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Brazil will export less than 5 per cent of its total apple crop in 2011 as the re-valuation of the local currency hampers competitiveness and forces suppliers to focus on the local market

By Gill McShane de Eurofruit.

European importers and distributors are expecting a significantly reduced volume of apples from Brazil this year where frosts, rains and hail in the post-flowering period have cut a swathe out of production. A strong local market and a sharp appreciation of the Brazilian real versus the US dollar and the euro will also keep a lid on exports, with volume estimated to decline by 45 per cent to 50,000 tonnes – Brazil’s lowest apple export crop in recent years.

“Despite a very good winter, Brazilian apple production will decline by 22 per cent to less than 1m tonnes in 2011,” Pierre Pérès, chairman of the Brazilian Apple Producers Association (ABPM) tells Eurofruit Magazine.

“A very cold spring, with frosts in the high altitude orchards, followed by storms and hail have reduced production in some areas. Plus, after a bumper Fuji crop in 2010 we are now having an alternate bearing year for this apple variety in 2011.”

With the strong Brazilian real still hampering the industry’s competitiveness and the percentage of apples remaining on the local market continuing to increase, Brazil’s overseas exports this season could be the lowest of the last few years – despite positive marketing conditions in Europe where there are fewer topfruit stocks, higher prices and stable demand.

“Exports will reduce mainly because of the need for growers to cover their costs,” explains Mr Pérès. “The re-evaluation of the real has been impressive these last few years and all of our costs have to be covered. Seeing as it is difficult to raise prices in euros or dollars, our fruit will mainly be sold on the internal market – not as an option but in order to cover costs.”

Fortunately, demand is high on Brazil’s internal market, and although prices during the picking season will come under some pressure from the high volume of individual growers selling their fruit at the same time, ABPM estimates strong demand and a good level of prices once picking is over, which should see growers cover their costs.

Out of the 58 most important economies in the world, Mr Pérès says Brazil has the most expensive currency in the world, which he claims is making the lives of exporters “miserable”, but “very easy” for importers.

“The strong appreciation of the Brazilian real against the US dollar will negatively affect the apple industry by making exports less competitive,” agrees Decofrut’s José Manuel Alcaíno. “But, in the end, the final export volume will depend largely on prices achieved on the internal market.”

Some hope for exports

And although the real-euro/dollar exchange rate will offset the positive marketing panorama in Europe, ABPM believes Brazil may have a chance for some success on the market during the second half of the season.

“The good marketing conditions in Europe should prevail in the second semester, which may allow a good Brazilian export season if the price level is sufficient enough to cover the production costs,” predicts Mr Pérès.

“But Brazilian fruit will be more expensive in general this year (because of the shortfall in volume) so exports will depend our clients’ willingness to accept the price increase.”

The vast majority of Brazil’s 2011 apple exports will be sold in Europe – mainly continental Europe given that eastern Europe is very price sensitive, which makes Brazil uncompetitive, and even more so this year.

“Europe will definitely be the dominant market,” notes Roland Brandes, general manager of RBR Trading – a Brazilian grower-exporter with an import arm based in the Netherlands. “But the positive market situation in Europe will only last for the start of the Southern Hemisphere season,” he predicts.

“After April, I believe the price level will adjust to the quantity of apples arriving from the Southern Hemisphere (Chile, Argentina, South Africa and New Zealand). If the exporters decide to load too much the market may shrink but if volume is lower the price and market will remain positive. As suppliers, we will need to wait and see how the importers and exporters behave and how that influences the market.”

RBR plans to supply around 10,000 tonnes of apples to the domestic and export markets in 2011, which represents around 1 per cent of Brazil’s total crop, according to Mr Brandes. Although the export volume will decrease, the overall quantity RBR handles will be similar to last year.

“RBR had made some new export arrangements for our apple business in 2011, but unfortunately all of the fruit was hit by hail so we will have to sell it on the domestic market,” says Mr Brandes. “We will try to export as much as possible in order to retain our customers, but due to poorer quality and the currency re-evaluation the domestic market will dominate.”

Across in the Middle East and Asia, ABPM expects the good work carried out in the last few seasons will certainly continue this year – a prediction backed up by Mr Brandes who claims both markets are growing.

“If the Royal Gala crop produces smaller sizes this year, exports may increase to some Middle Eastern countries in 2011,” he suggests.

In the US and Canada, meanwhile, exports of Brazilian apples remain possible in theory but practically impossible in practise. “North America needs big sizes apples which are difficult to find in Brazil, so the market there remains small for us,” explains Mr Pérès.

Leading varieties in decline

According to the World Apple And Pear Association (WAPA), Brazilian apple production will come in at 951,000 tonnes this year, compared with 1.23m tonnes in 2010. After a period of growth, the shorter crop this year marks the first decline in Brazilian production since 2008 when volume fell to 983,000 tonnes, from 993,000 tonnes the year earlier, according to WAPA figures.

Variety-wise, Decofrut expects the greatest fall in Brazil’s apple crop will be in the Fuji category (estimated to be down 39 per cent against 2010), due to an “off” year following the large crop of 429,560 tonnes in 2009. Gala volume will also be down by 14 per cent.

In terms of sizes, the rain in January has helped Royal Gala sizes to recover – a situation which will become more clear as the harvest continues, according to Mr Brandes. Harvesting, meanwhile, is expected to start as normal – one week later than last season, which was ahead of schedule.

ABPM, meanwhile, continues to work on the consolidation of the marketing side of Brazil’s apple industry through the creation of a consortium of growers, which is being established with the help of the Brazilian Ministry of Agriculture.

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