South Africa's bearable 2012 citrus deal
South African citrus growers will meet in Stellenbosch today for a market access workshop, as the industry seeks to assess its options in the face of competitive markets and rising container costs. At the Produce Marketing Association's (PMA) Fresh Summit event over the weekend, www.freshfruitportal.com caught up with two producer representatives to discuss the season past and key priorities to hopefully be addressed before the start of the 2013 campaign.
Citrus Growers Association of Southern Africa (CGA) CEO Justin Chadwick said exporters supplied "what the market could bear" this year.
"Apart from the early navels and satsumas, the rest of the categories did quite well," he said.
"We had a low crop season for grapefruit, and when you have that sort of situation it's obviously always a lot easier - Japan was supplied with fruit it could actually market and other markets like Europe and the U.K. weren't oversupplied.
"We also had a lot of small fruit that went into processing rather than the fresh fruit market, and that kept some of the supplies off too."
He said growers sent less fruit into Russia following the experience coming up against too much Egyptian fruit there in 2011, but further east Asia remains a big focus.
"The Asian market has until now been a good alternative – our volumes there are increasing but not to the levels we’d like them to increase to."
Western Cape Citrus Producers Forum (WCCPF) CEO Suhanra Conradie said the U.S. market was not as good as expected for South African citrus this year, but the situation has improved towards the end.
"We've seen more soft citrus than last year, but the clementine market wasn’t that good. There were more Chilean fruit available and Californian fruit was more available," she said.
"The market was not what we expected. To go over to oranges, what had a big effect on us was that Californian fruit was available much later than in previous years because they have more late varieties in the market. That affected us, because in the U.S. they will not buy imported citrus if there’s still local fruit available.
"In the mid-part of the season the market was under pressure, the price was under pressure, but luckily, with what we’ve done over the last 10 years we’ve set ourselves up with really supportive importers and retailers."
WCCPF spokesperson Lisa Packer said it was hoped citrus would have left the U.S. market early due to weather impacts.
"It seemed as though all signs were indicating the U.S. consumers were going to be without access because of the weather situation.
"There has been so much demand for the clementines, and if you look year over year at demand and what was available compared to this year, there's a big difference."
The U.S. only accounts for around 5% of South Africa's citrus exports, but shipments grew this year to more than 42,000 metric tons (MT).
Chadwick says exporters were finding more and more difficulties in Europe, in terms of private standards and phytosanitary issues with industry.
The "private standards" refers to tight minimum residue requirements from many German supermarkets, which go above and beyond the minimum residue levels (MRLs) set by the European Union.
"In fact, the sort of measures that some of the German retailers are adopting in terms of percentages of MRLs actually has a detrimental effect on the environment.
"Although they might think they’re doing it to help the environment or consumers, they’re not because of two things; firstly, resistance.
"If they cut down on the amount of products that we can use, or they force us to use suboptimal applications, that pest or disease could develop resistance to that chemical, and then essentially you’ve got to use harder chemicals."
He said this has to do with the ability of growers to rotate the chemicals used. For Chadwick, the second reason these retailers' demands are problematic for the environment is to do with removing chemicals for specific pests.
"What the guys would have done is to spray only if that pest is detected in the orchards, but now that you’ve taken that product away, you actually have to use a harder product earlier in the season and you blanket spray your orchard just in case.
"They're actually forcing us to use more pesticides earlier in the season, than if they allowed us to use them at MRL levels, which are very safe levels."
Logistics and trade troubles
But perhaps the most pressing issue for South Africa's citrus industry is Maersk Lines’ decision to raise reefer container rates by US$1,500.
"There is no way our fruit industry can afford that, so we have to see what we can do. We're obviously looking at alternatives, other liners - some have followed suit but not all of them.
"We’re also going to conventional people, specialized reefer vessel owners to see what capacity they have available."
He said the Southern Hemisphere Association of Fresh Fruit Exporters (SHAFFE) has agreed to take joint action to solve the issue, while members of the Mediterranean Citrus Liaison Committee (CLAM) will meet mid-November to see how they can help.
"Perhaps internationally we can put on pressure. I don’t know what we can do because it’s a commercial right for anybody to charge what they want to, but there might be some antitrust issues around predatory pricing.
"This is something we are already exploring within South Africa, and might be exploring internationally, but to explore that route you’ve got to have fairly deep pockets.
"We’re obviously fortunate that we’ve got five or so months to plan for next year."
Conradie said the effect of rate rises was uncertain for growers in her forum, as only 15% of citrus exports to the U.S. from South Africa are in container freight.
"We do conventional vessels, and the rate issue started rolling when we were finishing already. I don’t know how that will affect us," she said.
She said a a more critical issue for shippers to the United States was the new centralized examination system for fruit instead of on-site tests in Newark, which was impacting many exporting countries.
Chadwick added that limited access to the Tanjung Priok port in Jakarta was also a concern.
"In all these government negotiations, timeframes are like weather forecasting - the four countries (Australia, New Zealand, Canada, U.S.) have got recognition status, and we applied about the same time as they did.
"Recently our minister of trade and industry has been in Indonesia as a joint trade commission, raised at that level to get recognition.
"The first step of that is for their officials to come to South Africa and inspect our systems, which hasn’t happened yet."
He said there were "capacity constraints" in the South African government for international negotiations, while at a local level it did not show a partnership approach to the farming industry.
"Unfortunately there’s still a lot of trust to be developed between industry and government, so while you’ve got the relationships, there’s no real partnership approach to a lot of things.
"If there were, the industry could help with a lot of those capacity constraints. I think that’s changing but it’s going to take time to change."
Opportunities in Africa
Chadwick said one of the areas to be touched on in today's market access workshop is Africa.
"I’ve approached some export agents and asked them what the potential of Africa is, and the reaction has been that citrus is a different product and probably won’t be as popular [as apples], so but I still think it's worth pursuing.
"We'll talk about the different regions, and one will be Africa, just to get a feeling from export agents, to get an idea of what research we need to do - are Ghanaians eating oranges? Apparently, according to some research we’ve done, they do.
"Do the Nigerians eat oranges? In a workshop yesterday morning, they stated Nigeria is the biggest importer of Champagne in the world, and they said champagne is a lead indicator of wealth and prosperity."
He said while the industry needed to look at African markets, they were not easy to service.
"Most of them are serviced by sea anyway – so you’ve got to go through those ports, and a lot of them are quite inefficient.
"I think that needs to be looked at because issues of sea freight are going to be big issues in the future, so we need to look closer to home and see what we can do there."