Changing exports reshaping states

December 30, 2013 

Five ways exports are changing across America. From Midwestern beef and Georgian peanuts finding a market in China to the rivalry between fishing in mining in Alaska to landlocked states' using higheways for shipping and manufacturing taking off in the South.

Midwestern beef moos to China

U.S. beef exports gradually expand after mad cow scare

Medill News Service

WASHINGTON — Beef has long been a quintessential American staple, captured decades ago in the marketing slogan “Beef. It’s What’s for Dinner.”

These days, however, more and more of the red meat is making its way from farms in the United States to tables in numerous countries abroad, where many diets are incorporating more beef.

One of the biggest increases has been in Hong Kong, one of two regions that are part of China but have separate trade policies.

According to U.S. Meat Export Federation data, Hong Kong’s imports of U.S. beef have been steadily climbing since 2004, after a mad-cow disease scare in 2003 settled down. The value of U.S. beef exports to Hong Kong has doubled since 2010, up to $331 million from $155 million. The number was only $198,000 in 2004.

As for mainland China, U.S. beef has been banned there since the mad cow scare, although there are signs that might end. If it does, that represents a major reopened market – and many new opportunities – for U.S. beef farmers.

At technical trade talks in Beijing in December, Chinese officials promised to ease restrictions on beef from the U.S. in 2014.

The recent spikes in Chinese demand for beef are due to a few factors. According to a recent U.S. Department of Agriculture report, one reason is food-safety incidents with Chinese poultry and pork, which pushed consumers toward preferring beef.

The concept of serving a large piece of meat I think in early years struck many Chinese as odd.
Sheree Willis, executive director of the Confucius Institute at the University of Kansas

This growing hunger for beef can also be attributed to changing diets among the Chinese, according to Steve Kelly of the Kansas Department of Commerce. Advertisements for beef – particularly for fast-food establishments such as McDonald’s – have made their way abroad, according to Judith Farquhar, a University of Chicago professor of anthropology.

There may be parents who see the beef advertising and say, “ ‘Well, I’m going to raise my child to be big and strong like Michael Jordan,’ ” Farquhar said.

China’s cultural appetite for beef was whetted long before McDonald’s took root, however. During times of famine, meat was in very short supply, leading people to idealize and crave it, Farquhar said.

American fast-food restaurants and a British music store chain are among the foreign presences in Hong Kong.

Mark Avery — Orange County Register/MCT

A keenness for beef over other meats in China took awhile to catch on, however, as food is usually served there with chopsticks or spoons – not steak knives.

“The concept of serving a large piece of meat, I think, in early years struck many Chinese as odd,” said Sheree Willis, the executive director of the Confucius Institute at the University of Kansas. “Twenty years ago they were shocked; now they’ll ask for it.”

However, consuming large quantities of beef, and eating beef altogether, was – and in some cases still is – looked down on.

In the early 1900s, Farquhar said, “there was a kind of popular Buddhist voice that was saying, ‘There’s something barbaric about these foreigners. What is this savage appetite for meat?’ ”

More recently, a neo-Buddhist culture that shuns meat and embraces vegetarianism has developed, according to Farquhar. But it hasn’t been enough to stop the growth of beef imports.

We’ve had cattle on this operation for five generations and we’ve never seen prices like they are right now.
Donn Teske, president of the Kansas Farmers Union

The increase in American beef exports has raised beef farmers’ prices across the U.S. and is linked to a hike in demand in areas such as Hong Kong, according to Joe Schuele of the U.S. Meat Export Federation. Many farmers have seen their prices nearly double in recent years.

For example, Donn Teske, the president of the Kansas Farmers Union, who raises cattle, said that in the last few years a calf would bring $500 at auction. Now they’re bringing $750 to 1,000 apiece.

“We’ve had cattle on this operation for five generations and we’ve never seen prices like they are right now,” Teske said

Mining and fishing in Alaska

Proposed Alaska mine might boost 1 vital export but hurt another

Medill News Service

ILIAMNA, Alaska — It was another subfreezing day in Alaska as Glen Alsworth prepared for a 200-mile flight to a remote southwestern region of the state. Oreos, diapers and milk were among the items he stored in the back of his plane.

Before long, the single-engine aircraft glided past the Redoubt Volcano and through the ravines of glacier-runoff water. Wonder and satisfaction crossed Alsworth’s face.

“I look out the window – that’s my office,” he exclaimed.

Salmon is cut and hung to dry whole in a Newhalen, Alaska, smokehouse to be preserved for the winter. Drying the fish in a cool, fresh smokehouse removes moisture that can cause bacteria.

Marina Cracchiolo — Medill News Service/MCT

Alsworth is known as the “flying mayor” in the Lake and Peninsula Borough, balancing his time between running his small airline and volunteering as the mayor of a region that’s caught in a debate over how international trade will shape Alaska’s future.

This isolated place is home to the proposed site of North America’s largest open-pit copper mine. Pebble Limited Partnership suspects that more than $300 billion worth of minerals lie below the ground.

But it also sits at the headwaters of the Bristol Bay fishery, home of the world’s largest population of wild salmon and a major piece of Alaska’s multi-billion-dollar seafood export business.

If you were to pick the world’s worst place to put the world’s largest open pit mine, this is an ideal spot
Marc Niver, commercial fisherman

“If you were to pick the world’s worst place to put the world’s largest open-pit mine, this is an ideal spot,” commercial fisherman Mark Niver said, slamming a finger onto a map of Alaska at the anti-Pebble Mine headquarters, set up in one of Anchorage’s oldest homes.

He’s one of many who fear that mine pollution might leach into fishing waters and change the ecosystem where the salmon return upstream to spawn.

Fishing is Alaska’s top export business, making up 13 percent of America’s seafood exports. It generated roughly $20 billion in the last decade, and grew 58 percent during that time. It was worth $2.2 billion in 2012.

The Bristol Bay fishery, the most profitable in Alaska, brings in about $280 million annually and supports 5,000 jobs in the state. It’s largely known for its brilliant-orange sockeye salmon, a prized fish that sells for a pretty penny.

During the 2013 season, Bristol Bay fishermen caught more than 15 million sockeye, at a value of $138 million. The fish is traded for an average of $1.50 per pound, compared with 30 cents per pound for pink or chum salmon.

Anchorage-based Pebble Limited Partnership LLC is seeking new investors to develop the largest open-pit copper mine in North America.

Marina Cracchiolo — Medill News Service/MCT

But Alaska also has a storied mining tradition. And that sector has exhibited tremendous growth and success as well, becoming the state’s second largest export industry. It produced $10 billion in the last decade, growing 270 percent. In 2012, it generated $1.5 billion and made up 30 percent of America’s mining exports. The Pebble Limited Partnership said its mine could expand U.S. copper production by 20 percent.

Oil and gas largely drive revenue in Alaska, but those resources mainly stay in the U.S. – and they’re dwindling. Over the last decade, the Alaska Oil and Gas Association reported a 39 percent drop in production.

State Rep. Mia Costello, a Republican from Anchorage, thinks the Pebble Mine could be a way for Alaska to diversify its economy.

“Pebble is like a second Prudhoe Bay,” she said.

Sitting in the living room of her Anchorage home, Costello remembered the excitement that surrounded the discovery in the 1970s of Prudhoe Bay, the largest oil field in North America.

Right now, fishing and mining are the titans in Alaska’s export game. Might the dramatic expansion of one industry decimate the other?

“I think we ought to have both,” said Alsworth, the flying mayor.

Pebble Limited Partnership entered the fray in 2006, when it was formed by two foreign shareholders: Anglo American and Northern Dynasty Minerals Ltd. Anglo American pulled out of the project in September, leaving Canada-based Northern Dynasty the sole investor in Pebble Mine. Just two weeks ago, Rio Tinto Group, the second largest mining company in the world and a 19 percent shareholder in Northern Dynasty, announced that it’s considering selling its stake in Pebble Mine.

Northern Dynasty estimates that the site, just west of the Aleutian Range, holds 55 billion pounds of copper, 3 billion pounds of molybdenum, which is used in steel production, and 67 million ounces – 4.2 million pounds – of gold. The mine would be 2 miles long and 1,700 feet deep, according to the partnership’s 2006 plan.

A major point of contention is Pebble’s plan to set up tailing ponds to hold tons of toxins that critics say could seep into the porous tundra.

Pebble has drawn permits to conduct environmental and water testing, but it hasn’t submitted building plans to the state. And recently, its plans stalled after Anglo American pulled out of the project to focus on other interests. Pebble had aimed to file building plans this year but it’s now seeking new investors.

Pebble CEO John Shively has every intention of seeing the project through, and he said the jobs would be there. The Pebble partnership promises to create more than 10,000 of them over the next 30 years. Salaries would be double the state average, according to a study commissioned by the partnership, as high as $109,500.

Jobs are scarce across the Lake and Peninsula Borough, which is home to 1,600 people over 24,000 square miles. The Alaska Department of Labor and Workforce Development said 48 percent of the population had incomes below the poverty line.

For many Alaska Natives, the threat to their traditional lifestyle outweighs job concerns. Salmon have been a linchpin of life here for the past 3,000 years or more.

“That’s who we are; it’s how we grew up,” said David Askoak, a Yupik Eskimo in Newhalen, a small village that borders Pebble Mine’s Bristol Bay headquarters.

Shively said the mine wouldn’t wipe out that tradition.

“We’re at the top of a watershed near three small streams out of literally hundreds of hundreds of streams that feed the eight watersheds in the Bristol Bay region,” he said. “The idea that we can destroy the whole fishery isn’t even possible.”

The Port of Anchorage, Alaska, is a lifeline for the state that relies heavily on imports. The vast majority of consumer goods for Alaska come through the port.

Marina Cracchiolo — Medill News Service/MCT

Deciding which industry will shape Alaska’s economy won’t be in the hands of the state or the private sector, but of the federal government.

The Environmental Protection Agency is set to release a study soon that will shape whether the agency evokes its veto authority under the Clean Water Act. Such an action would mark only the 14th time the EPA has used its veto power, and it would put a permanent stop to the mine. The EPA’s preliminary assessment, released in 2012, said a mine in the Bristol Bay region could cause irreversible damage to the ecosystem and affect the fishing industry.

“When we’re ready with our plans, we’ll go into the permitting process,” Shively said. “That’s when the project should be judged.”

Landlocked Idaho looks to trucks for shipping

Effort to boost exports often leads to a scramble for trucks

Medill News Service

WASHINGTON — As many states look to increase their global exports, one of the biggest challenges may be among the most basic: finding ways to move products so they’re ready to be shipped overseas.

In Idaho, for example, wheat, vegetables and dairy products were among the top agricultural exports in 2012, according to the Idaho State Department of Agriculture. The products were destined for Canada, Mexico, China and Japan.

But Idaho’s location sometimes limits local businesses’ ability to ship exports abroad efficiently, fueling a reliance on truck drivers to haul goods to transfer points such as Seattle, Portland, Ore., and Oakland, Calif., said Jan Roeser, a regional economist at the Idaho Department of Labor.

Nate Shaffer loads pallets of concrete mix packages on a flat-bed truck for shipment at the Handy Truck Line facility in Meridian, Idaho.

Joe Jaszewski — Idaho Statesman/MCT

“We can’t even get enough trucks,” said Bill Newbry, the chief executive officer of the Pacific Northwest Farmers Cooperative, which represents more than 750 farmers in the Washington and Idaho border region. “We could utilize 12 to 15 a day, and we’re lucky to get three or four. It’s very, very difficult to get the commodity out on time.”

Granted, there’s a river port in the northern Idaho town of Lewiston, about 465 miles from the Pacific Ocean. But some central and southern Idaho businesses aren’t able to access it easily, Roeser said.

In 2011, about 500,000 tons of wheat was shipped from the port, increasing to about 725,000 in 2012, according to port records. The number of container shipments from the port dropped from about 13,000 in 2007 to 5,000 in 2012, however.

The container decline “has been a function of the Great Recession,” said David Doeringsfeld, the manager of the Port of Lewiston. “We’re not trying to become a West Coast port. What we’re doing is providing for the region the least-cost method for local businesses.”

Limited access to freight rail is another problem Idaho businesses face.

“We don’t have as many goods as others might, so we don’t get preferential treatment by the railroads,” Roeser said. “We have smaller amounts, smaller goods, and it just doesn’t pay for them to stop and pick up what we have.”

Although the demand for Idaho truck drivers continues to increase, experts say trucking companies face recruitment challenges, which further limits the state’s ability to increase global exports.

The nationwide demand for truck drivers will grow by 21 percent from 2010 to 2020, faster than the national average for all occupations, the Bureau of Labor Statistics projects.

You can tell how good the economy is by the demand for transportation. If you can’t find enough trucks to haul your product, they’re somewhere else hauling.
Bill Newbry, chief executive officer of the Pacific Northwest Farmers Cooperative

“Trucks go anywhere or just about anywhere,” said Bob Costello, the chief economist at the American Trucking Associations. “As the economy continues to improve, we see demands for truck drivers increasing. If you go to truck driver training school and don’t have a criminal record or poor driving record, you’re going to get hired.”

In Idaho, about 20,000 truck drivers and driver/sales workers were employed in 2012, up from about 18,000 in 2010, according to the U.S. Census Bureau.

To recruit more drivers to transport goods to transfer points, Julie Pipal, the president and CEO of the Idaho Trucking Association, said driving schools and trucking companies were partnering up.

One of those is Handy Truck Line, which has about 100 employees and four locations in Idaho. It’s reached out to job centers to attract more drivers, said Clay Handy, the company’s CEO.

While Handy said he hadn’t encountered many problems retaining truck drivers, he said some companies faced high turnover.

“The core problem is that for most people, it’s not an attractive job,” he said. “They want to be home more often.”

Truck driver Dean Ashcraft prepares to unload a shipment of sand packages at Handy Truck Line facility in Meridian, Idaho.

Joe Jaszewski — Idaho Statesman/MCT

The solution, Handy said, was to ask single truck drivers without families to take overnight shifts, while those with families work day shifts.

“You can tell how good the economy is by the demand for transportation,” said Newbry, of the farmers’ cooperative. “If you can’t find enough trucks to haul your product, they’re somewhere else hauling.”

Peanuts from Georgia head to Asia

For Georgia peanut farmers, sales to China a bonanza that may not last

Medill News Service

Another peanut harvest has come to an end, and the fields of southern Georgia are littered with gray vines, which will fertilize next year’s crop.

For farmers in southern Georgia, 2012 was a record-setting year; 2013 paled in comparison. As they talk about 2014 and how the markets might change, one thing always comes up: China’s massive potential market.

In the 2012-2013 year, for the first time ever, we’ve exported significant shipments to China.
Stephanie Grunenfelder vice president of international marketing for the American Peanut Council

“We had a spectacular crop in 2012,” said David Chase, who’s been farming here for 20 years. “That has weighed on the market into 2013, and it might still be shelled into 2014.”

The United States exported its largest yield of peanuts in 2012, nearly 265,000 tons, valued at $470 million. According to peanut experts, that’s a crop and a half.

The record-setting harvest yielded an excess supply that would have sat in warehouses, but Georgia found a new trading partner: China. While China usually imports peanuts from India, a terrible drought in 2012 destroyed nearly all of that country’s crop.

Instead, the Chinese turned to the U.S., with shipment after shipment heading across the Pacific. On Dec. 28, 2012, for example, a ship that left the port in Savannah, Ga., carried $357,000 worth of peanuts, destined for the Port of Qingdao in China, according to records maintained by PIERS, an export and import tracking service. On Jan. 30, a shipment that contained $244,000 worth of “runner jumbo peanut” made its way east. Many others followed.

“In the 2012-2013 year, for the first time ever, we’ve exported significant shipments to China,” said Stephanie Grunenfelder, the vice president of international marketing for the American Peanut Council. In late 2012 and early 2013, the U.S. exported about 76,000 tons of peanuts to China.

“That’s a third of our overall sales in three months, from nothing the year before,” she said.

Georgia is the leading peanut producer in the United States, providing more than 45 percent of the American crop per year, according to data from the University of Georgia. Since trading with China in 2012, Georgia’s economy stands to gain even more ground internationally, but that future is uncertain.

“China is something we’re really going to be watching over the next couple of years, because they have an emerging middle class,” Grunenfelder said.

After two consecutive years of drought, all the stars aligned for perfect weather during the 2012 growing season.

That led to a massive crop. And although farmers might have overplanted, Grunenfelder said that because of China, they were able to export more than they thought they would.Grunenfelder said that with more disposable income in China, people there would spend more on their diets. In China, peanut oil is used for cooking much more than it is in the United States.“It’s one of their main ingredients, so they have a strong demand for peanuts, peanut snacks and peanut oil,” Grunenfelder said.

We’ve never seen such an influx of volume at one time in buying interest.
Joe West executive vice president at a peanut-shelling facility

Joe West, the executive vice president of sales at a peanut-shelling facility in Georgia, said that when it came to the global increase in demand for peanuts, everything depended on price.

Although China is the world’s largest peanut grower and exporter, it’s gradually been consuming more than it produces, so it must import peanuts from elsewhere. China reached out to the U.S. because the record 2012 crop in Georgia sold at a low price.

“We’ve never seen such an influx of volume at one time in buying interest,” West said. “It wasn’t easy, but the overall experience with China was good. It was a learning experience.”

Historically, peanuts were considered a regional food of the South. After the Civil War, technological advancements increased their demand, and noted scientist George Washington Carver encouraged farmers to use peanuts as a rotational crop for cotton production.

The peanut is a staple of American culture and childhood, but foreign countries consume a lot of Georgia’s crop. Canada is the biggest market outside the U.S., importing just under 40 percent of U.S. peanuts. The European Union imports about 30 percent, followed by Mexico, at 20 percent, and Japan, at 10 percent, according to Grunenfelder.

With peanut harvests nearly complete, the National Agricultural Statistics Service has estimated that final production numbers for 2013 will be about 40 percent lower than the record-setting 2012 numbers.

Jason Moore, a peanut broker at JRJ Brokerage Co. Inc. in Albany, Ga., visited China earlier this year, hoping to establish stronger ties with clients. He said price would determine future trade.

“They are very price-conscious people,” Moore said. “So if the Indian crop is a good one, then they will have plenty of peanuts to import and crush for oil.”

India’s peanut crop in 2013 was back to what it was before the drought.

Chase, the Georgia farmer, has witnessed trends in his industry changing as global imports have increased. He agreed that the Chinese are price-sensitive, but said trade opportunities did exist if the price was right.

“At a certain level, the Chinese could be a great trading partner,” he said.

While peanut trade with China is new for Georgia, commitment to the domestic market, the local farmers and shelling facilities hasn’t waned.

West, the sheller, offered one possibility of guaranteed, profitable trade for years to come: “If only you can get the Chinese eating peanut butter.”

Transportation manufacturing gets moving in the South

Sun Belt hopes for rebirth in manufacturing to boost economy, exports

Medill News Service

GREENSBORO, N.C. — At an aviation hangar on the campus of a community college in Greensboro, N.C., three students crouched over a jet engine, discussing its deconstructed parts.

One of them, Keith Brown., a 28-year-old military veteran, returned to school to study aviation systems technology because he “always had a thing for airplanes.”

For Brown, the effort at Guilford Technical Community College is personal. But for officials in North Carolina, Mississippi and other states, it’s part of a renewed focus on changing manufacturing’s rusted reputation – and boosting exports and the jobs that come with them.

From 2011 to 2012, exports of civilian aircraft, engines and parts from North Carolina jumped 14 percent, according to U.S. Census Bureau data. In 2012, that sector represented nearly 4 percent of North Carolina’s exports, and it’s expected to continue growing, company officials said.

Even so, there’s still much to be done: While the industry is ready to take off, some executives say the skilled workforce in the state remains small.

“We’re facing a shrinking labor pool of qualified mechanics and we’re facing difficulties finding enough qualified engineers,” said Leonard Kazmerski, the vice president of marketing and business development at TIMCO Aviation Services, a plane maintenance company in Greensboro.

TIMCO repairs planes from the United Kingdom, Iceland and Morocco and develops new plane interiors for companies in Turkey, Malaysia and Japan. B/E Aerospace, Honda Aircraft Co. and Triumph Actuation Systems – aviation or parts manufacturing companies – also call North Carolina home.“In the past, the domestic market was so strong that export sales were too complicated while there are other buyers just down the street,” said Jean Davis, the director of international trade at the North Carolina Department of Commerce. She noted, however, that the vast majority of consumers live outside the U.S. “

In the last five to 10 years that whole equation has changed,” she said.Some state government officials have pinned their hopes on the aviation industry to cover holes left by disappearing bedrock industries, including textiles, furniture manufacturing and tobacco, which have been devastated by globalization in recent decades. Furniture imports leapt from $9 billion nationally in 1998 to $27 billion in 2006, flooding the domestic market and drowning some American companies. At the same time, U.S. employment in the textile industry plummeted, declining by more than 65 percent, according to data collected by Duke University.

The immediate reaction is, ‘I don’t want to be a part of that. But it’s a different environment now... It’s based on science, math – technological skills that were not there in the past.
Gary Green, president of Forsyth Technical Community College

Another Sun Belt state, Mississippi, also is undergoing a manufacturing transformation.

In the 10 years since Nissan North America Inc. began building cars in Canton, Miss., Toyota Motor North America Inc., PACCAR Inc. and GreenTech Automotive Inc. have joined the market in the state by adding assembly plants.

Suppliers also are eyeing Mississippi. In September, Yokohama Tire Corp. and German auto parts maker Feuer Powertrain GmbH & Co. KG broke ground on new plants. Nissan is building its own supplier park at its Canton plant.

Overall, growth in this industry created 2,000 jobs in the last year in the state, said William “Skip” Scaggs, the director of the Mississippi Development Authority’s existing industry and business division.

The surge in manufacturing might up the ante for education, not only at the community college or trade-school level but also at the university level. Companies will be looking for skilled workers, as well as people who know how the auto and other industries operate.

“That means we have to adjust our higher education to be thinking about that,” said Roger King, the director of Mississippi State University’s Center for Advanced Vehicular Systems. “Do you offer automotive engineering classes or more robotic classes because so many things are automated out at these assembly lines?”

In North Carolina, Penny Whiteheart, the executive vice president of the Piedmont Triad Partnership, a state- and privately funded economic development agency, said the state had started emphasizing aviation two years ago after examining the region’s assets against the backdrop of economic conditions across the globe. She wanted to determine where North Carolina could best invest its time and resources for a global market.

“It was aviation,” Whiteheart decided.

North Carolina’s community college aviation programs are just getting off the ground. At Guilford Tech, the administration invested millions in a new aviation campus near the Piedmont Triad International Airport. The school is also a member of the National Aviation Consortium, which received more than $1 million in grant money from the U.S. Department of Labor to close the skills gap in the aviation industry.

“Anyone that has graduated this program doesn’t seem to have a problem getting a job,” student Keith Brown said.

At Forsyth Technical Community College in Winston-Salem, machining coordinator Todd Bishop said the mechanical engineering technology program had shrunk five years ago to a small night program for just a certificate, “but now we’re back to running day and night.”

One of the main struggles is to convince students and their parents that advanced manufacturing, which includes aviation production and maintenance, has a bright future in North Carolina. The shadow of shuttered factories hangs heavily in memory.

“The immediate reaction is, ‘I don’t want to be a part of that,’ ” said Gary Green, Forsyth’s president. “But it’s a different environment now. . . . It’s based on science, math – technological skills that were not there in the past.”

The Medill News Service is a Washington program of the Medill School of Journalism at Northwestern University.

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