Brand and crop changes in store for Aussie citrus industry
Whether it be exchange rates, weather, quarantine inspection charge hikes or the impacts of the carbon tax, Australia's citrus industry has the odds stacked up against it. But in its favor is high quality fruit that has been popular in export markets, leading Citrus Australia chair Tania Chapman to call for stronger national unity in marketing, instead of just regional promotion. At PMA Fresh Summit in Atlanta, Chapman told www.freshfruitportal.com about the likely trends that will be coming up down under in the years to come.
Ahead of the National Conference in the Barossa Valley this Sunday (Oct. 23), Chapman says she'd like to emulate the unified and concerted efforts of citrus-exporting countries like South Africa.
"We’re trying to get everybody to come on board with some brand that really does push that it is Australian citrus," she says.
"There are borders obviously on land between New South Wales, Victoria, South Australia, Queensland, but what we’re trying to do is remove those borders within our industry so that we have a united industry that takes Australian citrus to the world.
"That's opposed to 'come and get your Sunraysia citrus' or 'come and get your South Australian citrus'."
She says Australia's biggest suppliers still think they can push their own brands in a better way, but hopefully a more significant national brand will emerge within two years.
Her comments come at a time when the industry is faced with myriad challenges, from the value of the U.S. dollar to every farmer's life support and burden - the weather.
"It has been a hugely difficult season, not the least of which being the exchange rate. Obviously that has dropped a bit but that needs to keep dropping to be of any real benefit. On top of that there’s the weather issues - because we’ve had the best rainfall ever over the last growing season, that brings its own issues.
"It brought humid climate down to the southern areas, which means we’ve had to start looking at treatments that we’ve never done before. Unfortunately, one area has recently been hit massively by hail, and it’s about a stone’s throw from my farm so I’m very lucky that I didn’t lose anything.
"I know growers that have lost every orange off of every tree. It was in Sunraysia, about 50km south of Mildura in the Nangiloc-Colignan area, which is a big citrus region. People have been hit so badly - I had some photos emailed to me and it actually looked looked like a snow storm. It’s not good."
She says the hailstorms hit large volumes of Navel oranges that were still on trees and Valencias too, while the weather event will also impact on next year's crops.
"Next year's flowers are on the trees, and it’s sliced them."
Government policy setbacks
Chapman says Australian farmers are resilient and can deal with difficult weather. Working with the government bodies though is a different story, after the Australian Quarantine Inspection Service (AQIS) recently raised quarantine charges exponentially without delivering on its cost-saving promises.
"Of all the years that they had to do it; the whole plan was that the charges would occur on the first of July, but they would have cost saving measures in place, such as AQIS-approved officers so that we wouldn’t have to fly AQIS officers up to do the inspections. This way, large packing houses could have somebody that could do them on site, and that would be a major cost saving.
"Well, they didn't have those plans in place. They hadn’t signed off the protocols with the countries that we export to that it would be OK, so they put the prices up without having the measures in place, so we got the double whammy again.
"It's dealing with government, how hard can it be? It’s about the hardest thing we can do."
She says the Federal Government's new carbon tax will significantly raise freight costs, which the farming industry will have to bear. In addition, farmers won't get carbon credits for their trees because they use fertilizer on them.
"Growers have really had it stacked against them and it’s not getting any better unfortunately. But if nothing else we are resilient – we will find a way forward and come out stronger.
Competition and quality
Australian citrus exports overlapped in the U.S. market this year with both a late Californian deal and early Chilean volumes, but Chapman says there are some positives to be taken from the experience.
"I suppose that the highlights of the produce we did send into the U.S. this year were that it did arrive in class one condition, we didn’t have any outurn issues, and our retail price that produce was sold for was actually the highest it’s been in probably four or five years," she says.
"So, it was a lesser volume obviously because of the exchange rate, but the citrus we did have over here (U.S.) was prime citrus and it sold well.
"Chilean arrivals aren’t getting any smaller - in fact their numbers are increasing year by year, as are Peru’s - but at the end of the day you still can’t buy a navel quite like ours anywhere else. It’s got to come from us."
She says the citrus characteristics come from the balance of the weather, with a big range in temperatures from cold nights to very hot days.
Citrus Australia had its first national citrus quality standards out this year, which Chapman says has been well-received by the public.
"The response to those has been amazing, and that will continue through the Valencia season. It’s all part of making sure the consumer gets that great eating experience every time, because there’s nothing worse than picking up a bad piece of any produce.
"With the retailers who have jumped on board, we’re trying to educate them about how the produce that they put on the shelves needs to always be the freshest – don’t let it sit out there for days."
Chapman points out that price pressures have led to a change in how Australia's citrus industry operates, and the aim of this year's national conference will be to show growers how they can make better use of the supply chain.
"We can’t have it like we did 20 years ago where you grow a piece of fruit and somebody will pay me more than it costs to grow it. We have to look at our market and say, what do I need to do to actually do to get a really good return?
"Citrus Australia is really trying to have a focus on getting everybody in the supply chain to understand the position and the role of everybody else in the supply chain; the grower, to understand what happens to his best fruit before it gets to the consumer. How do we make sure that every time we deliver a piece of fruit to the consumer that they get that enjoyable eating experience?
"So we’re really trying to take everybody along the whole chain with us so that they all get to understand that, and that’ll be our focus over the next 12-18 months, and forever really."
Seasonal outlook and the competitive threat of common oranges
Australia is set for a bumper Valencia crop this year with a 230,000 metric ton (MT) crop expected from the southern states, which Chapman says will have a negative impact on concentrate prices, while the high Australian dollar will still have a negative impact on exports.
"The problem is that normally we would aim to get 20%-30% onto the export market. Countries such as as Japan have traditionally loved our Valencias; they prefer a slightly smaller fruit than the navel. Obviously with the exchange rate where it is, putting a whole bunch of Valencias in a box isn’t going to give a good return to growers.
"The downside of that is that the fresh juice can obviously only cope with so many - once again, we have that oversupply pushing prices down, so it is going to cause some issues, especially for those growers who only grow Valencias for juice production."
In terms of 2012 forecasts, the current conditions are looking good for a healthy crop.
"Citrus is typically a little bit bi-annual, but judging by the flowerings and the health of the trees, it’s looking like we’ll be backing up with another crop.
"Because of unpredictable weather conditions, our supply to our export markets has been a bit up and down, and with the exchange rate this year, we have still supplied markets in order to hold on to our position there, so to be able to back up with another crop next year is fantastic."
Chapman highlights several dynamics at play in the Australian citrus industry that will change how the game is played in years to come.
"In Sunraysia when we talk about export we're predominantly talking about Navels, even though we do export Valencias. So the number of navels that comes out of Sunraysia is probably the highest out of any of the southern states, and although it's fantastic to see that, it is fantastic to see that the number of Navels coming out of the Riverina is actually on the increase.
"Riverina has been hugely dominated by Valencias, so now they have actually stepped up their tonnages of Navels - now with the amount of plantations of common oranges going on through New South Wales up in Gunnedah, Forbes, all the way to Moree, that will take up up a lot of the Valencias that were sold out of the Riverina.
"So those (Riverina) growers that want to stay in the industry need to start looking as to what do they need to be planting, what do they need to have in the ground, because a lot of the demand for Valencias will disappear with those common oranges."
With plantations on the rise, Chapman makes the bold claim that mandarins will overtake Navel plantations in Australia over the next 10 years.
"They’ve done very well this year and they’ve held up some very good prices. Once again the Murcotts had quite a good crop and are now starting to fight for that shelf space with the Afourer and things like that - plantings of Afourers worldwide have been phenomenal.
"Bearing in mind that when you’re planting a tree you've got about five years before you’re going to start getting that into production, if we look at the number of trees in the ground with Afourers now and what production will be in five years time, that's huge.
"Now it's probably only 5% of production - mandarins themselves are about 28% - I would it will probably increase perhaps 100-fold in the next five years, I couldn't even begin to guess how much. It's a very heavy-bearing tree. It is a big yield so there is absolutely no doubt in my mind that if you go 10 years down the track, Afourers will be outproducing navels."
While Australian growers have ramped up production of Afourers, Chapman herself hasn't planted them.
"We really do need to ramp up consumption of that. I personally won’t plant an afourer, solely because of the number of plantings that have gone in.