Table grape market in the U.S. could face oversupply

Heavy South American grape supplies a concern

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Heavy South American grape supplies a concern

The table grape market in North America, and specifically the U.S. East Coast, morphed from being relatively stable with robust pricing on moderate movement in the Feb. 10-24 timeframe, to a downward trending market that is of late receiving substantially more fruit than is currently being absorbed into retail distribution, indicates Mark Greenberg, president of Capespan North America Inc., which is based in Montreal.

These challenging market conditions arise from a number of supply factors originating in both Peru and Chile, factors that have resulted in heavier than optimal weekly arrivals.

Greenberg shared for publication this North American grape market report he released Feb. 24.  

On the demand side, table grape movement through January was moderate due to high retail pricing that reflected the high FOB prices being achieved. Those high retails were not problematic because Chilean grapes were late to market and arrivals remained relatively light. But in the last two weeks, arrivals have gained pace and retail pricing has not yet adjusted sufficiently to stimulate more movement.

Peruvian table grape loadings to all markets between Week 39 and Week 7 are up 2.5% from last season, substantially lower than the 10% increase forecast by the Peruvian industry. But loadings to the US (all gateways) through Week 7 were up 18.5%. This is despite the protests that disrupted the harvest and loading of table grapes from Ica and other points south of Lima. Indeed, since the start of the year, each week Peruvian table grape loadings to the US have run ahead of last season’s loadings, save and except the last week of January when loading came to a virtual standstill.

These increased loadings to the US have come at the expense of Europe and the UK where tonnage has declined by 14.8% from last season. Tonnage loaded to Asia through Week 7 is down by almost 30%.

These late Peruvian arrivals themselves would not pose an especially onerous market challenge, but Chile is also in the game and has been loading volumes to the US that have been steadily increasing over the last few weeks. What is more, the Chilean harvest has been concentrated into a shorter shipping window. As we have previously reported, the early Chilean harvest started late this year due to cool spring weather.

But the rest of Chile’s table grape production regions are experiencing an earlier harvest. Through Week 7, Chile has exported over 110,000 metric tons (13.4 million cases) of table grapes to the US (all gateways), an increase of over 23% over the same period last season. The critical point to note is that all of this increase has come in the last four weeks. Through Week 3, Chilean table grape loadings to the U.S. were down 32% from last season.

But from Week 4 through 7, loadings are up 49%. These heavy loadings began to make their presence felt in the market in Week 5 and are continuing to put pressure on inventories and, thus, on market pricing. With Chilean table grape production regions overlapping among themselves and with Peru, a substantial “bubble” of table grapes will arrive in the market in late February and through the first couple of weeks of March.

This will continue to put pressure on pricing. The sad irony, though, is that the Chilean harvest is expected to end abruptly with most industry experts predicting that it will not come meet the forecast of 67 million export cases.

Then there is the demand side which is also concerning. Through January, table grape arrivals from all sources were as moderate as was movement. Prices were robust which translated into high retail pricing in the shops. But stock levels are now mounting with the result that selling prices are softening…quickly. These softer selling prices, though, will not move more fruit until they are met with proportional reductions in retail prices, and sellers do not directly control that. Once retailers have cleared their expensive inventories, though, we should expect lower retails to follow.

The buying environment must also be taken into account. Food price inflation in North America continues to be an issue and consumers are watching their grocery dollars carefully. Consumers on a budget may be inclined to eschew expensive table grapes for apples, oranges and other products that deliver value and shelf life. Finally, there is the weather. The end of Week 8 will bring with it another set of winter storms that will batter the midwestern states with snow and will continue eastward to interfere with travel and commercial transport in the northeast. 

That will have an impact on product movement over the weekend. With that background, we come to prices, and they are all over the map. Right now, good condition red and white seedless grapes are moving in a US$20 – 22 (mostly US$20) for X-Large (900) and US$ 22 – 24 (mostly US$22) for Jumbo (1000). But this price is moving downward and most of the inventory on the USEC will achieve prices below these levels.

Those that expect fruit to receive the price observed in the week of arrival will be disappointed. Smaller fruit and fruit showing condition can be as low as US$ 16. Wholesale markets are saturated and offer no opportunity. 

Much-needed promotional activity is expected in the next two weeks with prices, though, that could quickly go as low as US$ 16 - 18. As unsavory as that may be, if that moves enough fruit to bring inventories back into line, FOB values could start to rise again toward the end of March. But if grapes are not promoted heavily, or if promotions do not generate substantially increased movement, a soft market could persist well into April.

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