Arkansas Exports See Revenue Rise for Most Products in 2010

For the first three quarters of the year, most Arkansas export products sold better than they did during the same period in 2009.

While the state's international trade declined 1.25 percent to $3.7 billion in the first nine months of 2010 compared with 2009, the drop was tied mainly to the aircraft and spacecraft industry, which was Arkansas' top export item in 2009, according to a report from the Arkansas Economic Development Commission.

(For a list of the Largest Arkasnas Exports click here.)

The value of aircraft and spacecraft exports from Arkansas tumbled 71 percent to $325 million in 2010 compared with the same period in 2009, the commission's report said.

"That's purely an effect of the global economy," said Dan Hendrix, president and CEO of the Arkansas World Trade Center.

He said aircraft companies in Arkansas produce civilian and private business jets, which have seen sales fall because companies have slashed their spending.

But he said export sales were improving for most items. And it's possible that the value of Arkansas' exports could surpass the total in 2009 with a strong fourth quarter, which has typically been good for exporters, the Arkansas Economic Development Commission said.

Also, free-trade agreements are being negotiated with South Korea, Panama and Columbia that should help Arkansas exporters down the road.

"There are still some concessions on both sides yet to be completed," Hendrix said. But deals could be reached by the first of the year, he said. After trade agreements have been signed, Arkansas' exports to those countries with new trade agreements have jumped at least 70 percent, he said.

President Barack Obama also gave exporters a boost in March when he created the National Export Initiative, which has a goal of doubling exports during the next five years by working to remove trade barriers.

"As the U.S. government continues to find ways to double exports in the next five years, then that will certainly impact Arkansas companies and agriculture," Hendrix said.

Cereals were Arkansas' second-largest export item in the first nine months of this year with a value of $352.4 million, up 4.61 percent from the same period in 2009.


Top Movers

Of the top 15 Arkansas export items this year, 13 categories reported increases in the value of exports compared with the same period in 2009.

In addition to aircraft and spacecraft products, the value of miscellaneous chemical products fell 4.4 percent to $60 million in 2010 during the same period last year. 

The biggest movers were arms and ammunition sales, which jumped 145 percent to $210 million in the first three quarters of 2010. In 2008, the value of arms and ammunition exports from Arkansas totaled $116.4 million. And cotton and yarn fabric items leaped 155 percent to $138 million, which surpassed the sales in all of 2008, when the value of the items sold was $94.3 million.

Sales for electrical machinery increased 58 percent to $314.6 million in the first three months of 2010 compared with the same period last year. In all of 2009, electrical machinery sales totaled $284.6 million.


A Rough 2009

In 2009, 12 of the top 15 export products had sales declines over 2008.

One of the largest drops in sales was for iron and steel products, which fell 50 percent to $61.3 million in 2009.

The export value of machinery items was $462.9 million in 2009, off from its high of $661.2 million in 2008.   

"The recession took the bite out of any strong growth patterns that might have existed before the recession," said Kermit Kuehn, the director of the Center for Business Research & Economic Development, which is located at the University of Arkansas at Fort Smith's College of Business.

Still, the $5.3 billion in total Arkansas exports in 2009 was 66 percent higher than it was in 2004, according to the Arkansas Economic Development Commission's report.

Kuehn said the declines in 2009 could have been worse. He said the decline in the value in the dollar is better for exporters because customers in other countries can buy U.S. goods for a lower price.

Canada continues to be Arkansas' largest trading partner and accounts for more then $1 billion in products exported from Arkansas in 2009, the report said. Mexico is Arkansas' second-largest trade partner with more than $500 million worth of items shipped from Arkansas in 2009.


Fluctuating Currency

The decline in the value of the euro to about $1.32 from above $1.40 last month and $1.50 in the fourth quarter of 2009 should be a slight blow to U.S. exporters, said Richard Levich, professor of Finance & International Business at the Leonard N. Stern School of Business at New York University.

"U.S. exporters are probably going to have a bit harder time exporting to Europe now versus a year ago because of the exchange rate," he said.

But he said there were ways for exporters to sidestep a fluctuating currency.

Levich said exporters could trim their prices or take a smaller profit margin.

"They might try to provide additional features in their products or ... provide cheap financing," he said.

Still, some countries will continue to buy export products, such as agriculture items, even if the prices rise 15 percent, Levich said.

"People's buying habits are fairly rigid," he said. "People aren't going to change their diets or change their suppliers much on the basis of a 5 or 10 or 15 percent change in price."
And other factors play into a foreign company's decision to buy exports.

"I don't think we could imagine that China would start importing automobile parts from the United States or electronic components to use in their manufacturing even if the exchange rate were to change because the production costs ... are so substantial," he said.

He also said companies may have contracts in place that can't be broken.

"People aren't likely to change a supplier if they think the exchange rate might be reversed in another three or six months, which it could be," Levich said.