Coping With Market Regulations And More

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Coping With Market Regulations And More!

• Tom Stenzel, President and CEO
• United Fresh Produce Association
• Washington, DC USA

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Todays Agenda

• About United Fresh Produce Association
• Snapshot of U.S. import/export picture
• Southern Hemisphere impact
• Market access issues
• Food safety issues
• Microbiological food safety
• Future issues?

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About United Fresh Produce

• 100-year heritage from United Fresh Fruit and
  Vegetable Association
• Merger with International Fresh-Cut Produce
  Association in 2006
• Based in Washington, DC
• North American market focus in regulatory,
  government affairs
• Global outreach in food safety and quality,
  education and marketing

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Member Participation

• Membership from total supply chain
• Grower, packer, shipper, marketer, retailer
• Over 100 commodity, regional associations
• 40-member Board of Directors
• International membership growing with members in
  27 countries
• Focus on fresh-cut, value-added produce
• FreshConex/Fruit Logistica partnership
• International membership meeting in Berlin

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Value in the U.S. Marketplace

• Government relations understanding
• Food safety leadership and understanding
• Unique FreshTech and Fresh Marketplace trade
  shows, partnership with senior retail management
• 4-7 May 2008

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U.S. Import/Export Trends

• From 1992 to 2006, imports almost tripled from
  2.7 billion to 7.9 billion
• In same period, exports almost doubled from 2.2
  billion to 4.2 billion
• But comparative increase in imports does
  contribute to a nationalistic mood
• U.S. population is less confident in the benefits
  of free trade than in past
• Peru Free Trade Agreement is example
• All Statistical Data -- USDA Economic Research
  Service

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Peru Free Trade Agreement

• To be considered by Senate next week
• More controversial than expected, although still
  likely to pass
• Presidential candidates split
• Clinton, Obama support
• Edwards, Biden, Dodd oppose
• But, Clinton opposes Columbia, Panama, South
  Korea agreements without labor, environmental
  safeguards

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Trade in Fruits and Vegetables

• Imports
• Fruit 4.0 billion
• Vegetables 3.9 billion
• Exports
• Fruit 2.5 billion
• Vegetables 1.7 billion

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Major Importing Partners

• Southern Hemisphere
• Argentina, Australia, Brazil, Chile, New Zealand,
  South Africa, Peru
• Banana-Exporting Countries
• Columbia, Costa Rica, Ecuador, Guatemala,
  Honduras, Panama
• NAFTA Countries

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Share of Imports

• Southern Hemisphere
• 32 fruit 4 vegetables
• Banana-Exporting Countries
• 36 fruit 7 vegetables
• NAFTA Countries
• 27 fruit 83 vegetables

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Share of Import Value

• Fruit
• Bananas 29
• Grapes 22
• Tropical fruit 15
• Other 35
• Vegetables
• Tomatoes 29
• Peppers 18
• Cucumbers 10
• Other 43

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Long-Term Commodity Trends

• Bananas decreasing as share of imports
• Volume stagnant while others increase
• Greatest increases in tropical fruit
• Pineapples, mangoes, papayas
• Share of imports doubled from 7 to 15 from
  1992-2006
• Traditionally Mexico has been market leader, but
  Brazil, Peru, Ecuador and Belize rising

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Long-Term Commodity Trends

• Grapes increased share from 16 to 22
• Volume up 61
• Chile accounts for 71 of imports
• Deciduous fruit share of imports steady across
  1992-2006
• Apples, pears, peaches average 6-8 market share
  of imports
• However, volume increases of 41, 60, 32
  respectively

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Southern Hemisphere Imports

• Share of commodity imports
• 73 Pears
• 74 Grapes
• 79 Kiwifruit
• 83 Apples
• Almost 100 of peaches, plums, nectarines,
  apricots, cherries

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Southern Hemisphere Imports

• Share of U.S. consumption
• 55 Kiwifruit
• 41 Grapes
• 23 Plums
• 14 Pears
• 11 Peaches, nectarines, apricots
• 6 Apples
• 6 Cherries

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Rapidly Growing Imports

• Fruit
• Avocado
• Mango
• Blueberries
• Papaya
• Vegetables
• Asparagus

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Market Access Issues

• Phytosanitary requirements are major factor in
  market access
• Goal to safeguard domestic agricultural resources
  from introduction of plant pests and disease.
• Under authority of USDA Animal and Plant Health
  Inspection Service (APHIS)
• Permits required for fresh produce imports
  regulations at Title 7 Code of Federal
  Regulations 319.56

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Role of Marketing Orders

• Federal marketing orders can establish commodity
  quality standards/funding levels that importers
  have to meet
• Recent experience has been generally favorable in
  cooperation across domestic, importing industry
• Hass Avocado Board
• National Mango Board

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Market Access Issues

• Diversity of U.S. agriculture and climate makes
  protection from plant disease a difficult issue
• The regulatory system is not simple, and
  importers need local support, willingness to
  invest time and money
• U.S. growers are also stakeholders, but USDA
  approaches SPS issues from a scientific basis in
  keeping with trade agreements

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Current APHIS Import Priorities

• Argentina Lemons
• Chile Table grapes, expand citrus to oranges and
  grapefruit, baby kiwis
• Brazil Melons
• Peru Avocados
• Uruguay Access granted for blueberries
• Source Allen F. Johnson Associates
• www.afjandassociates.com

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Food Safety Issues

• Pesticide issues
• Environmental Protection Agency must have an
  import tolerance established for any chemical
  residue, or default level is zero
• Very problematic, but not likely to change
• Only solution is to register chemicals to
  establish a tolerance or not use them
• Good news? U.S. retailers and buyers generally
  do not apply their own standards for pesticides

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Microbiological Food Safety

• Major issue creating U.S. market turmoil
• Why? U.S. has the most extensive foodborne
  disease monitoring system worldwide
• Computer network linking all medical reports
• Extensive database analysis with DNA
  fingerprinting of pathogens
• Ability to link illnesses and pathogens to common
  source

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Impact on Produce Industry

• If a pathogen is present, likely to find it
• Most items are eaten raw without cooking
• Medical profession is looking at raw produce more
  intensely when someone is sick
• If two or more consumers are sick, easy to
  identify whether its from a common source
• Prevention of contamination is priority
• Low level of incidence is unacceptable
• Government, buyers, producers are equally in
  crisis and struggling for solutions

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Commodity Action Steps

• Commodities that have been linked to foodborne
  illness are establishing best practices for
  growing, distribution and supply chain management
• Leafy greens, tomatoes, melons, green onions,
  herbs
• Can be through federal or state government
  regulation, marketing orders, or voluntary
  agreements

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Commodity Action Steps

• Commodities that have not been linked to
  foodborne illness are also pursuing best practice
  standards
• Commodity best practice standards likely to
  become marketplace expectations, rather than
  government mandate
• But, importers will find retailers/buyers
  demanding compliance
• Impact likely across all commodities

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Fear Drives Market Demands

• Retailers/buyers react to food safety fears out
  of defensiveness
• At least in the U.S., concerns driven as much
  about liability as quality
• Auditing is in dire need of harmonization
• Cant agree on the standards
• Cant agree on validity of audits, auditors
• Retailers/buyers doing their own thing
• Government under pressure to act

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U.S. Consumer Expectations

• Food should be safe
• Especially healthy food
• People trust what they think they know
• Domestic over imported
• Local/small over distant/big
• Government should determine whether foods are
  safe enough
• Is the industry doing everything it should?

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The Regulatory Environment

• Imported foods are under microscope
• Problems with products imported from China
  galvanized public attention
• President Bush appointed team of Cabinet officers
  to look at imported food safety
• FDA Food Protection Plan just issued, with major
  focus on imports
• Congress now considering numerous options to
  regulate food safety

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Produce Safety Act of 2007

• Introduced by Sen. Tom Harkin
• Chairman of Senate Agriculture Committee
• Supporter of fresh produce
• Wants to support, not punish industry
• Legislative focus
• Minimally processed produce
• Grower food safety plans
• Risk based inspections
• Domestic/import equivalency

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Likely Next Steps

• Congress or FDA will take action
• Some changes may occur sooner, but major action
  likely after November 2008 elections
• New import regulations will likely require
  importers to certify that foods have been
  produced in accordance with U.S. standards
• Equivalence may be established by bi-lateral
  country agreements, or producer/importer
  verification
• Potential precedent for produce in mandatory
  seafood HAACP regulations

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Future Issues?

• U.S. likely to continue to trail Europe in social
  issues, but theyre coming
• Labor, worker welfare probably greatest chance of
  sudden impact in U.S. market look at clothing
  industry precedent
• Green consciousness is a trend, and will grow
  major implications for packaging
• Food miles, carbon footprint still a remote
  concept to most in U.S.
• But, Tesco is coming to America

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Future Opportunity?

• Cant leave you only with the challenges
• Tremendous opportunity to expand fresh produce
  consumption
• Farm Bill poised to expand school snack program
  to 4.5 million children
• Government WIC feeding program to offer FV
  vouchers for poor women and children
• Worldwide health commitment with industry support
  should provide basis for growing markets for
  decades to come

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For Follow-Up

• For a complete set of data and research from this
  presentation, and regulatory issues in the U.S.
  market, please link to
• www.unitedfresh.org/southernhemispherecongress
• Thank you!