A strong euro relative to the dollar would seem to pull Chilean fruit to Europe, but that’s not the case as Chilean shippers are sticking with a more stable market.
“I do not think that the currency fluctuations will significantly alter the Chilean fresh fruit market distribution,” said Juan Pablo Vicuna, president of Santiago-based Dole Chile SA.
There certainly are reasons that would lead one to think otherwise, Vicuna said. At least in theory, a strong euro relative to the dollar would seem to lure Chilean fruit overseas. In practice, however, it hasn’t been the case.
“Throughout 2009 and for most of the varieties exported by Chile, the European market – and especially the euro zone – has been very poor, and the expectations for 2010 are far from being bright,” he said. “For the time being, I do not see the intention of Chilean exporters to increase programs to the EU vs. the U.S. market because of (the exchange rate).”
Chilean shipments could increase this season to the Far East, Middle East, Eastern Europe and Latin America, Vicuna said. If they do, however, it will be more because of “higher market expectations,” not less because of a difference in exchange rates.
This fall, the value of the euro may look a little more appealing to Chilean exporters than the value of the dollar, said Jim Donovan, vice president of international operations for avocado shipper Mission Produce Inc., Oxnard, Calif.
On Nov. 4, one dollar was worth 528 Chilean pesos. One euro was worth 794 pesos. A year ago at the same time, the dollar was worth 673 pesos, the euro 858 pesos.
But, Donovan said, given the volatility of markets over the past year, “that could change tomorrow,” he said. Going back a little further, to the months before the world financial collapse, the Chilean peso, buoyed by huge cash reserves as a result of soaring copper markets, was very strong relative to the dollar, Donovan said.
Now, the situation has been largely reversed, he said.
“In the economic meltdown, the success of the dollar caught everyone by surprise,” he said.
That said, Donovan agrees with Vicuna that the importance of exchange rates can be overstated. The size of a crop, for instance, can render peso versus dollar considerations largely obsolete.
“The funny part is, the fruit business is not always dictated by that,” he said. “We’re bringing in more from Chile because they have a big crop.”
And even if one country or region’s exchange rate is significantly more attractive to exporters than another’s, it’s no guarantee of success.
“You could flood the market in Europe, even at the best exchange rate, and you’re dead,” he said.
And as far as the end user is concerned, exchange rate barely registers, if it registers at all, Donovan said.
“My personal opinion is it has very little effect on price,” he said. “It’s kind of like fuel costs. They don’t get passed on to the consumer. You just kind of eat it and move on, and in time it works itself out.”
If there’s a big enough crop in Chile, getting it shipped in a timely manner trumps finding the ideal exchange rate, said Broc Bengard, vice president of Los Angeles-based Bengard Marketing.
For instance, new cherry plantings in Chile this year will guarantee the U.S. has an ample supply of Chilean cherries (which Bengard will begin importing in-November), regardless of whether the euro is stronger than the dollar or not.
“Exchange rate is always an underlying issue, but sometimes the country with the better exchange rate isn’t always the best place to ship to,” he said.
And even when Chilean fruit is detoured away from U.S. markets because of exchange rates, it’s not always a bad thing, Bengard said.
“It can help markets from becoming flooded,” he said. “It helps stabilize markets. It can be a blessing in disguise.”