Poor returns fuel cherry dumping allegations
Production on both sides of the Washington-B.C. border has soared in recent years.
Cherry growers in British Columbia, Canada, have announced plans to launch a trade action against Washington State growers following indications that cherries were dumped in markets in Canada last summer.
Dumping occurs when a product enters a market at below the cost of production. B.C. growers claim that Washington State cherries entered Canada at prices as low as U.S.$11.60 for a 20.5-pound box in 2006, a figure the Okanagan Cherry Kootenay Growers’ Association reckons was less than the cost of production, packing, and freight.
Association chair Christine Dendy declined requests for an interview about the allegations or the potential for trade action, saying, “We are not in a position to make any comments at the moment.”
Typically, an industry conducts its own investigation when members allege dumping. When it has sufficient evidence to make a case, industry representatives file a formal complaint with the Canada Border Services Agency. The complaint triggers an official investigation by the agency. Should the agency find evidence of dumping, shippers are slapped with a temporary duty that raises the cost of the product to a level approximately equal to that of domestic product pending a final determination.
British Columbia imported just over U.S.$12.6 million in cherries from the state of Washington through the end of August 2006, down from the U.S.$13.2 million imported in 2005 but approximately twice the volumes imported in 2003 and 2004. A decade earlier, cherry imports from Washington totaled just U.S.$2.2 million.
Production is up
The growing value of cherry imports hasn’t been for lack of production in Canada. In fact, production on both sides of the border has soared in recent years, creating increasingly competitive market conditions. British Columbia now boasts 2,655 acres of cherries, of which 2,545 acres were planted with assistance from the province’s 15-year-old orchard replant program. New late-season varieties such as Lapins, Staccato, and Sweetheart led the plantings with a promise of giving B.C. growers an edge in the marketplace.
In 2005, the province produced 14.7 million pounds of cherries valued at Can.$19.9 million (U.S.$17.7 million), a strong showing over the harvest of just 5 million pounds that garnered growers $5.7 million (U.S.$5 million) in 1996.
Though 2006 crop figures aren’t yet available, B.C. Tree Fruits Ltd. in Kelowna handled 35 percent more cherries this year than it did in 2004, previously the best year on record. A similar increase provincewide would put the 2006 harvest on track to top 19 million pounds.
Rising production has helped push down returns on the new varieties, however, and Washington State growers have come in for some of the blame.
Growers south of the border have also been renovating their orchards, extending their own season with both early- and late-season varieties. This year, Washington saw its largest cherry crop ever with a packout of 289 million pounds harvested from some 32,000 acres.
But Andrew Willis, domestic marketing and promotions director for Northwest Cherry Growers, attributed softer pricing to the quality of some of the fruit that was shipped out rather than to an abundant crop.
“There was a softening of the market due to a number of factors that were not oversupply,” Willis said. “We strongly believe that the market is strong enough, and stronger still than the supply that is out there.”
However, the U.S. Department of Agriculture reports that an 18-pound carton of Bing cherries was selling at U.S.$40 to U.S.$45 in June (compared with U.S.$30 a year earlier) but as shipments increased week by week through mid-July, prices fell to below last year’s levels. Cherries entering Canada in July were averaging $28.75 (U.S.$25.63) a box, and reports of shipments coming in at $13 to $18 (U.S.$11.60 to U.S.$16.05) a box surfaced.
Still, heavy crops and low prices dogged cherry markets around the globe this year, said Reg Mann, whose Global Fruit Brokers Ltd. in Creston ships to the U.S., Europe, and Asia.
Okanagan growers have traditionally enjoyed premium pricing on high-quality cherries flown into foreign markets, but this year buyers in the United Kingdom and Europe opted for cheaper, decent quality U.S. fruit. Mann said cherries shipped overseas in containers were often half the price of an air shipment and arrived in not too bad shape.
By sea, by air
“Our fruit that was going over by air, it wasn’t accepted. And when it was accepted, [buyers] were picky about quality and the whole bit. It put the growers in a real bad situation.”
A similar scenario played out in Asia, where Mann said B.C. growers were shipping out product at $50 (U.S.$44.60) a box from Vancouver, while U.S. growers were shipping from Seattle at $30 (U.S.$26.75) a box.
“[It’s] a big drop,” Mann said. “And we’ve only hit the tip of the iceberg. I personally feel that this year is a wake-up call for the cherry industry.”
Though Mann was fortunate to sell all the product he handled this year, he’s considering using containers for overseas shipments next year to keep pace with U.S. packers. He understands others are planning to do likewise.
Mann also wonders if growers and packers should be looking at markets closer to home, noting that he was still able to command premium prices for his fruit in some U.S. markets even as reports were circulating of U.S. fruit undercutting B.C. cherries in Canada.
But large crops remain a challenge. “If we get another year where everything works well, overseas has excellent markets and Canada does and the United States, it’s going to be terrible,” Mann said. “People will be leaving their fruit on the trees, because it’ll be cheaper than to pick it. I thought we had another three or four years of clear sailing. After this year, I’m not sure.”
Despite the greater volumes of fruit hitting the market, B.C. Tree Fruits domestic sales director Peter Austin said prices remained fairly consistent with pricing seen in recent years. Though overseas markets weren’t delivering great prices, domestic markets were solid.
“We were able to put more into our historic stable markets and generated a good return overall,” he said.
Austin wasn’t aware of any specific instances in British Columbia where prices appeared to be suspiciously low, or low enough to prompt allegations of dumping.
“I really can’t tell you I saw it in B.C.,” he said. “Where we experienced that type of problem was back in eastern Canada, and any of the offshore markets that we were looking at. That’s where the prices tumbled. So we stayed out of them. We stayed out of the markets where it was unstable.”