European easy peelers market

  • Published on 27/01/2017 - Published by IMBERT Eric
  • FruiTrop n°246 , Page From 26 to 36
  • Free

Campaign into its second half... finally!

The professionals are eagerly awaiting the second half of the easy peelers season, so poor have the results been so far. Their hopes of regaining a better economic profitability level should not be disappointed this season, though production is set to be much bigger in the medium term. FruiTrop offers a review of the prospects for this market segment, crucial to the cash flow balance of many Mediterranean producers.

Open/Close Shop

Calamitous start to the season  

No two successive seasons are the same. The 2016-17 campaign was set to be difficult, in contrast with an outstanding 2015-16 (see FruiTrop 245). This fairly bleak forecast was based on a very high production level from the main Community market protagonists, along with small sizing due to a severe generalised drought in the West Mediterranean. Reality outdid the forecasts in mediocrity during the first half of the campaign, with extremely unfavourable weather conditions to blame. The rainfall, so scarce since early 2016, was practically tropical at the end of the year throughout the West Mediterranean. The total precipitation registered from November to December was twice the normal figure in Valencia, and 1.5 times the normal in Casablanca, with Agadir receiving in the course of these two months volumes equivalent to the 2015 annual total. The total precipitation registered from November to December was twice as great as in 2015 in Valencia and three times as great in Casablanca, with Agadir receiving during these two months volumes equivalent to the 2015 annual total. This deluge was accompanied by extremely mild minimum temperatures, making fruit preservation problematic in the production zones, and weighing down on consumption in certain European countries. Some figures relating to the Nules clementine illustrate how disastrous this first part of the season was for producers: orchard prices fell below 20 eurocents in early November in the Valencian Community, and plunged to below 15 eurocents in late November, a level 30 % below the three-year average. Furthermore, the sorting rejects in December were as high as 40 to 45 % for professionals operating with the finest brands. The lost quantities can be probably be measured in hundreds of thousands of tonnes.

A transitional January, once again marked by the presence of fragile Nules

Thankfully, the second half of the season augurs better, if the major cold spell affecting much of Europe, at the time of writing these lines, continues to spare the West Mediterranean. January is a transitional month. There is major customer interest in late varieties (Nour and Hernandina clementines, late hybrids), whereas the volumes available of mid-season varieties (Nules, Clemenvilla) are less than normal due to production losses, the magnitude of sorting rejects or Clemenvilla going on the market ahead of schedule. The professionals consider that the Nules season should see a distinct ebb from 15-20 January, i.e. two weeks earlier than normal. Nonetheless, some leftovers of this variety will continue to be sold throughout the month. Furthermore, some promotions at highly competitive prices, scheduled in December in an extremely swollen market context, have given some bad signals.  This background noise will weigh down on the market recovery, though certainly not prevent it. Furthermore, prices at the production stage of late hybrids have taken an upturn in Spain.

Very good harvest level for late hybrids, but in an ultimately favourable context

The arrival of February should completely change the market configuration, in both quantitative and qualitative terms. While the late hybrids supply is set to be bigger than last season, volumes will remain entirely manageable, in particular if we consider that these cultivars reached the market ahead of schedule in January, and the void left by the early disappearance of the clementines. In Spain, the Nadorcott harvest was not adversely affected by the rain, with the fruits at a slightly advanced stage of maturity during these spells, while the majority of the cultivation area of this variety is outside of the hardest hit zones (60 % of plantations in the region of Murcia and in Andalusia). The potential should actually be just above the forecasts and last season’s figure, with the fruit size increasing. Similarly, exports of Spanish Orri are set to be considerably bigger than in 2015-16, while maintaining a limited footing (going from 26 000 to 33 000 t). The situation is similar in Morocco, where the Nadorcott harvest is at a very good level, with an export potential in excess of 135 000 t (as opposed to 106 000 t in 2015-16). The prohibition at the US border for sanitary reasons, which has applied to fruits from Berkane since the end of the year, will not result in transfers onto the Community market (no Nadorcott production in this zone). Unlike its two West Mediterranean competitors and previous seasons, Israel has not had to cope with major climate problems this winter. Hence the Orri harvest is set for a very good level. Exports should approach 90 000 t, a figure up by approximately 30 % from the past campaign. Overall, across all sources and varieties (Orri + Nadorcott), the late hybrids supply will for the first time exceed 400 000 t. However, the rise from last season is only fifty thousand tonnes or so. Such volumes are indisputably within the market’s capacity, in particular if we consider the context mentioned above.

Structural growth trend in late hybrid volumes

This situation should enable producers to regain lucrative prices on this end-of-season segment, crucial for being so often the only one able to revitalise cash flows that have been hit by a structurally poor mid-season, without exceptions. Nevertheless, we might well ask for how long will that continue? Our average price barometer for these varieties indicates a distinct downward trend, even during last season, excellent though it was for all varieties. This is to be expected, given the distinct upward trend in volumes, which is nowhere near stopping. Producers mainly targeted this marketing period for their planting or conversion programmes, since it is the only one which has hitherto guaranteed a good profitability level and growth prospects, with the market completely saturated throughout the rest of the winter season. True, this planting trend has come to a complete halt in Israel, after two very difficult seasons in terms of climate, which sent yields and profitability tumbling. Some orchard uprooting could even occur in the climate threshold zones. Similarly, the granting of Nadorcott and Orri permits has now been frozen. Nonetheless, we can reasonably expect that the combined export potential of Spanish, Israeli and Moroccan Nadorcott and Orri should in the medium term approach 620 000 t, i.e. 200 000 t up from the present.

Don’t overestimate the capacities of the Community market, and target spring instead

On which outlets can these additional volumes be sold off? The consumption growth prospects for the Community market, where the bulk of these volumes are sold, are difficult to assess. The two examples below may nonetheless give some indications. The first line of thought concerns the orange (similar introduction process during the last decade of a new later varietal range of enhanced quality, with Lanelate and other varieties for the very end of the season). It seems to show that we should not overestimate the margins for progress. While the supplier country behind this innovation, Spain, very considerably increased its volumes sold, it was mainly through taking market share from its competitors. Overall consumption at Community level has risen only slightly. The analysis of the evolution of monthly volumes of easy peelers sold in recent campaigns can also provide some lessons, especially as to which period has the clearest growth margins. There is no perceptible dynamic in January and February (barring alternate bearing effects), when consumption is already high. There is however a very clear growth trend in March, April, and to a lesser degree in May.

Benefit from replacing Ortanique

Replacing one variety with another providing superior quality is a growth pathway which has proved its worth in the citrus industry. There is no lack of examples of this qualitative substitution, to employ the economics term, starting with perhaps the most iconic: substitution of Satsumas by early clementines such as Marisol, themselves later replaced by Clemenrubi. The new range of late hybrids may be a superior replacement for Ortanique, a variety with little going for it on the fresh market besides its lateness and transportability (large size, difficult to peel, etc.). At present, Ortanique is still well represented on the market (probably more than 150 000 t), especially in the Spanish range. Furthermore, it could be positioned as a “juice easy peeler”, as is already the case with certain distributors today, or supply the Eastern European markets seeking attractive prices.

Little growth to be expected from substitutions with Southern Hemisphere production

Conversely, the possibilities for substitution with the earliest Southern Hemisphere produce appear more limited. On the one hand, the quantities involved are limited over the period in question (volumes falling to between approximately 35 000 and 40 000 t, of which more than 20 000 t for May alone). On the other hand, they largely comprise Satsuma at this time of year, a speciality to which the British market seems to want to remain loyal.

Safeguarding the late market’s window of profitability

This article only reveals some food for thought, and makes no claim to be a market study. Nonetheless, it shows that the greatest vigilance is required as to the developments in the late easy peelers market. There are growth margins in the EU-28, through applying qualitative substitution or harnessing the potential of the spring market. However, the future volumes are not neutral. Hence work also needs to be put in to develop the remote diversification markets (North America and Asia, where it is still all to do); and why not also think about a promotion system like the one set up for club apples? Furthermore, some light also needs to be shed on the future volumes of other late cultivars which will start to enter production very shortly. The question can be posed in particular for Tango, both in terms of surface areas actually planted (no official figures) and the cultivation conditions of this variety. It is no exaggeration to say that the challenge is of utmost importance, since safeguarding the remaining window of profitability on this market segment is crucial for the Mediterranean citrus growing industries

Click "Continue" to continue shopping or "See your basket" to complete the order.