Disruption in China dampens optimism for produce shipments
At the Nov. 2-4 Asia Fruit Logistica meeting in Bangkok, produce industry marketing consultant Dawn Gray was reminded that tables can quickly turn
Because of the pandemic, the Asia Fruit show had not physically convened in two years. The good news, she notes, was that participants were quite excited to see each other again.
Obvious in Bangkok, was the decline of participants from China and India. Over the past decade at the show, which was previously presented in Hong Kong, there has been increased focus on selling into China and Asia from many growing regions.
“China seemed to have an insatiable appetite for imported fruits. And it is one of those phenomena where you can get caught up in the magic and say, ‘There are 1.4 billion people in China and 1.3 billion in India. And they don’t have to eat a lot (individually) to have a huge impact, particularly if you’re a net export-producing country. So there has been lots of enthusiasm, lots of excitement and lots of activity.” With this, fruit companies from Chile, Peru, Australia and South Africa opened sales offices in China.
The optimism surrounding China’s insatiable appetite is not there now, between Covid and the logistics nightmare created by Covid. “There were huge amounts of backups and ships that couldn’t get containers. Ocean freight rates tripled and quadrupled to get to Asia.” Steamship deliveries became incredibly inconsistent. Shipments that normally would have taken 28 to 35 days took 48 to 60 days. This shortfall for fresh produce is enormous.
“For years, China was called the beacon of hope and lived up to that promise. That is not occurring. We’ve seen it the last couple of years.” Gray offers the example that 95% of Chile’s cherry exports went to China.
That proved unsustainable, with terrible Chilean cherry returns last season. It was the same for Chilean table grape exporters. China is no longer absorbing the volume, nor can pay price levels that would be sustainable for producers.
The 2023 Chinese New Year is going to be early, Jan. 22. This fall, Chinese importers are telling suppliers, “If you can’t get a vessel that’s guaranteed to arrive at least a week before the Chinese New Year, don’t send it. Or send very little,’” Gray reports.
Now, China’s robust market doesn’t exist. Chinese importers are nervous. Gray saw images of an empty fruit market in Guangzhou. No one was there because quarantine restrictions are strong. Imported fruit for that particular Guangzhou market is targeted for “gift giving and sharing your abundance. If people aren’t leaving their houses, they’re not going out to share their abundance.”
The long term
“Everything runs in cycles. This could be a one, two, three year cycle. Time will tell. Containers will get repositioned around the world and be where they need to be. That will allow for a predictable flow to the market and the supply chain will get settled.” Gray believes ocean freight rates will stabilize and come down.
“All of that will smooth out. Some of the really expensive, horrendous bumps we’ve seen, where we missed Chinese New Year and missed the Moon Festival in Taiwan; you can’t really recover from that in terms of movement and velocity of sales," she says.
But she expects the global industry to still “stabilize, normalize. That will help and release those trading partners to something more normal."