Low grower returns for Chilean grapes in recent years have led to the failure of some vineyards. This year, others are poised to exit the market if sufficient prices do not materialize.
“We could arrive at a mid-term situation where producers can disappear,” said Rodrigo Echeverria, president of Fedefruta, the Santiago-based federation of Chilean fruit growers.
“Table grapes — in the majority of varieties — are very close to break-even. In the long-term, this cannot be maintained and other fruits can replace them.”
Manuel Jose Alcaino, president of Decofrut, Santiago, agreed that there is a point at which it is not commercial to undergo high investments in growing and labor costs to export table grapes.
“Some of these growers are leaving these vines for wine or raisins, which of course don’t require any of the intensive labors that the table grapes do,” he said, noting that his estimate of a 7% reduction in table grapes is conservative, and does not include vineyards that may go out of business.
“If we sell at same prices as last year, growers are going to get a lower return because of the exchange rate. Compounding that, they are seeing reduced yields,” said Josh Leichter, director of the grape category in the Vancouver, British Columbia-based Oppenheimer Group’s Newark, Del., office.
“The Chilean growers have not had great results the last couple of years. It is very important that we manage the crop as best as possible so that we can provide the growers with a sustainable return.”
Leichter said the key to maintaining the system will be maintaining weekly arrival volumes and promotional programs with retailers.
Clamshell programs and red and green seedless promotions for Valentine’s Day and St. Patrick’s Day will help prevent fruit from backing up in coolers and deep discounts that hurt growers, he said.
Several suppliers said increased costs and insufficient returns have contributed to the failure of vineyards or the reduction in table grape exports.
“Returns from the past few years really have not been sustainable for the growers,” Leichter said.
He also said it is the concern of Oppenheimer and growers to deliver outstanding quality and value to customers while providing sustainable returns to growers.
“Vineyards are going out of business,” he said.
Alcaino said the grape business has gotten very tough, especially for growers of varieties as thompson seedless that require a high investment to produce.
“Only very few people could make money last year and the vineyards that are going out of business are mostly old vineyards that don’t have the capacity to yield high productions,” he explained.
Alcaino said vineyards that produced 1,500-1,800 boxes per hectare are insufficient, and a high production in the area of 2,500 boxes per hectare is necessary to survive.
“We expect the thompson seedless price not to drop as heavily as it did last year and the years before … because there is a shortage and it is the preferred variety in the United States.”
Omar Abu-Ghazaleh, imports manager for Pacific Trellis Fruit LLC, Reedley, Calif., said the southern Chile deal is seeing more casualties because of prices in the $12-14/ box range in February, March and April.
“Growers need about $16 to break even,” he said, noting that Pacific Trellis also owns ranches in Chile that grow grapes.
Brian Schiro, grape category manager for Jac Vandenberg Inc., Yonkers, N.Y., agreed that a price range of about $16-20 per box is “the best of both worlds” because growers are profitable while still enabling a promotable price to retailers.
“Everybody expects it to be there. It will probably be there by end of January, early February,” he said.
Abu-Ghazaleh predicted that the market would continue to be snug in the north because of smaller sizes overall in the industry and some growers packing less than anticipated. He also said that a spike in prices for the southern deal is unlikely.
Chilean grape suppliers are expecting some production costs to be slightly more amenable this year thanks in part to a drop in petroleum prices.
“Transportation has come down because gas has come down. Packaging hasn’t come down much,” said Anthony Stetson, vice president of sales for Pandol Bros. Inc., Delano, Calif. “Things are going up, but less last year.”
Abu-Ghazaleh agreed that costs are down by about 10% this year, although labor is up slightly.
“We need to have our retail customers promoting fruit instead of afraid to promote because of these high prices,” he said. “The current situation of the high pricing is concerning because our job is to move fruit as soon as the volumes come in, and they will start coming in.”
Tom Tjerandsen, marketing manager for the Chilean Fresh Fruit Association, Sonoma, Calif., said suppliers are also expecting for the Chilean season to continue beyond the agreed-upon last arrival date of April 10 as determined by Chile and the U.S.
“All grapes that arrived after April 10 had to qualify as U.S. No. 1 or better, and Chile did successfully manage to ship a substantial volume of grapes into the U.S. after April 10 because they all easily qualified for that designation,” he said, noting that arrivals continued into May last year.