Chilean fruit industry thriving - Spotlight on Markets

Chilean Fruit Industry Thriving

Chile's emergence as a supplier of fresh fruit to the world market has been extraordinary. In 1974, Chile's fruit exports were a modest 57,000 tons, while in 1986 they had grown 1,182 percent to 674,000 tons (table 1). Over the same period, fresh fruits went from being 17 percent of the total value of Chile's agricultural exports to 45 percent.

Table : Table 1 - Chile's agricultural and fresh fruit exports

Year   Total agriculture   Fresh fruit 1/   Fresh fruit   Share2/
                 Thousand dollars              Tons       Percent
1974        113,681           19,254         56,908         17
1975        180,886           39,595         91,586         22
1976        226,362           54,750        144,139         25
1977        300,018           55,051        143,753         18
1978        375,710           96,845         36,834         26
1979             na               na             na         na
1980             na               na             na         na
1981             na               na             na         na
1982        660,214          215,016        383,132         33
1983        676,609          217,231        431,445         32
1984        775,634          300,153             na         39
1985        861,258          358,983        539,775         42
1986      1,083,957          484,530        674,103         45

na = Not available 1/Fruits included are oranges, tangerines, or mandarins and clementines, other citrus fruit, fresh bananas, fresh apples, fresh grapes, and edible nuts, fresh or dried. 2/ Percent of total value of agricultural exports consisting of fruit. Source: (2)

Capacity and Trends

in Production

Chile's fruit-growing area has increased dramatically since 1974. In that year, 65,670 hectares (ha) were devoted to fruit and tree nut production (almonds, cherries, plums, apricots, peaches, apples, nectarines, lemons, quinces, oranges, walnuts, olives, avocados, pears, and table grapes). By 1986, the area had almost doubled to 130,000 ha. Fruit production nearly tripled, from 559,550 tons in 1974/75 to 1,463,000 tons in 1986/87 (1). 1/ Much of the increase in area was for table grapes, from 4,250 ha in 1974 to 36,000 ha in 1986 and 47,700 ha in 1989 (1, 6). Production increased from 59,100 tons in 1974/1975 to a 1989/90 crop of 615,000 tons (7, p. 25). Production will continue to increase because approximately a quarter of planted land in table grapes has not reached bearing age. Of all fruits produced in Chile, table grapes account for the most land. The majority of exported table grapes are destined for the United States. Chile is also the largest supplier of U.S. table grape imports.

From 1974/75 to 1989/90, production of apples jumped from 125,000 tons to 755,000 (7, p. 25). Data on planted land and tree ages indicate that Chilean apple production could increase 50 percent over current levels in the next 10 years. A major export crop, the apples are sold mainly to Europe. While the country's primary Southern Hemisphere competitors are South Africa, Australia, New Zealand, and Argentina, Chile has surpassed them in capturing shares of the European Community (EC) winter market. Major fruits produced for export, besides table grapes and apples, include peaches, nectarines, and pears. Chile has a number of natural advantages in fruit production. Geographically it encompasses a variety of climates and therefore produces a large number of products at different times of the year. And Chile is relatively isolated physically, providing excellent natural protection from pests and diseases. To the north is the Atacama Desert, to the east the Andes Mountains, and to the west the Pacific Ocean.

International Competitive

Position

Because Chile is in the Southern Hemisphere, its deciduous fruit ripens during the U.S. and European winter. While this lessens competition to the Chileans from their export markets' domestic producers, competition is still an issue. Table grapes overlap U.S. production early and late in the season. Due to section 8e of the Agricultural Marketing Agreement Act of 1937, grapes imported into the United States have to meet the same quality standards applied to Coachella Valley (California) growers by the Federal Marketing Administration for Desert Grapes. However, the emergence of Chile as a supplier of fresh grapes may have enhanced demand for U.S. grapes. U.S. consumers became accustomed to year-round availability of grapes and consequently increased consumption in all seasons. Per capital consumption of table grapes in the United States increased from 2.68 pounds per year in 1973 to 8.03 pounds in 1988 (5, p.22). However, Chilean production has increased to the extent of raising concern that it may be competitive with U.S. fruit.

Worldwide production of apples is growing faster than demand (4), increasing competition for markets. Apples from Chile compete with stored apples in the Northern Hemisphere. Nevertheless, the United States offers strong competition to Chilean apple production. A recent study of the major foreign U.S. apple markets of Canada, the United Kingdom, Singapore, and Hong Kong indicated that the emergence of Chile as a major world supplier has not substantially altered the U.S. position in these markets regarding price or market share competition. Consequently, as these markets grow, the United States would be expected to increase its share as it did before Chile emerged in the international apple market (2).

To gain market share and to combat unfair trading practices, the United States is spending money, which is matched by grower groups, to promote its exports of apples, grapes, peaches, nectarines, pears, and cherries through the Market Promotion Program. Domestic expenditures on promotional activities are also increasing. Chile, in contrast, spends little to directly promote exports. Pro-Chile, a branch of the Ministry of Foreign Affairs, promotes exports by gathering information and coordinating marketing activities with industry.

Chilean Domestic Policy

The Government of Chile plays a small direct role in supporting its fruit sector. Required reports and documents are kept relatively simple and accessible to exporters. The Chilean Government examines foreign regulations regarding fertilizers, pesticides, post-harvest treatments, and labeling standards, then disseminates the information to exporting companies and growers. Chemical residue and labeling standards that will meet the regulations of the countries Chile exports to are recommended. By helping growers and exporters conform to international regulations, the Government facilitates fruit exports.

On January 18, 1991, minimum quality requirements for winter fruit were announced by Chilean grower associations. These requirements include standards for size, maturity, and general conditions and are specified by fruit type. This quality control program is being overseen by technical experts at a Chilean agricultural university.

Chile's free market orientation is manifested in the fruit sector by growers working directly with expoort companies, rather than the Government, to aid in both the production and marketing of their fruit. Growers are free to choose the export company they wish to represent them. One-year contracts are the norm, making it possible for growers to readily change companies. Export companies often provide technical assistance and financing. They usually provide university-trained personnel to visit growers regularly to help solve production problems. Exporting companies usually negotiate lines of credit with banks and, in turn, extend credit to growers. Terms and early availability of credit influence growers' choice of an exporter.

The costs of fertilizers and chemicals are rising along with taxes and the value of land. As a result, there are downward pressures on profits for the individual grower.

Access to Markets and

Future Industry Trends

Several promising signs are on the horizon for the Chilean fruit industry including the opening of Central European markets and the rising incomes of Asian countries, particularly Taiwan and Singapore. These areas could well become major new markets for Chilean fruit. Also, the industry is evolving into more of an industrial concern. The country, partly through joint ventures with Europe and the United States, is expanding the infrastructure to produce canned fruit, along with juice concern-trate and dried and frozen fruit. The Chilean industry also expects to increase the demand for fresh fruit in established markets by more aggressive promotion efforts and a more uniform quality standard for exports.

(1) These tentative data were computed by the Chilean Bureau of Agricultural Planning (ODEPA) on the basis of the Development Corporation (CORFO) real estate registers, and regional information, modified according to National Bureau of Statistics (INE) surveys of April 1985.

References

[1.] Chilean Investment Committee.

Agriculture Chile, third edition,

July 1988.

[2.] Sparks, Amy L., James L. Seale,

and Boyd M. Buxton. Apple Import

Demand: Four Markets for

U.S. Fresh Apples. USDA,

Agricultural Economic Report No.

641, December 1990.

[3.] United Nations, trade data.

[4.] U.S. Department of Agriculture,

Economic Research Service.

Fruit and Tree Nuts Situation and

Outlook Report, TFS-249, March

1989.

[5.] U.S. Department of Agriculture,

Economic Research Service.

Fruit and Tree Nuts Situation and

Outlook Yearbook, August 1990.

[6.] U.S. Department of Agriculture,

Foreign Agricultural Service. Attache

report AGR number C10001,

December 1989, Santiago, Chile.

[7.] U.S. Department of Agriculture,

Foreign Agricultural Service. Horticultural

Products Review,

February 1990.

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