Global Coalition of Fresh Produce report on price and value chains finds 70 per cent of operators are thinking of exiting the industry within the next two to three years
The Global Coalition of Fresh Produce has released a new report studying international fruit and vegetable supply chains and their impact on price.
Covering a number of wide-ranging factors, the briefing note studied input costs, sustainability, logistics, compliance, trade policies and more.
One of the most worrying findings came in a section covering the economic viability of the fresh produce industry.
The Coalition said that the business faced ”a daunting operating landscape characterised by geopolitical conflicts, climate change and inflationary pressures that disrupt global supply chains”.
Some 70 per cent of respondents to its survey said they were considering exiting the industry within the next two to three years, driven primarily by increased input costs, low selling prices and higher labour costs.
”While the majority of respondents to the Global Coalition’s 2024 survey into production and trading costs and prices reported an increase in average selling prices compared to last year, this increase was for the most part insufficient to offset rising operating costs,” the report stated.
”As a result, two fifths of the global industry was found to operate at a loss (25 per cent) or break even (36 per cent) in 2024.
”Alarmingly, more operators are operating at a loss in 2024 than in 2023 (19 per cent),” the Coalition outlined.
”While fluctuating profit margins are a common occurrence in the fresh produce industry, the share of operators who are making a profit remains at the lowest level recorded over the past ten years.”
Price data
Globally, there had been an upward trend in consumer prices for food, including fruits and vegetables, in recent years, the report found.
This trend was most marked during and immediately after the Covid-19 crisis and had lessened since.
However, prices for fruits and vegetables generally rose less than those for other foods.
This means that fresh produce remained ”highly competitive compared to other food categories”, and was still one of the most cost-effective choices for consumers.
Higher prices did not, however, necessarily equate to more money for growers.
”Consumers in the USA, for example, are forecast to pay between 0.6 and 0.9 per cent more for their fruits and vegetables, respectively, in 2024 compared to 2023,” the Coalition explained.
”At the same time, farm-gate prices are expected to fall or grow slowly on average in 2024: prices for farm-level fruits are predicted to decrease by 1.9 per cent, while prices for farm-level vegetables are expected to increase by 0.5 per cent.
”Net farm income is expected to decline by 6.3 percent in 2024, signifying continued financial strain for the agricultural sector,” it warned.
Influences
The prices paid by consumers for fruits and vegetables were influenced by a range of factors, which were often “poorly understood”, the report continued.
It was, it said, crucial to understand the many investments involved in production, while acknowledging the perishable nature of the products made them sensitive to change in weather, the supply chain, and other short-term areas.
“Supply chain challenges such as higher production costs, extreme weather conditions, logistical bottlenecks and geopolitical tensions exert inflationary pressure on global supply chains for fruit and vegetables, with little sign of abating in the foreseeable future,” the Coalition commented.
In the long run, climate change was expected to significantly affect fresh produce production, it said, while the costs of various inputs such as construction materials, fertilisers, fuel, machinery, and shipping services continued to climb.
Then there was the cost of compliance with standards for social and environmental sustainability, with the Coalition using South Africa as an example.
It said it was estimated that the average fruit grower in South Africa spent 10 per cent of its gross income to comply with private standards for social and environmental sustainability and food safety.
Volatility in global trade policies was another lingering threat, with the report stating the industry “does not respond well to uncertainty”.
The Coalition used the well-publicised tariff threats issued by the new Trump administration as an example, warning of major shifts in global trading patterns and the potential for long-term inflationary pressure, soaring costs and higher prices for consumers.
