There already are some black clouds for the fruit season that has started, although they related more to local factors, rather than external ones.
Production in the Valley remains at low levels, when compared to the production achieved in recent decades. Producers expect to achieve a lower volume of pears and higher amount of apples than in the previous season.
Additionally, there is a lack of quality in the different farms in the region.
"We are seeing an important decline in William's and a lot of fruit affected by frost and hail," stated Pablo Cervi, the president of Argentina's Chamber of Integrated Fruit Growers (CAFI).
There are several producers planning to make a single pass in this variety, as, in many cases, prices do not justify harvesting the poor quality fruit. There's an up to 40% decrease in production in some important lots in the region and the prices paid for fresh conventional William's varieties have a 25 cent ceiling. So far, the industries have no intention of buying the fruit, as they have stocks from previous seasons that they still haven't sold. The situation is completely different in the organic fruit. Producers expect this market segment will achieve higher prices. There are also low volumes and a decrease in quality in other pear varieties, such as the Packam's and D'Anjou varieties.
The head of the CAFI said the market would be difficult for this species, taking into account the prices achieved in Russia in the previous year, which were below production costs, and the demands made by Brazil to place fruit in that market.
Brazilian health authorities still haven't answered the proposal of the Argentine government of relaxing the requirements of the Risk Mitigation System (SMR) that was imposed on the Valley's pome fruit last year. "We'll have to be very careful with what we send. We must take care of this market," Cervi said.
Common sense dictates that, as the supply declines, the quality pear will be able to reach niches and achieve good prices on certain destinations. However, that isn't what the producer companies are seeing nowadays. The problem is that, according to the first projections, less than a third of product being packaged has these characteristics. The remaining more than two thirds are second and third quality fruit that has serious placement problems and low returns.
Last year, many companies bought fruit at prices that were never validated by the demand. As a result, currently exporters are receiving very prudent bids on pears and apples. Unlike last year, there currently is no pear in cold storage, so trading should be more fluid than in the beginning of last season.
The apple's situation is different. There is a higher volume of apples this year, but their quality is very similar to the one achieved in the previous year. Producers have expectations for apples, given the good prices achieved in recent months. Before the end of the year, some high quality apples were sold at up to 16 pesos per kilo. "We expect to receive no less than 8 pesos per kilo of good quality red apple to be stored and sold in the domestic market in the second half of this year," said a major producer from the area of Cipollett. It will be very difficult for businessmen to justify this price on the shelves in the future.
The good quotes achieved in the latter part of last year were largely due to a low harvest and a lack of quality. In other words, there was a very low offer in the last quarter. Currently, there is a bigger supply, but it is still lacking quality. Many entrepreneurs project that, compared to the previous year, there will be a higher volume of fruit for the second half of the year, which could have an impact on final prices. "It may be that the prices in the last quarter of the year are similar to those achieved in the last season, but they won't be higher," a market operator said when asked about the subject.
Another complicating issue this season is the lack of funding. Local banks have stopped giving loans to many regional firms because they fear they won't be able to pay them.
There are many companies that are already selling their future exports to operators from abroad to finance the packaging at this early stage of the harvest. The financial cost of this alternative is extremely high. In this sense, we must also mention that Donald Trump's victory led to a sharp increase in the ten year interest rate in the US, which means the Federal Reserve will adjust its currency faster this year. In this context, the cost of borrowing money will become more expensive, unless Argentina has big improvements that allow lowering the country's risk and offsetting the Trump effect.
Signs abroad
International trade is stable and the Valley has had a noticeable improvement in competitiveness, thanks to the appreciation of most of the currencies in the countries of the southern hemisphere.
The rouble improved its position against the dollar by 25% yoy (see attached Infogrames), the real by 20% and the remaining currencies (Chilean peso, New Zealand dollar, and South African rand) showed a similar behavior.
The Argentine peso is also lagging against the dollar, a tendency that will increase in the course of this year, as part of the policy of President Macri.
According to the latest report released by the United States Department of Agriculture (USDA), global apple production volume for the 2016/2017 season will increase, as well as exports, which would compensate for a possible oversupply. The same trends are observed in pears.
Local exporters worry about the possibilities of placing their offer in destinations such as Brazil, Russia, and Algeria; three countries that, until recently, imported a large proportion of the country's second and third quality fruit. Today, for different reasons, those markets are buying their pears and apples from third parties. It will be important to rebuild trade flows with them, given the high volumes of low quality pears and apples there are in the Valley.
Source: rionegro.com.ar