Argentina. Citrus Semi-annual. Jun 2014 June 26, 2014
Marketing year (MY) 2013/2014 fresh lemon production is estimated at 750,000 MT, the same level of USDA’s official estimates but drastically reduced from the previous year. Frosts during the winter of 2013 and a drought affected most of the country’s growing areas throughout 2013. Exports are expected to decrease to 180,000 MT given the production decline and a delay in the beginning of the harvest. Consumption is up from USDA’s estimate but remains rather steady over the long term as lemon domestic demand tends to be inelastic. Fresh orange production showed a significant increase, up 150,000 from USDA estimate, as plants recuperated from last year’s frost. Tangerine production is up slightly from USDA’s estimate but is stable from last year’s production. A delay in the harvest, lack of competitiveness in the export market, and high domestic prices decreased exports of oranges and in turn increased both domestic consumption and oranges used for processing. Orange consumption is forecast to increase to 410,000 MT, and exports are estimated to decrease to 50,000 MT. Orange for processing is expected to double to 240,000 MT as a result of larger production and smaller exports. Tangerine domestic consumption is estimated to increase to 150,000 MT due to larger production, and exports are projected to remain stable at 90,000 MT. Tangerine for processing is projected to almost double to 60,000 MT due to an increase in production.
For MY 2013/2014, fresh lemon production is estimated to remain unchanged at 750,000 MT from official estimates, down by 45 percent compared to the previous year due to frosts during the winter of 2013, which reduced fruit volumes and damaged a significant number of trees, and a drought that affected most of the country’s growing areas throughout 2013. Lemon exports will decrease to 180,000 MT, down 70,000 MT from official estimates, as a result of smaller production. Moreover, the lemon harvest was delayed due to excess rains during April-May 2014. Post estimates an increase in consumption to 70,000 MT from official estimates although over the long term it tends to be inelastic.
Fresh orange production for MY 2013/2014 is expected to increase to 700,000 MT, up 150,000 MT from official estimates, as plants recuperated well from last year’s frosts, and consumption is estimated to increase to 410,000 MT due to larger production and smaller exports. Exports are forecast to decrease to 50,000 MT due to a delayed harvest, low competitiveness in international markets, and high domestic prices. Orange for processing is estimated to double to 240,000 MT as a result of larger production and smaller exports.
Post estimates fresh tangerine production for MY 2013/2014 to increase to 300,000 MT, up 40,000 MT from official estimates, in line with revisions carried out by the private sector. Tangerine consumption is estimated at 150,000 MT, up 15,000 MT from official estimates, as a result of larger production, and exports are expected to remain unchanged at 90,000 MT. Tangerine for processing is forecast to almost double to 60,000 MT due to an increase in production.
For MY 2013/2014, fresh lemon production is estimated to remain unchanged at 750,000 MT from USDA official estimates, down 45 percent from the previous year due to severe frosts during the winter of 2013, which reduced fruit volumes and damaged a significant number of trees, and a drought that affected most of the country’s growing areas throughout 2013. In addition, the lemon harvest was delayed about 20 days due to excess rains during April-May 2014. Post increased production estimates for MY 2012/2013 to 1.35 MMT, in line with revisions of data by private sources. Main lemon varieties grown in Argentina are Genova and Eureka.
Fresh orange production for MY 2013/2014 is forecast at 700,000 MT, up 150,000 Mt from USDA official estimates, and fresh tangerine production is projected at 300,000 MT, up 40,000 MT from official estimates. As reported by private sources, the plants recuperated well from the effects of the frost that affected the main sweet citrus growing region of Argentina in June 2012 and fruit volumes resulted above expected levels. Post revised production for MY 2012/2013 to 550,000 MT for oranges, and to 300,000 MT for tangerines, up 50,000 MT for both fruit compared to official estimates. The main orange varieties grown in Argentina are: Navetina, Salustiana, Washington Navel, Navel Late, Valencia Seedless, and Valencia Late; main tangerine varieties:
Clementina, Clemenvilla, Ellendale, Malvasio, Montenegrina, Murcott, and Ortanique (Source: Federcitrus). Overall, the citrus sweet varieties that have been expanding faster are seedless varieties, such as Tango for oranges, and Clementines and Clemenules for tangerines.
One of the main concerns affecting the citrus sector in Argentina continues to be increasing production costs (especially, labor, inputs, energy, inland and ocean freight) as a result of a high inflation rate (between 20-30 percent during the past seven years, and estimated around 40 percent for 2014) which causes a significant loss of competitiveness for local exporters. (The salary increase reached 32 percent in 2014 plus an additional attendance bonus at the end of the season for workers attending work about 80 percent of his/her regular duty. In 2013, the increase was agreed upon 23 percent with the lemon sector, and about 24 percent with the sweet citrus sector.) Intermittent strikes by both SENASA and customs inspectors have disrupted trade over the past few years.
On February 26, 2014, the Agricultural Emergency Status for the Citrus Sector of the Province of Tucuman was declared by Decree No. 326, which was published in the Official Bulletin (it is expected to be approved soon for the whole country). This measure is meant to benefit all citrus producers whose 2013/2014 production has been reduced by at least 50 percent due to bad weather conditions through the granting of loans by official banks, tax exemptions, facilitation of VAT (value-added-tax) returns and export rebates, etc.
During the past few years, the Government of Argentina (GoA) reduced gas supplies to major industrial operations in the country to assure household gas supplies during winter (months of May to September). Gas is mostly used in lemon processing during this period, when lemon processing plants are in full operation. In the Province of Tucuman, main lemon growing region in the country, gas supplies were significantly reduced in the past and the government has announced new reductions which have already started to be implemented. Gas supplies are expected to continue to be scarce as no major gas investments are being planned to overcome this energy problem. The Governor of Tucuman Province requested that the province be exempted from gas rationing during the processing season. Although this is becoming an increasingly serious problem, so far, the local industry has not been significantly affected. A few of the leading lemon industries have developed operations which recycle industry waste into gas. However, the industry is far from becoming self-sufficient in gas supplies.
For MY 2013/2014, area planted to lemons is estimated to remain unchanged at 49,500 hectares, in-line with USDA official estimates, as producers will only invest in plant replacement to overcome the effect of the frosts, and will only invest in land marginally. Lemon production used to compete with sugar cane production in the Province of Tucuman. However in the past few years this trend has slowed despite the challenges in the sugar cane and bioethanol industries.
Currently, ethanol producers are facing environmental contamination issues, and the sugar industry has not been making significant investments due to the decrease of international sugar prices and high production costs. Lemon production also competes, although to a lesser extent, with urban expansion and soybean production, which has grown in marginal areas. According to private sources, the Argentine lemon sector is not expected to expand significantly through land investment but through the incorporation of new genetic material, which would improve yields.
For MY 2013/2014 and MY 2012/2013, Post increased area planted to oranges and tangerines to 46,100 hectares and 33,900 hectares, respectively, as a result of the National Institute of Agricultural Technology’s (INTA in Spanish) latest official statistics. In MY 2013/2014, area is expected to remain unchanged for both citrus fruits, compared to the previous year.
For 2013/2014, fresh lemon for processing is estimated to increase to 500,000 MT from previous official estimates, due to smaller exports and high prices paid for lemon by-products. For MY 2012/2013, it was increased to 996,000 MT as a result of larger production.
Fresh orange for processing in MY 2013/2014 is expected to double to 240,000 MT from official estimates as a result of larger production and smaller exports. In MY 2012/2013, it increased to 113,000 MT, up 23,000 MT from official estimates, as a result of larger production. Fresh tangerine for processing in MY 2013/2014 is estimated to almost double to 60,000 MT, compared to official estimates, due to an increase in production. For MY 2012/2013, it increased by 100 percent from official estimates, up from 30,000 MT to 63,000 MT, due to larger production and smaller exports.
Over 50 percent of total lemon production in Argentina is processed by four plants, of which three are located in the Province of Tucuman, and one in the Province of Salta. In addition, there are about 35 high-tech packing citrus plants which are approved for export by the Argentine sanitary authorities.
After recuperating from the severe effects of last year’s frosts in the main lemon growing region of Argentina, investment in land devoted for lemon production is expected to continue to expand marginally, especially in the Provinces of Salta and Jujuy. In addition, two new packing and processing plants became operational in 2012 in Tucuman. Investment is due to the potential opening of significant export markets, such as the U.S. and China, for fresh lemons and the expansion of leading beverage companies in Asia. Despite the lack of profitability and the domestic economic crisis that the lemon sector is undergoing, larger producers continue to invest in new lemon trees to replace old trees, and genetic materials with the objective of improving productivity. Tree replacement is carried out at an average annual rate of five percent.
Fresh lemon domestic demand tends to be inelastic and consumption does not typically vary much over time, unlike oranges and tangerines, which are often substituted by other types of fruit depending on the price. However, Post’s estimate for MY 2013/2014 is up from USDA official estimate to 70,000 MT. Consumption in MY 2012/2013 was increased to 75,000 MT as a result to larger production.
For MY 2013/2014, fresh orange domestic consumption is projected to increase to 410,000 MT from USDA official estimates due to larger production and smaller exports. For MY 2012/2013, consumption increased to 360,000 MT, up 20,000 MT, as a result of larger production than initially expected.
Tangerine domestic consumption in MY 2013/2014 is forecast to increase to 150,000 MT from official estimates due to larger production. Consumption in MY 2012/2013 increased to 150,000 MT as production was larger than originally expected.
Fresh lemon exports for MY 2013/2014 are estimated to decrease to 180,000 MT (down 70,000 MT from USDA estimates), as a result of decreased production and a delay in the beginning of the lemon harvest. Exports for MY 2012/2013 remained stable at 280,000 MT. According to private sources, in the Province of Tucuman, it is possible to produce 350,000 MT of premium-quality fresh lemon to supply export markets. However, the fresh lemon export business is not very attractive due to extremely high costs and low competitiveness. This scenario is not expected to change in the near future unless international lemon prices increase significantly, or there is a larger devaluation of the local currency vis-à-vis the dollar (there was a 20 percent devaluation of the Argentine peso in early 2014 but it was not sufficient to cover increasing costs in dollar terms). In addition, the “All Lemon” certification seal that has been developed by the Argentine lemon sector (see Promotion Section) regulates the volume of fresh lemons for export, based on quality, to avoid steep price decreases.
Following the practice carried out in the past few years, relatively high volumes of fruit are being devoted for processing as a result of the decision made by the industry to export only fresh lemons meeting higher quality standards, thus restricting the export supply and preventing a steep decrease of international prices. This market strategy is working very well and is expected to continue.
Argentina does not export fresh organic lemons, given that fruit undergoes a bleaching process, which is not allowed under organic certification standards. However, some lemon by-products are produced and exported as organic.
For MY 2013/2014, fresh orange exports are expected to decrease to 50,000 MT from official estimates, given a delay in the harvest, decreasing competitiveness in international markets, and high domestic prices. In MY 2012/2013, exports increased marginally to 77,000 MT, compared to latest official estimates of 70,000 MT, due to larger production and stronger demand from export markets as a result of less fruit in the Northern Hemisphere.
Tangerine exports for MY 2013/2014 are expected to remain unchanged at 90,000 MT from official estimates. Exports for MY2012/13 decreased marginally to 87,000 MT from official estimates, as a result of larger domestic consumption and more fruit devoted for processing.
For MY 2013/2014, no major export market diversification is expected for citrus fruit. The EU and Russian markets are not expected to expand significantly as no growth in population is projected, thus, demand is forecast to remain relatively stable. In addition, citrus fruit supply is larger in the Northern Hemisphere producing countries, compared to last year’s season. Fresh lemon exports to non-traditional markets have been increasing in the past few years. Although South Africa is a significant challenge for the local lemon sector since it can reach Asia and the Middle East with more competitive prices, Argentine lemon companies are increasingly expanding exports to those non-traditional markets.
In CY 2013, the EU remained the largest export market for most types of Argentine citrus fruit: lemons (68 percent market share from 70 percent in 2012), oranges (65 percent, from 58 percent in 2012), and the second largest market for fresh tangerines (18 percent, down from 26 percent the previous year). In addition, Russia was the largest market for tangerines accounting for an average of 49 percent of total Argentine tangerine exports, and the second largest market for lemons with 15 percent market share. Paraguay was the second largest export destination by volume for oranges, accounting for 33 percent share (although, by value it accounted by only 5 percent share). Other markets which increased exports of Argentine lemons were Ukraine, United Arab Emirates, Albania, Serbia, Jordan, and Georgia, among others.
Citrus imports are expected to remain negligible in MY 2013/2014. This trend is forecast to continue in the future as Argentina is a net citrus fruit exporting country, and especially with government food import restrictions, which have been in place in the past few years (see Policy Section).
Import and Export Regulations
Export taxes on fruits and vegetables are relatively low. In 2008, the GOA reduced these taxes by 50 percent (Official Bulletin, Decrees Nos. 38/2008 and 40/2008). Currently, export taxes for all citrus fruit are 2.5 percent. Part of Argentina’s export tax on citrus is rebated depending on the size of the container.
The Argentine fruit sector is concerned about the numerous trade restrictions and requirements affecting imports which have been instituted by the GoA. These policies hamper producers in acquiring needed production and processing inputs, which must be replaced by locally-manufactured products at higher costs, and have also reduced citrus imports, although imports have traditionally been small. Other measures require preapproval for imports weeks before beginning the importation process. Additional obstacles include the imposition of strict limits on foreign exchange transactions and restrictions against the payment of dividends and repatriation of profits, more widespread usage of non-automatic import licenses, and difficulties in obtaining certificates of country-of-origin for products to be imported.
Argentine phytosanitary authorities continue negotiations with China to reopen the market for Argentine fresh lemons. Trade was interrupted in 2005 when China established cold treatment for all citrus fruit, which damaged the fruit quality. The industry has been focusing on other export destinations pending negotiations with officials in China, such as Philippines and Indonesia, among others. Currently, the market is open to fresh “sweet” citrus varieties.
In addition to Fruit fly, Citrus canker, Citrus scab and some mites occurrence in Argentina, two citrus diseases are still of concern for APHIS and the U.S. citrus industry: Citrus Variegated Chlorosis (CVC) and Citrus Greening Disease (Huanglongbing or HLB). Following a study on CVC transmission by Argentine and Brazilian experts, APHIS developed a Pest Risk Assessment (PRA) and a set of risk mitigation measures to allow the United States to safely import lemons from northwest Argentina, including Tucumán. On April 10, 2014, APHIS published the draft PRA for stakeholders to review and comment. The comment period will end June 10, 2014.
Citrus Greening: On July 4, 2012, APHIS was officially informed that a case of HLB was reported in one infected tangerine tree in Puerto Deseado, Province of Misiones (NEA region of Argentina – close to the border with Brazil). The infected tree was destroyed as a precautionary action. In addition, SENASA intensified the surveillance for citrus species in the area with sampling in 150 premises with negative results for both: symptoms and vector (Diaphorina citri) of the disease. SENASA stated that, since the location is not a citrus commercial area, and it is surrounded by national parks, it is likely that this was an illegal introduction from Brazil. Based on the above, SENASA still maintains its HLB-free status.
International (FOB) Prices for Fresh Citrus Fruit
Fresh lemon FOB prices during MY 2012/2013 were over 10 percent higher than the previous year as a result of less fruit availability in Northern Hemisphere competing countries, such as Spain and Turkey. Overall, fresh orange and tangerine FOB prices were lower than 2011 and 2012 prices due to strong competition from South Africa.
The highest FOB price for lemons during 2013 was $927/MT (March); for oranges, $437/MT (June); and for tangerines, $869/MT (July).
“ALL LEMON Tested & Certified for Export” is the Argentine quality seal which certifies the quality of about 80 percent of Argentina’s total lemon production. Currently, this program, created in 2009, carries out audits of the 16 leading lemon producers and exporters in Argentina. Its primary goal is to develop and establish quality standards to be applied by lemon companies, which are committed to export a strictly selected product. Lemons identified under ALL LEMON parameters must comply with:
• High juice content
• Resistance and durability
• Uniform format
• Balanced color
• Skin in optimal condition
• Traceability and safety