Middle Eastern fruit market shifting to consignment deals
A Middle East fruit market expert says the trend of oversupply in the region is changing the trade dynamic from traditional fixed price deals to consignment arrangements.
G.F. Marketing director David Pearce told www.freshfruitportal.com the shift has been a decade in the making with the onset of more fruit providers
"The Middle East has always been a fixed price market, fewer traders allowed that they could take a stock risk and normally ended up making a profit, and hence there was no need for a consignment based market," says the South African national.
"As South Africa has increased shipments of pome fruit, stonefruit, citrus fruits and grapes to the Middle East, so has Chile, Argentina, New Zealand, Egypt, Spain, France and other suppliers to the market, and this has caused that there are surpluses rather than shortages in the market.
"I do believe that if this trend of oversupply keeps continuing, the Middle East will change to a consignment market or a 'minimum guarantee' market which will ultimately be to the detriment of the suppliers."
He explains that South Africa alone has increased its exports to the region from 10,000 pallets in 2001 to 70,000 pallets last year, and with more fruit coming from around the worl,d importers have become more discerning in what they choose.
"For the past two years we have witnessed many occasions when importers have come back to exporters and asked for market assistance due to an oversupplied market on a certain fruit type - we have witnessed this phenomenon happening in Russia and the Far East markets.
"The container business has also dramatically changed the market and apart from bananas there are virtually nil bulk vessels bring fruit to the Middle East markets currently.
"To compound the above problem is the fact that all Middle East trading is done in U.S. dollars; countries such as Saudi Arabia, the U.A.E. and others have their currencies pegged permanently to the US dollar. The volatility of the US$ has not done anyone any favors in the past two years and has especially affected some of the Southern Hemisphere exporting countries."
Pearce says the market has been typically 'sluggish' in the aftermath of Ramadan, with all fruit categories selling slowly regardless of their quality.
"French apples have arrived in the market and are not selling at their normal early season tempo. South African lemons are selling way below cost price. South African Valencia oranges are selling at cost price or below.
"I suppose that the biggest concern for us is the future rather than the present. The traditional EU markets performed very poorly for the Southern
Hemisphere countries this year and there is generally a feeling that Southern Hemisphere countries should seek other markets in the East, meaning the Middle and Far East.
"The problem with that is that we will see 'every man and his dog' trying out these new markets causing flooded markets and poor returns. The Middle East is a market that can absorb only so much before it is upset with too much volume."
With the stonefruit season four weeks away, Pearce highlights European markets are not going well so the fact there are problems in the Middle East too is a cause for concern.
Photo: Cargo Care
Related stories: Price gaps changing in the Middle East
Chile's gala apples having a ball in the Middle East
SA citrus picks up in the Middle East