Competition heats up in U.S. citrus market
U.S. importers have noticed strong demand for both domestic and foreign citrus fruits this year, but reports are mixed about availability on the East and West Coasts. New Jersey-based Seven Seas Fruit believes concerns over South American frost damages have been 'exaggerated', but Californian company LoBue Citrus has noticed the effects. Chile's Citrus Committee says it will still be three weeks before the full effects on oranges, lemons and mandarins are known.
Seven Seas vice president of imports Bill Weyland says the level of competition is 'tremendous' in the U.S. citrus market right now, with a larger Californian crop and the usual Southern Hemisphere suspects vying for sales during the overlap period.
"I don't believe that many of the overseas grower or exporters looked at the California navel situation and factored that in; especially the impact it would have on the front end of the program," he says.
"California had a large crop. The weather that California had this past season allowed for an extended harvest period and there are still California Navels in the market.
"Australia, South Africa and Chile will always overlap in this market - the front end of the market window for imported navels will always be dependent upon the impact that California will have in the market. The longer California growers can market their navels the shorter the window becomes."
While frost damages in Chile have generated concerns in the U.S. market, Weyland says the South American country's navel orange shipments were already running far ahead of last year.
"My experience as it relates to 'frost' damage is that all stakeholders have a tendency to jump to conclusions way too early.
"We have to wait and see I find that typically the first reports coming out tend to be slightly exaggerated. Growers and packers must be careful and to do a good selection to avoid having problems with their fruit once it arrives in the market."
He says the North American market has reacted positively to increased navel volumes from Chile, with good demand for easy peelers and lemons as well. He says Australian volumes are likely to be down on last season - despite the country's bumper crop, the high Australian dollar has made exports to the U.S. less profitable.
"The challenge facing southern hemisphere growers is their rising input costs and the poor currency exchange rates that have been prevalent for the past years. Unfortunately, the market will not allow the loss in currency to be offset with higher FOBs (Freight On Boards).
"There is tremendous competition in this market at this time with locally grown fruits and there is always a fight for shelf and advertising space."
When asked whether the effects of frosts have been visible on the West Coast's citrus markets, LoBue Citrus vice president of sales and marketing Rick Osterhues says there is no doubt.
"There's really no question about it for us and that's been manifested mainly in terms of the general lack of, or missing imported product. It's usually up and running by now, especially here in the west, so it's been slow in a way.
"Also, the domestic navel market has been strong and the Valencia market’s been strong, because you’re not seeing that imported product. Late navels have gone well too.
"This year was going to be a challenging one anyway as you've got the currency exchange with the relatively weak dollar, so in the North American markets there were not going to be large volumes, and now we enter tough environmental conditions into the mix, so there's question marks over that."
View from the south
Chile's Citrus Committee president Enrique Ortúzar says with surveys still taking place it will still be a few weeks before the full extent of damages are known, but the Chilean fruit that was already harvested is going well in the U.S.
"In clementines the U.S. market has gone fairly well with strong demand. It is a season that has not had many surprises. There is a considerable volume of lemons that are being sent to the U.S. and it's working," he says.
"Prices have held up well, tending to rise without margins for speculation. We have a natural window that's produced by the decrease in Californian supply and Chilean fruit is going well. In late mandarins the season still hasn't started yet and we'll have to see how the clients react.
"As Chile has planted more mandarins there has been a growth of young plantations, so that will tend to compensate for the decline produced by frosts - obviously which still has to be checked."
He says harvesting has continued as normal and affected orchards have been marginalized - with a lot of fruit showing no signs of damages, the market hasn't acted in a speculative way.
"In oranges, Chilean fruit has competed very well in the North American market because the quality of Chilean oranges has improved a lot in the last 10 years. There are a lof of new well-planted orchards and they're arriving well in the market.
"Australia has high costs and they are also seeing that prices in the U.S. are not as high as they need, so they are distributing to other markets that are closer and relatively more attractive.
"I believe competition above all in oranges is with Australia and South Africa, and I believe it's a competition under very reasonable margins with larger volumes, not excessive, because no supplier is in the condition to send significantly higher volumes.
"South Africa has quarantine restrictions. Australia has cost restrictions and a high cost of labor."