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Argentina 08/07/2020

The impact of the supply on the processed lemon prices in Argentina

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The good weather conditions during the second half of March and the uncertainty surrounding the development of the COVID-19 virus, prompted Argentinean growers to accelerate lemon harvest.

 

This season, Salix Fruits, a fresh fruit company, has started a new business unit “Processed Products”. Its managers analyze the current situation with the marketing of lemon juice concentrate (LJC) and essential lemon oil (ELO) to help with better planning for the rest of the year.

 

Daniel Calvo, head of Salix Foods, a new division of Salix Fruits says, “For 2020 in Argentina, a drop in the lemon harvest is estimated due to the drought suffered in the end of last winter and during last spring, added to a very hot summer.”

 

As a result, a decrease of 30% in production estimated for this year. If these figures are confirmed, the volume of processing could be in the range of 1/1.1 MM tons in 2020 that is a very important drop.

 

The impact of this fall on the ELO market is already showing itself. The current season is the opposite of the previous season. 400 K tons had been processed by the end of this May, while last year, by the same time, the number was about 500 K tons. Last year high levels of processing ELO (1.4 MM tons) and a high processing figures in the Northern Hemisphere, prevented the market from gaining price stability. Prices fell to half, from the 20/22 range, it fell to 8/10 $ per kilo.

 

“In fact, the price has currently recovered to the level of 11/13 USD/kilo, and our experience is that the demand for ELO is quite inelastic. So if there is a drop in supply in that proportion, it would not be unusual for prices to rise to the range of 15/18 $ /kilo or even more”, says Esteban Lazzo, specialist in the ELO market.

 

As to the marketing of LJC, the drop in the behavior of supply is clear, but not that of demand that has not recovered from the effects of COVID-19. A price accommodation is reached a floor of 1700 $/ton. Currently, small volume operations are closed in the range of 1800/2000 $/ton, for close deliveries.

 

The Argentina's financial crisis, the lack of credit, and the stoppage of COVID-19 makes supply side processors very expensive to maintain stocks.

 

“The early purchase with volumes limited to realistic estimates seems to be the best move”, concludes Daniel Calvo.

 

More information can be found on company’s website.

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