The past three months have made for a tough period for citrus players, with shortfalls in volume following the European season and a number of challenges facing those working to satisfy demand. The strength of the market, however, should see growers generating higher returns in a more profitable category.
Shortfalls in oranges and grapefruit, together with ongoing lemon shortages, have seen the market tighten up considerably this quarter. The average price of product has climbed but, for suppliers, the imbalance between supply and demand has proved tough.
“The figures for the citrus market are looking healthy, in value, not volume terms, with values 10-15 per cent higher than last year,” says an insider. “The market, generally, has been fairly tight for the whole of this year so far, and there has not been the plentiful supply of European product that could usually be expected. Spain has sent fruit to eastern Europe and other export markets, rather than the UK - and this is a general trend for citrus producers - which has combined with short supply and high values.
“Some encouragement can be seen in the easy-peel market,” he adds. “The Europeans have had a fantastic trading period on their late clementines, which sold for very high values, without hitting the volumes sold.”
South African supply came on stream two weeks later than usual this year and is expected to be lighter than normal, with easy peelers available from April and volumes down 25-30 per cent. “This has not been caused by anything you can put your finger on,” says one importer, who works closely with South Africa. “If you ask growers, they don’t know - there was a good crop last year so it could be a reaction to that, but there have been no real climatic problems. Still, there are high expectations for this market.”
Easy-peeler exports from South Africa to the UK have dropped from more than 20,000 pallets at this time last year, to a modest 12,000 pallets so far this season, as result of the lighter crop and the opening of new markets, including Russia, the Middle East and the Far East, as well as a strong domestic market.
“The easy-peel market is looking very stable for us at the moment,” says one South Africa exporter. “Argentina has so far undersupplied the UK market because of weather-related issues and freight problems, while prices in Uruguay are higher than in South Africa this season.”
South African oranges and grapefruit are just starting out, some 10 days late, before more plentiful volumes hit the market in mid-June and peak in September.
Oranges are expected to be tight all summer, much like last year, as there is not enough product around to supply general demand.
The grapefruit sub-category, in particular, is expecting a strong market in its first three to four weeks. The Star Ruby crop is expected to be down 20-25 per cent, but Marsh supply should meet its declining demand. The season will finish in August, potentially making way for more obvious shortages later in the year.
The lemon sub-category has shown itself to be insensitive to price increases this quarter, with TNS figures confirming that volumes purchased have increased, despite a 45 per cent price increase, as a result of ongoing shortages. Every important lemon source has fallen short, including Argentina, Spain, Turkey, Italy and the US.
Argentina, which supplies 80 per cent of lemons in the UK market, has yet to send any real volumes to the UK following climate issues and strikes in the South American country. South African growers are set to make triple the usual price on boxes of lemons, even though sizes are on the small side as they race to get their fruit to market. “The main lemon-producing area, the Eastern Cape, has come on stream but shipments have not dampened the market,” says one insider. “We are trying not to play the game and take crazy money for early fruit before it is ready, but there are people running around with a chequebook in their hands, trying to buy fruit.”
Across all the categories, the major citrus-producing countries are tending to undersupply the UK market and, in many cases, UK retailers have just enough product, while wholesalers are struggling to get fruit.
“There is a trend away from the UK for a number reasons, but this is not to say it has been forgotten altogether,” says an insider. “There is a lot more security in the UK now than there was in the past. However, there are concerns that pre-arranged retail strategies could damage the market. The pound is weak against the euro, and quite a lot of other countries tend to favour FOB deals with a very committed price, rather than the speculative trading you get in Europe, in which growers have had their fingers burnt in the past.”
The supply situation is not expected to change over the next few months and, looking ahead, growers and suppliers are hoping that retailers will not upset the market by persisting in promoting fruit on price when there is not enough to go round.
“I don’t think there will be volumes to promote,” says one insider. “It will continue to be an expenditure-driven market - you would have to be a brave man to promote anything at this point in time, but retailers may well have their own strategies.”
FLORIDA SECTOR TAKES STOCK
the florida season started back in October, a few weeks later than normal, but while volumes have been down on last year, exports to Europe and the UK have grown, says Mike Yetter from the Florida Department of Citrus.
The latest US Department of Agriculture (USDA) forecast in May puts our grapefruit crop at 26.3 million boxes, compared to last season’s crop of 27.2m boxes.
Shipments to Europe are up 16 per cent this season, compared to last year. It is difficult to get an exact number for any country in Europe because a significant amount of our fruit is shipped to ports in Belgium and the Netherlands, and from there it is transhipped to other countries in Europe, which we cannot track.
I would estimate the volume consumed in the UK to be around one million cartons, and we have been extremely pleased with the movement to the UK and Europe this year.
Despite a three per cent drop in our crop size, we are showing significant volume and share gains throughout all of Europe. I believe this is due to a combination of factors - favourable exchange rates, solid marketing programmes, recognition by the trade of Florida’s commitment to the market, and an excellent eating crop with brix levels in the 11-degree range again this year.
This season has turned out better than expected. The latest USDA forecast, released on May 9, showed an increase of 1.8m boxes - a jump of 7.3 per cent - from the earlier season forecast.
However, we did hit some dry weather during our growing season, which affected the size of the fruit, and sizing for the season was some of the smallest we have seen.
The external quality of the crop this past season was representative of a normal season. There was some wind scarring, which is typical for Florida fruit. The internal quality as I mentioned was excellent. I suppose if we could have changed anything, it would have been to have a little larger size fruit.
I guess I would use the word “stable” to describe the market condition this year. Volumes to Europe exceeded our expectation, our growers made a decent return on the crop, and I believe the trade was happy with overall market performance.
We will continue to focus on our priority markets, in western Europe and Japan.
The biggest issue facing Florida over the next three months, and for several years to come, is our battle against tree diseases. Greening and canker continue to be an issue that will affect our tree population and, consequently, our crop size over the next few years. However, the industry is united in a quest to solve the disease issue. Significant state and federal funds are earmarked for disease research over the next few years. I’m confident that the problem will be solved, but we do expect smaller crops over the next few years.
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