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Pandemic Delays Argentina's Exports

Dropping demand for table olives and olive oil in Brazil combined with low prices for both mean many producers are having problems remaining solvent. Some are getting emergency loans while others cut costs.

Pablo Radice for Olive Oil Times
May. 5, 2020
By Daniel Dawson
Pablo Radice for Olive Oil Times

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The COVID-19 pan­demic has damp­ened the eco­nomic prospects of table olive and olive oil pro­duc­ers in north­west­ern Argentina, as exports to the lucra­tive Brazil­ian mar­ket grind to a halt.

Slow­ing demand in Brazil com­bined with low olive oil prices, have left many pro­duc­ers barely able to pay the wages of their har­vesters. Some are even con­sid­er­ing whether or not to aban­don their groves.

Com­pa­nies seek­ing to con­tinue their activ­ity will have to review their expenses and cost sched­ules. They will either make adjust­ments, and so are one step away from aban­don­ing their farms and low­er­ing pro­duc­tion.- Julián Clusel­las, Argen­tine Olive Fed­er­a­tion

The issue of coro­n­avirus has slowed sales,” Julián Clusel­las, pres­i­dent of the Valle de La Puerta olive oil com­pany and a board mem­ber of the Argen­tine Olive Fed­er­a­tion, told Olive Oil Times. Trans­porta­tion is slower and the costs are a lit­tle more expen­sive. But the main prob­lem is that con­sump­tion is going to slow down.”

Brazil is by far the largest mar­ket for Argen­tine table olives and a sig­nif­i­cant one for the country’s olive oil as well.

See more: COVID-19 Updates

Between 65 and 70 per­cent of Argentina’s table olive har­vest is exported to Brazil, Clusel­las said. On the other hand, about 17 per­cent of Argentina’s olive oil exports from 2017 – the last year for which data are avail­able – were des­tined for Brazil, accord­ing to the Inter­na­tional Trade Cen­ter.

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We know that there are sev­eral oil pro­duc­ers who are hav­ing dif­fi­culty export­ing for lack of firm demand and are at high risk from the sit­u­a­tion that we see with the Brazil­ian mar­ket today,” Clusel­las said.

The coro­n­avirus pan­demic has hit Brazil par­tic­u­larly hard. To date, the coun­try has more than 101,000 recorded cases and an offi­cial death toll of more than 7,000. How­ever, test­ing has been lim­ited and many experts believe both fig­ures are far higher.

While much of Brazil has not closed down due to the pan­demic, the country’s econ­omy has con­tracted sig­nif­i­cantly. The real, Brazil’s cur­rency, has deval­ued by 45 per­cent, mak­ing it far more expen­sive for importers to buy Argen­tine goods.

Brazil is not a coun­try that has a flex­i­ble exchange rate, so when the cur­rency deval­ues, mer­chants do not update prices and imports fall,” Clusel­las said.

The country’s retail­ers are less likely to restock their shelves when the real deval­ues because their profit mar­gins on imported table olives and olive oil drop sig­nif­i­cantly.

Accord­ing to pro­jec­tions from the Getulio Var­gas Foun­da­tion, a Brazil­ian think tank focused on the econ­omy, imports from Argentina in 2020 are pro­jected to decrease by 11.7 per­cent com­pared to last year. In prac­ti­cal terms, that comes out to $9.32 bil­lion in lost rev­enue for Argen­tine pro­duc­ers across a vari­ety of sec­tors.

How­ever, Clusel­las added that olive oil pro­duc­ers who export to Europe and the United States have only had minor incon­ve­niences caused by the pan­demic. Accord­ing to the Inter­na­tional Trade Cen­ter, Europe and the U.S. were the des­ti­na­tion of 57 per­cent of the country’s olive oil exports in 2019.

On top of slow­ing demand in Brazil, prices for both table olives and olive oil have remained per­sis­tently low for more than a year.

Clusel­las said that many pro­duc­ers in Argentina are sell­ing for less than half the value they were in the 2017/18 crop year, with many of them unable to cover their pro­duc­tion costs. In order to remain sol­vent, some have had to turn to the country’s national bank in order to receive emer­gency loans.

Clusel­las warned that this could be the begin­ning of a vicious cycle; one in which pro­duc­ers have to cut costs in order to remain in busi­ness. This, in turn, will impact their abil­ity to return to pre-pan­demic pro­duc­tion lev­els and grow exports after the coro­n­avirus cri­sis has passed.

Com­pa­nies seek­ing to con­tinue their activ­ity will have to review their expenses and cost sched­ules,” Clusel­las said. They will either make adjust­ments, and so are one step away from aban­don­ing their farms and low­er­ing pro­duc­tion. Maybe some will even con­vert to rais­ing live­stock.”





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