In what looks set to be a record year for volume, the Argentine cherry sector is increasingly making the most of faster shipping services from the Chilean port of Valparaiso to tap into Asian market demand. At Fresh Fruit Portal we catch up with a sector leader and two major grower-exporters to gauge the outlook for a promising industry in an economy on the mend.
While recent hail in Argentine Patagonia may cause setbacks for the pome fruit sector, it appears the region’s cherry growers have largely been spared thanks to a mix of timing and geography.
“Fortunately it didn’t affect us. The Rio Negro Valley had some cases of serious hail but for us it didn’t happen. It’s a very large and extensive valley, so if there are isolated weather problems the probability that something happens to you is still quite low,” says Cerezas Argentinas operations director Adolfo Storni.
Nonetheless, Cerezas Argentinas – a large grower by Argentine standards that is also linked to blueberry operation Extraberries – is putting up in anti-hail nets and rain protection covers for new plantings of early varieties. The group is investing US$12 million in a packhouse and production revamp over the next three years.
“The project is to expand the packhouse and triple the packing capacity which today is very limited, and plant more cherries as well as more pears and apples,” he says, adding an existing Unitec sorting machine is being widened to add more lines along with the advanced reading technology ‘Cherry Vision’.
Companies like Storni’s are emboldened not just by the booming cherry market in Asia that neighbors in Chile have been capitalizing on in recent years, but also an economy in recovery with an outward-looking government.
This year real GDP growth is expected to be at 3% and next year that rate could rise to 3.5%, and while inflation is still extremely high the government has forecast it will drop to 15.7% in 2018.
Vista Alegre managing director Carlos Enriquez likens his country to a patient in intensive therapy, still in recovery after years of economic crisis and protectionism.
“Maybe the results can’t be seen yet, but we have a state that is opening up to the world and wants to insert itself into the global economy,” Enriquez says.
He highlights this can be seen in the government’s renewed push to seal trade agreements with the likes of Europe and China, and in the fruit industry Argentina is closer than ever to getting its blueberries and cherries into the Chinese market.
Greater global connectivity
And for producers like Enriquez in rural Argentina, more international flights from regional centers will also be a big help as a bridge to global markets.
“In fact we have a flight with Latam from Neuquen to Santiago and it’s only 1.5 hours. So this year we’ve had visitors from China and from American origins go to see their grower partners in Chile and then come straight here,” he says.
“Connectivity makes commerce multiply because it’s much easier to reach different places. Someone can sleep at a hotel in Santiago, take a flight here in the morning at 8am and at 6pm go back to Santiago.
“We are encouraging expansion at the Neuquen Airport because of the [cherry] volume that will be rising in the coming years. Last year we did trials which were fantastic with planes taking loads of cherries to Miami and Hong Kong, but not with the regularity we’ll have when the Chinese mainland market opens.”
Association of Integrated Producers of Argentinean Cherries (CAPCI) executive manager Anibal Caminiti says existing flights from Neuquen to Santiago are not so well designed for perishable cargo, however the industry is hopeful this could be improved to foster new export alternatives in the future.
Caminiti reiterates Enriquez’s views on the enormous potential of charter flights from Neuquen to various global destinations, buoyed by heightened efforts to gain access to new markets.
“This year the provincial government of Neuquen has been working on a readjustment project for the airport through the development of a new air cargo terminal with adequate transfer halls and refrigeration to guarantee good logistics and good quality,” he says.
“What interests us from Neuquen with charter flights is mainly for Asian markets, especially China – markets that can absorb a charter of 100-110MT and not generate a negative impact.
“We have been working on the opening of markets like Japan and Mexico, and the week before last we had a visit from phytosanitary inspectors from Thailand. This year we opened the Indonesian market – we’re exporting to Singapore, Hong Kong, Malaysia, to India, and we’re increasingly exploring these Asian countries.”
Re-exports from Chile
Air freight is a key component for the Argentine cherry industry to harness market windows when global supplies are scarce, whether it be early in the season in late October or November, or from the latest varieties in the southern provinces of Chubut and Santa Cruz.
But when supply is abundant, maritime shipping is essential to maintain profit margins. This is already a common practice from the ports of Buenos Aires to markets like North America, Europe and the Middle East, but for Asia a different solution is needed.
“The advantage of being early here means our fruit arrives before the first volumes from Chile, so the market is very clean. Now is when the market starts to get complicated – you see falls in prices and the rest of it, but we’re at the tail end of our harvest,” says Enriquez of the Rio Negro and Neuquen production.
“We can take the cherries express from Chile. We clear it with customs here in Neuquen and then it goes to China via sea freight. This has been done for the last three years,” he says.
“This year I think the amount of containers taking that route went up a lot.”
Caminiti agrees this is a significant trend.
“Last year exports began with faster freight from Santiago de Chile, experimenting not just with cherries but blueberries too. This makes the most of logistics that isn’t just economical brings about earlier arrivals in the markets while maintaining good quality,” Caminiti says.
“What I can tell you is that between last season and this one, we are seeing a lot more operations. There are companies that have increased their operations a lot via Chile with maritime shipments.”
Before delving into season forecasts, Caminiti clarifies that Argentina’s cherry season is still subject to weather events and is also quite long, starting in the province of Mendoza in late October and finishing in Santa Cruz in February. The distance between these two extremes is almost 2,000km (1,242mi).
“There are harvests still to be finished in the provinces of Rio Negro and Neuquen. The harvest still hasn’t started in Chubut and Santa Cruz, but it’s looking like it’ll be a record production year for us with very good weather conditions for us, good yields and very good fruit quality in general.
“We are also facing a season that’s a record for us in terms of exportable volumes.
“Compared to other countries in the region in the Southern Cone our volume is small. Our volume 2016-17 was 4,233MT. We had good prices which had to do with the quality of the fruit, especially the Patagonian fruit.”
Last year’s exports were limited due to hail events described by Enriquez as “extraordinary”, but the quality fruit that was available achieved very good prices.
“Last year we had an average FOB price in Buenos Aires of US$5.09/kg, and in operations for destinations like England – which is the traditional market for Argentina – almost US$7/kg FOB which is a good return for Argentine growers,” says Caminiti.
“And for this season the expectations are for exceeding 5,000MT. We expect to send 5,200MT of exports.
“The area of Rio Negro and Neuquen is prosperous in cherries. Every year the surface area increases and volume in production, so this year the weather was good – we are very content.”
Enriquez expects to finish harvests in the region early this week while Storni’s farms will have picking through to the Christmas week. In Chubut, production is likely to start on Dec. 15 and in Los Antiguos, Santa Cruz the harvest will start in January.
“The volumes, especially in Chubut, overlap with volumes from Chile. They have to compete in truth with a strong player in the market. The fruit from Chubut have good perspectives for the late fruit,” says Caminiti.
Forni says his company is also linked to another group further south in Argentina called Fruta de Los Lagos in Colonia Sarmiento, Santa Cruz – one of the southernmost commercial cherry operations in the world.
“This is oriented towards a later export, and especially it’ll be designated for export to China,” he says of the operation which still consists of fairly young groves with plenty of room for potential growth.
“It’ll be for between weeks 50 and 2, in January, and that allows for a later arrival to arrive in time for Chinese New Year which usually occurs between the end of January and mid-February.
“We have a strategy to have cherries from two companies in two zones; one early and mid-season, and the other one mid-season and a little bit late. So we can be in the market for 10 weeks.”