department of Commerce's International Trade Administration. The food groups are identified according to the North American Industry Classification System (NAICS) code. For our purposes, they are grouped as unmanufactured agricultural products (code 111, "Crop Production") and as all processed foods (code 311, "Food Manufacturing").
Since 1990, the volume of U.S. agricultural exports has grown by 1.2 percent annually, on average. The corresponding export values increased 4.9 percent annually from 1990 to 2009; thus, export unit values of all farm products rose by about 3.75 percent annually during the past two decades. Export prices of nonfood products, which are largely bulk commodities, climbed 1.9 percent per year over the same period. Based on an annual export volume growth of 3 percent and 2 percent since 1990 for processed and unprocessed food exports, respectively, export unit values for processed foods increased 3.3 percent per year, on average, while unprocessed food prices climbed 1.8 percent per year. Thus, not only is the volume of processed food exports growing faster than unprocessed foods, but their prices are also increasing faster. Given that processed food exports are mostly high-value products and unprocessed foods are largely bulk commodities with lower per unit values, 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 production. Like exports, total food production is aggregated from the production volumes of all food groups in the ERS Food Availability Data System. Nonfood production came from both PSD data and from USDA's National Agricultural Statistics Service (NASS) commodity data. U.S. agricultural production volume expanded at 1.25 percent annually from 1990 to 2009, or a weighted average of 1.6 percent growth for animal products and 1.2 percent for plant (crop) products. The food component of agricultural production increased 1 percent annually for both processed and unprocessed foods over the past two decades. Thus, nonfood farm commodity production grew at a faster pace than food production based on either volume or physical weight.
We estimated the value of U.S. farm and food production as the sum of total farm cash receipts (minus aquaculture) and the value added by food manufacturers (NAICS 311 minus fish/seafood). We accounted for the cost of raw materials used in food manufacturing in farm cash receipts. Farm sales receipts came from the ERS U.S. Farm Income database, and value-added data for food manufacturing came from the U.S. Census Bureau's Annual Survey of Manufactures (ASM). Total agricultural production value annual growth rate averaged around 3.26 percent from 1990 to 2009. This trend indicates that agricultural prices at the producer level increased 2 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 4.25 percent, indicating that producer prices of processed foods have climbed 3.25 percent each year, on average, since 1990. Price inflation for nonfood farm commodity production was the slowest, at less than 1 percent through 2009.
Estimating Export Share
We estimated the share of exports in U.S. agricultural production based on either volume measures or dollar values of exports and production. Since agricultural and food exports consist of unprocessed (bulk) commodities and processed products, production estimates must include both farm products and food manufacturing output. The volume of agricultural production can be measured solely from the physical weight of total farm output, given that raw materials used by food manufacturers are part of farmers' output. The value of agricultural production is similarly calculated: since the value of agricultural exports includes bulk and processed products, production value reflects both total farm cash receipts and the value added in food manufacturing. Again, the cost of raw farm materials used by food processors is already accounted for in farm cash receipts.
The export share of agricultural production in 2009 was 19.8 percent when estimated based on volume. By comparison, the export share based on value was 18.3 percent over the same period. The export share based on volume would be similar to that based on value if two major farm commodities could be measured in volume terms. However, farm production of live animals cannot be transformed easily from number of head to million pounds. Similarly, nursery and greenhouse crops are not measured in physical weights. For this reason, these two farm commodity groups must be omitted even though they have sizable domestic production volumes and relatively small export amounts. As a result, their exclusion from aggregate export and production volumes effectively inflates or overstates overall export shares based on volume.
The 19.8 percent volume-derived export share estimate for 2009 represents a weighted average of the 21.9 percent export share for all farm crops and products and the 7.8 percent export share for animal products. The upward trend for animal products reflects larger volumes of red meat and poultry meat exported relative to production. These trends appear to be related to the declining export shares for feed grains in recent years as domestic feed grain production was used more frequently to feed 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. In addition, grain product exports, such as distillers' dried grains (DDGs), increased as more residues from starch manufacturing and the brewing and distilling industries were shipped abroad.
The 2009 overall export share of 18.3 percent based on value is a weighted average of export share for processed agricultural products (15.3 percent) and for unprocessed bulk commodities (22.7 percent). Both measures showed upward trends over the past two decades. Starting at 10.6 percent in 1990, the aggregate export share of U.S. agricultural production increased over time as the value of exports more than tripled for processed exports and doubled for bulk commodities. When considered individually, the export shares of animal products and crops increased by 10.7 and 21 percent, respectively, as corresponding export values expanded relative to production values.
As mentioned above, the value-based export share was based on the value of domestic farm production, which was estimated as farm cash receipts by ERS. The volume-based share uses production volume, which can be obtained from ERS commodity supply and use tables and from the FAS Production, Supply, and Distribution (PSD) database. Both of these estimates of agricultural production are reliably accurate, but they required further transformation for our purposes. Aggregating production volumes in terms of a singular unit of measure involves transforming quantities into physical weight units. The ERS commodity supply and use tables provide weight or weight-equivalent measures for all products except nursery and greenhouse crops and live farm animals. Since exports of processed products are recorded in product weight, these units must be transformed into farm or fresh weight equivalents to be compatible with their original production weight.
For the value-based measure, calculations must account for the additional value of manufactured or processed agricultural products without double counting the value of the raw agricultural materials used in their production. Adding the shipment value of processed products to farm receipts would count the cost of raw agricultural materials twice. Only value added by manufacturers should be added to farm receipts when estimating the value of U.S. farm and food production.
There are advantages and disadvantages to using either a value-based calculation or a volume-based calculation. The value calculation is preferable to a purely physical measure when making an economic assessment of agriculture's dependence on the foreign market. In addition, value can account for all agricultural and food products exported and produced domestically, whereas certain 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. As such, value-based export shares increase as commodity prices rise, even though the volume exported remains the same relative to domestic production. Export shares estimated based on volume are not directly influenced by price changes-at least, not in the short run, because of the one- to two-quarter lag between ordering and shipment. Aggregating exports and production requires, however, consistent volume units, which means converting product weights (of exports) into farm or fresh weights (of production) and converting liquid or quantity units into weight units. When specific measurement problems occur, such as how to transform livestock quantity and nursery crops into physical weights, they are generally excluded from export share estimates.
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 for processed products 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.
Characteristics of Estimates
Aggregating physical weight measures to estimate export shares 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 of 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 weights in aggregated export shares based on value (higher) as opposed to volume (lower). That is, when there are more expensive exports, such as processed meat, cheese, wine, and dried fruit, than lower value exports, such as bulk commodities, the aggregate export share based on value will exceed the export share based on volume.
Over the past two decades, overall export shares based on volume fluctuated in a stable pattern at around 20 percent. This relatively flat behavior was true also for livestock products and plant products as aggregate volumes. With respect to value-based export shares, however, the overall trend increased gradually. Both animal products and crop export shares seemed to be trending upward. These trends indicate that the dollar value of exports was climbing relative to production value; the per-unit value of exports was rising faster than their domestic counterparts. This is partially a result of the dollar's depreciation, which started its long-term decline in 2003. As the dollar's value dropped, demand for high-value exports picked up. Nevertheless, value-derived aggregate export shares remained below volume-based export shares.
The comparatively lower estimates for value-based export shares may be a result of sizable value-added amounts attributed to food processors and manufacturers, which were nearly as much as total farm cash receipts. Since the portion of exported processed agricultural products was significantly less than that of unprocessed or bulk farm commodities, the relatively large value of domestic production of processed products (those not exported) reduced the overall export share. More importantly, the unit values of bulk commodities (which had high export shares) were smaller than unit values of high-value exports (which had lower export shares). Thus, the export shares of bulk commodities based on value were generally lower than export shares based on volume.
While the volume-based measure reduced variations as a result of product prices, the value measure better reflects product quality, such as the difference between a pound of steak and a pound of hamburger. Increased foreign demand for U.S. exports raised both their volume and value. If greater demand is influenced by a depreciated dollar, however, there may be stronger demand for high-value products, such as premium foods and produce, than for bulk commodities. Although diverging trends may exist between some agricultural product groups, more exports relative to production raise both value-based and volume-based aggregate export shares over the long run.
Since 2003, when the dollar started to depreciate, value-based export shares rose, driven by the increased purchasing power of foreign currencies. Volume-based export shares for processed agricultural products, fresh fruits, nuts, and vegetables rose in tandem with food and feed grains. Feed grains, which are increasingly consumed in the domestic market for feed and as fuel feedstock, are exported as meat, poultry, and dairy products and processed grain products. If the dollar stabilizes and exports are less influenced by exchange rate fluctuations, aggregate export shares by volume or value are expected to trend consistently over time.
In the long run, the export share trends by commodity group show rising volume-based estimates for red meat, poultry meat, soybeans, cotton, tobacco, vegetables, spices, pecans, sweeteners, candy, and wine. Export shares for wheat flour, corn, sugar, and frozen fruits, among others, are declining. Nevertheless, more commodities show rising export shares than declining export shares based on both volume and value. Given that feed grains accounted for close to half of the total export volume of crops, their falling exports relative to production were exerting downward pressure on the overall U.S. export share. Despite larger corn production in recent years (2007-09), domestic use for ethanol increased, diverting supplies away from exports. Thus, volume-based export shares did not exhibit the same upward trend as value-based export shares since rising high-value exports were counterbalanced by lower feed grain export volumes (relative to production). Excluding live farm animals and nursery crops from volume-based export shares effectively raised the overall export share because these two major commodity groups showed minuscule export shares. Their high dollar values and inclusion in value-based export shares, on the other hand, pulled down the overall U.S. export share.
Value-based export shares were the more pertinent indicator versus volume-based shares when assessing the contribution of export earnings to the 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 market demand) can be diverted abroad, thus the larger the total market. Ultimately, the larger the portion of crop harvests or livestock supply that find 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 exports by volume came from the ERS Food Availability Data System and the FAS Production, Supply, and Distribution database (PSD); commodity data came from USDA's National Agricultural Statistics Service (NASS). We used the ERS database for food commodity and product data; we used the FAS and NASS databases for other agricultural commodities. Units of measurement that were not provided in physical weight units were transformed using USDA conversion factors. For example, the wine and beer fluid volumes were converted into weight equivalents of wine grapes and grain ingredients per gallon. Commodity production and export data were aggregated into two sectors: farm animal products and plant products (crops). Summing the two sectors provided an overall estimate of the share of exports in U.S. agricultural production, which was equivalent to the weighted average of the two sectors' export shares.
We estimated export shares for a food or commodity group by dividing export volume by production. Unfortunately, FAS does not have supply and use data for all agricultural commodities (e.g., hay, tobacco, wool, or hops); production volumes for these commodities are available from NASS. Other agricultural exports for which no production volumes are available from USDA or other sources include hides and skins, essential oils, planting seeds, fibers, spices, and other fodder. We estimated export shares by value based on ERS farm cash receipts, while value-added by manufacturers was based on data from the U.S. Census Bureau's Annual Survey of Manufactures. Export values as well as volumes came from the FAS Global Agricultural Trade System (GATS). For processed products, export values by NAICS codes came from the U.S. Department of Commerce's International Trade Administration.
Summary export shares by sector and commodity group for selected years (1990-2009) are provided in table 1. Export shares are also shown for major agricultural products in table 2. Since farm cash receipts were calculated by calendar year, we looked at the export data for January-December. Statistics before 1989 are not readily accessible from the data sources cited above. Fish and shellfish (aquaculture) were excluded since they are not classified by USDA as agricultural products.
Since neither the PSD nor NASS databases cover all agricultural commodities, such as planting seeds, nursery crops, or hides and skins, those commodities were excluded when estimating export share from volume. Farm cash receipts of these commodities are, however, part of U.S. agricultural production value and were used to estimate value-based export share. Tropical imports, such as coffee and cocoa beans that are later exported as finished products, had no corresponding production volumes or values, except value added in manufacturing.
Another caveat when analyzing and comparing export shares involves how nonagricultural use of some crops, such as tobacco and cotton, are treated. Although cash receipts for these crops are included in total farm production value, exports in the form of cotton fabric or cigarettes are not defined as agricultural. Hence, industrial products manufactured from farm commodities were not counted as part of agricultural exports. These exclusions lowered export shares, which introduces a downward bias on estimates derived from these values.
To calculate the total production value of processed products, the value added from manufacturing was summed for the following commodity groups and their NAICS codes:
- Animal food manufacturing (code 3111)
- Grain and oilseed milling (code 3112)
- Sugar and confectionery product manufacturing (code 3113)
- Fruit and vegetable preserving and specialty food manufacturing (code 3114)
- Dairy product manufacturing (code 3115)
- Animal slaughtering and processing (code 3116)
- Bakeries and tortilla manufacturing (code 3118)
- Other food manufacturing (code 3119)
- Beverage manufacturing (code 3121)
ERS farm cash receipts were used to calculate the production value of these unprocessed commodities:
- Meat animals
- Dairy products
- Poultry and eggs
- Food grains
- Feed crops
- Oil crops
- Cotton and tobacco
- Fruits and nuts
- Nursery crops and grass seeds
The sum of value added for processed products and farm receipts of unprocessed commodities represent total U.S. agricultural production value upon which total export value is applied to estimate overall U.S. export share (table 1).