Spend Matters welcomes this guest post from Liliana Minton, of Mintec.
California, “the Golden State,” is not just the home of last year’s NBA champions but also the home of the golden raisin (and all of the U.S. raisin producers).
First brought to the U.S. in the 18th century, Spanish missionaries introduced grapes and grape cultivating to Mexico and California. Production is concentrated in valleys, with the Fresno valley in California a good choice for sun-drying, due to its ideal sunny conditions.
In 2014/15, U.S. raisin consumption was relatively steady year-over-year at 1.6 pounds per person but down from the peak raisin consumption reached in 1990, due to increased competition from other dried products and higher availability of fresh fruit year-round.
The U.S. is a net exporter of raisins. For 2014/15 raisin exports were valued at over $352 million, and with around 50% of raisin production exported each year, the industry is important to the U.S. agricultural sector. The U.S. is the largest raisin producer, with Turkey a close second. Both produce around half of the global supply. Raisin prices from the U.S. and Turkey have seen diverging trends over the 2015/16 season due to changes in production.
How is the 2015/16 Season Looking?
Raisin production in the U.S. is expected to rise by 9% y-o-y, supported by increased yields in California — an incredible feat considering the long-term drought in the state. Californian growers have become more efficient with their water allocation, leading to a greater number of grape bunches per vine and higher output this season. The greater supply will cause U.S. exports in 2016 to rise sharply by 26% y-o-y, helping compensate a drop in Turkey’s output.
Turkey has become a very important player in the raisin market in the past few years. With the cost of production much cheaper than the U.S., they can export raisins more cheaply. In addition, Turkish raisin output has surpassed U.S. output in both 2012 and 2014.
In 2015/16, Turkish raisin production was badly affected by drought in the summer months, leading to an almost 40% y-o-y fall in output. Consequently the price went up by 24% y-o-y, which in turn led to the forecast of exports in 2016 to fall 33% y-o-y.
So all in all, global raisin production is forecast to fall by 6% y-o-y in 2015/16 to 1.14 million tonnes. We expect Turkish prices to continue to trend upwards in 2016, with the premium between U.S. and Turkish prices reducing.
As demand is expected to remain unchanged this season, it will be a good opportunity for the U.S. to firmly keep its number one position in the industry.