MercoPress. South Atlantic News Agency

Chilean farm exports fear “cheap” dollar and current situation in Japan

Juan Miguel Ovalle, the president of the Chilean Pork Producers Association

Due to the falling U.S. dollar and the current crisis in Japan stemming from last week’s devastating earthquake and tsunami, Chilean exports may be hit hard with losses this year, despite government assurances to the contrary.

Luis Mayol, president of the National Society of Agriculture, explained the increase in unemployment in the export sector as a result of the falling dollar and other international issues that have decreased profitability in the agriculture sector.

“Many crops in the export sector are no longer profitable or have greatly reduced in profitability, which prevents us from hiring more people. We have seen an increase in the labour force during this harvest season however it is still much lower than similar periods in previous years”.

Mayol added that “the dollar makes it impossible to recruit the people you need and pay the corresponding salaries.”

The low value of the dollar coincides with decreased export opportunities to Japan. One key example is in the pork industry, where Japan is Chile’s largest commercial partner, importing 40.2% of Chilean pork exports. Given the current crisis in Japan, that percentage will most likely fall, forcing the Chilean market to adjust pork prices.

Juan Miguel Ovalle, the president of the Chilean Pork Producers Association said that the coming weeks in Japan could see a decrease in consumption across the country, and acknowledged that the lower consumption could lead to a contraction in domestic prices in Japan.

Ovalle added that Chilean domestic companies might have to readjust their production to other markets. However he noted that currently several companies have already contacted their Asian distributors without receiving instructions to restrict pork shipments to Japan.

Chile’s second largest pork exporter, Maxagro, is currently considering redirecting their product to other Asian countries such as Korea and China. According to assistant manager, Rolando Contreras, the redirection would begin within the next few months.

Several pork companies are opting to switch from exports to domestic sales, which could hinder the pork economy within Chile, leading to an oversupply of pork and lowered prices.

The same phenomenon occurred in Chile in 2008 when companies had to boost domestic sales after Japan banned Chilean pork imports following the discovery of dioxins in the meat.

By Amanda Reynoso-Palley – Santiago Times