The impact of the dollar item by item

25/01/2016

While it is clear that the rise in the dollar is beneficial for agriculture, its impact is not even. Although for some items it means higher profits, for others more complicated, it implies the lifeguard that will allow the result to be less black in negative conditions.

Clearly most of the fruit that the country exports has had a good start to the season. High demand, prices at attractive levels and with much of the costs paid at a cheaper dollar value, make the current exchange rate only add benefits.

«The effect of the dollar, in general, is extraordinary, because the season was already paid for with the dollar at lower values and the last expenses, which are those of the harvest, are managed in pesos, so the increase does not affect them. impacts», says Isabel Quiroz, executive director of iQonsulting.

For Juan Carolus Brown, president of Fedefruta, it is important that marketers and exporters deliver to the producers the benefits of the current exchange rate and the low price of services, such as freight. "Don't let it stay in the middle"he insists.

Next, an analysis of how the dollar affects each item.

Blueberries in balance

As with most export fruits, the exchange rate benefits blueberries, which is the main market in the United States, which means that the return is very positive, since it is one to one. However, things change when it comes to other destinations.

«Clearly the exchange rate situation is favorable for export-focused industries and is no different for blueberry exporters, whose main destination market is the United States. However, in the case of Europe, the second destination market, the exchange rate situation is not as favorable and becomes more difficult., says Andrés Armstrong, president of the Blueberry Committee.

The specialist explains that the United States continues to grow in consumption and is very relevant to the national industry, which is where most of the season is played. The exchange rate situation favors commercialization in this market. In the case of Europe on the contrary, where the exchange rate has not been favorable «The movement has been slower this season. In the case of the United Kingdom, it appears more favorable compared to the Euro zone, but also the situation of the pound sterling, which has weakened in recent days, could play tricks on us for the remainder of the season.He says.

According to Armstrong's information, berries, in general, and blueberries in particular, are one of the fastest growing categories in the area of fruits and vegetables in supermarkets in the world. «Demand continues to grow and in the case of the United States our supply in terms of volume has remained quite stable for the last 5 seasons, in circumstances that local production grows at an approximate rate of 10% per year. Our growth in this period has been concentrated in Asia and Europe, whose participation in the volumes shipped last season was 10% and 23% respectively.", Explica.

The usual thing is that on these dates there was an abrupt fall in price, however in this season «the price decline curve has been very smooth. This is because as there were fewer grapes in the United States, it helped ensure that blueberries did not have violent falls, and to date there is an agile and demanding market., Isabel Quiroz raises.

Of course, it remains to be seen how China can influence this situation and can affect the growth rates that that market brought, especially due to the lower growth and the advance in about 10 days of the Chinese New Year. In Asia, blueberries also have an interesting presence in South Korea, although quite far from the Asian giant, and Taiwan and Singapore appear increasingly, while Japan, while losing space, remains important, Armstrong emphasizes.

Once again the call is to be very attentive to what the weather may do, especially because it has been very changeable and because the lower accumulation of degree days meant a more delayed season and with lower volumes than the previous campaign. «This has caused difficulties in meeting sales programs, using a greater proportion of air shipments to supply the markets. We have an accumulated deficit close to 12% and for now we maintain an estimated volume around that obtained last season, but there is uncertainty about what may happen in the remaining weeks of harvest to reach that goal," comments the president of the Committee.

Cherries, affected by the depreciation of the yuan

While there were high expectations for cherries, the weather played bad times and led to a sharp drop in production. Thus the initial estimate of 24 million boxes will be closer to 18 million, says Isabel Quiroz.

"The climatic problems mainly impacted the early varieties, which suffered pollination and condition problems, which finally ended up affecting a production that was expected to be very good."

On the other hand, prices have moved at good levels, although nothing exceptional as seen a couple of years ago, despite the lower supply (we must consider that Chile is relevant in this production since it does not have great competition in the markets).

From that perspective, the current value of the dollar would then serve to compensate for lower sales, due to the fall in the harvest. However, Isabel Quiroz draws attention to how it can affect the situation in Chile.

«The exchange rate can work in their favor to compensate for the lower production, but we must consider that the return may be affected by the depreciation of the yuan, since in this case the value received must be converted to dollars and there may be a loss. », explains the specialist.

For all the above Isabel Quiroz insists that «It was not the year of cherries, but the industry was prepared for that. The situation would undoubtedly have been much worse without such a positive dollar.

Apples, do they recover land?

For apples, 2015 was the worst year of the last two decades. This fruit came from very hard seasons, with overstocking in the markets. Now, the value of the dollar adds to a recovery in demand, which could lead to the situation picking up this year.

This is due to lower global production - the species tends to have a good year and another with a smaller volume - which has led to a decrease in the number of tons in the United States. Something similar happened with South African production, although in Europe the volumes at December 15 were similar to those of last year. With less supply, a space could be generated for smaller apples. If you add an exchange rate like the current one, the result is positive.

However, specialists insist that you have to be cautious.

«The situation of 2015 can be repeated because it is a structural issue. At a global level, areas have entered into production that are adding new varieties to global exports. This means that with a smaller total area for cultivation, the harvest volume is greater. So it is likely that in the future the stock that existed last year will be repeated, and we must be prepared for that situation.", emphasizes Isabel Quiroz.

For this reason, Juan Carolus Brown, president of Fedefruta, emphasizes that one of the challenges they face is modernization, not commercial but productive. «Apple producers have to take advantage of the returns, which should be positive, to change and renew varieties. There are many obsolete ones, today in the world two-tone ones dominate and there are no longer red ones; other flavors are sought. That is what they have to look at and invest in at this good time, to be prepared for the future.".

Source: Revista del Campo