NEWS for North Dakotans
Agriculture Communication, North Dakota State University
7 Morrill Hall, Fargo, ND 58105-5665

November 19, 1998

Value-added Wheat Products Offer Market Opportunity

Dramatic growth in international trade of value-added wheat products provides an opportunity for U.S. export growth. However, U.S. exports have not grown as rapidly as world export growth, indicating a loss in market share, according to a report by North Dakota State University agricultural economists.

The report, by William W. Wilson, professor of agricultural economics, and Jennifer M. Onnen, research assistant, says that world trade in value-added food products and agricultural commodities has been growing rapidly over the past few decades, with trade in value-added products growing faster than that of commodities, 574 percent during a 20-year period, compared to 363 percent for commodities.

Growth in international trade of value-added wheat products has also been dramatic, at 342 percent for breakfast cereals, 401 percent for macaroni, 1,778 percent for bread/biscuits and 68 percent for pastries from 1985 to 1995.

U.S. export values grew during the period. Exports of macaroni grew 999 percent from 1985 to 1995, reaching a value of $90 million in 1995. Breakfast cereal exports grew 414 percent to $90 million, bread/biscuits exports grew 265 percent to $300 million, and exports of pastries grew 216 percent to $90 million.

Wilson says recent rapid growth of the global market for value-added wheat products encourages new firms, including U.S. firms, to enter the market. Firms wishing to enter this global market need to determine which countries to export to, which products to export, and the primary competitors in each product.

One method of choosing a market to enter is comparing market size, another is comparing market growth rates.

"There are problems with using each measurement independently," Wilson says. "A large market may be growing very slowly relative to other markets, or it may be shrinking. A rapidly growing market may be too small to export to."

Results of Wilson's study showed that in each product category, the largest importing countries were typically the slowest growing import markets. In the macaroni market, for example, the largest importing countries were the U.S., Germany, France-Monaco, the United Kingdom, Canada, Hong Kong and Japan, accounting for 75 percent of world imports. The fastest growing import markets for macaroni products were Chile, Zimbabwe, Egypt, Peru and Argentina, but these five countries accounted for only 2 percent of world macaroni imports.

U.S. exports in each of the four value-added wheat product categories is growing at a slower rate than the world average, indicating a loss of market share. However, says Wilson, in spite of the indications of slower export growth than the world average, the U.S. is still one of the largest exporters and had positive export growth for each of the wheat product categories during the period of the study.

"The growing global market for these products provides an opportunity for U.S. producers to capture a larger market share," Wilson says. "Any policies intended to increase U.S. exports of value-added wheat products need to be re-evaluated. Public support of programs to promote value-added wheat products can help U.S. producers capture a larger share of this growing market."

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Source: William W. Wilson (701) 231-7472

Editor: Gary Moran (701) 231-7865