It seems that the seven plagues of Egypt moved to the Rio Negro Valley and to Neuquen during this season. Popularly, the seven plagues mean that someone, some people or everybody in a town is being punished in biblical proportions, i.e. they are receiving an unimaginable and insurmountable punishment.
The regional fruit sector is being affected by these seven plagues:
• The historical delayed exchange activity.
• The taxes on exports, which are unique in the world
• A record internal tax charge on production
• A lack of bank financing for development
• High internal costs that don't allow producers to market their products
• A national economic policy that is choking the system
• Several hailstorms affected some 8,200 hectares
The storms were the final blow on the sector's hope of pushing through the season. The hailstorms suffered in the area since late last year have affected 8,200 hectares.
According to reports from the private sector, the storms brought losses of 270 million kilos of fruit; a number that many view as a normal statistic in the system every year.
If that fruit could have been placed in the external market, it would have generated about $280 million dollars in income. Had that volume been destined for the domestic market, sales would have amounted to nearly $1,500 million pesos.
These 270,000 tons would have created over 2,500 jobs during the harvest season and other countless jobs to pack this volume of fruit; jobs that have been lost to the bad weather.
This is the real calamity: the fruit is lying on the ground, the producers are helpless, the workers unemployed, millions of dollars lost, and the sector still doesn't know how to get out of this crisis. The hail was so hard in certain areas that several producers had losses that exceeded 100% of their production, as it also affected the plants' ability to bear fruit next season.
What's next?
The hail limited the entry of the Williams pear and the Gala apple to the packing sheds. Very few producers could deliver these varieties to the companies that export them.
"The lots that had a damage above 15% were rejected by the exporters. They said it wasn't profitable to pass them through the machine," confided a producer of Cipolletti. There is no chance that these two varieties are absorbed by the juice industry as there is no price for that type of fruit. Currently, the industry is only buying the fruit that is discarded at the packing companies.
In short, the most optimistic estimates state that only 350,000 tons, of the more than 900,000 tons of pears (Williams, Packham's and D'Anjou) and Gala apples that were initially forecast, could be harvested in the first part of the season. The rest will be lost for various reasons.
The tolerance set by entrepreneurs who send their fruit overseas broke the market's equilibrium. Historically, 30% of what is shipped from San Antonio, Bahía Blanca and Buenos Aires was destined for Russia. The inferior pear was sent to Europe and USA. Currently, this fruit can't be sent to the Russian market nor redirected to the northern countries.
"Currently, the pear market in Europe is not depressed. The first fruits from South Africa achieved good prices, but we are talking about a sample in a season that has just begun for the southern hemisphere," confided a businessman from Berlin, where the Fruit Logistica 2015 was conducted this week.
"Our main problem now is the apples because we can't compete with them in Europe as a result of the high costs and varieties we have to offer," added the source.
The majority of the businessmen surveyed said there was less activity in Europe than in previous years, although they expected good returns generated by the good quality pear, although it is clear at this point in the season there won't be significant volumes. Exporters have also expressed great concern about the volatility of macroeconomic variables that are observed in different markets, especially of currencies such as the Euro and the ruble.
Russia is a separate issue. Sources in Berlin are sure that the problems with Vladimir Putin are far from being over; furthermore, they will deepen which is bad news for the regional fruit sector.
This season's shipment schedules from Rio Negro Valley and Neuquen will decrease 30% when compared to last year. The collection risks, together with the country's economic instability (oil prices falling to 50% and depreciation rates of 100% in the last twelve months) do not reflect a good business scenario in this market.
The loss of competitiveness suffered by Argentina's fruit sector makes matters worse. Currently, to achieve positive returns, a box of pears must be sold in Moscow at 1,800 rubles, more than double the price obtained during the previous season.
"The small amounts of pears we have in Russia are achieving these prices, but prices will most probably change once the shipments from the southern hemisphere arrive. It would be catastrophic for us," added another exporter from Berlin.
The lower fruit sent overseas could create complications in destinations like Brazil and the domestic market, since there are many producers saving their pears or advancing apple sales -to achieve a return- in these two destinations.
There will be a lot of fruit being moved around, which could cause an oversupply in these two destinations that have worked well within the system so far.
This week, a lot of trucks from the province of Buenos Aires, Santa Fe and northern Argentina arrived at the farms to buy their fruits directly. "We are charging ridiculous prices. We have no choice. A portion is paid in cash and another by check," said a producer who was excited about having an outlet for his crop.
In some cases the checks received can only be cashed in within 90 days. What will happen when the fruit begins to clog the markets and prices begin to fall?
Producers won't be able to cash in most of these checks, which will give way to the second peak of the crisis. Producers should only send fruit that is likely to be sold, so they can be paid, into the domestic market and Brazil.
Source: Diario Rio Negro