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November 2020
Contents
COVID-19 (Coronavirus) Impact Update.......................... 3
RISK OVERVIEW.............................................. 3
Industry Definition & Activities......................................... 3
Industry Risk Score.......................................................... 3
Risk Rating Analysis......................................................... 4
STRUCTURAL RISK.......................................... 6
Structural Risk Score........................................................6
Barriers to Entry................................................................6
Basis of Competition........................................................ 6
Domestic and International Markets................................ 8
Industry Assistance.......................................................... 8
Industry Life Cycle............................................................ 9
Industry Volatility........................................................... 10
GROWTH RISK...............................................11
Growth Risk Score.......................................................... 11
Growth Risk Analysis......................................................11
SENSITIVITY RISK..........................................12
Sensitivity Risk Score..................................................... 12
Price of fruit....................................................................12
Demand from canned fruit and vegetable processing... 15
Demand from wineries................................................... 16
Per capita fruit and vegetable consumption.................. 18
Trade-weighted index..................................................... 20
COVID-19 IBISWorld's analysts constantly monitor the industry impacts of current events in real-time – here is an
(Coronavirus) update of how this industry is likely to be impacted as a result of the global COVID-19 pandemic:
Impact Update
• The Fruit and Nut Farming industry is expected to contract in 2020 due to a significant slowdown in
demand from food service industries.
• The industry is expected to nonetheless benefit from high volumes of food purchases stemming from
retail channels.
• Most industry operators qualify for federally-funded small business relief programs, thus mitigating the
effect of the COVID-19 (coronavirus) pandemic on the industry's operations.
Note: The content in this report is currently being updated to reflect the trends outlined above.
Risk Overview
Industry Definition Farmers in this industry grow nuts such as almonds and peanuts, as well as fruits such as apples, berries,
& Activities grapes and other noncitrus goods. Operators in this industry sell their crops to downstream processors
and fresh produce wholesalers and retailers.
Growing berries
Growing apples
Growing almonds
Growing peanuts
To calculate the overall risk score, IBISWorld assesses the risks pertaining to industry structure
(structural risk), expected future performance (growth risk) and economic forces (sensitivity risk). Risk
scores are based on a scale of 1 to 9, where 1 represents the lowest risk and 9 the highest. The three
types of risk are scored separately, then weighted and combined to derive the overall risk score.
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Despite challenges at the outset of the period, the industry's production output increased marginally given
more favorable weather conditions in recent years. However, changes in industry operations occur on a
marginal and lagging basis as agricultural operations often receive government subsidies during periods
of low prices. In addition to growth in industry output, industry profitability is expected to increase from
2015 levels due to recovering prices and a favorable interest rate environment. IBISWorld expects the
average industry profit margin, measured as earnings before interest and taxes, to total 9.0% in 2020.
Industry revenue is anticipated to grow over the five years to 2025 due to increasing demand for higher
margin products, such as almonds and pistachios, and strong retail prices for fruit. In addition, a rebound
in consumer confidence and continued advancements in transportation technology are expected to result
in higher sales of high-quality, high-value domestically grown fruit and nuts in the global market.
Moreover, the ratification of the 2018 Farm Bill will extend funding over the next four years for research
and subsidy programs affecting fruit and nut producers. Overall, IBISWorld forecasts industry revenue to
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increase an annualized 2.8% to $31.5 billion over the five years to 2025.
Price of fruit: An increase in the price of fruit positively affects the industry. Price fluctuations reflect
supply levels, downstream processing activity, global demand and other factors. The price of fruit is
expected to stagnate in 2020. This factor's contribution to risk is expected to decrease in the coming
year.
Demand from canned fruit and vegetable processing: A large portion of the industry's products goes
toward processed foods, one of the industry's major markets. As downstream processors demand more
fruits from farmers, industry revenue grows. Canned fruit and vegetable processing revenue is expected
to grow in 2020, presenting the industry with a potential opportunity. This factor's contribution to risk is
expected to increase in the coming year.
Demand from wineries: Wineries represent a significant market for fruit farmers. Grapes are the industry's
largest product segment, and wine producers buy the largest share of grapes. An increase in demand
from this industry will boost revenue for fruit farmers, particularly from vineyard operators. Revenue from
wineries is expected to increase in 2020. This factor's contribution to risk is expected to decrease in the
coming year.
Per capita fruit and vegetable consumption: Increased public concern about nutrition and diet has a
positive influence on fruit and nut consumption. However, according to health experts, fruit consumption
in the United States still needs to greatly increase to meet recommended standards. This factor's
contribution to risk is expected to increase in the coming year.
Trade-weighted index: Since exports account for about half of revenue, exchange rates determine the
price competitiveness of US products. When the US dollar appreciates, US fruit and nut exports are
relatively more expensive on the global market and less attractive to purchase, hampering export
demand. The trade-weighted index is expected to increase in 2020. This factor's contribution to risk is
expected to increase in the coming year.
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Structural Risk
Structural Risk Structure component Level Trend Weight Score
Score
Barriers to Entry Medium Steady 13% 5.00
Barriers to Entry Barriers to entry in this industry are Medium and Steady
Overall, the barriers to entry in this industry are moderate to substantial and
largely depend on the bearing acreage of a fruit or nut growing operation. For a
small operation, most inputs are readily available and there are often many
farms for sale. However, large commercial operations often require substantial
upfront capital to finance machinery and equipment.
Two other possible barriers include capital investment requirements and the
lead time for commercial harvesting. For some industry segments, the long
lead time between planting and harvesting is perhaps the biggest barrier for
prospective growers. On average, it takes about four years for fruit trees to
reach commercial bearing, although new propagation techniques have
managed to bring this lag down to two to three years. Further, it can take up to
eight years before orchards break even. New participants need to be able to
sustain the farms in the absence of a positive cash flow during this time. As a
solution, many farmers create alternative revenue streams. This usually
involves the growing of alternative crops, such as wheat, hay and potatoes.
For enterprises already engaged in other cropping, start-up costs are low.
Nonetheless, fruit growing requires some specialized machinery including
harvesters and sometimes irrigation systems. New growers can overcome the
cost of purchasing this machinery by employing outside contractors with the
appropriate equipment. Nonetheless, if farmers are unable to afford these
initial capital investments, they will be unable to enter the industry.
Basis of Competition Competition in this industry is High and the trend is High
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Production costs
This is a key competitive factor among growers because within each variety,
most fruits and nuts are homogeneous in nature and farmers receive very
similar prices. Therefore, farmers who can produce their fruit at lower costs
will have a competitive advantage. This is particularly the case for fruit that are
grown for processing. Prices for these fruits can be up to 80.0% lower
compared with fruit sold on the fresh market. In addition, they are usually
grown as part of a contract with a processing plant, which will prefer to buy
produce at the lowest cost possible.
Quality
To a limited extent, fruits and nuts can be differentiated by quality. Fruits and
nuts are commonly judged on their size, taste and appearance. Premium
graded fruits are usually sold into the fresh fruit market and therefore demand
a higher price than fruit picked for processing. The introduction of organically
grown fruit and nuts is creating a new sub-segment in the market. Organically
certified farmers are able to demand a higher price. Although a base for
competition, quality is difficult to control because it is largely determined by
exogenous factors like growing conditions. Weather, pests, and crop moisture
levels combine to determine the quality of harvested non-citrus fruit and nuts.
Variety
There are about 30 varieties of non-citrus fruits and half a dozen varieties of
nuts grown by the industry, each suitable for different purposes. These
varieties attract different returns depending on demand levels. Strawberries,
for example, typically attract higher returns than apples and pears. Farmers
that carry a wide variety of products can consistently supply to consumers'
shifting preferences.
Branding
Over time, the importance of branding is growing as farmers and packers seek
to differentiate themselves from their competitors. Branding is becoming
especially important for growers that produce varieties that compete with
imports because it is one of the best ways for local growers to take advantage
of America's reputation as a producer of safe food.
Producers that are consistently able to deliver produce are better able to
maintain business with wholesalers. There has been a move within the industry
away from spot markets (where prices can fluctuate widely) toward
maintaining supply contracts. To maintain these contracts, producers must
consistently supply produce.
External competition
Fruit and nut growers also compete with several alternative products. Within
the fresh produce segment, the high level of substitution among fruit means
that growers in the industry compete directly against citrus growers.
Meanwhile, non-citrus fruit growers and nut growers must also compete with
an ever-increasing range of processed foods in the snack segment. Given the
high level of competition and the presence of discerning customers at the
retail level, growers must endeavor to deliver high quality produce to the
marketplace.
Abroad, the Fruit and Nut Farming industry competes in export markets against
producers in other regions like the European Union, South America and Asia
particularly China). The key factors affecting world demand for fruit and nuts
are the same as the variables driving domestic demand. However, in addition,
the global market is affected by foreign exchange effects, foreign supplies and
variances in per-capita consumption of fruit and nuts in other parts of the
world.
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Exports
Imports
Producers experienced increasing competition from imports over the past five
years, which account for more than half of domestic demand at an estimated
54.8% in 2020. Consumers have become accustomed to purchasing fresh
produce year-round, regardless of domestic availability and this has boosted
reliance on imports. Due to US farmers being limited to seasonal fruit
production, the United States imports fruits during off-seasons. Furthermore,
consumption of tropical fruits that the United States has limited investment in,
such as mangoes and papayas, have increased during the period, further
boosting imports. Therefore, countries in Central and South America, which
have opposite seasons and tropical climates, are the largest sources for fruit
imports. As a result, imports are anticipated to grow an annualized 1.7% to
$19.1 billion over the five years to 2020. Furthermore, increasing trade has
been facilitated by technological advancements in the transport of fruit.
Controlled atmosphere techniques enable foods to be shipped in containers
where oxygen, nitrogen, temperature and humidity are maintained at optimal
levels to preserve the quality of fruit.
Industry Assistance The level of industry assistance is High and the trend is Increasing
The Fruit and Nut Farming industry receives minimal federal assistance
relative to commodity crops such as corn and cotton due to the status of the
industry's products as specialty crops. However, industry assistance has
gradually risen over the 10 years to 2020, with authorized USDA funding levels
for specialty crops and organic agriculture increasing under both the 2008
Food, Conservation and Energy Act (2008 Farm Bill) and the Agricultural Act of
2014 (the 2014 Farm Bill). Specifically, under the 2014 farm bill, an estimated
$739 million in annual funding was allocated toward thirteen specialty crop
programs, such as the Technical Assistance for Specialty Crops program and
the Specialty Crop Research Initiative. This represents an estimated 9.3%
increase from the 2008 farm bill's $676 million in annual funding for specialty
crop programs. Nevertheless, funding for specialty crop programs is
overshadowed by allocations for commodity crops; in contrast, producers of
commodity crops are expected to receive $4.7 billion in annual funding under
the 2014 Farm Bill via various programs, including direct price and income
support programs. In late 2018, the 2018 Farm Bill was signed into law by
President Trump. The 2018 Farm Bill largely extends funding for existing
specialty crop programs from the 2014 Farm Bill, such as the Specialty Crop
Research Initiative.
Unlike fruits and tree nuts, peanuts are considered a commodity crop and are
therefore eligible for more extensive government assistance programs. Under
the 2014 Farm Bill, peanut farmers are required to elect between one of two
programs, Price Loss Coverage (PLC) and Agricultural Risk Coverage (ARC). A
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one-time election will stand for the entire duration of the farm bill, for the crop
years 2014 to 2018. Under PLC, farmers receive payments if the average US
price falls below a certain reference point. For peanuts, this threshold is $535.0
per ton. Under ARC, payments are determined by county and kick in when
actual crop revenue is below a guarantee for a crop year. The guarantee is
calculated as 86.0% of county ARC benchmark revenue. Additionally, coverage
is capped at 10.0% of the benchmark revenue, meaning payments stop
increasing if revenue falls below 76.0% of benchmark revenue.
Non-payment programs
Farmers in this industry are also eligible for federally subsidized crop
insurance programs, which were expanded under the 2018 Farm Bill. There are
several different types of crop insurance, but some form of insurance is
typically required for farmers to receive a loan from a bank. The federal
government subsidizes crop insurance by contributing a certain percentage of
the cost of farmers' insurance premiums. Crop insurance programs are usually
designed to target certain commodities, and historically these insurance
programs have not targeted fruit and nut production. However, whole-farm
insurance, a new coverage option under the 2014 Farm Bill, now makes it
possible for fruit and nut farmers, as well as farmers of vegetables and other
specialty crops, to choose coverage of their entire farm, regardless of the
selection of commodities it produces.
In the international market, US fruit and nut farms previously benefited from
export programs such as the Market Access Program, National Export Initiative
and food aid programs. The food aid program provides matching grants to
commodity marketing boards and cooperatives to help expand markets
overseas for US agricultural products. The Fresh Produce Association of the
Americas is a major beneficiary of this program. The 2014 Farm Bill continued
funding available through the Market Access Program set at $200.0 million
annually. In addition, Local and Regional Procurement was established as a
permanent program, providing $80.0 million in funding for international
development assistance and food aid.
Industry organizations
In the private sector, US fruit and nut growers receive assistance from the
lobbying efforts of industry associations. Membership organizations include
bodies like Florida Fruit and Vegetable Association, and the United Fresh Fruit
and Vegetable Association. Peanut farmers can join the American Peanut
Council or the National Peanut Board. These non-profit organizations represent
the interests of growers, shippers and processors operating in the fruit and nut
supply chain. In addition to supporting the industry through market
development and lobbying efforts, most associations also provide information
and education.
Taxation
Fruit and nut farmers experience the same tax benefits offered to all US
farmers, including several tax breaks and allowable deductions for farm-
related expenditure. For example, farmers can receive a credit or refund for
excise tax paid on fuel used on a farm for farming purposes. In some
instances, farmers are also entitled to a tax deduction for expenses incurred in
the conservation of land used for farming. This includes the cost of activities
such as the treatment or movement of earth, the eradication of brush and the
planting of windbreaks. However, the total tax deduction for conservation
expenses is limited to 25.0% of the gross farm income for a given year.
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forecast to grow an annualized 1.4%. IVA growth during this 10-year period is Growth in industry
expected to significantly underperform GDP growth; however, this is largely participant numbers has
attributable to the industry's reliance on commodity prices and low product been restrained
differentiation.
Widespread domestic
Moreover, domestic market opportunities are limited. Per capita fruit acceptance of industry
consumption levels are an estimated 44.2 pounds annually, according to the products has limited US
US Department of Agriculture (USDA). Likewise, nut consumption has also market growth
leveled off over the past five years, totaling 3.7 pounds per person annually.
Consequently, farmers successfully expanded to overseas markets. The value
of exports is expected to grow at an annualized rate of 1.7% over the 10 years
to 2025. This forecast expansion is attributable to advancements in
transportation technology, which enable fresh fruit to be exported with greater
ease.
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Growth Risk
Growth Risk Growth component Level Revenue Weight Score
Score
2018-2020 Annualized growth Medium 2.0% 25% 4.92
Growth Risk Analysis The economic output of the Fruit and Nut Farming industry, which excludes
citrus fruits, has declined over the five years to 2020. While general fruit prices
were nearly stagnant before experiencing significant growth in 2016, demand
for certain segments, including major tree nut crops such as almonds and
walnuts, remained consistently high during the current period. However, the
period has been characterized by rare, adverse events including drought and
the COVID-19 (coronavirus) pandemic. In 2015, severe drought conditions in
major fruit and nut crop areas in the west caused the industry's economic
output to decline. In 2020, the industry is contending with major shifts in
downstream demand channels as the pandemic has caused food services
establishments to close temporarily. Overall, IBISWorld expects industry
revenue to decrease an annualized 0.9% to $27.5 billion over the five years to
2020, including a projected decline of 4.0% in 2020 alone.
Despite challenges at the outset of the period, the industry's production output
increased marginally given more favorable weather conditions in recent years.
However, changes in industry operations occur on a marginal and lagging basis
as agricultural operations often receive government subsidies during periods
of low prices. In addition to growth in industry output, industry profitability is
expected to increase from 2015 levels due to recovering prices and a favorable
interest rate environment. IBISWorld expects the average industry profit
margin, measured as earnings before interest and taxes, to total 9.0% in 2020.
Industry revenue is anticipated to grow over the five years to 2025 due to
increasing demand for higher margin products, such as almonds and
pistachios, and strong retail prices for fruit. In addition, a rebound in consumer
confidence and continued advancements in transportation technology are
expected to result in higher sales of high-quality, high-value domestically
grown fruit and nuts in the global market. Moreover, the ratification of the 2018
Farm Bill will extend funding over the next four years for research and subsidy
programs affecting fruit and nut producers. Overall, IBISWorld forecasts
industry revenue to increase an annualized 2.8% to $31.5 billion over the five
years to 2025.
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Sensitivity Risk
Sensitivity Risk Sensitivity component Level Weight Score
Score
Price of fruit Medium - High 35% 5.74
The price of fruit represents the prices received by farmers for their fresh fruits and melons. Annual
figures presented in this report are equally weighted averages of monthly means. Data is sourced from
the Bureau of Labor Statistics, with forecast growth rates sourced from the US Department of Agriculture
(USDA).
Current Performance
After financial markets crashed in late 2008 and the unemployment rate soared, per capita disposable
income fell, forcing consumers to cut back on their consumption of most goods. Fresh fruit is a luxury
good when compared to cheap processed foods, and as a result, demand for fruit slipped, causing the
average price to fall 10.2% over 2009. The economy stabilized over 2010, causing consumers to increase
their demand for fruit, causing prices to rise. In addition, adverse weather during the first quarter of the
year forced prices up. The resulting 12.2% increase caused the price of fruit to return to its prerecession
high.
Prices eased down slightly over 2011, as the economy struggled to return to robust growth. In 2012,
slight growth in demand, coupled with a drought across the Midwest and Great Plains regions, boosted
the price of fruit 1.1%. Prices then increased at steady rates, at 1.8% and 2.7% in 2013 and 2014,
respectively.
According to the USDA, the price of fruit index spiked in 2016 due to a large drop in apple and strawberry
harvests. In 2016, the supply of large-size fruit declined, partly due to above-average temperatures and
dry conditions in some states. For example, Washington State had poor climatic conditions, resulting in
high apple prices in late 2015 through 2016. At the same time, demand for some fruit (e.g. strawberries)
outpaced supply, due to adverse weather conditions hampering harvest yields in Florida and California.
However, California harvest yields picked up in the 2016-2017 season, alleviating the issue of demand
exceeding supply, causing fruit prices to increase at a slower pace. In 2018, the price of fruit declined
slightly amid a slight increase in supply. This decline is forecast to continue through 2019 until it
stagnates in 2020. Overall, over the five years to 2021, the price of fruit is expected to rise at an
annualized rate of 0.1%.
Outlook
The price of fruit is forecast to rise further over the five years to 2026, at an annualized rate of 2.3%.
According to the USDA, the value of farm production of fruit (citrus and noncitrus) is expected to become
the largest share of horticultural crops (fruit, tree nuts and vegetables). In particular, robust sales growth
of noncitrus fruit varieties is expected to propel the price of fruit upward. Notably, the price of domestic
fruit will become increasingly tied to global prices. According to the USDA, imports will satisfy a growing
share of domestic demand, with imports projected to supply just over half of domestic fruit and nuts by
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2024.
Volatility
The price of fruit has experienced moderate volatility; however, this driver is generally less volatile than
the prices of other farm products, due to its lack of a connection to fuel prices. As no fruit is made into
biofuel in the United States in any significant quantity, the price of fruit moves only due to demand
fluctuations and supply changes. As a result, the most significant movement in the price of fruit in recent
years occurred due to falling demand due to household income fluctuations.
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Operators in this industry purchase fruits and vegetables and process them with other ingredients to
create a variety of food products including canned juices, canned soups (except seafood), jams, baby
food, sauces and dehydrated fruits and vegetables. The final products are then packaged and sold to
consumers at various retail channels. This industry does not include frozen fruits and vegetables, which
are discussed in IBISWorld report 31141.
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The Wineries industry consists of companies engaged in at least one component of the winemaking
process. This process includes growing and harvesting grapes, crushing and pressing grapes into
unfermented wine and fermenting the wine. The industry also produces wine blends, brandies and wines
made from other fruit sources.
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Per capita fruit and Estimated value in 2021: 641.2 Pounds (lb)
vegetable
consumption 2016-2021 Compound Growth: -0.31%
This variable represents per capita fruit and vegetable availability. Data is sourced from the US
Department of Agriculture.
Current Performance
Per capita fruit and vegetable consumption fell steadily from 2005 through 2009, mostly due to the rising
costs of these crops, which can be linked to rising oil costs. As the United States increasingly looked to
alternatives like biofuels, demand for crops that can be made into biofuel grew. In turn, their prices went
up and consumption demand for these crops was pushed onto other crops, raising their prices as well.
Though fruits and vegetables are food staples, high prices have caused them to comprise a smaller
portion of consumers' diets in recent decades. This was especially the case in 2008, when per capita fruit
and vegetable consumption fell 2.7% to 650.3 pounds per person, as consumption for all goods dropped
in response to the recession. After declining slightly in 2009, consumption rebounded 0.9% in 2010 as the
economy began its slow recovery. The rebound was short-lived, however, as vegetable prices rose again,
leading to a 2.4% decline in per capita consumption in 2011 and a relatively modest decline of 0.2% in
2012. Since then, consumption trends have been mixed. This pattern ocntinued through 2016 and 2019
with stedy voltility. Overall, IBISWorld projects per capita fruit and vegetable consumption to decline over
the five years to 2021, decreasing at an annualized rate of 0.3%.
Additionally, the growing health consciousness of many consumers has pushed many individuals to eat
healthier foods in recent years. This trend tempered the observed fall in fruit and vegetable consumption
caused by the aforementioned price increases. Moreover, rising health consciousness has caused
consumption to move from processed fruits and vegetables toward fresh produce. However, fresh
produce usually costs more than processed produce, so even though consumers have been eating more
fresh fruit and vegetables, they typically replace their processed produce with a smaller amount of fresh
produce. As a result, total per capita consumption has continued to fall over the past five years, with per
capita consumption of processed produce falling at a particularly rapid pace.
Outlook
Over the five years to 2026, per capita fruit and vegetable consumption is projected to remain relatively
stagnant. With oil prices expected to rise after their precipitous decline in 2020 amid the COVID-19
(coronavirus) pandemic, demand for biofuels is likely to grow once more, causing agricultural product
prices to rise as well. At the same time, increasing health consciousness among consumers is
anticipated to prevent meaningful declines in per capita fruit and vegetable consumption. Still though,
IBISWorld projects per capita fruit and vegetable consumption to fall at tepid annualized rate of 0.2% over
the five years to 2026, as the population continues to expand.
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Pounds Pounds
Year % Change Year % Change
(lb) (lb)
1980 604.76 N/A 2004 703.38 0.2
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The trade-weighted index (TWI), also known as the real broad index, measures the strength of the US
dollar relative to the currencies of the nation's trading partners. Weightings are determined by the share
of trade with each country, with the five largest allocated to the Euro, Canadian dollar, Chinese yuan,
Japanese yen and Mexican peso. These five currencies account for over two-thirds of the TWI. The data
for this report is price adjusted (i.e. real) and sourced from the Economic Research Division of the Federal
Reserve. Figures are based to an index value of 100 at January 2006.
Current Performance
The dollar declined for six consecutive years between 2003 and 2008, driven by increased demand for
cheap imports sourced mainly from Pacific Rim nations. Meanwhile, the Euro strengthened rapidly during
this period, adding new countries and establishing itself as a credible international reserve currency.
Lastly, strong economic growth in China, Europe, Russia and Australia created significant interest rate
differentials with the United States, diverting investor funds into these nations. The combination of these
factors reduced demand for US dollars while increasing the value of the US's major trading currencies,
resulting in a steady devaluation of the US currency.
The financial crisis in 2009 temporarily reversed these trends. The collapse of the subprime mortgage
market and the subsequent fallout crippled the global economy and investor appetite for risk. As a result,
investors flocked to safe assets, leading to a surge in demand for US assets and causing a 4.8%
appreciation in the US dollar for the year. However, global economic conditions improved in 2010, a trend
which persisted in 2011, bringing back investor appetite for risk and reversing the greenback's recent
momentum. As a result, the TWI declined 4.8% in 2010 and an additional 5.0% in 2011.
Sharp increases experienced in 2015 are expected to be a direct consequence of diverging monetary
policies in advanced economies. For example, while the Federal Reserve raised the federal funds rate, the
Bank of Canada and the European Central Bank reduced comparable rates resulting in a higher return on
the dollar as opposed to other major currencies, raising its value in the international market. Between
2015 and 2019, the daily value of the greenback has fluctuated considerably. For instance, the index
increased significantly from 2014 to 2016, but fell slightly in 2017. The uncertainty surrounding the
financial future of sovereign debt issued primarily by Greece weakened the value of the euro during this
period. The weakening of the euro also provided a boost to TWI, particularly given the euro's large
weighting within the index. Alternatively, the United States presented a bright spot in the global economy,
causing the value of the US dollar to rise.
Moreover, as commodity prices slid in 2015, it left many emerging markets severely exposed leading to
greater currency flight into the United States. The majority of the gains in the value of the dollar during
2016 occurred after Brexit, and following the US presidential election; however, IBISWorld measures TWI
as an annual average. As a result, the annual value for TWI in 2016 was relatively subdued, though the
metric entered 2017 at a relatively high level, causing the TWI to decline slightly throughout the year.
Additionally, the Federal Reserve raised rates early in 2017; however, this action was largely priced into
the market. Federal Open Market Committee rate decisions were much less aggressive throughout the
rest of 2017, as inflationary pressure did not rear itself as aggressively as jobs numbers would have
indicated. As a result, stronger growth in Europe and Japan, combined with an easing of accommodative
monetary measures in Canada, placed strong downward pressure on the TWI in 2017, and this trend
continued through 2018. In 2019, the TWI increased again as trade tensions and negotiations impacting
world commodity prices. Additionally, ongoing geopolitical struggles have increased the value of the
dollar in 2019, further increasing the TWI. With the COVID-19 pandemic affecting markets globally, in
March 2020, investors rushed to safe-haven currencies, such as the US Dollar, as financial markets
experienced major distress. This in turn strengthened the US Dollar and raised the TWI index. Market
uncertainty has dampened since March, as monetary and fiscal stimulus have boosted confidence in
financial markets and easing of lockdown measures as many countries slowly reopen their economies.
Regardless, the index is still expected to remain relatively high over 2020 as economic recovery may be
slow over the rest of the year and US-China tensions continue to persist. In 2021, as the global economy
is anticipated to continue its recovery and the global community remains hopeful of a potential
coronavirus vaccine that would likely accelerate the economic recovery, the TWI is expected to recede
from its 2020 high. Overall, IBISWorld estimates that the TWI will stagnate to an index value of 105.4,
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Outlook
IBISWorld projects the TWI to decline slowly over the five years to 2026, though this metric is expected to
hover around the index's historical equilibrium. As the global economy recovers from the economic
ramifications from the COVID-19 pandemic, investors will look to take on more risk and move out of safe-
haven currencies in search for higher return.
Overall, while the TWI is expected to decline over the next five years, the forecast is highly exposed to
macroeconomic variables, and various potential movements in both the country-specific and international
levels can alter the path of the TWI. For instance, one potential concern is the appreciation of the yuan
that may occur as China seeks to reduce its image as a currency manipulator and take the lead in
globalized trade. China's prominent and growing weighting within the TWI means that the US dollar would
be weakened by the reversal of this policy and the subsequent appreciation in the yuan. Furthermore,
increase geopolitical trade tensions could also negatively impact the TWI as American goods become
more expensive to importers in other countries. However, some of these concerns are already priced into
the current value of the TWI, and the dollar may remain at similar levels if the actual revaluation is lower
than expectations. Lastly, global interest rate movements may affect the level of the TWI depending on
how the certain regions of the world recover from the negative economic growth expected in 2020, which
may go into 2021. This is dependent on vaccine developments and the success of spread mitigation
efforts.
Data Volatility
Floating exchange rates are notoriously volatile; they respond to changes in the political climate,
economic conditions, interest rates and trade patterns, among a plethora of other factors. However, the
TWI displays only a moderate level of volatility because it is based on an average of many currencies.
Furthermore, fluctuations in any given component may be offset by changes in another. IBISWorld
anticipates that this degree of volatility will persist in the future.
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Fruit & Nut Farming in the US November 2020
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Fruit & Nut Farming in the US November 2020
The Industry Risk score is forward looking, and the score looks at expected Industry Risk over the next
12-18 months. The methodology is based on industry classifications and is designed to identify and
quantify risks inherent in specific industries both now and into the 12 month forecast.
Industry-based information would, for example, enable the examination of a loan book (portfolio) with
regards to risk, which would enable a more sophisticated assessment of risk spread and pricing to risk.
Alternatively, individual exposures can be better evaluated using an assessment of structure and key
drivers of change in the industry of the exposure.
Industry Risk A numeric scoring system is used and is based on a scale of 1 to 9, where a score of 1 represents the
Scoring lowest risk and 9 is the highest risk. For each of the three major risk categories (Structure, Growth and
Methodology External Sensitivities) a component score is derived from various sub components. Finally an overall
score is derived by combining the three major risk categories.
Overall Score: This is derived from an amalgamation of the various component scores, as explained
below:
Structure Score: This score is made up by analyzing internal industry risk factors. These factors are an
industry's; level of volatility, barriers to entry, external assistance, trade exposure imports and exports (if
any), industry life cycle, and amount of competition. This component contributes to 25% of the overall
score.
Growth Score: This figure is derived as an amalgamation of background and forecast growth scores. This
component contributes to 25% of the overall score.
Sensitivity Score: This figure is derived by examining external and exogenous factors which affect risk
within the industry. Examples include input costs, number of housing starts, commodity prices, etc. This
component contributes to 50% of the overall score.
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Fruit & Nut Farming in the US November 2020
>5.9 - 7 >7 - 9
High Very High
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