Australian grapes have developed a strong following in the China market over the past few years, with Crimson Seedless in particular scoring highly on flavour and commanding the sort of prices that make the comparatively high procurement costs acceptable.
This year, however, the figures don’t appear to be stacking up for the trade, as a rain-soaked growing season has seriously impacted on quality while a rising Australian currency pushes up costs.
The Hong Kong/China market for Australian grapes took a distinct turn for the worse 10 days ago, according to Tuong Luu of exporter Luu Global. “The situation was very bad for fruit with quality problems,” he said. “The selling price dropped from Yn250-260 per carton to Yn150-160 per carton. The market has received a lot of poor quality fruit from Australia this year and that’s the reason why the market has crashed.”
Mr Luu said many Australian exporters had stopped sending fruit to China over the past week, as the wholesale selling prices were too low to make any return for growers.
Market strong, but quality weak
Shirley Lin of major Guangzhou-based importer Hydix was swift to underline that the slump in prices was not a “market” issue, but rather one stemming from Australia’s quality.
“Actually in China this season, all the grapes from South Africa, Chile, Peru and Argentina have sold well. They’ve been getting excellent prices across the board and bringing good returns for growers,” she told Fruitnet.com.
“The only issue is the quality from Australia. When I travelled to Australia `earlier in the season` I could already see the problem. They’d got too much rain and there was rain damage across all varieties. When the grapes arrived in China, their condition was so weak it made sales very difficult,” she said.
Buyers are now facing “big losses” on Australian grape imports, Ms Lin added. “The average sales price is about Yn230 per carton, but the cost price is around Yn280 per carton, so the buyers are definitely losing roughly Yn50 per carton, which is about US$7 per carton,” she said. “There’s still good demand for grapes in the market. Crimson `Seedless` from South Africa are still selling for Yn155-160 per (4.5kg) carton and Red Globe from Chile has sold for around Yn250 per carton.”
David Minnis of M&A Exports, another key Australian exporter, suggested that reports of a “crash” in the China market for Australian grapes were exaggerated, however.
While prices were “falling away”, he said some fruit continued to achieve satisfactory returns. “Some fruit is still selling for Yn280-300 per carton, but there’s a lot going at the Yn220-mark or even lower,” he noted. “This price is not loss-making but the grower would be making less than they would supplying supermarkets domestically. Prices are all over the place and the market is paying for fruit on its merits.”
Wettest season since ‘74
This year’s quality issues had to be understood in the context of an extraordinarily challenging growing season, Mr Minnis added.
“We’ve had our wettest growing season since 1974. Growers had to put covers on earlier than ever before, and that affected the grapes’ ability to store sugars,” he said. “It wouldn’t have mattered if we’d have had two or three rain events and then a run of dry, sunny weather as the fruit would have developed the sugars. But it just kept raining, and every time it rains the vines take up water so you don’t get the sugars.”
Picking of Crimson was heavily delayed as a result, and even then it did not have the required sugar levels, he said. “The fruit had Brix levels of around 15.3-16.5o, which is too low; the market wants 18-20o.”
Coloration too has been a problem, with berries either failing to colour or going too dark for the Chinese market.
“There’s been a combination of dark fruit that’s not very good-eating this year, and there’s too much of it,” said Mr Minnis. “That’s not good for China, which wants light-pink, cherry-red grapes with high sugars. And that’s what the market has reacted to. With the season we’ve had, we’ve disappointed buyers, particularly on flavour.”
Climbing currency adds pressure
The Australian currency’s climb to record highs has only compounded the problems, he added. “We started out the export season with our dollar at US$0.98 but it’s just kept rising and now we’re over US$1.09. It’s hurting them `the buyers`, and it’s hurting us,” said Mr Minnis. “When we had a big season into China in 2009, our dollar was trading at around Yn4.4. Now it’s at Yn6.98-7.”
M&A Exports plans to continue exporting to Hong Kong/China through the end of May, according to Mr Minnis, who noted more of an overlap with South African fruit this year. “The South African grapes are lingering. They expected to finish at Easter but they’re still in the market now,” he said.
While he reported an unusually low presence of Chilean Crimson Seedless in China so far this year, one Hong Kong-based importer said large volumes of grapes are set to arrive from Chile in the next few weeks. “This situation will not help Australian grapes to perform in the market unless growers are willing to lower their prices,” said the importer.
Disappointing year for exports
The problems for Australian grapes in Hong Kong/China cap off a very disappointing export season in general for the industry, characterised by poor volumes and slow demand. While below-par quality has been a major culprit, fruit fly outbreaks earlier in the season also disrupted access to key markets, such as Thailand and Indonesia.
Air shipments to Thailand, which have developed into an important trade for the Australian industry in recent seasons, were effectively cut off on 20 April when a new protocol came into force that requires all product to be fumigated or cold treated for more than two weeks before shipment.
But Mr Minnis said Thai importers stopped buying Australian grapes “in any volume” much earlier in the season.
“That’s a market that did collapse `this year`,” he said. “Thailand’s been an important market for Australian grapes over the past few years, taking around 8,000 tonnes, but I’d be surprised if they’ve even taken 3,000 tonnes this season. They stopped buying after Chinese New Year because they were left with stock in cold rooms and they lost money on Australian grapes early on. They switched to Chile.”
China protocol raises interest
On a more optimistic note, the Australian table grape industry has seen unprecedented interest from new Chinese buyers this year, aided by the signing of the official protocol for market access.
Delays to the signing of the protocol, which was finally inked in late March, made it almost impossible for the trade to get import permits lined up and product cleared in time for export this season. Nevertheless, Chinese inspectors, who visited Australia recently, cleared one container of Crimson Seedless grapes, which is due to discharge in Shenzhen on 2 May.
