27 July 2011 Minutes for the Freshfel/SHAFFE Citrus Teleconference of 27 July 2011 Introduction: A declaration was made by all participants that the discussion will by no means involve matters or topics which could influence market prices or volumes and that the exchange of data and information is strictly limited to matters which do not interfere with competition or anti-trust legislation. The minutes and data from the meeting will be made publicly available to ensure the transparency of the discussion also for non-members. The teleconference covered the following points: Review of the SH 2011 season s progress and outlook for the rest of the season; Overview of the season for NH 2011 and outlook for the coming season. Participants included suppliers and trade representatives from South Africa, Chile, Belgium, Spain, Argentina, Italy, Australia, Uruguay and Germany and additional input also received from Cyprus, USA and Turkey. The representatives from the USA and Chile at the last moment could not join the teleconference. It is scheduled to all a new teleconference during the last week of September or first week of October to review the forecast of production for the NH season Southern Hemisphere production and export overview for 2011 season South Africa: Russian market this season is very difficult for all types of citrus fruit. Large quantities of late Egyptian and Moroccan fruit arrival at the same time which overlapped also with larger volume than usual from South Africa. It is anticipated that fruit diverted away from Russia will put pressure on other markets. Initially sales rates in Japan for grapefruit were lower than the average of the last five years, but have improved as South African fruit started to dominate. Good markets are still to be found for sound fruit of the required specifications. Substandard fruit are not exported widely. Soft citrus: rainfall during early packing influenced shelf life of Satsuma s with some reported quality issues (rind issues). Clementines generally are well received in most markets. Late mandarin s season has just started. Oranges: hail in growing season in central region impacted on volumes, while rainfall also impacted on early navels. However the situation improved as season developed. Predicted crop navels slightly dropped from 19.4 million cartons to 19.1 million cartons (2010 was 22.9 million). The season for the variety Valencia has just started, with estimations of 42.9 million cartons (2010 was 46.5 million). Grapefruits: season almost over with 14.8 million packs out of 15.3 million packs predicted (2010 was 12.5 million). The size of the fruit is smaller than in 2010. Fruit of small size have been sent for juicing with a good demand of the industry. Japan remains leading market while promotion campaigns are undertaken in the UK and Japan. Lemons: predicted crop dropped from 9.3 million packs to 7.2 million packs. The Far East market was fluctuating while the Middle East is stable.
Difficult market conditions in Russia for the next 4-6 weeks (until excess stocks cleared). There are some concerns that diverted fruit may put pressure on other markets. Rainfall during winter impacted negatively on normal summer rainfall areas which stopped packaging; there are some concerns about quality however juicing alternative of all citrus fruit is attractive. Strike is affecting also the soft development of South African season namely petroleum industry affected resulting in fuel shortages in some areas. Other groups also striking or threatening to strike (coal mines could impact on electricity). So far there is no direct impact on workers in citrus supply chain. (i.e. workers on citrus farms, packhouses, drivers, port workers ect.). Exchange rate is also a problem in South Africa which brings bigger costs. Argentina: This season for Argentina is the most disappointing during the last years due to the poor demand, low prices, bad weather conditions, extended northern hemisphere supply and high domestic costs. Soft citrus: demand is very poor. Early varieties such as Satsumas enjoyed a poor and oversupply market with negative returns. Mid season varieties such as Clementines and novas had increased competition of an earlier crop of summer fruit that affected demand and prices. Frost affected production of late varieties such as Murcotts and Ellendales in Argentina and Uruguay, thus the exports have been stopped for two weeks. This is to be combined with the also expected lower tangerine s shipments from South Africa due to rainy weather conditions (see above). Exports of mandarins are lower by 5% compared with the previous season. Oranges: shipments of oranges have been reduced due to lack of demand, low prices and high stocks of Spanish fruit in Europe and Moroccan and Egyptian stocks in Russia. The quality and size of fruit is very good this year. Exports of oranges will continue with reduced rate and with low prices (40% lower compared with 2010). The variety of late Valencia is expected to have usual volumes. Grapefruits: production is in decline while the demand is affected by summer fruit. The total exports of grapefruits were 9.000 tonnes, same as last year but only a third of the volume 4 years ago. Lemons: the European market had Spanish supply until early July. Therefore the start was late and with low prices. Afterwards, argentine lemons suffered from frost, which was the biggest of the last five years.. The lemon exports in the future are expected to continue in a limited scale, much lower than 2010. Prices will go up as the argentine supply cannot be replaced by South Africa or Uruguay. 150.000 tonnes of lemons are already exported and total season supply will not be higher than 200,000 tons. End of season will be influenced by the start of the NH season and prospects of production from Turkey and Spain would be relevant to be available as soon as possible. General macroeconomic conditions continue affecting the Argentinean competitiveness. Internal costs and exchange rate are increasing without substantial modifications. The government has significantly delayed the refund of export domestic taxes. Workers conflicts are taking place in the top of the season, which affects shipments. Presidential elections in October 2011 increased social, union and industrial demands. Uruguay: The season started as planned but with a reduction in volumes, according to all varieties. Drought during springtime summer and high temperature caused fruit drop and fruit sizes for all season. The rain did not affect the harvest until the 3 rd week of June, when some shipments had been delayed. Frost occurred particularly in the northern part of the country in the first week of July. In the southern part of the country temperature were higher, thus the quality of fruit in general remained good. Soft citrus: the volumes are lower by 15-20% than it as expected. Most of citrus have been harvested before frost. The variety of Ellendale has been affected the most, but the monitor is done. The production of late varieties of soft citrus is lower, but with better size. Bigger sizes are expected at the end of the season. Oranges: the frost mainly damaged Navels. The variety of Valencia has not started yet and damage of frost is evaluated. Medium sizes are expected at the end of the season. Lemons: size of fruit is medium and most fruit in the north and south had been harvested before frost. Quality and size (medium and small) was good, except in more sensible areas. Total volumes at the end of the season are expected to be lower by 10-15% compared with the initial estimations. Small volumes in late varieties are expected. Rain during the winter forecast a better yield for the season 2012. In general the production is lower compared with previous season with higher costs. Currency is the most outstanding problem. The main costs are: labour costs which are higher and higher, fuel and energy. Fuel has
increased costs of most inputs and transportation, domestic and international freight. The new European GSP scheme may represent a serious threat, especially in exports of mandarins to the EU. There is a general concern in the industry due to the flow of performance of the EU as market. South African deviation to other markets (especially Far East) did not have a change in the level of prices compared with the previous season. Chemicals and many times less doses in order to comply with the most qualified retailers may become a threat to fruit quality, specially condition and shelf life. Australia: Mandarins: season in Queensland is expected to be higher by 5-10% comparing with previous season would have been greater had some orchards not been flood affected in January. Oranges: season for the variety Navel in southern areas will be at least 25-30% higher than last season. The quality of fruit is high and large crop of medium size fruit. The volumes of lemons and grapefruits are very small, while volumes of mandarins and oranges are very strong. The export markets decreased by 30% below the same period last year though it s very early measures. Consequently domestic market is flooded with fruit and prices are unsustainably low. Trade protocols for Thailand are under review, while the demand in Japan s market is already very strong. Southern Hemisphere exports Following the country specific reports as above, the secretariat provided an update of export on an aggregate basis for all the SH to all destination by categories. The data is as follows: up to week 28 -all destination in '000T 2011 2010 2009 Var 11/10 Oranges 361 420 367-16% Lemon 252 251 236 0% Soft citrus 238 254 219-7% Grapefruit 207 153 185 26% Total 1.058 1.078 1.007-2% Supply and market of citrus in the Northern Hemisphere Spain: Lemons: the total production forecast will be at 900.000 tonnes, which is a normal production volume. Lemon production mainly is exported to intra EU countries. Export volumes in the EU are similar to the data of the season 2008/2009. In total 283.592 tonnes are expected to be processed, which is 105% more than during the previous season 2009/2010. This season the lemon variety Vern does not overlap with the same variety in Argentina. At the beginning of the season the prices of lemons were low and now the production faces the competition from South Africa in lemons and oranges. For the forthcoming season similar production volumes are expected. 08/09 09/10 10/11 EU EXPORTS 396.908 323.442 386.259 NON EU EXPORTS 39.268 27.762 33.557 DOMESTIC MK 110.000 114.000 114.000 LOSSES 27.309 23.260 26.691 PROCESSING 284.876 138.453 283.592 TOTAL 858.361 626.918 844.098 Grapefruits: this season for grapefruits has been difficult due to the decrease in the commercial interest and no processing interest. Similar production volumes are expected for the coming season.
Oranges: Mandarins: 08/09 09/10 10/11 EU EXPORTS 1.344.598 1.189.946 1.350.000 NON EU EXPORTS 74.794 69.685 90.260 DOMESTIC MK 800.000 850.000 850.000 TOTAL 2.219.392 2.109.631 2.290.260 LOSSES 348.000 227.000 430.000 PROCESSING 880.000 320.000 750.000 TOTAL 3.447.392 2.656.631 3.470.260 08/09 09/10 10/11 EU EXPORTS 1.293.279 1.248.291 1.440.000 NON EU EXPORTS 134.020 114.549 171.526 DOMESTIC MK 298.299 317.384 320.000 TOTAL 1.725.598 1.680.224 1.931.526 LOSSES 269.488 128.475 350.000 PROCESSING 237.000 215.000 210.000 TOTAL 2.232.086 2.023.699 2.591.526 Mandarins/Oranges: prices for the citrus dessert, tangerines and oranges, have not recovered this season in Spain at any time during the season. Even the season of the variety Nadorcott has finished with difficulties. Current prices of oranges are very low while the campaign has almost finished. The E.Coli crisis has had also an influence, minor compared with other products, however negative for mandarins and oranges. Crop forecast season 2011/2012: The season will start at the beginning of September with the variety Satsuma, while the season of clementines will start at the end of September, Oranges end of October, lemons- second week of October. A very first trend of production could be made at this stage as follows: Satsumas: -15-25%; Clementines: -10%; Navelins: - 20-30%; Navelates: -5-10%; Salustinas: -Valencia: -10-15%. Cyprus: The balance of the export of citrus fruit of the previous 2 season is as follows: Citrus fruit export 2010/2011 (in tonnes) export 2009/2010 (in tonnes) Oranges 6.000 7.700 Soft citrus 28.000 28.000 Lemons 3.600 2.000 Grapefruits 12.000 11.000 Forecast for the forthcoming season: the production of soft citrus is expected to decrease by around 15-20%. For other varieties no big changes in the production are expected, except for white grapefruit which production is expected to decrease slightly as well, while the production of red grapefruit is foreseen to remain at the same level compared with the previous season. Turkey: Export data corresponding to thee season (period: Sept. 2010 June 2011 compared to Sept. 2009 June 2010) shows that the export of lemons has increased by 10%, easy peelers by 38%, oranges by 63% and grapefruits by 0.34% to reach total exports of 1.394.504 tonnes compared to 1.098.884 tonnes last season. The main export destinations for lemons, oranges, easy peelers are Russia, Ukraine, Iraq, Romania and Saudi Arabia. Grapefruits are the most exported to Russia and to the European countries like: Romania, Ukraine, Poland and Germany. Lemons season due to star around 15 September, but more details should be considered. Italy: The volumes of lemons remain the same as previous season, but the volumes of oranges at the end of season were lower, which influenced lower exports of 9.000 tonnes to the main destinations which are Germany and Switzerland.
2010 2011 Volumes (in tonnes) Value (000 euro) Volumes (in tonnes) Value (000 euro) Oranges 111.468 60.230 89.669 55.898 Other oranges 17.597 10.519 11.389 7.241 Clementines 29.048 18.864 34.244 17.577 Monreale Satsuma 130 95 177 116 Mandarins 4.695 3.194 3.124 2.359 Tangerins 2 2 7 12 Other mandarins 548 406 245 329 Grapefruits 3.590 2.393 2.821 2.101 Lemons 19.122 14.795 16.170 12.098 Limes 99 98 71 162 Citrus fruit 257 364 142 189 USA: Oranges: The shipments of California Navels will be finished by the end of the week 31, which have had a very good end of the season as the temperatures for the beginning of summer were very mild. This gave much needed life to the Navels allowing a much longer shipping season than it was expected. Volumes will be very close to original projections. It is very early to give any good projections for 2011/2012; however it is implicated that more than likely an early start will take place. Valencia Oranges will continue through the end of September and volumes will be very close to projected. Texas has had a very dry summer and this will affect their volumes and timing of new crop in all varieties. Florida did have a very dry spring and early summer but in recent weeks a good measure of rain. The bloom was affected with the early drought and very little evidence of multiple bud sets. This will have a strong possibility of a lighter crop, better size and an earlier start for all varieties. Soft citrus: California had a very good production year with volume of Nules and the late varieties of mandarins. It is very early to predict but the thought is that the volumes for the upcoming season of Nules would be at best the same but could actually be somewhat shorter. It is too early to speculate on the late mandarins. Lemons: California lemons are harvesting most of the fruit now on the cost. The quality is good and sizing is peaking on mid range. Pricing continues to increase each week as summer interest continues to grow. The crop for next year will have problems in the desert as the freeze last year did serious damage thus the volume will be lighter. Grapefruits: California grapefruit is at harvest and will continue until the end of August unfortunately with a limited volume (less than last year) and limited demand. The crop in Texas looks to be the same for the beginning of 2011/12 compared with previous season. Government indecisiveness, the consumer out of work and the country in bankruptcy are the concerns of the market condition in the USA. The consumers in the states are reacting to their needs and the retailers are following. Consumers will not pay higher prices for imported produce and retailers will not promote high price imports. The consumer will not pay for luxury produce. USA is very concerned that this summer may be the worst months to date. The retailers are all trending down in gross dollar sales that started in March. GLOBAL ANALYSIS OF THE CITRUS MARKETS (NH+SH) Based on the various report submitted, delegates concur that the 2011 market situation is complex and might remain difficult. Several elements are pointed out: Demand on the Russian market was saturated by late and heavy volume from Egypt and Turkey combined with an early start from South Africa. A redirection of volume to more demanding market such as the Middle East did
not solved the situation, as this region might have lower demand in the coming weeks given the start of the Ramadan. A unstable market for citrus is foreseeable. Elsewhere, the market in Asia has not been buoyant either. Japan is moving slowly and other South East Asia market has not been as strong in recent weeks as in the past. Similarly the demand in the US was also not particularly strong. In Europe, the overall fruit and vegetables market has been under pressure for a while due to economic depression leading to a decline of consumption and a heavy competition on prices. All categories are affected. The vegetables markets collapsed end of May /early June as a consequence of the EHEC crisis which also led several third countries to close their border for EU vegetable further aggravating the market pressure. Separately and building on a difficult citrus season, other fruit categories also experienced difficulties, in particular summer fruit ( peaches and nectarines due to production overlap as well as for melon (impact of EHEC crisis on image in particular for the Spanish origin) while the bananas market is also under pressure... In regard to citrus, complex decision should be taken to have a recovery of the market; a difficult balance is to be found between the demand and the offer side. On the demand side, the following parameters play a role: heavy competing price providing lower return, the possible consequence of postponing marketing until better time (which could then just postpone and aggravate later the situation). On the supply side, one should take into account that return from the market are often below cost of production when taking into account other important parameters in the country of production such as inflation, cost increase, currency fluctuation and ect. Often price return is below breakeven price. In regard to current situation, the soft citrus market is affected by little demand and overall poor quality. Oranges experienced in Europe a late finalisation of the NH campaign. The demand remains but prices are moderate. Russia has low demand for Valencia and Middle East will progressively cut its demand given Ramadan. It is recommended to avoid speculation and keep a realistic view of the market to avoid a further collapse later in the summer. The grapefruit market remains (structurally) worrying and very volatile. The demand in Russia is experiencing up and down leading to some overflow of volume to Poland, Japan is taking less and less. There is progressively is a structural unbalance in the grapefruit world market with an inadequacy of production compared to evolving and declining demand. The start of the US season is an important factor and more information should be provided as soon as possible. In regard to lemon, the recent adverse climatic conditions in Argentina might influence the total market supply- which recently was also not strong either. The switch between NH and SH was difficult, but given revised supply from the SH, the market might recover in the coming weeks. It will be important to secure appropriate information about the start of the NH season, in particular from Turkey (likely to start on 15 September) and Spain. The secretariat should provide if possible in timely manner information available in this respect.