How Is the Weak U.S. Dollar Affecting You?
A weak U.S. dollar means different things to different people and countries. When measured against foreign currencies, it can be a strength or disadvantage, opportunity or problem, depending on who is importing or exporting. We asked tree fruit industry representatives from around the world their thoughts on the devalued dollar.
Grove, Tasmania, Australia
Garry Langford said Australia is exporting less because of the weak U.S. dollar.
Most of their exports go to Southeast Asia, where they almost always deal in U.S. dollars. The Australian dollar has appreciated 20 percent against the U.S. dollar over the past six months, he said.
"It has physically slowed down exports for us," said Langford, who manages the Australian Pome Fruit Improvement Program, an evaluation program for new varieties. Most of the producers in Tasmania grow for the domestic market, he noted, but the proportion of production that they typically exported—around 10 to 15 percent—has now dropped to 5 percent. "There's less return, and that comes right off the bottom line."
But Langford said that money markets go in cycles. "You just have to live long enough to get through them."
"The weak U.S. dollar has had a strong impact and, for me personally, a good impact,'" said Pierre Herman, adding that he is taking advantage of the exchange rate and recently purchased a straddle trailer from the United States for fruit bins. "Now, when we pay royalty to U.S. fruit breeders, it's very cheap."
The United States has such a big economy that it impacts countries around the world, said Herman, who is with Castang Nursery. "When you cough in the United States, we freeze in France."
Apple production costs have steeply increased in the last year or so. With the euro rising, freight, transportation, and input costs have all gone up. He said that 20 years ago, France produced 2.5 million bushels of apples. Today, it produces 1.5 million bushels. Apple acreage has followed a similar trend, declining to 29,000 hectares now, from 50,000 hectares two decades ago. Labor is very costly in France, he added, making cherries "too expensive" to grow.
The weak dollar has very much affected Chile, from the nursery to grower, said Uwe Pfeil of Andes Nursery Association. "We export everything based in U.S. dollars. There has been a 15 to 20 percent drop in the currency rate," he said. His country's exports to Europe have not been affected, but the exchange makes table grape exports to the United States expensive.
Growers have experienced a 25 percent increase in labor costs in the last year, he added. "It's hard to produce a premium product and make a profit," he said, adding that some customers recently backed out of nursery contracts because of financial problems.
"Everything we plant is for export," he said. Chile exports about 70 percent of its agricultural products to 110 countries, according to Pfeil. "But our main market is the United States."
Firm domestic prices
Glady Bellamy, president of Columbia Marketing International, a vertically integrated grower-shipper and exporter of Washington apples, pears, and cherries and fruits from other states, said, "Obviously, the weak dollar has been a big help to our export products." The weak dollar will also keep domestic prices firm throughout the summer, he said.
"Most of the Southern Hemisphere shippers are looking for better alternatives than shipping to the U.S. market with the terrible exchange rate," Bellamy said.
"We would expect total imports on apples and pears to be reduced as much as 30 percent from last year's totals."
"The weak dollar will give the United States more opportunity in established markets like the United Kingdom and continental Europe," said Yavez Taner, head of the Alara Company that grows, packs, and exports fresh cherries and figs. "It will give the United States more opportunity to penetrate markets in Europe."
Taner said the immediate effect on his company is not as great because they trade in euros when selling their fruit to European countries. However, he predicts there will be stronger competition from American cherry producers. That will in turn reduce prices paid to the Turkish cherry growers for their product.
"But export prices will still be better than prices for cherries shipped to domestic markets," he said.
Rising labor costs
Mauricio Frias, horticultural consultant, said that growers would need to take stock of their costs and current financial situation after harvest. Labor, fuel, pesticides, fertilizer, and other production costs have increased sharply. Increased labor costs are a sign of a better economy in the country, he added.
Frias said that in February 2008, the exchange rate was 435 pesos to one U.S. dollar. Just four years ago, the exchange was 730 pesos for a dollar.
"The fruit industry in Chile is starting to compress," he said. "Production is not going down, but there are fewer growers." Agriculture is not as important to Chile as it once was, he added, noting that other sectors like copper mining have gained in importance.
Frias, who is a private consultant for producers of apples, cherries, pears, and kiwis, said that apple production continues to move south in his country.
Growers are putting money into new land to grow apples with better color, flavor, and storability. Last year, growers told him that they were unable to purchase Malling 9 rootstock from some of the nurseries because they were sold out.
Dan Boyer, owner of RidgeTop Orchards, sends much of his production to countries in Central America, including Costa Rica, Honduras, Nicaragua, and Trinidad. About one-third of his apple production is exported.
The weak U.S. dollar should encourage export movement, he said. In addition, tariffs continue to drop under the Central America Free Trade Agreement.
"We should notice a difference in movement in the coming year," Boyer said "Exports play an important part in keeping demand strong for apples. We have a lot of Reds [Red Delicious] and we can't move all of them in the domestic market."