Prairie Business Magazine, February 2009: North Dakota depends on world markets

Prairie Business Magazine, February 2009: North Dakota depends on world markets

Posted on February 15, 2009

With more than 90 percent of the world’s consumers living outside the United States, many North Dakota companies are venturing beyond the nation’s borders to grow their business.

And federal export data shows they are successfully taking advantage of strong worldwide demand for North Dakota products and services.

North Dakota exporters set a state record in 2007, selling $2 billion in merchandise to foreign buyers and increasing the state’s annual export growth by 34 percent – more than any other state.

North Dakota’s exporters again set a state export record in 2008. As of October 2008 - the latest export statistics available - North Dakota’s merchandise exports reached a value of nearly $2.2 billion – a 34 percent increase from the same time in 2007, the U.S. Department of Commerce reports.

“We believe that our continued export growth is one of several drivers that have helped curb in North Dakota much of the economic downturn experienced in other parts of the country and world,” said Susan Geib, executive director of the North Dakota Trade Office.  “We are very pleased that our exports continue to grow and help diversify our state economy.”

Though the state’s exports have continued a long-standing growth trend, the weakened world economy and subsequent credit crunches are posing considerable challenges in some key markets, Geib said.

Driving North Dakota's export growth in 2008 were favorable exchange rates (although the dollar has recently gained strength),  emerging economies with improved living standards, the effects of free trade agreements and a proactive effort in North Dakota to take advantage of high-demand markets throughout the world, Geib said.

Canada is, by far, North Dakota’s largest export market, receiving about half of the state’s merchandise exports. Agricultural machinery, construction equipment and processed foods are some of the products shipped north of the international border.

Mexico, the state’s second largest export market, has steadily increased its purchases of North Dakota goods from $39 million in 2002 to $179 million as of October 2008. The most exported goods include value added foods and machinery.

Canada and Mexico, members with the United States in the North American Free Trade Agreement, also are major importers of North Dakota crops. North Dakota farmers generated $5.49 billion in agricultural receipts last year and 46 percent of those earnings came from export sales. More than half of those exports were shipped to Canada and Mexico, the U.S. Department of Agriculture reports.

North Dakota exported $943 million in machinery during the first 10 months of 2008. One of every seven manufacturing workers in North Dakota relies on exports for their jobs, according to the U.S. Department of Commerce.

With machinery accounting for nearly half of North Dakota’s merchandise exports, the North Dakota Trade Office has invested heavily in expanding the business sector’s international opportunities.

Among North Dakota’s more broad-based, high-demand markets for machinery are the former Soviet states of Ukraine, Russia and Kazakhstan where the agriculture industries are undergoing major transitions from small, state-owned farms to large, corporate businesses in dire need of modern farm equipment.

In 2007, the U.S. Department of Commerce awarded the North Dakota Trade Office a $330,000 matching grant to assist North Dakota equipment companies in expanding their exports in former Soviet states.

The three-year market development program’s initiatives include:

  • Working with the U.S. International Trade Administration and U.S. Commercial Service to further identify equipment distributors and other key equipment buyers
  • Hiring a Ukraine-based representative to assist in expanding North Dakota export business in this high-demand market
  • Recruiting qualified equipment buyers from the Newly Independent States and other high-demand markets around the world to attend the annual Big Iron Farm Show in West Fargo
  • Developing trade missions and participation in overseas equipment trade shows to support exports and build brand identity for North Dakota equipment companies
  • Assisting companies throughout the export process

Released in October, The U.S. Department of Commerce’s 2008 National Export Strategy report to President Bush praised North Dakota’s efforts in Ukraine. In the report, North Dakota’s market development program is highlighted as a “model of collaboration” between state and federal agencies to expand international business.

Several local companies including Brandt Holdings, Summers Manufacturing, Amity Technology, RDO Equipment, Sorm Incorporated, Titan Machinery and Northern Grain Equipment participate in state export programs and are actively marketing their products in the Newly Independent States and other foreign markets. North Dakota’s exports of agriculture equipment have made Russia, Ukraine and Kazakhstan the state’s fifth, sixth and 10th largest foreign markets, respectively.

In the first three quarters of 2008, North Dakota equipment manufacturers and dealers exported about $212 million in machinery to the three countries – 33 percent more than in all of 2007. Just six years ago, North Dakota’s exports to Russia totalled $3 million and Ukraine and Kazakhstan were not importing any North Dakota goods.

Value-added foods

Another major export sector in North Dakota has grown from an increasing world demand for foods that can be traced from the field to consumers’ plates.

Devastating outbreaks of mad cow disease and other food scares are fueling a growing trend among consumers the world over to know what is in the foods they eat.

It means big business for North Dakota producers and marketers of identity preserved crops including organics, crops free of genetic modification and crops grown for specific, traceable quality traits.

The state’s producers and marketers “identity preserved” soybeans, peas, lentils and other value-added foods aren’t waiting for customers to come knocking on their farmhouse doors. They’re traveling to Japan, South Korea, Malaysia, Thailand, Italy, Spain, Turkey and many other countries to win over new customers with their high-quality products.

The state’s value-added food producers are taking part in trade shows, trade missions and “reverse missions” where qualified buyers are invited to North Dakota to get an understanding of the state’s production expertise and high-quality foods. The Northern Crops Institute plays an important role in these marketing efforts by educating food buyers from around the world about the uses and quality benefits of North Dakota-grown foods.

“International business is very important to our company as it accounts for about half of our total sales volume, said Jennifer Tesch, marketing and sales director for Fargo-based SK Food International Inc.

SK Food provides buyers around the world with completely traceable beans, grains, oilseeds, flours, sweeteners and other food ingredients. The company contracts with producers primarily in North Dakota and neighboring states, Tesch said.

“Our growth from international markets has steadily increased over the years,” Tesch said. “Asia, specifically Japan and Southeast Asia, have remained strong markets for us.”

North Dakota is home to smaller business sectors that export medical equipment, aviation equipment, and security devices. The Trade Office and U.S. Commercial Service also work with the state’s universities and colleges to assist in recruiting foreign students.

Power plants, refineries and industrial manufacturers throughout the world have come to rely on Grand Forks-based PS Doors for security and employee safety.

“We have shipped to about 20 countries, but Canada is our largest export market right now,” said Cory Melland, PS Doors’ marketing director.

PS Doors designs and manufactures heavy, industrial security doors for power plants and refineries, water-tight flood barriers and safety gate and railing systems to protect workers from falls.

The company’s growing domestic and international business led to an expansion of the Grand Forks plant, increasing its manufacturing footprint from 32,000 square feet to 56,000 square feet, Melland said.

“We’re doing well, but we’re always interested in looking at other countries and other markets,” he said.

Some of North Dakota’s exporters create a category of their own, shipping everything from handicap accessible ramps to beach cleaning equipment.

“People in the general public would be surprised to learn about some of the state’s innovative companies and just how much international business they’re involved in,” said Heather Ranck, a Fargo-based international trade specialist with the U.S. Commercial Service.