Required Report - public distribution

**Date:** 10/10/2006

**GAIN Report Number:** AR6036

AR6036

**Argentina**

**Canned Deciduous Fruit**

**Annual**

**2006**

**Approved by:**

![](media/image1.wmf)Kari Rojas

U.S. Embassy

**Prepared by:**

Francisco Pirovano

**Report Highlights:**

Calendar Year (CY) 2007 peach production is forecast at 160,000 metric
tons (MT), 80,000 MT will be processed. Exports are expected to increase
to levels close to 40,000 MT. Imports will continue at low level.
Domestic consumption is forecast to continue growing due to increased
production.

Includes PSD Changes: Yes

Includes Trade Matrix: No

Annual Report

Buenos Aires \[AR1\]

\[AR\]

Table of Contents

[Section I. Situation and Outlook 3](#section-i.-situation-and-outlook)

[Production areas 3](#production-areas)

[Production 3](#production)

[Consumption 3](#consumption)

[Trade 4](#trade)

[Imports and Exports Requirements 4](#imports-and-exports-requirements)

[Prices 5](#fresh-peaches-farm-gate-prices)

[Domestic Prices 5](#domestic-retail-prices)

[International Prices 5](#international-prices)

[Production Cost 6](#production-cost)

[Section II. Statistical Tables 7](#section-ii.-statistical-tables)

# Section I. Situation and Outlook

## Production areas

Canned peaches are mainly produced in Mendoza Province, located
alongside the Andes mountains. According to up-to-date official numbers,
7,600 hectares are currently planted with cling peaches in this
province. Based on data from the latest census carried out by the
Mendoza Provincial Government, there are 1360 farmers, with an average
farm size of 5.6 hectares.

Since Mendoza is a very dry province with an annual average rainfall of
8 inches or less, all plantations are irrigated. The main source of
water is snowmelt from the Andes. There are three main production zones
in the province of Mendoza, called oases.

The oldest and most traditional production zone, the southern zone,
encompasses the departments (counties) of San Rafael and General Alvear.
It has a total planted area of 3,163 hectares, 41 percent of the total
planted area in the Mendoza Province. Farms in this area are small, not
over three hectares, and are generally subsistence in nature. Production
is characteristically low tech with yields no higher than nine MT per
hectare.

The northern and eastern zones, with 2,136 hectares in production, have
an average farm size of five hectares. Yields in this zone reach 17 MT
per hectare, which reflect the use of yield improving technology.

The last zone, the Uco Valley, is where more developed and active
farmers have settled during the past 20 years. Also, larger plantations,
most of them owned by canneries, have been established in this zone.
With a total planted area of 1,550 hectares, the average farm size in
this area is eight hectares, and yields reach 25 MT per hectare.

According to a survey carried out by the Rural Development Institute of
Mendoza (a private/public sector entity closely related to the
provincial Ministry of Economy) together with two industry NGOs, area
planted to peaches increased in CY 2005 by 105 hectares in the
Northeastern zone, and 245 hectares in the Uco Valley. Also, 10 and 41
hectares of old plantations will be eradicated in the northeastern and
southern zones, respectively.

## Production 

Industry sources report that the current development of the CY 2007 crop
will be 25 percent higher than CY 2006 due to good weather conditions
and new plantations entering production. However, in October frosts may
still occur, therefore total peach production may vary largely depending
on the weather conditions in the next months. Post forecasts total
production for CY 2007 at 160,000 MT (See statistical tables) of which
80,000 MT of peaches will be delivered to canneries.

Total production of fresh peaches in CY 2006 reached 126,000 MT. For CY
2006 total production for canned peaches was 67,000 MT.

## Consumption

Domestic consumption is recovering and it is expected to reach 1.7 cans
per capita in CY 2007, due to the ongoing economic recovery. Total
domestic consumption is forecast to increase in CY 2007 to 52,000 MT.

## 

## Trade

CY 2006 canned peaches exports are forecast to reach 24,000 MT as
domestic consumption is competing strongly with the export sector. Up
until the end of July 2006, registered canned peach exports reached
12,000 MT. Despite previous estimates, CY 2005 exports ended at 18,000
MT due to a larger worldwide production and the recovery of local
consumption. Mexico and Brazil are the main markets for the Argentine
canned peaches. Recently, Argentina signed an agreement with Mexico,
which established an annual quota of 10,000 MT at a zero tariff. The
normal import tariff in Mexico is seven percent. This quota will be
allocated by the Secretariat of Agriculture of Argentina which will give
priority to those canneries that have exported canned peaches to
somewhere in the last three years. Only 15 percent of the quota will be
allocated to companies that have not previously exported their product.

  --------------- ------------ -------------- ------------ -------------- ------------ --------------
  **Country**     **2003**                    **2004**                    **2005**     

                  **USD**      **Quantity**   **USD**      **Quantity**   **USD**      **Quantity**

  **World**       18,839,330   33,272         17,353,863   24,166         11,990,728   17,729

  **Mexico**      2,041,976    3,427          4,873,066    6,544          4,366,605    6,266

  **Brazil**      2,450,869    4,280          1,807,404    2,220          2,045,320    2,702

  **Uruguay**     577,275      918            330,939      452            1,079,135    1,655

  **Paraguay**    332,926      577            533,950      701            850,757      1,275

  **Chile**       2,366,904    4,649          1,211,399    1,650          576,548      812

  **Bolivia**     478,373      778            491,949      619            548,489      786

  **Thailand**    0            0              936,312      1,499          485,963      864

  **Guatemala**   205,421      331            452,459      616            382,061      561

  **South Korea** 135          0.197          0            0              187,337      300

  **EU**          5,217,328    8,935          4,916,917    7,197          72,578       100

  **United        1,304,754    2,185          518,797      842            64,747       97
  States**                                                                             

  **Egypt**       0            0              0            0              59,400       106

  **Others**      3,863,369    7,192          1,280,671    1,826          1,271,788    2,205
  --------------- ------------ -------------- ------------ -------------- ------------ --------------

## Imports and Exports Requirements 

+----------------------------------------------------------------+-----+
| ###### Outside the Mercosur Area                               |     |
+----------------------------------------------------------------+-----+
| Import Tariff                                                  | 14  |
|                                                                | %   |
+----------------------------------------------------------------+-----+
| Specific Minimum Import Tariff US\$/Kg.                        | 0   |
+----------------------------------------------------------------+-----+
| Statistical Tax                                                | 0.  |
|                                                                | 50% |
+----------------------------------------------------------------+-----+
| Export Tax                                                     | 5.  |
|                                                                | 00% |
+----------------------------------------------------------------+-----+
| Rebates                                                        | 4.  |
|                                                                | 05% |
| Containers with more than 2.5 kg.                              |     |
|                                                                | 6.  |
| Containers with 2.5 kg. or less                                | 00% |
+----------------------------------------------------------------+-----+
| ###### Inside the Mercosur Area                                |     |
+----------------------------------------------------------------+-----+
| Import Tariff                                                  | 0.  |
|                                                                | 00% |
+----------------------------------------------------------------+-----+
| Export Tax                                                     | 5.  |
|                                                                | 00% |
+----------------------------------------------------------------+-----+
| Rebate                                                         | 4.  |
|                                                                | 05% |
| Containers with more than 2.5 kg.                              |     |
|                                                                | 6.  |
| Containers with 2.5 kg. or less                                | 00% |
+----------------------------------------------------------------+-----+

# Fresh Peaches Farm-Gate Prices

According to sources in the industry, farm-gate prices will increase in
CY 2007 conveyed by higher international prices as a consequence of
lower production in the Northern Hemisphere. In CY 2006, fresh fruit
prices were between US\$0.19 and US\$ 0.20 per kilo while in CY 2007
canneries estimate that they will have to pay from US\$0.25 to US\$0.30
per kilo.

## Domestic Retail Prices

+----------------+--------+-------+--------+--------+-------+--------+
| **850 grams    | **O    |       | **Sep  |        | *     |        |
| net weigh      | ctober |       | tember |        | *Sept |        |
| can**          | 2004** |       | 2005** |        | ember |        |
|                |        |       |        |        | 2     |        |
|                | **     |       | **     |        | 006** |        |
|                | (1US\$ |       | (1US\$ |        |       |        |
|                | = 2.96 |       | = 2.90 |        | **(   |        |
|                | A      |       | A      |        | 1US\$ |        |
|                | R\$)** |       | R\$)** |        | = 3.1 |        |
|                |        |       |        |        | AR    |        |
|                |        |       |        |        | \$)** |        |
+----------------+--------+-------+--------+--------+-------+--------+
| **Brand**      | **     | #     | **     | #####  | **A   | #####  |
|                | AR\$** | ##### | AR\$** | # US\$ | R\$** | # US\$ |
|                |        |  US\$ |        |        |       |        |
+----------------+--------+-------+--------+--------+-------+--------+
| **La           | 4.44   | 1.50  | 3.65   | 1.26   | 3.99  | 1.29   |
| Campagnola**   |        |       |        |        |       |        |
+----------------+--------+-------+--------+--------+-------+--------+
| **Arcor**      | 4.29   | 1.45  | 3.30   | 1.14   | 3.49  | 1.12   |
+----------------+--------+-------+--------+--------+-------+--------+
| **Canale**     | 3.39   | 1.15  | 3.00   | 1.03   | 3.99  | 1.29   |
+----------------+--------+-------+--------+--------+-------+--------+
| **Alco**       | 3.39   | 1.15  | 3.29   | 1.13   | 3.59  | 1.16   |
+----------------+--------+-------+--------+--------+-------+--------+
| **Molto**      | 3.29   | 1.11  | 2.59   | 0.89   | 4.29  | 1.38   |
+----------------+--------+-------+--------+--------+-------+--------+
| **Santa        | 3.59   | 1.21  | 3.20   | 1.10   | 3.39  | 1.09   |
| Isabel**       |        |       |        |        |       |        |
+----------------+--------+-------+--------+--------+-------+--------+
| **Average      | 3.73   | 1.26  | 3.17   | 1.09   | 3.79  | 1.22   |
| price**        |        |       |        |        |       |        |
+----------------+--------+-------+--------+--------+-------+--------+

## International Prices

+--------------------------+--------------+----------------+----------+
| #                        |              |                |          |
| ####### **Prices Table** |              |                |          |
+--------------------------+--------------+----------------+----------+
| **Country**              | ######## *   |                |          |
|                          | *Argentina** |                |          |
+--------------------------+--------------+----------------+----------+
| **Commodity**            | ####         |                |          |
|                          | #### **Peach |                |          |
|                          | es, Canned** |                |          |
+--------------------------+--------------+----------------+----------+
| **Prices in**            | **US\$ FOB** | **per uom**    | **MT**   |
+--------------------------+--------------+----------------+----------+
|                          |              |                |          |
+--------------------------+--------------+----------------+----------+
| **Year**                 | **2005**     | **2006**       | **%      |
|                          |              |                | Change** |
+--------------------------+--------------+----------------+----------+
| **Jan**                  | 700          | 670            | -4.29%   |
+--------------------------+--------------+----------------+----------+
| **Feb**                  | 690          | 690            | 0.00%    |
+--------------------------+--------------+----------------+----------+
| **Mar**                  | 610          | 750            | 22.95%   |
+--------------------------+--------------+----------------+----------+
| **Apr**                  | 630          | 700            | 11.11%   |
+--------------------------+--------------+----------------+----------+
| **May**                  | 640          | 710            | 10.94%   |
+--------------------------+--------------+----------------+----------+
| **Jun**                  | 690          | 730            | 5.80%    |
+--------------------------+--------------+----------------+----------+
| **Jul**                  | 700          | 730            | 4.29%    |
+--------------------------+--------------+----------------+----------+
| **Aug**                  | 680          |                | -100%    |
+--------------------------+--------------+----------------+----------+
| **Sep**                  | 680          |                | -100%    |
+--------------------------+--------------+----------------+----------+
| **Oct**                  | 710          |                | -100%    |
+--------------------------+--------------+----------------+----------+
| **Nov**                  | 720          |                | -100%    |
+--------------------------+--------------+----------------+----------+
| **Dec**                  | 690          |                | -100%    |
+--------------------------+--------------+----------------+----------+
|                          |              |                |          |
+--------------------------+--------------+----------------+----------+
| **Exchange Rate**        | 3.1          | Local          |          |
|                          |              | Currency/US \$ |          |
+--------------------------+--------------+----------------+----------+
| **Date of Quote**        | 10/30/2006   | MM/DD/YYYY     |          |
+--------------------------+--------------+----------------+----------+

##  Production Cost

+---------------------------+--------------------+--------------------+
| **PEACH COST - CARTON 24  |                    |                    |
| X 1 - LIGHT SYRUP (14-16° |                    |                    |
| BRIX)**                   |                    |                    |
+---------------------------+--------------------+--------------------+
| **STANDARD QUALITY**      |                    |                    |
+---------------------------+--------------------+--------------------+
| ######### Inputs          | **CY 2005 US\$**   | **CY 2006 US\$**   |
+---------------------------+--------------------+--------------------+
| **Raw material**          | 0.147              | 0.150              |
+---------------------------+--------------------+--------------------+
| **Sugar**                 | 0.011              | 0.011              |
+---------------------------+--------------------+--------------------+
| **Corn syrup**            | 0.010              | 0.010              |
+---------------------------+--------------------+--------------------+
| **Tin plate**             | 0.155              | 0.165              |
+---------------------------+--------------------+--------------------+
| **Paperboard**            | 0.012              | 0.013              |
+---------------------------+--------------------+--------------------+
| **Labels**                | 0.008              | 0.009              |
+---------------------------+--------------------+--------------------+
| **Labor**                 | 0.035              | 0.042              |
+---------------------------+--------------------+--------------------+
| **Energy / Fuel**         | 0.005              | 0.007              |
+---------------------------+--------------------+--------------------+
| **Subtotal**              | 0.383              | 0.407              |
+---------------------------+--------------------+--------------------+
| **Other inputs**          | 0.022              | 0.028              |
+---------------------------+--------------------+--------------------+
| **Total direct cost**     | 0.405              | 0.435              |
+---------------------------+--------------------+--------------------+
|                           |                    |                    |
+---------------------------+--------------------+--------------------+
| **Indirect cost**         | 0.125              | 0.135              |
+---------------------------+--------------------+--------------------+
|                           |                    |                    |
+---------------------------+--------------------+--------------------+
| **Freight to Buenos       | 0.020              | 0.020              |
| Aires**                   |                    |                    |
+---------------------------+--------------------+--------------------+
| **Total cost**            | 0.550              | 0.590              |
+---------------------------+--------------------+--------------------+

# Sources in the industry stated that inland export costs through Buenos Aires port are extremely high. One container costs US\$1200 of which US\$700 are port expenses and US\$500 corresponds to freight from Mendoza to Buenos Aires. Another option would be to ship through the port of Valparaiso in Chile but in that case the freight would be US\$700 and the port expenses US\$500. The main problem with exporting through Chile is the bad condition of the road after every winter snowstorm. The technology used to clear the road is so old that trucks must wait days after every storm. This adds much uncertainty to the business and therefore most exporters choose to use Buenos Aires instead.

#  

# Section II. Statistical Tables

<table>
<colgroup>
<col style="width: 13%" />
<col style="width: 7%" />
<col style="width: 9%" />
<col style="width: 9%" />
<col style="width: 7%" />
<col style="width: 9%" />
<col style="width: 9%" />
<col style="width: 7%" />
<col style="width: 9%" />
<col style="width: 9%" />
<col style="width: 9%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="11"><strong>PSD Table</strong></td>
</tr>
<tr class="even">
<td><strong>Country</strong></td>
<td colspan="10"><strong>Argentina</strong></td>
</tr>
<tr class="odd">
<td><strong>Commodity</strong></td>
<td colspan="6"><strong>Peaches, Canned</strong></td>
<td colspan="4">(MT)(MT, Net Weight)</td>
</tr>
<tr class="even">
<td></td>
<td colspan="3"><p>2004</p>
<p>Revised</p></td>
<td colspan="3"><p>2005</p>
<p>Estimate</p></td>
<td colspan="3"><p>2006</p>
<p>Forecast</p></td>
<td>UOM</td>
</tr>
<tr class="odd">
<td></td>
<td>USDA<br />
Official</td>
<td>Post<br />
Estimate</td>
<td>Post<br />
Estimate<br />
New</td>
<td>USDA<br />
Official</td>
<td>Post<br />
Estimate</td>
<td>Post<br />
Estimate<br />
New</td>
<td>USDA<br />
Official</td>
<td>Post<br />
Estimate</td>
<td>Post<br />
Estimate<br />
New</td>
<td></td>
</tr>
<tr class="even">
<td><strong>Market Year Begin</strong></td>
<td></td>
<td>01/2005</td>
<td>01/2005</td>
<td></td>
<td>01/2006</td>
<td>01/2006</td>
<td></td>
<td>01/2007</td>
<td>01/2007</td>
<td>MM/YYYY</td>
</tr>
<tr class="odd">
<td>Deliv. To Processors</td>
<td>153000</td>
<td>153000</td>
<td>153000</td>
<td>140000</td>
<td>140000</td>
<td>126000</td>
<td>0</td>
<td>0</td>
<td>160000</td>
<td>(MT)</td>
</tr>
<tr class="even">
<td>Beginning Stocks</td>
<td>1594</td>
<td>1594</td>
<td>1594</td>
<td>1594</td>
<td>1594</td>
<td>1500</td>
<td>594</td>
<td>594</td>
<td>1000</td>
<td>(MT, Net Weight)</td>
</tr>
<tr class="odd">
<td>Production</td>
<td>70000</td>
<td>70000</td>
<td>70000</td>
<td>65000</td>
<td>65000</td>
<td>67000</td>
<td>0</td>
<td>0</td>
<td>80000</td>
<td>(MT, Net Weight)</td>
</tr>
<tr class="even">
<td>Imports</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>(MT, Net Weight)</td>
</tr>
<tr class="odd">
<td>Total Supply</td>
<td>71594</td>
<td>71594</td>
<td>71594</td>
<td>66594</td>
<td>66594</td>
<td>68500</td>
<td>594</td>
<td>594</td>
<td>81000</td>
<td>(MT, Net Weight)</td>
</tr>
<tr class="even">
<td>Exports</td>
<td>28000</td>
<td>28000</td>
<td>18000</td>
<td>26000</td>
<td>26000</td>
<td>24000</td>
<td>0</td>
<td>0</td>
<td>28000</td>
<td>(MT, Net Weight)</td>
</tr>
<tr class="odd">
<td>Domestic Consumption</td>
<td>42000</td>
<td>42000</td>
<td>52094</td>
<td>40000</td>
<td>40000</td>
<td>43500</td>
<td>0</td>
<td>0</td>
<td>52000</td>
<td>(MT, Net Weight)</td>
</tr>
<tr class="even">
<td>Ending Stocks</td>
<td>1594</td>
<td>1594</td>
<td>1500</td>
<td>594</td>
<td>594</td>
<td>1000</td>
<td>0</td>
<td>0</td>
<td>1000</td>
<td>(MT, Net Weight)</td>
</tr>
<tr class="odd">
<td>Total Distribution</td>
<td>71594</td>
<td>71594</td>
<td>71594</td>
<td>66594</td>
<td>66594</td>
<td>68500</td>
<td>0</td>
<td>0</td>
<td>81000</td>
<td>(MT, Net Weight)</td>
</tr>
</tbody>
</table>