Chatting March 2 with Manuel Alcaino, president of Decofrut S.A., Santiago, Chile. 

Karst chat with Manuel Alcaino: Chile looking for new markets3:00 p.m. Tom Karst: What are some of the main features about this year’s Chilean export season?

3:00 p.m. Manuel Alcaino: I think the most interesting aspect is the fact that the Chilean exporters are looking for alternative markets to diversify their portfolio. That has had an impact in the volumes that have arrived to what has been traditionally the main market for Chilean exports, that is the U.S.

The first sign of that was obviously the cherries. In a season that Chilean cherry exports grew 20% to the world, the arrivals to the U.S. decreased by about 25% compared to the year before. Most of the Chilean increase in volume has gone to China, with interesting results. This year was a complicated year.

 3:02 p.m. Karst: In what way?

 3:02 p.m. Alcaino: This year, the Chinese New Year, which is the event where cherries are offered and sold - it is like our Christmas. Rather than giving present and toys for the kids, they give away fruit for the Chinese New Year. Therefore, this fruit has to be special, delicate and different and red. That’s why cherries are so special to them. The timing of the Chinese New Year varies with the moon, like our Easter. And this year Chinese New Year was very early, Jan. 23. Next year it is extended to Feb. 15, so there be three more weeks to arrive. The early Chinese New Year had an impact in compressing the season because everyone wanted to arrive before the date. A week before the Chinese New Year it was huge volume that had a negative impact on the market. But having said that, the general information that we have been gathering is that the overall results in China, even averaging the results with the bad market situation in the week before the Chinese New Year, is that it is going to be a very good season.

 3:05 p.m. Karst: Is the focus on other markets true for other commodities?

 3:06 p.m. Alcaino: It is a similar situation we are seeing now with grapes. We are down around 6% in our grape arrivals in the U.S. through week eight or the end of February. If you compare Chile exports to the world, we are even compared with last year.

So where is the volume going? Again to the Far East, Russia, and a bit to Europe, which to me is a bit of a mistake. That (increase to Europe) probably has to do with the start of the season, which was very erratic. There was wrong information. There was a frost in the early part of Chile, Copiapo. There were expectations of very low volumes in December, but in the end it didn’t happen and Peru covered that gap with the California growers and Brazil.

The impact of the frost in northern growing regions of Chile wasn’t as much as expected, and volume was kind of normal, and the quality wasn’t very good of what had arrived from (the north) in those days. The start of the Chilean season with grapes was probably one of the lowest I’ve seen in the last five years. If you compare wit the two previous season, it was especially bad, because the two previous seasons were extremely good. Maybe Chilean exporters got scared with the American market being so cheap and they diverted volume to Europe, but they found themselves with a tremendous cold wave there that had a negative impact on consumption. The results of the increased volumes compared with the year before arriving to Europe has not been very good.

From the middle of February onwards, the market has been moving very fast in the U.S. In the U.S., there are around 6% less arrivals, which is 2 million to 2.5 million less than last year. It is especially concentrated in some varieties, such as thompson seedless and flame seedless as well. That shortage has had a positive impact on the movement and demand; prices are probably $3-4 higher compared with the year before and the expectations for the coming weeks is that the volume remains being short. Asia seems a very strong market, and it is shifting from the traditional import of red globes to seedless varieties. Korea has been a revelation even last year; they imported huge quantities of seedless varieties, up 5 million packages in reds and whites.

 3:08 p.m. Karst: There is talk about Peru taking a higher profile in Southern Hemisphere grape exports. What is your take on that?

 3:09 p.m. Alcaino: Certainly, Peru is becoming a actor. Still the volumes (from Peru) in the area of 15% to 20% of what Chile has, but hey come in a very special moment from mid-November through February. They are mostly out by now, but they hit that special moment when there are normally have very good prices. They have gained a reputation of good work. A lot of the technology that is being used, they are using the experience of Chilean technology people, of Chilean growers and all the suppliers of boxes and packaging material. So for them, the table was kind of set for them. The learning curve of the Peruvians has certainly  been a lot shorter than that of the Chileans because of the experience that was already gained.

 3:11 p.m. Karst: Will Peru continue to grow it exports?

 3:11 p.m. Alcaino: They are going to continue to grow, absolutely. They are planting a lot. They have much cheaper labor than Chile. The land is cheap, the water is cheap, so it was like Chile in the early days. The Chilean grape industry was founded on the basis of cheap and abundant labor, which is not true now. Labor is now scarce and expensive. Competition with Peru is tough. The Peruvians have good conditions to grow grapes - not late but certainly early. My feeling is that the ones who are going to suffer are (growers) Copiapo and the early valleys from the third and fourth regions in Chile. Those are the guys who will face the competition.

 3:13 p.m. Karst: What is Chile’s experience so far in dealing with the marketing order’s April 10 date in California?

 3:14 p.m. Alcaino: The experience so far with the marketing order has not as dramatic as initially thought. Most of the thompsons, the green seedless arrivals are already done(by the April 10 date) As a country we are able to ship all the green volume before the April 10 date. With the crimsons, it is certainly not possible. Chile needs to arrive with crimsons under the marketing order through probably the month of April. The experience up to now has been very good, If there have been some rejections because of quality standards, it has been minimal and ones that have been, operators have been able to repack them and present them again for entry.

 3:16 p.m. Karst: Does Chile have anything like the marketing order in California that require certain minimum quality standards?

3:17 p.m. Alcaino: No, in that regard, Chile is an open and free county. If you want to export very low and mediocre quality. You can do it, nobody will stop you from doing it. The only aspect that will stop you from doing it is the results you will obtain. There is no official limitation to the volume or to the quality.

3:18 p.m. Karst: We here about the drought in Chile. What effect does it have on commercial production so far?

 3:19 p.m. Alcaino: It is a factor in certain areas. But the northern areas, again Copiapo and the early valleys, which are very intensive in mining operations, which use a lot of water. So there is big competition, water for mines and for human consumption. There are certain initiatives from the government to provide the rigt amount of water. Sadly enough, some of the rivers are still throwing water out into the sea at the peak of the season. That means there is lack of infrastructure to capture the water and use it properly.

3:20 p.m. Karst: Blueberries has been a big growth item for Chile over the past few seasons. Is it still a hot commodity?

3:21 p.m. Alcaino: Blueberries have been a bit down this year. It has been a good season for blueberries. We are petty much the same exports as the year before. Again the Chileans are trying to divert blueberries to other markets. Last year, 85% went to the U.S.

The government signed an agreement for the protocol to enter China with blueberries, but it has been not so easy.

 It is a long trip, and the fruit is not as strong as grapes and apples in arrival conditions. It is not eay to arrive well in China. Still, there has been an 50% increase to the Far East. Far East destinations received 2,704 metric tons from Chile this year,up from 1,761 metric ton last year. But still, to the U.S. Chile sent the U.S. 51,800 metric tons, compared with 54,900 metric ton last year.

It was a very warm summer in the southern region of Chile, where the blueberries are grown. That affected the condition, as the fruit ripened too fast. It wasn’t a very good season condition wise for blueberries.