Opinion: seven-fold lemon price hike in Chile invites imports - FreshFruitPortal.com

Opinion: seven-fold lemon price hike in Chile invites imports

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Opinion: seven-fold lemon price hike in Chile invites imports

By Agronometrics CEO Colin Fain

Colin Fain profileThanks to the excellent data that is provided by the United States Department of Agriculture (USDA), I have mostly concentrated my previous columns on the U.S. markets or how external suppliers them. In this article, however, I want to shift focus to another great data set offered to us through the Chilean Ministry of Agriculture's Office of Agricultural Research and Policy ODEPA), which reports on prices and volumes of agricultural commodities in the country's wholesale markets.

From this exciting data source we dove into the information offered on lemons to ascertain the cause of an unusual hike in prices that have been observed over the last couple of weeks.

With a season that is countercyclical to the Northern Hemisphere, the bulk of production usually runs from April through August. Since the market is almost entirely supplied internally, higher prices are common this time of year, but not this high.

After a swift jump in prices right for the new year, prices dipped in February when Chileans were vacationing, only to shoot back up reaching an average of CLP14,880 (US$26.55) for a 20-kg mesh bag.

During the height of the season lemon prices below CLP2,000 ($3.57 USD) per bag are common, adding to the contrast the markets are facing right now. The last time markets saw a spike in prices this dramatic was in 2008 when the first week in March saw a quick jump up to CLP14,147 (US$25.22), only to come down shortly after.

This is a peculiar point of the year for lemons as Chile is coming out of the summer period when lemons are largely consumed on salads with oil and salt as a dressing. In the winter months demand is lower, accounting for the drop in price. That said, lemons are a staple of the Chilean diet; it is the fruit commodity that accounts for the fourth-largest volume in the wholesale markets, in 2013 seeing an average of 1,600 metric tons (MT) monthly without dropping from 1,000MT on any given month.

From the volumes reported we can observe that the first quarter of this year saw a 12% drop in volume compared to the same period last year. This is in line with estimates that this year's crop will be reduced by 10% due to the freezes last spring, which heavily affected the O’Higgins region just south of the capital Santiago - a major citrus-growing region.

In the comings weeks there is little doubt that the price will come back down to levels observed in previous years and it leaves us to ask what will the future hold for the Chilean lemon market.

If a 10% drop in volume has sent prices soaring sky high, we might be soon be seeing more imports to help make up the lost volume and help stabilize the markets for consumers. This year already saw a dramatic rise in imported lemons commercialized in the wholesale markets from 1,260kg last year to 69,030kg in the last month alone, which was identified as being from the U.S. It is interesting to note that the U.S. shipped roughly 61,000kg to Chilean wholesale markets during the price spike of 2012.

Colin Fain is the CEO of Agronometrics, a market intelligence platform for agricultural products that collects, standardizes and visualizes Agricultural data from around the world. For more information you can visit his website, www.agronometrics.com.

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