Q1 2022 Limoneira Co Earnings Call
[music].
Greetings and welcome to Lehman era's first quarter of fiscal year 2022 financial results. At this time all participants are in a listen only mode.
Question and answer session will follow the formal presentation.
As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host John Mills with ICR. Thank you you may begin.
Good afternoon, everyone and thank you for joining us for <unk> first quarter fiscal year 2022 conference call on the call today are Harold Edwards, President and Chief Executive Officer, and Mark Ela Mountain Chief Financial Officer.
By now everyone should have access to the first quarter of fiscal year 2022 earnings release, which went out today at approximately four P M Eastern time.
We have not had a chance to view the release, it's available on the Investor Relations portion of the company's website at Lehman era Dot com.
This call is being webcast and a replay will be available on <unk> website as well.
Before we begin we'd like to remind everyone that prepared remarks contain forward looking statements and management may make additional forward looking statements in response to your questions.
Such statements involve a number of known and unknown risks and uncertainties many of which are outside the company's control and could cause its future results performance or achievements to differ significantly from the results performance or achievements expressed or implied by such forward looking statements.
Important factors that could cause or contribute to such differences, including risks detailed in the company's 10, Qs and 10-K s filed with the SEC and those mentioned in the earnings release.
Sept as required by law, we undertake no obligation to update any forward looking or other statements herein, whether result of new information future events or otherwise.
Please note that during today's call, we will be discussing non-GAAP financial measures, including results on adjusted basis. We believe these adjusted financial measures can facilitate a more complete analysis and greater understanding of luminaire as ongoing results of operations, particularly when comparing underlying results from period to period.
We have provided as much detail as possible on any items that are discussed on an adjusted basis.
Also within the company's earnings release and in today's prepared remarks. We include adjusted EBITDA, which is a non-GAAP financial measures a reconciliation of adjusted EBITDA to the most directly comparable GAAP financial measures is included in the company's 10-Q and press release, which have been posted on its website.
And with that it's my pleasure to turn the call over to the company's President and CEO , Mr. Harold Edwards.
Thanks, John and good afternoon, everyone. We achieved topline growth in the first quarter with revenue, increasing 3% compared to the same period last year, driven by higher avocado volume and pricing and higher lemon sales.
We expect these trends to continue throughout fiscal year 2022, and are raising our full year avocado guidance, however, lemon demand and pricing were lower than we previously expected and I will provide more details in a few moments.
As we look out to the remaining nine months of this fiscal year, we are well positioned to achieve strong top and bottom line results compared to the same period last year and our real estate development project harvest at Lima, Neera is performing so well that we are raising our expected cash flow from this project approximately 19%.
To $95 million.
I will now discuss each of our business divisions' performance for the first quarter, starting with our agribusiness.
For the first quarter of fiscal year 2022, total net revenue was $39 3 million compared to total net revenue of $38 $3 million in the first quarter of the previous fiscal year agribusiness revenue was $38 $1 million compared to $37 $1 million in the fiscal quarter of <unk>.
Last fiscal year.
Agribusiness revenue for the first quarter of fiscal year 2022 includes $24 $7 million in fresh lemon sales compared to $25 million of fresh lemon sales during the same period of fiscal year 2021.
Approximately $1 million 207000 cartons of U S packaged fresh lemons were sold in aggregate during the first quarter of fiscal year 2022.
At a $20 and 48 average price per carton compared to approximately 1.320 million cartons sold at an $18 and 91 average price per carton during the first quarter of fiscal year 2021 <unk>.
<unk> revenues in the first quarter of fiscal year 2022, and 2021 included brokered fruit and other lemon sales of $3 9 million and $3 5 million respectively.
The lemon industry is experiencing a surplus of inventory due to a number of factors, including overall tree crops throughout the California, and Arizona growing regions being significantly larger this year compared to last year and unfavorable weather conditions on the east coast combined with the omicron variant negatively affecting demand.
And for all markets, particularly our Asian markets to put this in perspective Asian markets are operating at about 50% of pre COVID-19 levels.
We are beginning to experience improved demand domestically, but we expect lemon pricing to remain pressured this fiscal year due to current industry oversupply and the Asian export market continuing to be dramatically reduced due to ahmet crop.
We believe lemon prices could improve if the Asian market comes back in the second half of this year. If we continue to see the decrease on a crime.
We recognized $800000 of avocado revenue in the first quarter of fiscal year 2022, compared to no avocado revenue in the same period last fiscal year.
Approximately 365000 pounds of avocados were sold in aggregate during the first quarter of fiscal year 2022 at a $2 <unk> average price per pound and we are raising our expected avocado volume for the full year of 2022.
We recognized $900000 of Orange revenue in the first quarter of fiscal year 2022, compared to $1 1 million.
In the same period of fiscal year 2021.
Turning now to our real estate development Division harvest at Lehman, Eric continues to perform very well and has now closed 586 lots since inception, we have now completely sold phase one of this project and are now focused on the 554 lots for sale in phase II. Additionally.
Additionally, the joint venture Lee Minera, <unk> Lewis community builders L. L C LLC of which leave Minera owns 50% has signed a letter of intent to purchase an additional 17 acres from Lehman era to potentially develop an additional 200 residential units.
We expect to receive a cash distribution of approximately $8 million by the end of fiscal year 2022 from this new transaction.
We are raising our cash distribution expectations for harvest at leaving ore from 80 million to $95 million to reflect the planned sale of the additional 17 acres and an appreciation in land value in our existing harvest at Lehman era.
We also believe there is an opportunity for even greater upside to our revised cash distributions due to the potential development of a medical campus and our east area. Two development, we will provide more information on the medical campus later this year.
Overall, we are pleased with our results in the current difficult market and are confident we will achieve higher revenue and stronger bottom line results for the remaining nine months of the year.
This will be driven by the strength of our team and decisions. We have made to expand our one world of citrus with alliances such as Wildman brothers and Elliot.
Combining our volumes service and expertise under the one world of Citrus program will enable us to provide a greater variety and service to our customers and improved third party grow returns and with that I'll now turn the call over to Mark.
Thank you Harold and good afternoon, everyone. As a reminder, there is a seasonal nature to our business with our revenue driven by varying harvest periods from year to year, our first and fourth quarters as seasonally softer quarters, while our second and third quarters are stronger. Therefore, it is best to view our business.
On an annual not a quarterly basis.
For the first quarter of fiscal year 2022, total net revenue was $39 $3 million compared to total net revenue of $38 $3 million in the first quarter of the previous fiscal year.
Agribusiness revenue was $38 1 million compared to $37 $1 million in the first quarter last year.
Other operations revenue was relatively flat to the prior year at $1 $2 million in the first quarter of fiscal year 2022 AG.
Agribusiness revenue for the first quarter of fiscal year 2022 includes $24 $7 million in fresh lemon sales compared to $25 million during the same period of fiscal year 2021.
Approximately $1 million 207000 cartons of fresh lemons were sold during the first quarter of fiscal year 2022 at a $20 48.
Average price per carton compared to approximately 1.320 million cartons sold at a $18 91 average price per carton.
During the first quarter of fiscal year 2021.
As Harold mentioned Lemon demand suffered in the first quarter from adverse weather on the east coast as well as the emergence of omicron variant, creating an oversupply of lemons in the marketplace.
Also overall tree crops throughout the California, and Arizona growing regions are significantly larger this year compared to last year and this combined with lower demand is currently weighing on pricing in the second quarter and will continue until we see the Asian markets open back up.
The company recognized $3 $9 million of brokered fruit sales in the first quarter of fiscal year 2022, compared to $3 5 million in the same period last year.
Brokered fruit sales are very seasonal and per carton prices can fluctuate and seasonally softer quarters.
The company recognized $800000 of avocado revenue in the first quarter of fiscal year 2022, compared to no revenue in the same period last fiscal year.
Approximately 365000 pounds of avocados were sold during the first quarter of fiscal year 2022 at a $2 <unk> average price per pound.
The company recognized $900000 of Orange revenue in the first quarter of fiscal year 2022, compared to $1 $1 million in the same period of fiscal year 2021.
Approximately 53000 cartons of oranges were sold during the first quarter of fiscal year 2022 at a $16 42, <unk> average price per carton compared to 119000 cartons sold at a $9 17 average price per carton in the prior year period.
Specialty citrus and other crop revenues decreased 900000 to $900000 in the first quarter of fiscal year 2022, compared to $1 $8 million in the first quarter of fiscal year 2021.
Total costs and expenses for the first quarter of fiscal year 2022 were $48 8 million.
Compared to $43 $9 million in the first quarter of last fiscal year.
The increase in operating costs was primarily attributable to the company's agribusiness associated with an increase in third party grower and supplier costs and avocado harvest cost in the first quarter of fiscal year 2022.
The company also recorded approximately $770000 in one time severance costs in the first quarter of fiscal year 2022 related to the departure of luminaire as senior Vice President and Chief operating Officer, Alex Teak.
Operating loss for the first quarter of fiscal year, 2022 increased to $9 $6 million compared to a loss of $5 $6 million in the first quarter of the previous fiscal year.
Net loss applicable to common stock after preferred dividends for the first quarter of fiscal year, 2022 was $6 $6 million compared to a net loss of $4 $3 million in the first quarter of fiscal year 2021.
Net loss per diluted share for the first quarter of fiscal year 2022 was 38 cents compared to a net loss per diluted share of <unk> 25 for the same period of fiscal year 2021.
Adjusted net loss applicable to common stock for the first quarter of fiscal year, 2022 was $6 $2 million compared to a loss of $4 $4 million in the same period of fiscal year 2021.
Adjusted net loss per diluted share was 35.
Compared to an adjusted net loss per diluted share of <unk> 25.
For the first quarter of fiscal year 2021.
A reconciliation of net loss to adjusted net loss is provided at the end of our earnings release.
Adjusted EBITDA was a loss of $6 $2 million in the first quarter of fiscal year 2022, compared to a loss of $3 $1 million in the same period of fiscal year 2021 a.
A reconciliation of net loss to adjusted EBITDA is provided at the end of our earnings release.
Now turning over to our balance sheet and liquidity long term debt as of January 31, 2022 was $142 1 million compared to $134 million at the end of fiscal year 2021, we believe the level of debt will decrease throughout fiscal year 2020.
Two due to the expected cash flow from our agriculture and real estate businesses.
Now I'd like to turn the call back to Harold to discuss our fiscal year 2022 outlook and longer term growth pipeline.
Thanks, Mark as we all know the COVID-19 pandemic continues to affect our foodservice business and industry logistics on a global basis. However, due to our diversified fruit business, we expect to achieve top and bottom line growth for the next nine months of fiscal year 2022 compared to.
Last year however.
However, slightly offsetting our volume momentum we are experiencing a surplus of inventory as the overall tree crops throughout the California, Arizona growing regions are significantly larger this year compared to last year and unfavorable weather conditions on the east coast combined with the omicron variant are negatively affecting demand for all <unk>.
<unk>, particularly our Asian markets, we are beginning to experience improved demand domestically, but we expect lemon pricing to remain pressured this fiscal year until we see the Asian export market begin to open again.
We continue to expect fresh lemon volumes to be in the range of $4 5 million to 5 million cartons for fiscal year 2022, and we now expect avocado volumes to be in the range of 6 million to 7 million pounds for fiscal year 2022, compared to our previous guidance of five to 6 million pounds.
We also continue to expect to expand our product offerings in fiscal year 2022 by marketing another producers oranges and specialty citrus through our one world of Citrus program.
We have a growing list of customers that enjoy our ability to provide all of their citrus needs from one single supplier and by increasing our orange and specialty citrus offerings, we will be able to attract even more customers.
In addition, as I previously mentioned, we now expect to receive $95 million compared to previous expectation of $80 million from harvest at <unk>. During the next five fiscal years beginning in fiscal year 2022. This is due to increasing land values and our new letter of intent with the Lewis group.
<unk>.
The breakdown of annual cash flow is expected from harvest at <unk> is as follows fiscal year 2022 is expected to generate $8 million of cash to Lehman era fiscal year 2023 is expected to generate $15 million fiscal year 2024 is expected to generate $27 million.
Fiscal year 2025 are expected to generate $30 million and fiscal year 2026 is expected to generate $15 million. These expectations from harvest do not include the potential opportunity of a medical campus in our east area two development.
And with that I'd like to open the call up to your questions operator.
Thank you we will now be conducting a question and answer session.
I'd like to ask a question. Please press star one on your telephone keypad.
A confirmation tone will indicate your line is in the question queue.
You May press Star two if you would like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
Our first question is from Ben <unk> with Stephens. Please go ahead.
Hey, good afternoon, Mark Hi, Brian Hi, Ben.
So I would ask.
Thinking about the I appreciate the updated commentary around volumes.
I think about the cost equation on the business, obviously, we're seeing broad based kind of supply chain operational costs.
Inflation across the market.
Does that just raise the bar for where we need to see lemon prices get to in order to recognize the margin recovery in the business. As you guys think about the path to margin improvement in the business and kind of recognition of what is the underlying earnings power of this business. What do you think that path looks like from here.
Yes, it's a great question, Ben and it's that question that we've been wrestling with which is how much of the the inflationary pressure that we're experiencing and everybody is experiencing is transitory and how much are we sort of living with now and in our new world.
And I think there is a combination of both in there, but but in essence I think the bottom line answer to your question is yes. It is challenging the margins.
And with the with the oversupply based on much much larger tree crops in California, Arizona in combination with smaller markets because of the.
The lasting impacts of the pandemic youre seeing sort of a double negative on rising costs, and then pricing pressure because of the oversupply and so that those two issues are what are really driving the pressure on our margins.
Now as we get ourselves back into a growing demand situation, which we believe fundamentally we will get to eventually we'll be able to capture more of the advantages of running greater volumes through our packing capacity and we think that's going to help.
And that will help us drive down.
Our overall costs.
But until we get there we're in a more challenged environment certainly for our for our margins I'll turn it over to Mark and see if he has any other color colour on that.
Yeah, I just might add the other way we're going to fight. This is through increased productivity and efficiency. So over the last 10 years, specifically in our home ranch here on the coast in district, two our production just through innovative farming techniques and different agronomics has increased over 50%.
So we've initiated some new projects like lemon <unk> and different things. So it's really going to be a combination of all of this I don't know if you start an article recently that the all the Spanish lemons producers basically went into revolt just on the same thesis of the market prices are following.
Everybody's costs. So it's first on everyone's minds and usually you see bulldozers. After you get three or four years of this kind of activity.
And trees coming out so it's.
Through increased productivity and passing some of the charges through we're going to get there in <unk>.
And get that supply demand imbalance.
Yes, Okay fair enough that makes sense I think about harvest at Lee Minera, obviously, almost a 20% increase in the cash that you expect to receive from the project with it sounds like.
The potential from.
Another kind of round of upside beyond this.
What was it.
You pointed to.
The 17 acres.
You pointed to land value appreciation, if we continue to see land value appreciation does that should we think about kind of threshold thresholds at which you make another.
Redetermination of what the cash flows should be and then as you think about.
This medical campus in East area, two how should we think about at what point does that become solid enough such that you revisit this cash distribution number again.
Thanks.
I'll take the first part and then Harold can take the medical side. So from the harvest. They leave an error. So we have a 17 acre piece that we've held on two of the 550 acres, which was originally deemed to be a commercial retail sort of environment and when that whole idea sort of went away.
City had red reach out to us and looked at the opportunity to potentially develop that as residential for sale and for rent and so.
And the first concept that that $3 million of distribution that we originally had was going to be for a more commercial based idea and so when we developed this concept and now in partnership with Lewis and then just signed the LOI.
That is what got us to the 8 million plus a balance of increased land projections.
From the original project and so we had seen some.
Some cost increases, but not nearly as much as this land Kris increases as we've seen around the story. So it really gave us a great opportunity here to take that up by $15 million.
And the second part of your question is yes, there is potential for more opportunity. There there could be additional units that were still working on that will we will hopefully have some more insight on the year end and then as the years continue in the next two to three years. If we continue to see real estate climb we will expect our land values.
To climb accordingly, and therefore adjust cash flows accordingly.
Yeah, and then the second part of your question revolves around east area two across the highway in the medical campus.
We've previously announced a.
A letter of intent to actually sell parcels land parcels to a developer who will be in partnership.
We believe with with the healthcare agency of Ventura County to build.
We believe concurrently.
A medical office building and a 49 bed hospital.
And then another use of our contiguous parcel to that and we believe that those land transactions will take place in 2023.
The balance of the property most likely transacting in 2025 Directionally. The first three parcels for 2023, which is not included in any of our guidance.
Is approximately $15 million and then the.
The place holder of the balance in 2025.
Directionally is somewhere between eight and $10 million and we will bring more clarity as those deals are are announced and firm up but we do believe that there is a.
A very good chance that we'll see direct monetization and the sale of land to our.
Developer partner for the hospital Medical office building in a third parcel in 2023.
Okay, great. Thanks, so much thanks.
Thanks, Dan Thanks, Matt.
The next question is from Vincent Anderson with Stifel. Please go ahead.
Yes, thanks, guys.
So okay.
So maybe just at a higher level then is it possible for you to quantify for us in that <unk>.
Why demand impact between the California crop increase and the Asian demand shortfall and then working through that what are your thoughts are on the east coast later, this year, especially given the importance of Russia as an outlet for for Argentinean lemons.
Yeah, that's a great question and shows a lot of insight because that's the that's the big unknown, there Vince which is the the impact of now.
The Argentine lemons, not having access to the Russian market, and where we will where will that fruit go.
The Big question Mark for all of US in the United States at this point is how.
The impact of the increased shipping costs through containerized shipping lanes, how that will impact the profitability or ability for the exporters out of Argentina, and the importers in the United States to actually profitability land that fruit into this market.
We've we've seen the cost of containers double over the over the last.
12 months, driven a lot by the logistical supply chain challenges that we're all aware of and and basically we're somewhere between five and $10.
Our carton below the breakeven point for the Argentine shippers to be profitable. So we're not sure whether or not that fruit is going to find its way into the U S market or not.
It's a big question Mark because.
Obviously, if it arrives on the east coast.
Later on this year, then that's going to have a have a one one sort of impact that will most likely be negative.
From a from an oversupply situation on the other handsets will be participating in some of those imports.
It could potentially be beneficial to us, but our sense is that we're going to continue to be pressured from a pricing perspective, because all the all of the variables coming together suggests that we will continue to be oversupplied.
With lemons for the remainder of the year and at least will be under pressure.
Okay, and sorry did you.
Did you have a sense of just the scale of the California crop relative to what you lost in Asian demand.
Yes, so what we do know is the desert is 40 was 40% larger than last year. The valley was 20% larger than last year, and we think the coast is 15% larger if you put it all together, it's about 25% larger year on year the tree crop last year this year.
Versus last year.
It equates to about 10 million cartons additional cartons that we're all in the industry going to have to find a home for and as it relates to the destruction of Asian demand, it's probably off somewhere.
Somewhere in the magnitude of 5 million cartons type of thing.
So the combination of those two things are making it pretty crowded out there.
Well yeah. Okay. So those are those are pretty real numbers.
Okay.
So.
Little bit of a different question I mean.
Maybe just generally how the third party grower conversations are going with given everything. That's happened you mentioned that this is the kind of environment. The last few years, where trees should be getting taken out of the ground.
Are we seeing that and maybe just more specifically if this isn't too much at once but.
You're not a cooperative, but a lot of your competitors.
In the U S or do any of them have programs that you're aware of related to.
Alternative monetization of land or are they really just there to pack in market.
I think it's more of the latter there to pack and market and so there isn't there is a lot of discussion that we're in an oversupplied situation, we try to keep our finger on the pulse with all the nurseries throughout California, and Arizona and are aware of all the nursery activity, because thats sort of the harbinger of Av.
More supply coming if theres a lot of nursery stock that's being planted and we do know that there is an awful lot of young trees that have been planted in California, and Arizona, there is still yet to come online.
As bad as things are right now if you look back to last year as the world began to open up before the omicron variant really manifest itself. When we pulled back again, we had it we had a situation we're in.
In the Valley and district, one and then down on the coast in district to.
<unk> actually made made a little bit of money and we made we made money back to the ranch's for ourselves and for our outside.
Grower partners.
In a pretty good way and we expect that.
To be the case, it'll it'll be interesting to see how it all shakes out with the lower pricing environment.
It's not to the point of pain, where we've crossed the threshold where farmers are pulling trees out, but we believe we're getting closer.
Okay.
I'm, a little surprised to hear that there's a lot of new trees that are still coming to bear.
<unk> guests those plants at around like that.
2000.
<unk>.
Yes, absolutely.
Exactly and the other thing the other dynamic there Vince is you have different parts of the growing areas, where because of the drought there is water curtailment and so.
If you were row cropping and using five acre feet, an acre and now you know Youre limited down to one to two acre feet going into a permanent crops something like lemons does survive with less water and youre seeing a lot of planting is as a result of that.
Interesting okay.
That all of that land is.
Has to stay agricultural and California by and large except in the exception we saw from your real estate development. Yeah. We're definitely an anomaly in the exception not the rule. It takes it takes so much effort financially and just politically to convert an agricultural piece of property to urban development that you might as well just assume it can't be done.
Gotcha, Okay fair enough if I could ask one more quick one it's probably a big now.
We try we try not to care about juice.
But do you have any thoughts on this anti dumping cases is there any opportunity based on what you know of juice supply demand in the U S that.
$2, a carton for juicing goes to four and its just found money or.
Not much to do there.
Yeah.
A friend of ours, the Guy that filed the suit and periodically we will actually ship send him fruit.
These these kind of cases typically fizzle and.
And we don't have any expectation of a successful outcome. What we will say is we've had a we've had a direct relationship with a juice.
Manufacturer, who has a really great inroads into NFC offerings and as a result, we typically get a premium for that relationship versus the gentleman that filed the suit that was really just looking at the overall industry. So even even if he prevailed.
Really wouldn't necessarily expect it to.
Raise the.
Tied to float all boats, a little higher I think I think it would really just come across as a one off but we're rooting for them, but we don't really have a lot of.
We don't think he is going to be successful.
Alright, no problem I appreciate it guys. That's all from me. Thanks.
Thanks, guys. Thank.
Thank you.
Your next question is from Ben <unk> with Lake Street Capital markets. Please go ahead.
Alright, Thanks for taking my questions I have most of what I wanted to address is already been discussed but I do have one question about how this kind of current environment that you guys have been talking about affects your thought process around the London excuse me around the water rights that you have access to I mean is there is there any thought that that.
Wanted you have access to.
Would be is going to be deployed and kind of.
Non operational way to monetize it.
Given that given the challenges of the current environment or is that is that something that's not really a consideration at this point.
Thanks for the question Ben that's a good one.
I'll take a stab at it and then mark feel free to jump in so yeah.
You're beginning to see some really interesting opportunities to actively monetize water.
In ways that are not only in growing agricultural products in the first one that is about to be announced is a following program with our Colorado River water rights.
We own and farm 300 acres in Yuma, Arizona growing growing lemons.
Just followed 600 of those acres in preparation.
Of this following program and in essence.
In return for not not farming and not not pumping that water will allow that water to be pumped for other uses mostly filling up lake Mead to actually take that water to the central Arizona project of all the housing from Phoenix down to Tucson, but also to Las Vegas.
That following program will be a new and.
Our new alternative way for us to generate value for that water versus growing lemons. So that's an example of the first one.
One you will see we expect to formally announce that program later this year probably in the mid to late summer.
And so we are sort of taking inventory of all of our asset and what we're doing with them and constantly seeking highest and best use with them.
That's an example of something else that we're going to do with our water there marketing any other color.
No I think that's.
That's the one that's on the front plate right now.
Okay.
Very interesting and I guess, we'll stay tuned for more there. Thanks for taking my question that does it for me I'll get back in queue.
Thanks Pat.
Yeah.
Again, if you have a question. Please press Star then one.
The next question is from Eric Larson with Seaport Research partners. Please go ahead.
Yeah. Thanks, guys. Good afternoon. So I did one of them one of the questions that you've already addressed part of it with Europe .
The argentinean fruit.
So I don't think we actually quantified the potential case volume impact on that like you did in the U S market is how big is the volume.
Impact that you're thinking about that.
That won't potentially wont go into Russia, obviously, we don't know what's going to happen there yet, but so what have you got a number on that.
We don't Eric It's a great question.
Because there's there is also other areas there's other areas that it can go so besides <unk>.
Russia, the Spanish crop is down considerably. So we received a report this morning that there'll be a 4% to six.
Shipping window for some of that Argentina fruit to go to Spain, and so that that's going to help us in outlet.
And again.
A lot of it will depend on the on just the raw economics of of what the market is bearing at at the time that the fruit would be shipped.
Juxtapose against now the increased shipping costs to deliver that fruit that will that will really drive the decision of the Argentine exporters.
We.
We handle luminaire handled 20% of all the imported fruit from Argentina, a year ago.
And we believe that that Directionally that was somewhere on the order of about 1 million cartons and so if you. If you extrapolated that would be four to 5 million cartons of what came in last year.
All of the shippers if the economics were right we're prepared to export more or we would be all of us as employers would be prepared to import more but I really would doubt if that much fruit finds its way into the market. We were really just have to we will just have to see that.
It will all come down to the economics of what's the market pricing is at that time, driven by domestic supply coming out of district, two and what's that doing to the price that will either open the window for the imports or close it because of the.
The prohibitive low pricing.
And Eric Argentina does have a pretty large gs market typically only 20% to 30% of the crop ever went fresh and so they do have the ability through the coke contracts and whatnot to to absorb some to get you know.
Call. It maybe just below breakeven, but not total disaster. So they do have some optionality.
Okay, great. So.
Europeans and rush and do they do they like a different type of fruit grade.
Or is it pretty ubiquitous saw that.
It doesn't kind of a unique great of fruit that you're sending to those countries you could other.
Other areas opened up again, United States shipping you talked a little bit about that.
Fruit basically.
Anywhere else in the world.
Yes.
And in that case specific case 11, 11 is a lemon.
The $3 three grades the fancy the choice the standard typically the exports out of Argentina, or what they call their fancy grade. So if we can't do it in Russia. It can most likely go into any of the other markets that would be interested in Turkey.
Okay. So my my my final question I'll, let you guys go so you quantified.
You quantified the impact of the larger crop this year in California about 10 million cases, or cartons I'm, assuming that's an industry wide number is that correct.
If that rate correct.
Well you know you.
You are you've been adding acreage every year, we talked a little bit about that today too.
Does the overabundance of fruit change the way you plant.
<unk>.
Put into development of other acreage that you've been doing for the last three or four years.
And you know obviously, you've actually used to be 10 million cartons short too right. So does it impact how you are developing your other non.
Non producing lemon lab.
Yes.
And that's a very insightful question. So we have a lot of young trees coming that will be be bringing greater productivity with younger.
Stronger stronger trees at the same time, we're also balancing the portfolio across all the growing regions of older less productive blocks.
So you'll begin to hear about and see us pulling some of those older less productive blocks and most likely not going into lemons and going into alternative crops in those areas.
As a way for us to do our part to limit our total supply.
Because of the success of our of our <unk>.
<unk> partner services, and our ability to pack market and sell and provide those services to outside growers.
We think theres plenty of fruit to continue to expand and fill our packinghouse with other people's fruit.
And for us to begin to decrease the total amount that we bring albeit slowly because we're going to be constantly balancing. These these non bearing trees that are now becoming bearing with pulling out older less productive acres as we as we move forward, but we're going to be watching very very closely what everybody else.
And the industry is doing.
And hopefully find ourselves moving as an industry closer towards the correct balance between demand and supply a big part of the unknown right now Eric is just how big is the impact of the pullback in demand that is still being driven by the pandemic once that comes back.
I remember before the pandemic, we were seeing double digit growth throughout most of the Asian markets and we fully expect it to return there. We're just not sure how long it will take to get back there.
Got it so one of the goals that you've been striving for over the last let's say three or four years is to become a.
A more full service citrus supplier to your U S retail customers.
And I.
And I believe a conversation that we had on this was that you were really interested in more.
Of more Orange, it's more orange citrus plantings is that is that really where would that be the primary substitute. If you don't put lemons back I'm I'm Atlanta.
Probably not I think avocados would be an area of expansion and.
And really we believe we're very bullish down in the main ranch, where you visited in Santa Paula that where we have access to lower cost water relative to other parts of California that debt.
Appear to be secure and abundant which gives us a good opportunity to pivot from a lemon and avocado and if you look out into the future. We're really bullish about the future and continued consumption and growth of avocados.
Got it so last question and I'll, let you guys go.
The omnicom variant in the U S has come off very sharply we're lifting masking requirements in all of the mandates in all the all that stuff. So.
I, probably should know this well.
The and the infection rate.
I'm going to call them in Asia.
Where do they sit relative to where we are in the U S. So when that comes off shouldn't come off.
Sharply.
All sorts of like what we've seen here in the U S.
So we read this morning that Hong Kong is at its peak today like it's having the biggest outbreak they have had so far so it's peaking in Hong Kong today, Japan is on the downhill slide and it's improving.
And South Korea, we would put in that camp too those are the three primary markets that we that we work with but they're they're at a.
It's not like it is here in the United States, where it feels like we're looking at it in the rearview mirror, they're still actively dealing with it and the impact of especially of the Japanese market is what's been hurting the industry. The most.
And and we're just watching it very very closely because there is the reality of the pandemic, but then there's the reality of how their society is dealing with it and at this point feels like they are being more cautious. Maybe then then then than we are but we're watching it very closely in the litmus test.
For us it's just the orders, we're getting from the trading company or not.
And right now that's.
Going out about 50% of where it was before the pandemic hit us okay.
Okay got it. Thank you everybody I'll I'll follow up with you a little bit better.
Thanks, Eric.
There are no further questions at this time, so I would like to turn the floor back over to Harold Edwards for closing remarks.
Thank you very much for your questions and interest in Lehman era, and we want to wish you all a great day. Thank you very much.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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