Few people expect that the fruit growing sector of the Valley will have a positive season. Next year will be complex both domestically, due to the country's economic recession, and abroad, as more and more countries are closed to trade. While the it's true that the scenario in the world today can change dramatically, and some sectors can go from earning millions to losing millions in a few weeks, and vice versa, the fact is that fruit growing has a certain degree of predictability. There are five main variables that the sector should take into account when evaluating the issues it will face in the next season.
• Production. Even though there still is no harvest forecast, a survey carried out by producers and entrepreneurs shows that the projected volumes of pears and apples for the next season will remain similar to the volumes achieved in the 2017/2018 season, i.e. a little over 1 million tons. The majority of those consulted didn't want to risk speculating how the quality of the fruit will be, as they have to wait to see how the hail and radiation will impact the region's fruit in the coming weeks. According to projections, this year the region will market more than 725,000 tons of fresh pears and apples. The concentrate industry, which is facing a structural crisis, estimated it would process some 300,000 tons of fruit this season.
• Markets. The European Union harvested 12.6 million tons of apples this year, i.e. 36% more than last year. Meanwhile, US Apple Outlook projected the US would end the season with 5.1 million tons of apples, slightly more than the 4.9 million in produced in 2016/2017. Russia harvested 1.5 million tons, 10% more than in the last season. The increase in apple production in the northern hemisphere worries regional exporters. Meanwhile, this year pear production increased by 5% (EU-28 and the United States), i.e. nearly 143,000 tons more than in the previous year. In addition, local exporters are worried that the new president of Brazil, Jair Bolsonaro, might impose restrictions on imports.
• Funding. This is one of the biggest problems that the sector must overcome. This season, credit is once again absent in one sector. Currently, public banks offer an 8% rate for traditional pre-financing dollar bank loans that are guaranteed by exports, while private banks have a 12% rate. Years ago this rate stood at 3 to 5% per year. The rate for local loans and check sales will skyrocket to up to 50% per year, and in some cases it will reach three figures. Faced with this scenario, exporters will seek financing through advances from importers.
Currencies The devaluation of the peso undoubtedly gave oxygen to an important part of the fruit chain. However, everything indicates that, since it is an electoral year, the government will implement exchange rate monetary policies to help lower the high levels of inflation suffered by the economy. This means that the companies will lose the competitive advantage they gained thanks to this year's exchange rate in a short time, and that their costs in dollars will leave the fruit of the Valley out of the market. The Valley's fruit chain is also concerned about the threat of a super-dollar.
• Political context. This will be a complex year for the country. With an economy in recession, high interest rates and a lack of markets, the upcoming president elections add more doubts than certainties about the future. As a result, the country's risk rate is above 700 basis points, which shows that foreign investors are uncertain about the country.
Corporate responsibility - change is needed
What happened with Russia this season was terrible. Entrepreneurs did almost everything wrong. They packed and placed fruit that had no value in cold storage, hoping that the market was going to validate prices on a poor quality pear. The fruit then has to pay for the entrepreneurs bad decisions. That is always the case. The people most affected by this type of malpractice are independent producers.
Fruit growing is one of the few activities in the country that stumbles twice on the same stone. Something similar happens each year. When it's not the pear, as in this season, there are issues with apples. Some entrepreneurs should be more aware about what it means to manage the producer's fruit. There has been a lot of irresponsibility so far.
