Bittersweet bumper citrus crop
Record SA citrus crop fails to juice up farmer profits as freight and other costs soar. By
South Africa, the world’s number two citrus exporter, has what is expected to be a record crop of the fruit family on its hands. But farmers are not mixing orange juice with bubbly to celebrate, as soaring freight and other costs have chowed margins.
“It will be a record in terms of volumes, topping last year’s,” Justin Chadwick, the CEO of the Citrus Growers’ Association of Southern Africa (CGASA), said in an interview with DM168.
“But in terms of returns for the grower, they’re looking pretty dismal. The biggest factors in terms of influence on our export returns have been the freight rate and the cost of shipping. As a result, a lot of fruit was exported at a loss.”
Exporting fruit at a loss is better than letting it rot in the crate, but it is the farmer who takes it on the chin.
The Baltic Dry Index – the benchmark for shipping costs – soared over 1,000% higher at one point last year compared with its pre-pandemic levels, according to data gathered by the International Monetary Fund, which warned in April that the trend would be a major fuel driving inflation in 2022.
Freightos, a digital booking platform for shipping, said in September that global freight prices were “45% lower than [their] level a year ago, though still nearly quadruple the pre-pandemic norm”.
And, Chadwick said: “Fertiliser prices, diesel and energy prices, electricity prices, labour prices, they are all going up at the moment.
“There’s no inflation in the market for fresh produce. In Europe and the UK, which are our biggest markets, the price of fresh produce just stays static for years on end. So the costs have to be absorbed by the grower at the end of the day.”
On that score it’s perhaps revealing to note that fresh produce is not included in any of the five broad categories that comprise the Food Price Index calculated by the UN’s Food and Agriculture Organization. In terms of numbers, Chadwick said the CGASA estimates that about 167-million 15kg crates will be packed for shipment this year compared with 161.6-million crates in 2021. That represents about 70% of the crop, and the rest will go to the domestic market. There were concerns that the market in Russia – the fifth-biggest destination for South African citrus exports – would be a write-off this year because of Moscow’s invasion of Ukraine. But South African citrus exports to Russia have exceeded last year’s.
“When we had the invasion in February we were concerned because immediately people stopped sending vegetables to that region. Lemons, for example, which are quite an early crop, there were just no lemons going to Russia initially,” Chadwick said.
“In 2022 year to date [as of 23 September] we [had] exported 9.8-million 15kg cartons to Russia, and at the same time in 2021 we were on 8.8-million cartons,” he said. Chad
Above: South Africa is expecting this year’s citrus crop to top last year’s in terms of volumes. Below: wick went on to say that the weather conditions for the next citrus season look favourable at the moment, as the La Niña weather system was expected to herald good rains again this summer.
But he said September has been relatively dry in many of the citrus-growing regions and this is the period when the crop is “set”: the spring and early summer blossoms will transform into next year’s fruit for market. And citrus is a water-intensive crop. Just think about where fruit juice comes from.
“Now is a critical time for growers. There hasn’t been a lot of early rain, which is a concern, so the guys are irrigating flat-out,” Chadwick said. That, of course, adds to costs, but at least freight rates are headed south.