China and U.S. agriculture

China's undervalued currency is holding back U.S. exports, and this fresh ERS report talks about the implications. Thanks to Luis of the Fresh Produce Discussion Group for keying me on to it. Here is a little from the summary of the 26-page study:

China is being pressured by the United States and other trading partners to allow its currency to appreciate. In June 2007, the U.S. Treasury concluded that the Chinese yuan was undervalued and that the Chinese central bank’s intervention in the foreign exchange market contributes to China’s persistent trade surpluses and rapid accumulation of foreign exchange reserves. In response to pressure from trade partners, China’s monetary authorities have allowed the value of the yuan to rise gradually since July 2005. However, Chinese policymakers are concerned that a sharp change in the exchange rate could result in economic dislocations and financial market instability, and they have adopted a go-slow approach to exchange rate policy reform. Many analysts believe a much larger appreciation is needed in order to narrow China’s trade surplus.
This report examines how the undervalued yuan affects China’s competitive performance in domestic and international markets for agricultural commodities and food products. The report compares Chinese and U.S. prices for various foods and agricultural products to provide perspective on the price-competitiveness of U.S. agricultural products in China and allow informed assessments of how currency appreciation may affect that competitiveness.

Later, on apples

In this section, we compare the price of U.S. apples available in Chinese supermarkets with the price of various domestic Chinese apples. Apples are also a heterogeneous item that can vary in quality, color, size, and taste, all attributes that can affect the price. A careful comparison shows that U.S. apples sold in U.S. supermarkets are much more expensive than Chinese apples of similar quality that are sold in a Chinese supermarket.The average retail apple prices reported by U.S. and China statistical agencies are for two different types of apples (Red Delicious in the United States, domestic Fuji in China), but apples of varying price and quality are available in both countries. Imported U.S. apples are valued by Chinese consumers for their appearance and are given as gifts. But much cheaper Chinese apples are purchased for everyday consumption. There is, however, competition between U.S. and domestic apples sold in Chinese stores. In visits to Beijing supermarkets in July 2007, the authors found domestic Chinese apples very similar in appearance to U.S. apples. Sanchez and Wu report that demand for imported apples is weakening as high-quality apples are produced locally in China at lower prices.4According to the China Price Information Center, China’s national average apple price for January 2007 was 5.6 yuan per kilogram, but prices reported by a Chinese supermarket5 (Tianhui Supermarket Fruit Prices, January 5, 2007) showed domestic apples available at widely varying prices, from 3 yuan/kg to 10 yuan/kg (fig. 3). Imported apples were priced at 15.60 yuan/kg, nearly three times the price of commonly purchased domestic apples like Shaanxi Fuji (5.8 yuan/kg), and still 50 percent more than “high-quality” domestic Fuji apples and Aksu apples from western China.6 The 50-percent premium for imported apples is much less than the differential for apple
reported in table 1, but it still suggests that the yuan is significantly undervalued when products of similar quality are compared.
Other imported-fruit prices reported by the Chinese supermarket were also well above domestic prices. U.S. oranges were 11.8 yuan/kg and Australian tangerines were priced at 27.6 yuan/kg, while Chinese citrus fruits were priced from 5 to 8 yuan/kg. Domestic plums were priced at 3 to 5 yuan/kg while imported plums were over 37 yuan/kg.
Wholesale fruit prices quoted by the Xinfadi Agricultural Products market in Beijing (one of China’s largest agricultural markets) on March 2, 2007 showed an even bigger difference between imported and domestic fruit. U.S. pears were quoted at prices of 24-26 yuan/kg, about five times the price of the most expensive domestic pears (fragrant). U.S. red grape prices were quoted at 32-38 yuan/kg, more than four times the price quoted for domestic red grapes. U.S. plum prices were in a similar price range, but no domestic plum prices were quoted.

TK: China's surging farm exports would be vulnerable to decline if the yuan would appreciate, while it would open the door to Chinese consumers for U.S. exporters of some fruits. At the same time, continuation of the artifically undervalued yuan could be a real blow for the America's apple industry if China eventually gains access to the U.S. market.

Danny Dempster on produce safety

This is a column Dan Dempster of the Canadian Produce Marketing Association wrote for The Daily Townsman (Cranbook) in Canada, passed along by Doug Powell of K-State's Food Safety Network. I have a call into Danny but he was out.

Dan Dempster:

Canadians love their produce, consuming over 6.4 million tonnes of it every year. That's something like 50 billion servings of tasty salads, apples and berries, just to name a few.
Yet, produce has had some bad press lately, including information that's just plain wrong.
A number of produce-related issues late last year captured the headlines. But, serious though E. coli-contaminated spinach and recalled cantaloupes undoubtedly are, they don't define the reality of Canada's market for produce.
Confusing research also had some consumers wondering about the produce they're eating, with no good reason. Take, for instance, the scary statistic from the Public Health Agency of Canada that spoke of an estimated 11 million to 13 million cases of food-borne illness a year in Canada. A number like that suggests a veritable epidemic.
But a closer look reveals the number was a countrywide extrapolation from the results of a telephone survey conducted with 3,500 randomly selected residents of the Hamilton, Ont., area. In other words, it's an estimate.
Canadians can have more confidence in a study to be published later this year by the same public health agency, looking at actual documented outbreaks of food-borne illness in Canada over an eight- year period. This revealed that fewer than 3 per cent of the 1,127 outbreaks reported were definitively linked to fresh fruits and vegetables. Produce, it turns out, is actually the safest fresh food group.
Of course, one food-borne illness is one too many. But the statistics regarding the health benefits of consuming five to 10 daily servings of fruits and vegetables are overwhelming. Science has proved that consuming vegetables and fruit can help reduce your risk of cancer, heart disease, high blood pressure and diabetes, keep your bones strong and make it easier to maintain a healthy weight.
What happens without enough produce in the diet? Health Canada estimates $4.3 billion annually is spent treating illness and diseases linked directly to obesity alone. Add to that the billions of dollars spent treating heart disease, cancer and diabetes: Now that's an epidemic. Canadians need to focus on the big issues around healthy eating.
Health professionals have linked the consumption of fresh fruits and vegetables with a healthy lifestyle. Research suggests that if everyone ate between five and 10 servings of vegetables and fruit a day there would be 20 per cent fewer cases of cancer. Rich in vitamins, minerals, antioxidants and fibre, vegetables and fruit are a veritable long-term health insurance policy. Most have the added benefit of being low in calories and fat.
Supporting all this is an industry that devotes considerable resources and tireless efforts to ensuring a safe food supply.
Canadians enjoy an extensive variety of healthy, delicious fresh produce year round, and whether domestic or imported, conventionally grown or organic, this industry works diligently to provide safe, nutritious products to consumers.
Food safety is a team effort involving both industry and consumers.
Industry members share responsibility along the supply chain, while consumers complete the effort through proper washing, handling and storage of fresh fruits and vegetables in the home. The Canadian Partnership for Consumer Food Safety Education has developed recommendations on safe food handling practices, which can be found at www.canfightbac.org. For more information on healthy eating, visit www.5to10aday.com.


TK: Canada's eight-year study on foodborne illness outbreaks, apparently to be published later in the year, will be widely watched. Danny makes a strong point that consumers need fruits and vegetables in their diet. Danny's argument walks a line between emphasing the safety of fresh produce while at the same time not downplaying the need for food safety measures up and down the supply chain.

Blog outage

I'm sorry if the blog was unavailable to you this morning. Google had some server problems and Fresh Talk was down for a couple of hours. I'm looking forward to hearing more thoughts on Bruce's letter; it will also run in The Packer this week.

Along with The Packer's Andy Nelson, I'm off tomorrow to attend the U.S. Apple Association marketing clinic in Chicago.

Some headlines, passed along by K-State's Food Safety Network

Breakthrough Kitchen Appliance Removes E.Coli, Listeria, Salmonella and Other Dangerous Impurities From Food That's the claim from this press release, reading:
A kitchen counter top appliance that removes dangerous impurities from food, including E. coli, Listeria, and Salmonella, was made available to consumers today by Creative Culinary Marketing Solutions (CCMS). The kitchen unit, called CulinaryPrep, is the only appliance available today that applies a patented process to remove dangerous impurities from food, giving families direct control over the safety of the food they eat. CulinaryPrep(TM) uses the patented Grovac(TM) Process to remove unwanted bacteria and food borne pathogens from meat, fish, and produce. Removal of impurities also enhances the natural flavor of the food and extends its shelf life.


Baby carrots recall expanded to include Manitoba From Aug. 21 and the CBC:
Canada's food watchdog is updating an earlier recall of baby carrots after learning the product was distributed more widely than previously thought.
The Canadian Food Inspection Agency said Monday that Los Angeles Salad Company Baby Carrots, withdrawn for possible shigella contamination, were sold in Manitoba in addition to British Columbia, Alberta, Ontario, Quebec and Newfoundland and Labrador.
Costco Wholesale is voluntarily recalling the carrots from the marketplace.
Four associated illnesses have been reported in Calgary. None of the Calgarians was hospitalized. The Calgary Health Region is warning people to wash their hands thoroughly to prevent spread of the bacteria.

Plants provide potent antimicrobial extracts From Food Navigator:
Natural antimicrobial agents derived from cloves, oregano, thyme and paprika can be used to block pathogens on food surfaces and packaging, according to new research.Chemists and food scientists at Rutgers University in the US leveraged the antimicrobial ingredients found in a variety of plants to prevent the formation of difficult to remove biofilms of pathogens.Biofilms are a major problem at food manufacturing sites. Typically, a variety of bacteria will congregate on a surface to form a bacterial community that exists as a slime-like matrix biofilm.


Joint Statement of Prime Minister Harper, President Bush and President Calderon at the North American Leaders' Summit From the press release:

Safe Food and Products We will seek to strengthen the existing cooperation and mechanisms within the region, build on current standards and practices, and work with our trading partners outside North America using a scientific risk-based approach to identify and stop unsafe food and products before they enter our countries. These efforts could include: working with authorities to strengthen inspection and certification in exporting countries; identifying best practices by importers in selecting foreign manufacturers and inspecting goods either before export or before distribution; and reviewing our own existing authorities and practices to enhance national, regional and local coordination. Our governments will continue to address the safety of food and products imported into North America, while facilitating the significant trade in these products that our countries already have and without imposing unnecessary barriers to trade.


TK: Other coverage indicates that there is some disagreement over harmonization of food standards in North America, with Canada wanting to go farther than the U.S. and Mexico. The one area of agreement is significant, though, as this CP report says:
That one item is the development of common approaches for the safe production of fresh fruits and vegetables. Outbreaks of illnesses related to sprouts, berries and leafy foods have become a concern in all three countries.

FTC said WHAT?

Pamela Riemenschneider in Austin, Texas, here. I snuck down to the Whole Foods corporate headquarters this weekend to enjoy what some call the Disneyland of grocery stores and I have to agree -- the fresh tomato risotto I had was divine.

But the big news is, for now, that District Judge Paul Friedman released his ruling yesterday in the Whole Foods/Wild Oats merger.

If you're up to reading all 93 pages, go for it. It can be found here.

I pored over it this morning and man, I can't really fathom some of the Federal Trade Commission's arguments against the merger.

Here's one that really stuck out to me:

FTC believes the relevant product market is premium natural and organic supermarkets of which it alleges there are four in the entire country -- Whole Foods, Wild Oats, Earth Fare (with 13 stores in only four states) and New Seasons (with eight stores, all in oregon).

Say what?

What about Trader Joes? What about HEB's Central Market? What about Dean and Deluca? Sunflower Farmers Market (started by Wild Oats founder Mike Gilliand)? What about the army of Natural Food Co-ops in just about every town?!

It kind of seems like the FTC doesn't really understand the market. Whole Foods argued that it doesn't even really pay that much attention to Wild Oats, rather, it is focusing on the ever expanding market of mainstream spinoffs, like Safeway's Lifestyle, Publix's Greenwise, SuperValu's Sunflower Market.

The ruling had this to say about Whole Foods' competition:

"Whole foods believes it faces 'eroding product differentiation' as other supermarkets continue to stock many of the same products that Whole Foods offers."

"That it is in 'a time of unprecedented competition' where it increasingly does not have the 'advantage of offereing a unique selection of products."

"Many supermarket companies have invested significant resources into developing and opening new stores, some of which mimic Whole Foods' store designs and product offerings."

It seems that the court recognized something that many of us who watch the retail industry have been seeing for the past several years -- that big chains are putting big money and resources into making their own little Whole Foods (Whole Paycheck, anyone? I'm sure there are a lot of retailers that would like a piece of that).

Apparently, Whole Foods doesn't really pay too much attention to Wild Oats when it comes to pricing, either. More often, Whole Foods checks Trader Joe's and other area supermarkets because most of the time, according to the ruling, Wild Oats prices are higher.

Whole Foods also lives up to its "Disneyland" description, in that customers don't have the luxury of shopping there every day. The cross-shop at other retailers, according to the ruling, at least once a week.

Bottom line, according to Judge Friedman, this merger isn't likely to hurt the market because Whole Foods realizes this:

A fundamental problem ith the FTC's reasoning is that it addresses whether Whole Foods has any customers who are so dedicated to that stores's product array and other qualities that they would not switch any of their purchases to another supermarket if Whole Foods began to compete less vigorously by raising prices or decreasing quality.

The question is whether enough customers would switch enough of their purchases that a post-merger price increase or quality decline would be unprofitable for Whole Foods.

The evidence presented persuades the court that certainly beyond the point of critical loss, enough customers would answer this question in the affrimitave and switch all of their purchases to other food retailers, thus rendering unprofitable any post merger effort by Whole Foods to increase prices beyond a certain point.

So, if Whole Foods raises prices too far, customers go to Safeway, or HEB, or SuperValu or somewhere else.

You get the point.

Oh, and if you're up for a laugh, there's a new channel on YouTube encouragaing people to send videos of them doing funny things at Whole Foods here. So far, there's a teenager riding a tricycle through the produce department, among other things. It was supposedly launched by Whole Foods and will give prizes to the video maker with the most hits in a month.