Northern Chile’s grape profitability challenges
Grape growers in the northern Chilean valley of Copiapó faced a complicated season in 2011-12 with their exports dropping 10% year-on-year to 101,000 metric tons (MT). A high stock of late Californian grapes was an important factor as to why but aging plants and operational discrepancies were also to blame. At www.freshfruitportal.com we speak with Santiago-based market researcher iQonsulting to find out more.
iQonsulting senior analyst Karen Jones says there are many different speculations as to why such “meager economic results” were achieved, with some pointing to competition with Brazil and Peru.
However, a study conducted by the company showed there were 90% more Californian Crimson Seedless grapes on the market on Dec. 15, with a stock of 2.3 million cartons. California’s total grape stock at the time was 4.1 million cartons, representing a 60% year-on-year rise.
The statistics set the backdrop for region’s challenges, with the U.S. accounting for 67% of Copiapó’s shipments, followed by Asia (20%) and Europe (9%).
“Part of the explication has to do with the United States market having a higher grape supply in the period when Copiapó started sales. The questions that follow this observation are what led to this higher supply, and was this situation a one-off or will it continue with time?” says Jones.
The majority of Copiapó’s grape shipments to the U.S. were white seedless with a total of 31,000MT, while 25,000MT were red seedless.
Jones says these two types of fruit had to compete with the Californian Crimson Seedless grapes, which in addition were heavily promoted. She says Brazil entered the U.S. market earlier in mid-September with its white seedless deal, while Copiapó had more overlap with Peru, which sent 8,000MT of Red Globes and just 6MT of white seedless.
California has witnessed a trend towards the plantation of later varieties with better postharvest properties, which extends the season.
Jones says this means the sales window Copiapó has in December and January is changing.
“The increased presence of local grapes in these months will continue with time. In addition, local grape promotional efforts will be more intensive, making the market more competitive.
Opportunities for Copiapó
iQonsulting analyst Cristóbal González highlights that 72.7% of the region’s agriculture is dedicated to early table grapes, with 8,000ha focused on the crop. This means the fruit’s lower profitability has a wide-reaching impact on the area.
González says it is important to recognize the state of the productive system if the region is to realize its potential.
According to a study of the area’s export situation, carried out by iQonsulting and commissioned by the Chilean Association of Fruit Exporters (ASOEX) and industry union Fedefruta, around 44% of the planted surface area obtained negative operational results during the 2010-11 season.
Only 22% achieved results equal to or greater than US$7,000 per hectare.
One of the main reasons for this is the aging of plants. In the Copiapó valley around 4,080ha of grape land has vines that are more than 15 years old, and represents more than half the grape production area at 52.6%. The average production in the valley is 1,500 cartons per hectare.
The percentage of old trees is even higher at 55% for the white seedless varieties, while only three in five white seedless farms obtained positive operational results in 2010-11.
The plants are older still for Flame Seedless grapes with 67% of the planted area hosting vines that have been around for more than 1.5 decades.
On a brighter note, there were no Crimson Seedless vines observed that exceeded that age, but still only 63% achieved positive operational results.
“It was a different case for Red Globes as despite having close to 55% of its orchards more than 15 years old, they didn’t have negative operational results in 2010-11.
González attributes this to the variety’s high yields, lower cost and destination market diversity. He concludes that Copiapó has a high dependency on the U.S., its vines are old and its productivity does little for business viability over the long term.
He adds the valley’s varietal makeup including Thompson Seedless and Flame Seedless also makes it less competitive. This calls for a change in the area’s business strategy.
This would involve a better diversification of markets and following in California’s footsteps towards better post-harvest varieties, along with improved farming practices that would lead to higher yields, lower costs and better fruit quality and condition.
In the short term the U.S. will continue to be the main destination, so the issue of local competition will need to be addressed through more aggressive marketing and promotion.
“There is technology that can be applied to make the varieties more competitive and improve prices,” says Jones.
“We are in a period of market adjustments, which have changed the paradigm and a restructuring is needed.”