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Citrus industry soured by lemon juice antidumping complaint from US

‘This unfortunately happened in our festive season and an investigation into all of it is quite complicated’: Venco chair Hannes de Waal.

FIFI PETERS: The lemon juice industry here in South Africa is leaving a sour taste in the mouths of American manufacturers of the same fruit juice. The local lemon juice industry is now at risk of being slapped with tariffs if investigations that are being conducted in the US show that South Africa is dumping cheaper lemon juice and unfairly benefiting from higher profit margins compared to their American counterparts.

We have Hannes de Waal, who is the chair of Venco Food Processors – which is one of the companies that is being accused of dumping – on the show. Thanks so much for your time. Can you just give us an understanding of the market dynamics of the lemon juice industry there in the US, and why you think producers there consider you have an unfair advantage?

HANNES DE WAAL: Good evening and thank you for the privilege of being able to talk to you. This came as a surprise. We received notice on January 6 and the team said the process [had] been formally started just before the end of December. So we are still investigating what was alleged at this time, and the process that we are involved in with the American trade authorities is to cooperate.

The information that they’ve requested to date has been extremely basic, so we are still learning where it’s going to end.

But if we look at the market, it’s a market of about $130 million in total for all countries that export there. I’m talking about the exporting part – Argentina, Mexico, Italy, Brazil, and Spain being our main competitors. For South Africa totally so far we’ve only been able to put produce short of $9 million worth of lemon juice. I suspect we’ll concentrate maybe on this as well into that market.

So it’s a market that’s still developing for us. Some of the lemon products that we use in South Africa prohibit us from shipping to the United States. I refer to the products that we use in order to contain [the fungus disease] black spot, which is a well-known topic in the press and involves a European trade restriction that we deal with. So at this point it’s quite a big market, quite an attractive market, but to date it’s been very small for South Africa.

We are researching this. It seems that the company that filed a petition at the end of December, on December 30, called Ventura Coastal LLC and we know that they are related to the West Coast growers, and we know many of the West Coast growers.

So we are trying to determine exactly what is going on because this came, as I said, out of the blue. Nobody formally served any papers on us. We’ve just been asked by email to cooperate and we’ll do that. It’s not a simple matter.

Obviously we are people who grow and pack and sell citrus, and then also make lemon juice. This is a bit of a new field. But we are trying to lobby the industry at the moment in order to contest this because, if we look at where we are with growth on fresh product and especially lemons, we need every market in every market channel that we have access to the world, and we definitely don’t want to sacrifice a market.

It seems to us that the cost at which we’ve been able to sell was substantially lower than the US cost, but those are the same prices that we use in order to sell all over the world.

We sell a lot of juice in Europe at those prices, and we also sell quite a bit of juice today in South Africa at those prices. If we look at the tariff that’s being quoted, 128%, that means they want us to sell at double-plus. We are going to have to learn why exactly that is.

We’re definitely not selling at lower than our cost of production because that would be plain stupidity. We don’t have that kind of money and, as you can imagine, shipping a container of lemon juice concentrate to the United States is extremely expensive. If you look at the shipping challenges, why ship something we’re not going to make pay? That would be absolutely silly.

So if it is contested that we are selling below the price of production, we are quite willing to show the opposite. But I suspect that with our total cost chain we may be able to sell more cheaply than they are selling [at] in the United States. United States lemon production is not all that big and we know on the fresh production side, prior to Argentina entering that market, they’d been able to sustain extremely high prices. We are not sure whether this is the same case.

On the other hand maybe not a surprise. We’ve learned in doing business with the United States that these things happen. It is a country that protects its agriculture and its producers, probably with good justification, but we’re going to have to learn what exactly we have to do to cooperate with their authorities and hopefully not sacrifice the market in the process.

FIFI PETERS: In the worst-case scenario that you will be, as the industry, slapped with these tariffs and new prices are then forced to more than double in that market, what’s that likely to mean for the volumes of lemon juice that you are able to export under that scenario?

HANNES DE WAAL: Well, I think the party that filed the petition obviously worked out the market’s going to be very, very small for us, because we’d have to sell at a very expensive price. At the moment South Africa has an excellent lemon – be it fresh, juice or any other – product to sell. So if you price it out of the market, you are obviously not going to have a market.

That 128%, let’s say as a cigarette-box calculation, is going to make it very difficult in our opinion. If you look at the volumes that we’ve been selling, they are so low. As I say, South Africa is about $9 million of a $140 million market for imported juice. So it’s less than 10% –7/8%. So it’s very difficult to determine. I personally think it may hamper us in selling there in future.

It will be a pity. It’s a very, very good market for juice; not only for lemons and juice, but also orange juice and other juice concentrates. So we are lobbying the industry to contest it. We’ve also asked the industry association, which I know is meeting very soon on the matter, to lobby the IDC, the Industrial Development Corporation – to lobby government – to see if we can get some assistance.

The first quotations we received are legal costs on this matter and extremely high. For Venco, the company that I chair, our turnover in that market is less than what we think legal costs are going to be in order to contest. It’s a very technical field. You need lawyers and economists on your side. So it’s not going to be an easy matter to resolve. Unofficially we’ve made contact to try and see whether we can get the issue off the table because, obviously, if we’d been warned about it, we would’ve first investigated exactly what it is that is making people unhappy [enough] to take these steps.

But I’m not sure that there is a turnaround. I suspect that we are in for 15 rounds here.

FIFI PETERS: You mentioned orange juice, and I just wonder – if we’re dealing with a request by companies over that side for protection against lemon juice, to what degree do you fear that may extend to other forms of citrus juices, like orange?

HANNES DE WAAL: I’d be careful to make that kind of conclusion. But I think at the moment it’s the lemon juice market which they are protecting. The same company has done this successfully against Argentina and Mexico before. Now they’re going for South Africa and Brazil. We are still studying the big orange juice player in the world, East Brazil, and I’m not sure exactly what the US measures are as far as that is concerned; but then the big orange juice producers sit on the other side of the American coast, more on the Florida side. So, as I say at the moment, I can only speculate.

This unfortunately happened in our festive season and an investigation into all of it is quite complicated. We were served with about a thousand pages that my colleagues are going through at the moment in order to make out exactly what it is that we have to do. At the moment we are just trying to get the basic questionnaires back to the authorities to show our intention to cooperate. I’m sure we’ll learn a lot and maybe later have more clarity on what exactly we have to do.

FIFI PETERS: Mr de Waal, thanks very much for your time, sir. We will leave it there and certainly watch this story to see how things develop and unfold. That was the chair of Venco, speaking about the threat of tariffs being imposed on lemon juice going to America.

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