It’s a bumper season for Chilean cherries this year, with some crop estimates tipping volumes to hit 11.4m cartons, up from 6.7m cartons in 2009/10, but the hefty harvest is already resulting in a bumpy ride for China’s cherry market.
The China market has been a rising star for Chilean cherries in recent seasons, and its stellar status was highlighted a few weeks ago when the first arrivals of air-flown fruit from Chile fetched opening prices of Yn1,100 (US$160-plus) per 5kg carton. But an over-enthusiastic and under-researched approach from both importers and exporters has since seen volumes flood in and prices crash in spectacular fashion.
Although there are different price bands in the China market depending on quality and size, some fruit is now selling for as little as Yn120 (US$18) per 5kg carton, according to market reports.
With shipments so far being confined to airfreighted fruit, the red ink is reported to be flowing for the trade, and it looks set to thicken in the coming weeks when ocean shipments pour in.
Loading of sea containers began last week amid predictions that China will import some 10m cartons of Chilean cherries this season, up from 6m cartons in 2009/10.
According to Jason Bosch of Shanghai-based import company Origin Direct Asia, however, the problem of surplus volumes is compounded by a number of other factors.
“Packers are experimenting too much with this market in a season with too much volume,” he told Fruitnet.com. “We have had days when 100 pallets have arrived in Guangzhou and a total of 200 pallets throughout China. No-one really knows what the capacity for this market is on Chilean cherries, so the boundaries need to be tested, but with more of a conservative approach, especially in a bumper year like this.”
While China is a market that will pay handsome premiums for exceptional-quality product, it is also one that won’t pay much at all for substandard fruit. Unlike many other markets around the world, there are few, if any, outlets for this inferior-grade imported fruit in China amid the abundant domestic supplies. And with the high costs of entry, suppliers can soon find themselves facing losses if their product does not come up to scratch.
It would appear that Chilean cherry suppliers have failed to heed the need for such a quality focus in China.
“Some of the packers are sending ‘orchard runs’, basically all the fruit that came off the trees, from small sizes to large, into this one market, instead of putting small fruit into a price-sensitive market that has demand for small fruit and only premium fruit into a market that wants premium fruit and is willing to pay for it,” said Mr Bosch. “This is turning the market into a roller coaster.”
China’s stringent and distinct specifications in terms of quality and sizing have clearly not been communicated to packers, he added.
“This market requires a specific size and colour and these requirements are different in the south than they are in the north. Anything that falls outside these requirements brings down prices, and some packers and importers are not following these requirements,” Mr Bosch observed. “This is very evident on the sizes marked on the cartons. Every packer is calling their fruit size something different, be it Extra Jumbo (XJ), Jumbo Jumbo (JJ), Super Extra Jumbo (SXJ) or Giant (G). These different labels often amount to the same thing but they cause confusion in the market.”
The lofty opening prices for Chilean cherries in China this season also appear to have been a mixed blessing for the trade. “I feel that the opening prices were too high, scaring some consumers away and slowing sales rates,” said Mr Bosch. “What then followed was a price plunge, with importers carrying stock of high-priced cherries in a declining market, so everyone was trying to sell immediately before they lost any more.”
Looking ahead to when the red ink has dried, Mr Bosch believes the market collapse is likely to result in more consolidation, both among suppliers and receivers. “We could see consolidation of packers with more market knowledge, and on the importers end with fewer importers handling this high-value, popular product with more knowledge of the requirements of the various China markets,” he suggested.
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