Defying expectations, Asian financial crisis had little impact on California farm exports

Abstract

About a quarter of California's agricultural commodities are exported abroad, and about half of those are destined for Asia. When the Asian financial crisis hit in July 1997, trading losses to U.S. industry, including agriculture, were expected to be substantial. U.S. farm exports to the countries in East Asia most affected by the crisis were expected to decline by about 40% (see sidebar, p. 10), in fiscal 1998 and fiscal 1999. Our analysis, however, has determined that losses to U.S. growers were less, and losses to California growers as a result of the crisis were minimal. We interviewed California executives from the almond, beef, cotton, grape, orange and wine industries, and found no compelling evidence that the Asian financial crisis had a large negative impact on the export of these key California commodities. The Asian economies that were hit hardest by the crisis (Indonesia, Malaysia, South Korea, Thailand and the Philippines) constitute less than 10% of the California export market, which is only 2% of the state's production. In addition, the more mature economies of Japan and Hong Kong continued to import similar quantities from California throughout the crisis; in these richer economies, food imports from California are not all that responsive to changing domestic incomes and prices. And while the rest of the country suffered losses due to declines in grain and oilseed exports, California agriculture is not highly dependent on these crops, allowing growers to adjust more quickly to shifts in foreign demand.