US prune exports unlikely to benefit from a poor season in the Southern Hemisphere

Published 2021년 12월 9일

Chile’s prune exports dropped to only 33,212 MT in the first three quarters of 2021, 28% lower than the same period last year. While this was expected after their crop was nearly halved by untimely rains before the harvest started, there are very few prune suppliers that can step up to fill the gap and the US is the only realistic supplier of large volumes. However, if the US were to increase their exports, ending stocks could plummet to less than half of what it was at the beginning of the 2020/21 season. The ongoing drought in California means suppliers would rather be holding on to their stock. Despite it being the main prune exports season from the US, prices remain high due to the perceived drop in inventory.

The Southern Hemisphere running on empty

2021 marked one of the lowest prune crops in recent history, as world production dropped as low as 140,000 MT, according to the International Nut and Dried Fruit Council (INC). Chile’s prune harvest took a hard knock when rain fell out of season in Chile in January, just before the harvest was about to start, which nearly cut the crop in half. A similar situation played out in Argentina. Chile is typically the world's largest exporter of prunes, followed by the US and Argentina.

Source: INC

Prune production in Chile was a meager 35,000 MT in 2021, down from 68,212 MT in 2020 and 72,500 MT the 5-year average. According to INC estimates, Chile had 6,000 MT of inventory going into the season and the crop was 35,000 MT. Between January and September, Chile already exported 33,212 MT and domestic consumption still needs to be subtracted from this volume. Argentina started the season with 2,000 MT and production is pegged at 12,000 MT. Exports for M01 - 09 of 2021 were 5,700 MT and domestic consumption also needs to be accounted for. All things considered, there are very few prunes left in South America. Stocks in Chile and Argentina are depleted and could wind to a complete halt until the next harvest starts in February 2022.

Exports from other countries have not increased

The 2021/22 MY in the US started on August 1st which is also when the harvest normally starts coming in. According to INC estimates, beginning stocks were respectable at 43,800 MT, and production was estimated at 68,000 MT.

However, the crop harvested in 2020 was only 53,000 MT, much lower than the 5-year average of 70,000 MT. Beginning inventory in the last MY was 77,500 MT, much higher than at the start of this MY.

So, going back to when the extent of the damage to the Chilean crop became apparent, it was expected that the US will greatly increase exports to fill the gap. Export data reveals that this was not the case.

While global exports for Q1-3 still need to be tallied for every country, looking at the globe’s top 5 prune exporters already gives a clear picture. For Q1-Q3, Chile’s prune exports were 33,212 MT, 28% lower than in 2020. Exports from the US were only 14% higher than in 2020, at 27,452 MT, Argentina’s prune exports dropped by 64% over the same period, with minor increases from France and Spain. All in all, this means that the gap left by Chile and Argentina has not been filled.

Source: ITC Trade Map

Why isn’t the US cashing in?

Prune exports from the US for Q1-3 are only slightly up from 24,059 in 2020, to 27,452 MT in 2021, and keep in mind that demand for many commodities was subdued by Covid-19 restrictions in 2020.

The surprisingly small increase in US exports is due to a combination of factors. First off, the ongoing drought in California is still a major concern. Most fruit and nut trees are irrigated in California and need more irrigation water during a drought. Water levels in reservoirs are also a concern as these conditions persist. The crop estimate of 68,000 MT might be within reach, but it is more likely that the final crop will be lower, than higher.

Source: US Drought Monitor

Another reason is that ending stocks might drop even further if exports are not curbed. The 5-year average domestic consumption in the US is 47,762 MT for the year ending 2019, according to INC estimates. 5-year average exports(for Q3-Q2 to be more consistent with the marketing year) is 34,018 MT. Unless there are changes on the demand side, ending stocks might drop to only half of what it was at the beginning of the 2020/21 season. Keep in mind the drop in exports coming from South America and the global boom in demand for commodities, and a drop in exports might be unlikely.

Sources: INC, ITC Trade Map

While these reasons are all related, finally the price brings balance to the market. the unit value of US exports has been much higher than that of South America for much of 2021, however, with stocks running out in Chile and Argentina, their prices have caught up. Exports leaving the US were still more expensive than from South America by the end of September.