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High U.S. market prices driving interest from Chile - Decofrut

The pandemic and the rains at the end of January and beginning of February 2021 causes heavy losses in Chilean table grape production, but this new season will be different. Already the industry is seeing increases in shipments to and the strengthening of a key market: the United States. The Grape Reporter recently spoke with Manuel José Alcaíno, president of Chile-based marketing intelligence company Decofrut to hear his opinion about this season and his analysis of the water and logistic crisis.

The heavy rains in the middle of last summer caused, according to Fedefruta, losses of US$150 million to producers. This was one of the main reasons for the drop in shipments of table grapes. However, this new season volumes are expected to increase for the first time in many years.

"Chile has growth potential this season. We project that in 2022 shipments will grow in the order of 30%," Alcaino said.

"The largest percentage growth will be in white seedless grapes, which were the ones that were most heavily impacted by the rains of 2021. In that category, we will grow more than 50%, from 13.5 million boxes last year to more than 20 million boxes."

Alcaino, an agricultural engineer specialized in fruit growing with more than 38 years of experience in the industry, epects red seedless grapes to grow between 40% and 45%.

"Timco, which has dominated the new red varieties in export participation, will this year be surpassed by Allison, which is a very good late variety, which will reach 7 million boxes. In 2021 it was 3 million, which means that this year it will grow by 140%," " he said. "Crimson, which was impacted by the rains, will total 14 million cases in 2022 and Timco will reach 5.5 million cases, which, added to other varieties, will total 39 million cases of red grapes."

Alcaino also highlighted the lower forecast of Red Globe grapes, which is on the decline in both Chile and Peru.

"It has lost predominance because the great virtue it had was its size, but new seedless red varieties have acquired it, therefore, it is no longer an exclusive virtue. In Chile we project that there will be a 10% drop this year in Red Globe compared to 2021, which was also low," he said.

Rising prices drive development in the U.S. market

For decades, the United States has been one of the key markets for southern hemisphere futas, especially for Chile. This season, the high prices of table grapes have had a positive effect on the current season.

"The U.S. market is reacting very attractively, prices in the US are between 30% and 60% higher than at the same time last year," Alcaino said. "This is due to the fact that the Californian inventory was used up very quickly and was of very poor quality. U.S. retailers therefore switched much earlier than usual to imported supply. Let us hope that the enthusiasm is maintained in Chile's peak months."

He explained that Chilean production is behind last year, but shipments to the US are higher compared to the same date in 2021 due to a greater concentration to the U.S. market because of the prices, while prices in Europe and Asia are similar to last year.

"Both Peruvians and Chileans have increased their participation in the North American market, but our northern neighbors have taken enormous advantage of the high prices," he said.

Alcaino said Chile normally exports around 40 percent to the U.S., but that figure increase this season. The season is just beginning, with onñy 8 million boxes exported so far out of a forecasted total of 80 million.

"Before, growers tried to hurry the harvests, especially in the early parts so that they would arrive first, however, we ran into Peru, so it does not make much sense to hurry since Peru leaves before Chile," he said.

"One of the practices that was used to hurry the harvest was to lower the load to produce less, thus bringing forward maturity. Today this technique is not used because it does not make sense, so we Chileans have been delaying our harvests. Exports used to start at the end of November, but nowadays they start in December and January".

Impact of the logistics and water crisis on industry

The logistics crisis, which has also resulted in a sharp increase in costs, together with the ongoing global water crisis have created a new scenario of challenges for companies and entities around the world.

In the case of Chile, Alcaíno said: "Something remarkable has happened this year with respect to the high prices in the US. It is the first time that I can remember that at this time there have been shipments of grapes by airfreight, which shows that the price is good and attractive.

"But something worrying stemming from this type of situation is that those who sold firmly to supermarket chains for delivery on these same dates are finding themselves in a spot market with much higher prices. This creates an understandable temptation not to deliver to the supermarkets, and if they do not meet their commitments, this creates a bad precedent for future business and the chains are left resentful."

He said the logistics crisis in at least partly responsible for the high prices, due to lack of delivery capacity. 

However, the logistics costs of the operation have risen dramatically, he said. For example, in the case of ocean freight, the increase is more than double.

"In other words, if a container to the U.S. used to cost US$5,000 - 6,000, today it costs between US$10,000 - 12,000, which translates into an increase of between US$2.5 and US$3.0 per box, which in many cases is the producer's profit and more.

"There has also been an increase in the cost of cardboard, plastics, paper, everything related to fruit packaging, plus labor and fertilizers. Everything has risen considerably this year, partly as a result of the shortage in the logistics chain.

"The fundamental thing is that the supermarket chains are willing to pass on this higher cost to the consumer, or at least a good part of it, because the stranglehold that will be produced to the producer is dramatic because he will not be able to pay his production costs, because let us remember that one of the pillars of this industry is that the producer has a positive result."

Speaking on the water crisis, Alcaino said that the situation in the northern Coquimbo region - which is hugely important for grape production - is "very complicated".

But he said that the farmers' reaction to this, in terms of the capacity and technical ingenuity they have developed to produce with less water, has been remarkable.

"Before we had as a maxim that with less than 6,500 cubic meters per hectare it was impossible to produce grapes and today we are producing grapes with 5,000 and 5,500 cubic meters," he said. "We have managed to reduce water consumption per hectare by 20%, using technology such as mulch, antitranspirant management and new cultural practices."

"In the Coquimbo region we will have to do a very special and intelligent job, because production with less water can mean less storage capacity, therefore, that fruit has to be sold quickly at destination. We have very good partners, which are the Americans, who understand very well the process that Chile is going through. I believe that in this, the industry has the necessary capacity to react".

Regarding the labor force, he explained: "It will be a little more relieved, partly because of what happened with the cherries, which paid attractive values per day of work, and although the grape does not have the same capacity because the margins are different, the exchange rate has helped to maintain part of that labor mass.

"Even so, it is urgent to have a labor law that provides more flexibility for the entry of migrants to cover the seasonal jobs offered by fruit growing."

 

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