U.S.: Gerawan upbeat for new crop and unfazed by exchange rates

March 31 , 2015

The sharp uptick in the U.S. dollar's value has not affected export plans for California's largest stonefruit grower, as it prepares for what orchard conditions indicate will be a 'normal' season.

George Papangellin of Gerawan Farming, marketer of Prima-branded stonefruit, told www.freshfruitportal.com there had been a good bloom and set on its properties.

"We see the starting time and season duration as very similar to last season, and we do see at least the same if not a slight increase in volume this year over last year," Papangellin said, adding the drought had not impacted cultivation as the grower had a sufficient number of wells.

Photo: Armando Castrejon

Photo: Armando Castrejon

"What we have is a series of yellow fleshed peaches and nectarines that include both proprietary varieties as well as some of the standard or mainstream varieties, and we have found up until now that the core of those are successful both at the production and retail ends as well as in consumer acceptance," he said.

Gerawan also produces white-fleshed peaches and nectarines, as well as plums and apricots. Papangellin said the same general forecast applied across different lines.

"We have year-over-year increases in production - that means we have come across and developed the varieties that are accepted by the consumer. Firstly, we have additional plantings, and there are are plantings we had done some years ago that are now starting to come into production," he said.

"Recognition for our Prima brand is tremendous worldwide and people will look to that because they have gained confidence season over season in that brand and what it represents.

"But, there is one variety, our late season yellow-flesh peaches that consumers are identifying by variety name – the Prima Gattie, which is a variety grown and packed and sold exclusively by Gerawan Farming."

He said on average around 85% of the crop was sent to the U.S. and Canadian markets with the remainder sent elsewhere, but in some years the split was more like 80-20.

Challenges could be posed by the fact the U.S. dollar has rallied over the last year, making U.S.-grown products more expensive for foreign buyers. As an example, the dollar's value rose from €0.72 this time last year to €0.92 at the time of writing.

However, Papangellin does not believe this change will impact Gerawan's export deal, which is administered by U.S.-based agents.

"Although that’s always an important factor and I do look at that and take it into consideration, in the destination markets we have not seen - as we had not seen in prior cyclical events when the dollar had strength - any kind of reduction in our shipments or successes overseas," he said.

"To the contrary, it seems as though the Prima brand carries the day and people are willing to pay whatever reasonable price that the market is presenting to them, and I don’t think that they give a whole lot of second thought to that exchange rate.

"We have have tremendous demand overseas even to this date, fielding communiques from China, Taiwan, Australia, New Zealand and Mexico about what our intentions are going forward, as they shared with us the Prima demand is one that they want to make sure they are able to quench, thereby making sure we have the supply and that we have the continuing desire to ship to them."

He said Canada was the leading export destination, while other markets included, Mexico, China, Taiwan, Australia, New Zealand, Thailand, Malaysia, Singapore, Vietnam, Central America and South America.

The executive mentioned a few dynamics of interest overseas, some positive and some negative.

"We're pleased that New Zealand has reinstated the in-transit cold treatment of California stonefruit to New Zealand, and we are ever hopeful that one day Australia will follow suit; in the meantime we are looking forward to another good season going to Australia.

"Another issue, and I don't know what the U.S. can do about it, is the import permits that the country of Venezuela issues on a lotto type basis, or some kind of system to that effect - it would be good to see that lifted and put into some kind of normalized trading relationship."

He said Indonesia's import quotas, which have been the subject of a complaint to the World Trade Organization (WTO) from the U.S. and New Zealand, Papangellin said the effects had been felt more in table grape shipments than stonefruit.

"It definitely affects table grapes when they come out with a prescribed quantity, their quota for receiving by a certain date within a month," he said.

"For for example this past year when the West Coast ports were on a work slowdown or what have you where there was congestion up and down the coast, it caused vessels to be delayed in their loadings and sailings, and therefore their projected ETAs (estimated times of arrival) to Indonesia.

"That caused us to consider diverting some containers from that destination, Indonesia and go to another destination that doesn’t have those kinds of time and quota restrictions, and I’m sure a lot of other people were affected similarly."

When asked about Ecuador's introduction of 45% tariffs on all fruit imports, he said the effects would probably be felt in freight on board (FOB) price negotiations, but Gerawan always had alternative options when obstacles arose abroad.

"If they have an increase in tariff which obviously is going to put pressure on them to negotiate an FOB price that fits within their overall model, then we would only have the discussion at the FOB level, and not necessarily direct into Ecuador.

"These challenges can be frustrating but we are in the enviable position of having demand exceed supply for a good part of our season, so we actually allocate product to our customers within the U.S., Canada, Mexico and the rest of the globe," he said.

"If there is an importing nation that has some kind of delay or restriction in getting import permits issued, it’s out of our hands and if we’ve already made decisions and allocated volumes to others, someone will just have to wait in line until the powers that be allow them to begin exporting from California and importing into their lands."




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