Chile needs more time to recover from quake

03/19/2010 08:49:26 AM
Tom Karst

The U.S. Department of Agriculture should move back the start of marketing order restrictions for Chilean grape imports for humanitarian reasons.

Tom Karst
National Editor

The USDA’s Bob Keeney said the agency was still reviewing the request on March 17, but the decision on whether to hold the date at April 10 or move it back by up to 20 days may have already been made by the time you read this.

What makes the decision far from sure are the mixed messages from Chile in the aftermath of the 8.8 magnitude earthquake of Feb. 27.

Is it doom and gloom or business as usual?

On one hand, the arguments in support of moving back the date of the California desert grape marketing order point to “widespread and catastrophic damage” to Chile’s infrastructure.

On the other hand, the export community has tried to reassure buyers with pronouncements that late season shipments should be relatively normal.

According to a March 16 news release, retail giant Wal-Mart has sent a letter in support of the petition to move the marketing order date.

Wal-Mart wrote:

“Given the devastation and halt in the exports, we support the request of the government authorities and trade associations of the Delaware River region that the table grape marketing order be suspended for 10 days from April 10 to 20 of this year.”

The news release said the Feb. 27 massive earthquake caused “widespread and catastrophic damage to the Chilean port facilities and transportation infrastructure needed to transport the grape harvest.”

The news release also said: “Given the disruption in the Chilean harvest and shipments, Chile will lose the ability to distribute its crop — the voyage from Chile to the U.S. takes 10 to 14 days — without the temporary suspension of the import regulations. The Chilean industry estimates that 10 to 20 days of its harvest season will be delayed or lost.”

Despite all the compelling reasons to move back the marketing order date, the remarkable ability of Chilean exporters to adapt to the disaster, to roll with the punches from the quake and the subsequent aftershocks have made the decision less clear-cut.

Rebound or downtime?

In their communications to the media from Chile, the Chilean Exporters Association has steadfastly stressed the ability of the country to bounce back from the 8.8 magnitude earthquake.

While not exactly “Earthquake? What earthquake?” the export community has not appeared to be rattled by the quake.
The first press release from the Chilean Exporters Association, from March 1:

“Chile is well prepared for these types of seismic events, and growers and exporters will continue to make every effort to meet previously established shipping goals.”

A March 9 news release said: “However, it is important to consider that in general, there seems to be a consensus amongst the industry’s exporters and growers that the critical issues will be resolved within the next five working days, returning to relative normality.”

A March 12 release said: “The Chilean Exporters Association is still estimating that, with the exception of a short-term gap in arrivals this coming week, late-season shipments from Chile should be relatively normal.”

The mixed messages from Chile are to be expected, similar to the story of blind men and the elephant. Every man may touch a different part of the elephant and thus draw different conclusions than the next man. The man who grabs the tusk will have a different observation than the man who touches the ear.

One market observer I talked with this week said that reports of pricing conditions now resembled the varied on-the-ground reports immediately after the quake.

Since the event, talking to five different people would yield five different pictures of just how bad things were. Likewise, talking to five different Chilean fruit marketers in mid-March provides wide-ranging perspectives, from f.o.b.s as low as $16-18 per carton to as high as $30-32 per carton.

As I write this, the Chilean fruit market is trying to adjust to retail seedless grape prices as high as $4 per pound, while at the same time green seedless grape volumes will reach a healthy 1.3 million cartons to the East Coast the week of March 15.

F.o.b. prices for green seedless grapes were expected to slide dramatically as marketers again try to recapture retail pricing closer to $1.50-1.99 per pound.

Given the market’s ebb and flow caused by the earthquake — the USDA said that for the week of March 12 only 4,000 U.S. retailers were promoting grapes compared with more than 7,200 stores the previous week — the USDA should allow Chilean exporters and their U.S. counterparts more time.

The earthquake was a destructive force in Chile that will be felt for years, and the can-do spirit of growers and exporters should not count against the timely exercise of a humanitarian gesture.

E-mail tkarst@thepacker.com.

What's your take on extending the Chilean grape marketing order date? Leave a comment and tell us your opinion.



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