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California climate keeps strawberry advantage in U.S.

The market for U.S.-produced fresh strawberries will continue its 25-year growth streak, says Rabobank, as improvements in product quality, packaging, and availability help to stimulate consumer demand. China, however, is increasingly dominating traditional U.S. export markets for processed strawberries and, with projected annual growth of 10-15 percent over next five years, is poised to overtake the U.S. as the world's leading strawberry producer.

In a new report, Rabobank's North American Food and Agribusiness Research group highlights significant factors that are driving the growth of the U.S. fresh strawberry market, among them the production of varieties that have improved shelf life qualities, the implementation of better post-harvest techniques, and the development of packaging designed to enhance quality of the final product and its appeal to consumers.

Expanded year-round availability is also a key factor; thanks to California's long growing season as well as winter production in Florida and Mexico, fresh strawberries are now a consistent presence on U.S. produce shelves. In fact, strawberry acreage in California, which produces over 85 percent of the U.S. crop, has grown 30 percent since 2001, driving local land values up to more than $65,000 per acre.

“The fresh market will continue to be a source of profit for U.S. growers who leverage competitive advantages in technology, distribution and climate to deliver even higher quality product to retailers year-round,” says Chris Noble, fresh produce analyst with Rabobank's Food and Agribusiness Research group.

“Canada and Mexico are also increasingly important export markets for U.S. fresh product, as consumers in those countries acquire a taste for year-round strawberries. Even those states with more locally-based production, such as New York and Pennsylvania, can look forward to maintaining profitable niches with seasonal production of flavorful fresh varieties.”

China's challenge

Although the U.S. is currently the world's leading strawberry producer, followed by Spain and Poland, the emergence of low-cost competitors such as Argentina, Chile, Morocco and in particular China is challenging traditional ownership of the global market for processed strawberries.

Because the low quality of its strawberry production makes it largely unsuitable for fresh export, China is developing its processing segment and targeting lucrative foreign markets such as Japan. China has increased its share of the Japanese frozen strawberry import market from approximately 38 percent to over 60 percent since 2000, while U.S. share of the same market has declined from approximately 41 percent to 20 percent.

Low pricing has been the determining factor in helping China rapidly begin to take over export markets traditionally owned by U.S. processors. The price Japan pays for U.S. frozen product is roughly double that of China's, albeit there is also a sizeable difference in quality. China has even tapped the U.S. market, nearly tripling exports of frozen strawberries to the U.S. between 2004 and 2005.

“China looms as a major threat to U.S. frozen strawberry production,” says Noble. “As the quality of China's frozen strawberries improves and its cost structure remains low, both U.S. and foreign companies will import greater amounts of Chinese product. U.S. frozen processors will have two choices to remain competitive: focus on supplying high-end users who need high quality product, or begin to source frozen strawberries from China for sale to existing customers, much as U.S. apple juice producers have done in recent years.”

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