Consumer-oriented U.S. exports excel in united Germany's first year

AgExporter, June, 1992

If the first year is any guide, German unification is good news for U.S. exports of consumer-oriented agricultural products, from fruit juices to snack foods.

On Oct. 3, 1990, Germany was officially reunited after more than four decades of division. The German Democratic Republic (East Germany) ceased to exist, and the Federal Republic of Germany gained 16 million new citizens--16 million consumers who had long been denied access to high-quality foods.

Today, the economy in eastern Germany is being rebuilt and should gradually catch up with the prosperity of the much larger west. As this happens, the demand for imported foods in the east is expected to increasingly parallel that of the west, breathing new life into the mature German market.

However, not all U.S. agricultural commodities are likely to benefit in future U.S.-German trade. The market for U.S. feed gains is essentially lost because of European Community (EC) import restrictions, which now apply in the eastern part of the nation as well. U.S. trade specialists also foresee diminished opportunities for some other commodities because of EC policies and changing demand and production patterns in the east.

These projections of how the German marketplace may change are generally borne out by trade figures for U.S. fiscal year 1991 (Oct. 1, 1990 - Sept. 30, 1991)--a period that matches almost exactly the first year of German unification. Although a single year's data are hardly conclusive, the 1991 results featured a record-breaking performance by U.S. consumer-oriented exports.

Total Export Value Unchanged

In fiscal 1990, the year before unification, U.S. food and farm product exports to West Germany were about average for the 1985-90 period, at slightly over $1 billion. The five leading U.S. exports were raw tobacco ($212 million), soybeans ($183 million), tree nuts ($166 million), cotton ($144 million) and processed fruits and vegetables ($72 million).

While the Germany was the world's eight largest market for U.S. agriculture in 1990, East Germany ranked a lowly 67th. Direct U.S. agricultural exports were only $47 million, with more than 90 percent of that in feed grains. In the five years before unification, U.S. agricultural exports to East Germany averaged just slightly higher--about $60 million a year, with three-fourths of the total in feed grains.

What happened in the first year of German unification? Overall, it was a nogrowth year for U.S. agricultural exports to Germany.

In fiscal 199, U.S. agricultural exports to the united Germany totaled $1.1 billion, virtually identical to the previous year's combined exports to both countries. The product mix, however, revealed some significant changes among bulk, intermediate and consumer-oriented U.S. exports.

Bulk commodities are primarily raw products, such as feed grains, soybeans, cotton and unmanufactured tobacco. Intermediate products include semi-processed goods, such as flour, soybean meal and oil, sweeteners and hides and skins. Live animals and planting seeds also are classified as intermediate in U.S. agricultural trade statistics.

Consumer-oriented products are basically end-use foods and beverages that usually required little or no additional processing. This category includes fruits, vegetables, nuts, meats, eggs, juices, wine, diary products, prepared foods, pet foods and flowers.

Consumer Exports Set New High

In 1991, U.S. exports of consumer-oriented products to the united Germany climbed to a record high of $376 million.

Sales were up nearly $60 million, or 19 percent, from 1990 exports to both countries combined.

Several products contributed to the 1991 record U.S. sales of tree nuts, such as almonds and walnuts, rose to $187 million, up $20 million from the previous year's combined exports. U.S. exports of processed fruits and vegetables, nursery products, pet foods, fresh vegetables, wine and beer and snack foods all reached new highs.

Some of the sharpest percentage gains were registered by U.S. exports of fresh vegetables, up 133 percent from 1990 to $7.2 million; pet foods, up 85 percent to $8.6 million; snack foods, up 59 percent to $4.0 million; and wine and beer, up 42 percent to $4.4 million.

An initial surge of eastern German demand probably contributed to these sales gains. Prior to unification, U.S. exports of consumer-oriented agricultural products to West Germany were already following an upward path, but sales in both 1989 and 1990 were well below those of the previous record year.

Meanwhile, the former East Germany had been a very small importer of consumer-oriented products, taking no more than $1-$3 million a year of these U.S. products. Processed and other high-value imported foods were largely unavailable in the east before unification because of the lack of foreign exchange, an improvement economy and the communist regime's austere economic and trade policies.

While the U.S. consumer-oriented exports soared to a new high in 1991, sales growth was also impressive in the category of intermediate products.