Exports and Value-Added Agriculture Working in Oregon

Exporting and adding value to agriculture remains a key strategy for Oregon's economy.

Oregon farm field from the air

(SALEM, Ore.) - A national forecast on agricultural exports and an Oregon report on value-added agriculture both shed light on two important trends for one of the state's leading industries.

Simply stated, state agriculture officials say, U.S. ag exports are expected to eclipse previous record highs while the percentage of crops and livestock in Oregon that receive value-added processing is also on the rise. Both developments are very much related when it comes to a state like Oregon, where 40 percent of agricultural production goes to the international marketplace.

The U.S. Department of Agriculture reported a record $79 billion in agricultural exports in fiscal year 2007, topping the old record set the previous year. USDA says sales are expected to reach $83.5 billion in fiscal year 2008, which is already underway. That would be yet another record high.

"That's good news for our nation's agriculture, but very much so for Oregon agriculture, since we are an export-dependent state," says Katy Coba, director of the Oregon Department of Agriculture.

Much of the increase is attributed to higher prices for most commodities. But, in many cases, higher volumes of agricultural products are also heading for other countries.

In Oregon, second quarter export statistics– based on calendar year 2007– have been issued by the state's Office of Economic Analysis. They show the value of exported agricultural products increasing 28.1 percent from last year at this time, now standing at $911 million. Combined with the category food and kindred products, which has increased 40.5 percent in the past year, the total impact of agricultural exports from Oregon is very significant– more than $1.15 billion in value. Computer and electronic products, at $3.1 billion, is the only industry category ranked higher for Oregon, and its percentage has dropped 1.7 percent.

"Agriculture is a very important part of Oregon's economy, it has not died and gone away," says Coba. "This kind of factual information just demonstrates the continued importance of our industry, and the reason why all of us in Oregon need to do what we can to support it."

Meanwhile, Oregon State University's Extension Service has completed an updated study of value-added processing within the state's agriculture industry. As OSU defines it, the term value-added describes the economic value of an agricultural commodity when it leaves the farm and is transformed into a product ready for purchase by consumers.

A 1994 study indicated that, in aggregate, about 49 percent of the overall value of what was produced in Oregon was derived from value-added processing. This year's study shows that the percentage has grown several percentage points. ODA's director believes this is a positive trend.

"Anything that a producer can do to add value to the product is going to benefit them because it gives them a greater return on that product," says Coba. "It also adds jobs in our local economy, and increases the multiplier effect throughout many other industry sectors."

Officially, OSU economists have found that value added to Oregon's $4.1 billion in farmgate sales generated another $2.1 billion in first-handler activity. That's a 53 percent increase over the value of farmgate sales alone. According to its report, OSU says three agricultural commodity sectors– vegetable crops, poultry and eggs, and fruit and nut crops– more than doubled in value after value-added processing and handling was estimated. At the other end of the spectrum, Oregon's non-poultry livestock sector had a less than 10 percent increase in value after processing and handling was estimated. That low figure can be attributed to the lack of meat processing that takes place in Oregon.

The OSU report can serve as a guide to Oregon agriculture's strengths and weaknesses when it comes to value-added processing. That means it can point out opportunities for improvement among the more than 225 agricultural commodities produced in the state.

"We need to continue to look at traditional opportunities to add value as well as explore new opportunities, whether it's through packaging, labeling, certification, or other creative ways that allow us to command a higher price for the products we produce in Oregon," says Coba.

Commodities that have found it difficult to add value are discovering ways to get more for what is produced. Gilliam County wheat farmers are adding value by segregating their harvest and selling it based on specific protein content and other characteristics as demanded by export customers. Oregon's Christmas tree industry is exploring the added-value that can come from sustainably-grown certification. Customers who place a value on how something is grown as well as the commodity itself may be willing to pay more for the product.

To Coba, it is more than a coincidence that the increase in value-added agriculture in Oregon is happening at the same time the value of agricultural exports is rising. The two seem to go hand in hand.

"Some of our top export markets are places where consumer incomes are rising," says Coba. "China is a good example. As the Chinese people have more money to spend, they are looking to buy higher-valued food products. China has become a very important market for us. We will continue to offer our high quality, value-added products to get a good premium back to Oregon producers and processors."

There was a day when Oregon sent much of its agricultural production overseas in a raw, bulk form. Historically, Eastern Oregon wheat has been exported to Japan, milled and processed into noodles across the Pacific, and then actually sold back in the U.S. as a more valuable product. Oregon producers are now doing a better job of adding the value before it is shipped overseas, and capturing that extra dollar or two that goes to a processed product. Exporting and adding value to agriculture remains a key strategy for Oregon's economy.