Exchange rates, fuel costs put citrus imports up for grabs

06/02/2011 01:58:00 PM
Dan Gailbraith

A weaker dollar and higher shipping costs could mean fewer citrus imports hitting the U.S. market this summer.

“It’s not just the exchange rates that have things upside down,” said David Mixon, senior vice president and chief marketing officer of Vero Beach, Fla.-based Seald Sweet International.

“On top of that, you’re looking at a 20% increase in freight just because of fuel costs. Those are major concerns about what value fruits will achieve to meet growers’ cost factor. The value of the peso or the rand against the dollar, euro or yen — there are a lot of markets they’re taking a look at.”

“We have to sell (imports) at the best prices we can get to make up for the exchange rate,” said Matt Gordon, Chilean program manager for DNE World Fruit Sales, Fort Pierce, Fla.

But as Gordon sees it, imports should fare well against limited domestic alternatives.

“The only real competition is California valencias and lemons,” he said.

“Anything shipping eastward out of Los Angeles, that’s where the price inflation will be. I don’t see a lot of change out of New York or Philadelphia. California will still have a lot of freight coming eastward, so that should give a slight advantage to import.”

Last year’s citrus market saw prices depressed because of a glut of smaller fruit among imports and a California navel orange deal that lasted several weeks longer than normal. For grower-shippers everywhere, it was a summer of discontent.

Neither factor seems likely to return this summer, though estimates differ on when California navels will end.

“Exchange rates are working against all of the Southern Hemisphere countries,” said James Milne, citrus category director and business development director for Vancouver, British Columbia-based The Oppenheimer Group.

“There will be a more measured response to the market this year. You won’t see people sending fruit in vast numbers on a wing and a prayer. Fixed programs are the way to go. We’re fortunate because we have programs all over the place and wide distribution.”

Exporters as well as importers will be cautious about smaller sizes, Milne said.

“Last year small killed everybody,” he said.

“Retailers were spoiled for options. In the old days sizes 4 and 5 were perfect for bagging, but they became the orphaned child. Retailers and other buyers took the 24 and 28 and put them in a bag. This year the supply base might be more cautious about what they pack and send, and the trade here might have to be a little more forgiving and accept 4 and 5 at fair value.”

Even with a weaker dollar, Seald Sweet is committed to providing fruit for the U.S. market, Mixon said.

“We’re confident we can achieve pricing levels acceptable by consumers without putting growers out of business,” he said. “But there may be a higher percentage going to other markets.”

Last year California’s late navels went later than normal, bumping hard into imports.

“Typically California is gone by the end of June when South African and Australian fruit hits the market,” said Paul Marier, vice president of sales and marketing for Montreal, Canada-based Fisher Capespan.

“Last year, because California didn’t get the heat, they were delivering navels right into mid-August. It was a very negative thing for California growers fighting imports and vice versa.”

The long overlap depressed prices all around. While nobody’s predicting California navels will stretch into August, estimates vary on just when they’ll stop.

“Navels will not go nearly as long,” said Neil Galone, vice president of sales and marketing for Orange Cove, Calif.-based Booth Ranches, who expected to wrap up in mid-June.

“We do hear some shippers plan to go through at least the end of June. But I don’t think the fruit will hold up through the summer.”

Winter was wetter this year, and that means a shorter lifespan for late varieties, Galone said.

He predicted a supply gap between California navels and imports.

“Retailers like to have us keep navels in the supply chain until the Southern Hemisphere starts,” Galone said.

“What’s going to happen this year is that as more shippers run out of their late navels, there will be a gap between then and when imports start. Prices will go higher, supply will be tighter.”

But Paul Huckabay, Western citrus sales manager for Duda Farm Fresh Foods, Oviedo, Fla., predicted there will be no gap.

“With a large California navel crop that is expected to go probably through the better part of July, there will definitely be some slight overlap with the navels coming in from Chile,” Huckabay said.

California also had a strong clementine and mandarin season, Huckabay said, which should narrow the normal gap for those commodities with imports.

“You may see only a two- to three-week gap from the third week of May through the second or third week of June,” he said.

In May the Southern Hemisphere Association of Fresh Fruit Exporters issued its summer citrus forecast for exporting countries.

Among the findings:

Australia will rebound from a tough 2010 with an 18.5% gain in the category, to 600,000 tons, according to the association. That returns production back to 2009 levels. Picking was expected to be slightly delayed but size was likely to remain medium overall. The association predicted a good market outlook for Asia-bound exports.

South Africa’s volume for the category will be down 5% year-over-year at 2,157,000 tons. Orange exports will drop 10%, but are still high compared to long-term trends, according to the exporters group. Limited growth was forecast in other citrus commodities.

“They’ve had some cold weather in the early areas,” said Marier, who pegged South Africa’s navel decline at up to 15%.

“The fruit looks clean so the packout should be good. That will help counter the shortfall a bit.”

First arrivals in the U.S. of South African citrus are expected in late June and usually go into October.

“The European market is looking attractive so they may direct a fair amount of fruit there,” Marier said.

“The United Kingdom chains have really been coming on gangbusters.”

Fisher Capespan has high hopes for its South Africa grapefruit, though the program remains in its early stages.

“We had trial volumes last year,” Marier said.

“Buyers loved the fruit but were on California. We’re getting much better feedback. They’ve had a year to think about it and they’ve seen a few pallets of fruit. We’re bullish on that.”

This summer Fisher Capespan plans to bring, at most, 50,000 cases of the grapefruit to market.

“It’s still a novelty item,” Marier said. “We’re doing it slowly. It could grow quite a bit in a couple years.”



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