Chile needs ‘forward thinking’ to shift crops, says Spezzano
U.S. consultant Dick Spezzano has hailed Chile's export success in several fruit varieties, but advises the South American country to shift away from low demand fruit like plums and nectarines towards 'growth commodities'. At the PMA Fresh Connections Chile 2011 summit, he told www.freshfruitportal.com that blackberries could follow the same burgeoning path as blueberries, with Mexico already taking action. His talk was followed by compelling cases for change and resilience put forth by Decofrut president José Manuel Alcaíno, PMA Global Business Development vice president Nancy Tucker and Uruguayan plane crash survivor Carlitos Paez.
He adds cherries, apples and grapes to the list of ‘growth commodities’, but Chile is still exporting some fruit varieties with very little demand in the U.S like peaches, nectarines and plums.
“Figure out how to have ripe fruit arrive at the retailers store, work with importers that can pre-condition avocadoes, kiwifruit and tree fruit. Push out those varieties with poor demand and declining interest and flavor, and take the new varieties that have greater demand and great flavor,” he says.
“It’s a shift more than anything else. Less plums, more pluots, some of the grape varieties – more Thompson seedless, get into the Princes, the Pristine, varieties they can use.
“Some grapes are university varieties that are only available to the U.S. growers, but those that are not restricted to just U.S. growers, they (Chileans) need to do that.”
He says the government and banks need to provide better assistance and loan schemes for Chilean growers to achieve this transition, which would allow the industry to be more proactive.
“Sometimes the Chileans aren’t forward-thinking. They’re always thinking about this season and not five seasons down the road - ‘if I can’t push this out then I will not have income on that acreage for two years, three years, whatever it takes depending on the crop’.
“They’ve got to be more forward thinking and the government and the banks have got to help that – agriculture’s got to be given some special thought processes just because of that fact, to help them bridge that time when they don’t have income.
“If the government can step in and do that, they’ll continue to be a major supplier to North America and other markets – China, India, Korea, whatever that might be. Otherwise, what’ll happen is the rest of the Southern Hemisphere will take that as an opportunity.”
But while so much focus has been directed towards blueberries, he thinks blackberries could also follow a similar path.
“I think it’s similar because over the years what’s happened is, they’ve developed varieties that are huge, have great flavor, and can travel, where before you couldn’t ship them across the street without them melting,” he says.
“Now they’ve developed these varieties that you can ship long ways. But it looks like Mexico’s trying to take that end of the business out, because they’re growing all the strawberries and blueberries down there - in a small way blueberries, but a lot of blackberries.
He forecasts the U.S. will consume 1.5 billion pounds (688,388 metric tons) of avocadoes annually in a couple of years, while cherry demand also presents opportunities.
“Cherries are one of the few seasonal items left in the produce industry. California and the north-west we stock about mid-May and go through mid-August with the early varieties and late varieties, and then we have the off-shore out of Chile, so there’s a lot of demand for cherries because they’re not in the market that long or that often.
“Clementines have been a big hit - I did work for Sun Pacific when they first started growing clementines, and at that time we were getting in clementines in from Spain and Morocco, and they were bringing in about 55-60 million five pound boxes.
“Now, alone out of California it’s about 45-50 million just out of California with Chile and South Africa bringing in in the off-season.”
He said apples also presented great opportunities with new varieties such as Galas, Honeycrisp, Pacific Rose and Peak.
Aside from traditional farming methods, he says organic farming is worth the effort despite the difficulties, but growers had to keep costs below a 20% to 25% price variant premium.
“If you don’t dominate the Southern Hemisphere organic market, other countries will, so you need to make sure you can go to markets with organic and export directly,” he says.
While fruit consumption in the U.S. has grown on such a large scale, retailers will continue to cut costs and this will continue to affect suppliers.
“I’ve talked to some retailers telling me that prior to the economic slowdown, 20% to 26% of their total sales came from items that were on promotion at that time,” he says.
“Those figures now are as high as 30% to 35%. Consumers will continue to cut their costs, they’ll look for the supply chain to take out more costs, and that means many people in this room.”
‘Pedro and the Wolf’
Decofrut president José Manuel Alcaíno says the Chilean agricultural industry is facing its biggest threat since the grape cyanide scare of 1989. The reasons are manifold.
You have an industry that is heavily indebted, struggling with a high currency value that is unlikely to go away soon, rising electricity and oil prices, as well as a shortage of labor.
“It’s like the story of Peter and the Wolf. The wolf has not come, we’re still here, we’re still living, but every year they take a part, we lose a part of the working capital we need to function, every year we are weaker, more fragile and susceptible to the problem,” he says.
“Today the industry is badly confronted with short-term debt, a situation of fragility that today should have us worried. Fortunately we have a diverse industry, we have different realities, different productive zones, species, qualities within those species and that sets up a different space.
“We’re not going to solve these problems with aspirin or bandages. We need major surgery, the system needs investment, money, and for that we need adequate financial instruments for the industry.”
In terms of the fruits themselves, Alcaíno says growers are trying to move away from Flame and Thompson seedless grapes which are struggling to cover costs. But it isn’t so easy to just pull out crops because then growers will have no income to pay back loans. However, the situation is reasonable for Red Globe and Crimson varieties
He says the 45% of Chile’s apple plantations are in critical condition over around 82,000 hectares, while the situation for the kiwifruit industry is still ‘complicated’.
His view on nectarines and peaches echoes that of Spezzano, labeling them as ‘surviving’ and in ‘ICU’ respectively.
Alcaíno is far more upbeat on avocadoes despite the threats of drought and frost, while the cherry industry has received ‘a bit of luck’.
“I do not think that two or three years ago anyone would have predicted the impact China would have on cherry results. And I think if that had not happened and we produced the 11.5 million boxes produced last season, by God it would have been complicated.”
Alcaíno may describe the booming Chinese cherry trade as ‘luck’, but it’s a luck he thinks can be replicated for other fruit categories, and in other markets such as South Korea and Japan.
“What can we do? We have to learn to navigate these turbulent waters that face us in terms of quantity, quality and costs,” he says.
He says Chile has the ‘obligation and inescapable responsibility’ to conquer the Chinese market, which can absorb excess volumes that have put pressure on markets and prices.
He points to export data that shows trade with China and Hong Kong has grown from 2% of Chile’s fruit exports in 2007-08 to a projected 6% this year, representing around 115,483 metric tons (MT).
But with the government still reticent to act on the Chilean fruit industry’s calls for help, finding new consumers in China might not be enough to get Chile out of the doldrums.
A sustainable example
PMA Global Business Development vice president Nancy Tucker starts her speech addressing the common perception that ‘sustainability’ is something that looks pleasant on a website; something to apply when times are good.
She says it’s a perception she hopes to debunk for the fruit industry, to encourage growers to follow the example of those who have benefitted greatly from sustainable policies to reduce costs and improve the environment.
She points to U.S examples Four Seasons Produce Inc and Gills Onions, which both managed to avoid exorbitant costs by taking environmentally-friendly actions.
In the case of Four Seasons Inc it was able to cut costs by installing energy-efficient lighting and a variety of other energy-saving measures, as well as water and waste management programs.
But it was the case of Gills Onions that perhaps triggered the most lights – energy-efficient of course – in producers’ minds.
Gills was spending large amounts of money managing the waste from its onions by distributing the by-products on its fields; a practice that not only cost money, but degraded soil quality and was not well-received by local communities.
The company then decided to convert the waste into biofuel energy and cattle feed, working with the University of California to find a solution. It’s goal was achieved with the construction of an ‘Advanced Energy Recovery System’ and it was able to turn what was a liability into a resource.
For all the Chilean companies wasting money on waste, this surely gave them a few ideas.
After industry-related talks and discussions, the crowd in Santiago’s Espacio Riesco then heard a stirring talk from Uruguayan plane crash survivor Carlitos Paez.
Paez told the audience how horrible it was to be stuck in the Andes for 70 days, to have to eat his own deceased friends to survive, in the cold, without knowing whether the group would be rescued.
He talked of hope, finding unknown resources, and finding the possible to achieve what seemed impossible.
While the theme was not directly related to the fruit industry, the tissues were out and many were invigorated by his talk of survival and appreciating what one has.
It was fitting that a tremor occurred in the middle of his presentation, as if to shake an industry into life; an industry that is battling its way forward despite the problems it faces, producing new varieties, reaching new markets and finding innovative ways to market itself. Like Spezzano says, 'forward thinking' is the key.
See our photo gallery from the event here.