The Outlook for Table Grapes and Stone Fruit Agribusiness Management Conference

1
The Outlook for Table Grapes and Stone
FruitAgribusiness Management Conference

• Fresno, California
• October 31, 2002

2
Objectives

• Driving factors - Table grapes and stone fruit
• Production situation - California and Chile
• Bearing acreage trends
• Production trends
• Import/export markets
• Selected variety trends - California and Chile
• Outlook

3
Driving Factors

• Pace of change - Global business environment
• Need for product differentiation - Avoid
  commoditization
• Consumer preference(s) - Variety, taste,
  appearance
• Retail consolidation Greater buyer power
• Tough foreign competition (Chile, Mexico, China)

4
Bearing Acreage TrendsSource CDFA California
Table Grape Commission
5
CaliforniaTable Grape Bearing Acreage Source
CDFA
6
Bearing acreage summary

• Modest growth in stone fruit except plums over
  past decade
• Table grape acreage grew at a slower pace than
  stone fruit over past 10 years
• California stone fruit acreage - Flat past 5
  years - 112,000 acres
• Table grape bearing acreage increased 10 over
  past 5 years - 87,000 acres

7
Tree Fruit Production (boxes)Source California
Tree Fruit Agreement
8
California Table Grape Production(21 Cartons)
Source Calif. Table Grape Commission
9
Chilean Table Grape Production(000s of boxes)
Source Eximfruit
10
Production Issues

• GWSS remains a threat to table grapes
• Weather problems and soft prices plagued the 2001
  table grape crop in Calif.
• Price volatility is a significant factor
• Significant increases in costs
• Energy
• Workmens compensation insurance
• Labor - Mandatory mediation law

11
U. S. Table Grape SupplySource California Table
Grape Commission
12
Import/Export Issues

• Chilean imports continue to be a major factor in
  the U. S. market (Chile supplies about 33 of
  total U. S. market)
• Total 2001-02 Chilean shipments to U. S. were
  about 15 higher than prior year
• Early season Chilean prices were strong
• End of season Chilean prices weaker due to
  weather problems and large supplies
• Mexican table grape imports are a growing
  competitive factor for Coachella growers

13
Import/Export Issues (cont.)

• Port labor strike significantly interrupted table
  grape exports (Asia is a significant market)
• Impact of West Coast port has not been fully
  quantified
• Mainland China supplying some Red Globes to Hong
  Kong (depressing price effect despite lower
  qualities)

14
Selected Variety Trends - Calif.21
CartonsSource CDFA California Table Grape
Commission
15
Selected Variety Trends - Chile 000s of 8.2k
boxes Source Eximfruit
16
Outlook

• American eating habits boost fresh fruit
• Increased emphasis on health
• 5 a day
• Per capital consumption of fresh fruit and
  vegetables has increased 20 since 1970
• Domestic table grapes movement and prices have
  been sluggish since late July
• West Coast port shutdown have disrupted key
  exports to the Far East - Full impact not
  quantified
• Unseasonably large supplies of table grapes in
  storage

17
Outlook (cont.)

• Price differentials between large, vertically
  integrated producers and small producers are
  widening (marketing power, relationship with
  major retailers)
• Small producers with high quality can achieve
  good returns if they develop strategic alliances
  with large organizations that possess marketing
  power
• China represents an increasing competitive threat
  for some export varieties

18
Outlook (cont.)

• Outlook for some varieties is gloomy (Red Globes)
• Plantings to match production to demand and
  timing
• Stone fruit - later varieties higher production
• Table grapes - Crimson - Late season red seedless
  (has substantially replaced ruby seedless)

19
Outlook (cont.)

• Liquidity, good capitalization, and lack of
  significant dependence on borrowed capital is
  critical
• Quality, marketing power, vertical integration,
  use of technology, and excellent management are
  keys to success

20
Thank You!

• Mark W. Burrell
• Managing Partner
• The WestMark Group
• Bakersfield, Calif.