EU tightening could pose "huge danger" for global citrus industry - FreshFruitPortal.com

EU tightening could pose "huge danger" for global citrus industry

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EU tightening could pose "huge danger" for global citrus industry

The direction of South Africa's citrus industry hangs in the balance of a European Food Safety Authority (EFSA) assessment due in 10 days, although the report has already been delayed many times since September. The topic at hand is citrus black spot (CBS) and whether it poses a risk to European growers via imports of South African fruit; an issue that led to a symbolic and temporary import ban at the end of the 2013 season.

CGA CEO Justin Chadwick

CGA CEO Justin Chadwick

"The costs of compliance are immense but then the costs of failure are even more immense," Citrus Growers Association (CGA) of Southern Africa CEO Justin Chadwick told www.freshfruitportal.com during Fruit Logistica in Berlin last week.

"We know there will probably be increased enforcement, so we in South Africa are working on basically doing everything possible to comply.

"When we register orchards the department [of agriculture] goes through all of them and ensures they've got appropriate treatment, and then there are increased inspections of orchards, packhouses, and of the fruit at the port."

Chadwick hopes to dispel the belief amongst some European growers, mainly in Spain, that concerns about CBS have been ignored.

"There's a perception amongst some in Europe that we don't care, that we think science is on our side so therefore why do anything? Why worry? And that's not the case at all.

"Our hope is that we can maintain the EU market. We have to go overboard in making sure that every piece of fruit doesn't have CBS symptoms and if the growers are in doubt, they must stay out."

The condition of the market is a double-edged sword for the executive and his peers at the moment, who witnessed record export prices and returns last year and expect a good crop - potentially with larger fruit sizes - in 2014. This may well be supported by less competition due to weather issues in other counterseasonal citrus-supplying countries like Chile and Argentina.

Even for the country's grapefruit growers who have faced the lowest prices in the category, a 20% devaluation of the rand improved their bottom line significantly.

"The issue with citrus at the moment is that it's going through a very good period in terms of return. The incentive is rather to increase your citrus production rather than decrease it.

"If you consider that we export 45 million cartons into Europe, it means there's another 70 odd million going into other markets, and if you try to and divert any of that fruit into other markets there will certainly be some opportunity to expand but it's very limited.

"They're [markets] all very delicately balanced. You put a couple of hundred thousand cartons into some markets and they crash - we've done some studies that show we would lose probably half the revenue at least just from that."

"As a category you lose that consumer"

But the problem goes further than just crashing other markets due to excess volume if Europe is closed to South Africa. Chadwick said the ramifications would be felt for other growers who target Europe, with adjustments likely for consumption.

"Supermarkets just wouldn't get any Southern Hemisphere citrus because remember that black spot isn't a South African problem; it's a Chinese problem too, it's all around the world.

"If they say, 'we can't get South African, let's move to Argentinean', well, Argentina has black spot as well, so the real issue is if increased measures for CBS are introduced, the citrus as a category will disappear from the summer fruit displays.

"If you take away summer citrus, firstly the supermarkets might give that space to some other products, and then might not revert back to citrus in winter."

He added that under this scenario, loyal citrus consumers could turn to other products they hadn't tried before.

"As a category you lose that consumer, and I think that's a huge danger for the global citrus industry; not just South Africa, but Spain and all the others as well."

Looking elsewhere

Regardless of what happens with the European Commission, the South African industry is looking for new markets and seeking to remove trade impediments.

"We haven't even scratched the surface yet for markets like India. A lot of receivers there are very keen on South African citrus, but the problem there is the duty rates, which I think are 35% and that really adds to the price.

"For India we have discussions around a free trade agreement and the discussions have been ongoing for five or six years, but there's no urgency in the whole thing. You must remember the products they want to send in to South Africa would be with zero duty as well, and the South African government doesn't want some of those products, particularly manufactured products, coming in with no tariffs.

"If you read through the media you just see the plethora of free trade agreements that our competitors are signing – Chile, Argentina, Australia, Peru.  Australia just signed with South Korea, and that’s a very attractive market for us."

He added that South Africa sent grapefruit to South Korea for the first time in 2013, which was "unbelievably well received".

"There were seriously good volumes for a first year, and indications are that can grow, but South Korea has a duty of 25% or something like that as well."

South Africa is making some fortune in these two markets but with such high duties it can only send very high quality, niche fruit, according to Chadwick.

"What we need is the next band below to go into those markets and to do that you need a 25-35% discount to allow the fruit in as well, and get the volumes moving.

"With the grapefruit added last year our citrus export exports there [South Korea] might have gone up to 350,000 cartons. That's minimal. We want to send a million cartons in there.

He adds that while the Chinese market has been open to South African citrus since 2004, a difficult but not impossible protocol has restricted potential. Volumes are however starting to pick up.

"While you're sending 45 million cartons to Europe and three million to China, and you look at the urbanized, wealthier population in China and all those good things that should lead to good sales of imported fruit, three million is a drop in the ocean.

"The issue there is around the protocol mostly and the entry conditions are quite difficult - we send fruit to America under the same protocol, and to South Korea and Thailand.

"We are in discussions with the Chinese government through our Department of Agriculture to look at alternative ways of gaining entry, but it’s a long process, and we don’t expect to make any huge breakthroughs in the next year or two. At least we can move away from a concept of cold treatment, to a systems approach where you can assure the fruit doesn’t have any pest problems."

EFSA expectations

Chadwick said he did not want to speculate on what the outcome of the EFSA's recommendations would be, and that CGA was 'working on what it knew'.

"Most of the people we speak to indicate that we musn't anticipate any change to the EFSA conclusion, and their conclusion was that it was highly unlikely that it's [CBS] a risk but there is some risk, whereas if you look at the international panel's conclusion they say there's basically no risk," he said.

"Most people are indicating that one must anticipate that the draft PRA [pest risk assessment] that EFSA came out with in July will probably be similar to what the final PRA is, which is in conflict with the international panel’s conclusions.

"Even once it’s published there’s still going to be some time delay while the DG Sanco (Directorate General for Health and Consumer Affairs) considers the ramifications and the conclusions and recommendations from the report, and decide themselves what to do out of it.

"Every week of uncertainty is another week lost for the trade, because the trade depends on certainty."

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