While rains have hampered harvests in Argentina, San Miguel's commercial manager for fresh fruit Walter Ojeda aims to make the most of a wider lemon market window this year. In conversation with www.freshfruitportal.com, he also discussed newfound optimism for a U.S. market opening and efforts to tackle citrus black spot (CBS).

Ojeda said his country's lemon production would likely only rise slightly this year by 5-10%, but with one important difference - more volume will be up to export standard.

"Argentina can manage to export 250,000-300,000 [metric] tons (MT) of lemons worldwide and last year they were 190,000MT. That wasn’t because there was a big fall in production, but in yields for export," he said

"If you want to keep the same quality, which is a commitment Argentina has with a group we’re part of, All Lemon, if the fruit on the tree doesn’t have the right quality you’ll have to reduce your output in packing."

He said rainfall had actually been greater year-on-year in the last 12 months, but its distribution was different which had an important effect on fruit development.

"Last year in February and March there was a lot of rain but this year it’s been more gradual. 

"In terms of quality the fruit is better in the field in general, so we can work on making the most of yields."

This has implications for returns as well as it dilutes the industry's high fixed costs of production, while the market is also looking better and with Argentina's new president Mauricio Macri the sector faces a much more open and simplified operating outlook.

"Argentina usually sends 60-70% of the lemons it exports to Europe, so we are very attentive to the large production of lemons in the Northern Hemisphere which mark the start and finish of our season," Ojeda said

"What we’re hearing from Turkey is that they’ll finish a bit earlier than what was expected and compared to last year, and the Spanish production will less than last year when they had record production. This means our window can be wider than it was last year.

"Last year we were starting with big volumes in weeks 21-22, and this year we think about already being in the market then. We’re trying to start sending [fruit] in weeks 16-17."

San Miguel and other Argentine citrus companies could have even started earlier to capitalize on this window if it weren't for heavy rainfall over the last three weeks.

"Now we are suffering with a bit more rainfall which is delaying the start of the campaign," he said.

"If you talk about market conditions I'd say there is an opportunity. If you ask me about the weather, today would be the first day of harvest after having it stopped for three weeks," he said in the interview yesterday.

"We sent a bit, starting with the Russian market and Asia, but we had to stop because there were three weeks of rain that didn’t allow us to work."

He added it would take time for the fruit to be harvested and for cargo to be loaded, but the company was doing the most it could in good time in case the rains came again.

"The forecasts say the weather is unstable – they’ve announced rain again for this weekend so we're trying to start before that but it’s complicated," Ojeda said.

Forging better CBS controls

Citrus black spot (CBS) has arguably been one of the most controversial topics in the European imported fruit sector over the past year, with practically all eyes on South Africa which has intensified efforts to mitigate the problem so it can stay in the market.

But Argentina has the disease too and it has been intercepted in Argentine citrus shipments - an issue that San Miguel and the industry do not take lightly.

"For us it’s an issue that’s highly concerning. In the association All Lemon we have tried to promote the quality of our products and control them, we have made up a quality control team and set parameters that have to be met," Ojeda said.

"As we are members we use this quality seal, which means we have a series of processes and have controls with phytosanitary authorities and through the private sector with statistical controls and sampling.

"But it's not 100% control of the fruit. It comes more than anything as a complementary support between the quality control team and the awareness exporters need to have that this is a serious problem and it’s an issue we cannot allow."

He added All Lemon and its quality seal members aimed to provide training and education to the broader Argentine citrus industry.

"That's because if we don’t have the help and consent of every exporter, it’s difficult to implement any system," he said.

"In All Lemon we are changing the game a bit by uniting with other members. In All Lemon we are practically consolidating or coordinating around 80% of the lemons exported from Argentina, so on this level we’re working.

"We are opening our experience in control to the rest of the members who don’t have the quality seal. It’s intensive – it’s a proposal we are discussing with those outside the association of quality to see if we can make these controls extended."

The U.S. question

San Miguel also has citrus operations in South Africa, where the company is "solidifying" its presence and expects 8-10% lemon export growth this campaign, as well as in Uruguay.

The latter gained access to the U.S. citrus market a couple of years ago, and for the first time in 15 years - Argentina lost access in 2001 - Ojeda believes it is realistic Argentina will do the same.

"There has been a much clearer order lately, and there is an idea of opening to the world and as a company we are highly focused internationally, so in all senses this benefits us," Ojeda says of the election of Macri and a changing outlook for his country.

"In terms of the news we have, there are great expectations so that this [U.S. opening] happens in 2017 – if not, it’d be the following year, but I think we’re very close.

"Five years ago if you asked me I would have said ‘I don’t know’, but now we’re on a good path...politically we see that the conditions are there, so it’s something that’s imminent."

Inelastic lemon demand in Russia

It is common knowledge that the Russian market has not been easy since the application of counter-sanctions on the West and the decline in the ruble, which is relevant for San Miguel as 15-20% of its exports usually go to the country.

"In 2014 the average rate was one U.S. dollar for 34 rubles. In 2015 it was one dollar for 62 rubles, and now it’s fluctuating between 70-80. Clearly this plays against the demand for products," Ojeda said.

"There are products that can substitute and this has happened; in terms of fruit, a mandarin could be substituted with a watermelon. It’s not the same but it’s fruit, it’s local, it’s produced at a lower cost, and as a consumer you have the option to stop eating fewer mandarins and replace them with something else."

Thankfully for Ojeda, lemons are buffered somewhat from this phenomenon.

"While exports have fallen a bit, lemons don’t have many substitutes so demand is more inelastic so the same thing doesn’t happen with lemons as with other citrus fruits," he said.

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