The Citrus market is holding up well as southern hemisphere sources come on stream and pick up where the likes of Spain left high volumes of small-sized fruit and a strong market. However, the category traditionally takes a back seat in the summer months as heads are turned by summer fruit, so the sector will have its work cut out to keep supplies moving.
The latest indications show that southern hemisphere citrus production is set to fall on last year’s levels, with figures from Freshfel and the Southern Hemisphere Association of Fresh Fruit Exporters (SHAFFE) forecasting that output is set to decline by 4.7 per cent on last year’s levels, to 6.96 million tonnes, while exports are expected to decrease by 5.5 per cent.
However, Chile and South Africa are both predicting two and three per cent increases in their citrus production, respectively.
It is early days for the South African season, with easy peelers about a month into their window, while orange picking started in northern regions last week and the first arrivals of grapefruit are expected in two weeks.
So far, the season is shaping up well but it is not without its own set of challenges, caused by both global and domestic factors. The exchange rate has not provided the best backdrop for trade and at the same time, moth infestations have hit the quality of easy peelers out of the Eastern Cape.
But the fruit has been coming onto a strong market and satsumas in particular have done well, achieving good prices in the absence of plentiful volumes of early fruit from Argentina. Overall, the market is looking healthier than it has done in the past. There are not expected to be any gaps or shortages because there is more fruit ready to come on stream and a “fairly normal season” has been predicted all round.
The last three months have seen the UK go a little way to re-establishing itself as a sought-after customer now that the global market is not as confident as it was last year, with the Far East and Russia in particular not nearly as bullish as they were the previous season. However, growers and suppliers are wary given the economic climate and there are concerns about how the sterling exchange rate will hit trade.
“The exchange rate with sterling is a problem for growers,” one importer of South African fruit admits. “The market is not as optimistic from a producers’ perspective as it was this time last year. But having said that, the seasons that start off like this can turn out to be best because everyone is careful not to oversupply the market.
“This is going to be a more stable market and growers will be looking to supply more fruit into Europe than they did last year, when they had more options.”
So, could this be an early sign that the UK market is becoming more attractive for citrus suppliers, who in recent years have found it easier to move away from Europe and do business elsewhere? “Naturally, suppliers will have concerns about the UK if they do not have the right quality and disciplines,” says an insider. “We have confidence in the UK market, where growers will not get the best returns because of the weak sterling, but they will get a good average.
“There has been a recognition both in the market and at retailers that they have to pay the right price for fruit,” he continues. “We may be looking at £9-10 for 15kg of oranges this year as standard, which in comparison to previous years is quite a high price.
“The trend in the UK is that demand is only just supplied and no one is risking additional volumes. The next few months will see more of a leaning towards summer fruits and it is only really easy peelers that will have a consistent following throughout the summer. We will probably see the usual growth on easy peelers, of around six or seven per cent.
“Orange sales, on the other hand, will have to be promoted at this time, but even with these activities, we are still losing percentage points here and there.”
But it appears as though the retailers are making an effort to put a cap on value citrus lines, which has been welcomed by growers and suppliers keen for their fruit to maintain good returns and prices.
Elsewhere in the category, some of the other major lines have seen turbulence.
It is catch-up time on lemons, with Spain still marketing its mid-season varieties when it should have already moved on to its late-season supply and sizeable volumes have come on to the market. Suppliers are hoping that retailers will not be tempted to lower prices, after strong sales throughout the worldwide shortage in recent seasons showed that lemons are not price-sensitive.
“Promotions do not make a difference,” says one importer. “We sold more lemons at higher prices, but I fear there will be temptation to be competitive on lemons now that there are more available. Hopefully, the retailers won’t do that, but it will be a tricky trading period as the market will be well supplied.”
Grapefruit prices have been strong and Florida growers have made the most of the market, while South Africa - keen to get in on it - will start with Star Ruby and build until its peak in July. But it looks as though the “enormously strong” market of last year will not be repeated, says one supplier.
All in all, the citrus sector is likely to see some tricky trading periods in the next quarter, especially as demand traditionally falls in the summer months. But with consistent supply and the right promotions, the category should be well placed to ride out the next three months.
AGREXCO REVIEWS ISRAELI SEASON
The israeli season for citrus began with grapefruit, which started back on October 1, and we still have another three weeks of arrivals, says Rob Cullum, sales manager at Agrexco UK.
All reports continually talk about the decline of the grapefruit and this is something that all citrus players have to think about. In order to address this, we need to get the younger generation interested and be strict on internal quality, to encourage repeat purchases. However, it has been a good season for volume to the UK and the quality has been high, but we have had to endure a difficult situation with currency exchanges - the shekel has been strong against sterling for more than a year now. But we are not alone in this; the same problems affected most importers when sterling dropped against nearly all currencies, so it levelled the field again. However, our long season does give us a good position in the market.
On to oranges; it has been a relatively small season this year, but it has gone well - Navels and Shamouti, both of good quality and sharing top results, are now finished. The talk of a huge Spanish season was worrying, but we have managed to get through without any problems. The Valencian season has been short, with the last shipments on the way, and there was a demand for larger fruit due to the abundance of small sizes from Spain.
It has been quite a difficult season for easy peelers in the UK, as Europe and the Eastern Bloc countries were willing to pay far higher prices without the complication of UK specifications. Again, I think this was the situation for most exporting countries. We still upheld programmes for Suntina, Minneola and Or, but it did make for a tough season. Prices for premium easy peelers were very high from all countries, as demand outstripped supply. We have seen a continual increase in demand for these varieties each year - possibly at the expense of oranges, as customers in all countries look for convenience.
Unfortunately, following the frost of last year, which affected lemons, we did not bring any fruit to the UK, but hopefully we will be back next year.
Under our international label, Alesia, we brought in Mandora from Cyprus. Volumes were relatively small to the UK this year - again, most of the fruit went to the Eastern Bloc. With limes, we work with the best growers in Brazil and they have really done well to continue to supply through one of the worst situations in availability, which started in August and ran all the way until the end of December. Fruit available for export was down by 80 per cent in some weeks and this created havoc and ridiculous prices. We continue to expand our business with this item, which is the hardest citrus line to manage and, without a doubt, we owe this expansion to our dedicated growers. The main Mexican season is about to start, which will apply some volume pressure to the market. Normally, this is absorbed by the increase in summer sales - however, with the financial situation perhaps demand will not be as high as in previous years.
With our range of sources, we supply the market for 12 months in the US, Europe and the UK, which gives us a strong position to guarantee supply even in the tricky months. With exports from Peru, we started the season with satsumas recently. The crop is down massively on last year; up to 50 per cent in some areas. In combination with a very high local market and the dollar-sterling ratio, this means that this will be a small volume season to the UK. However, we still fill an important role with late fruit, which will be where the bulk of the shipments will come. Minneolas will follow, for which we are calculating the export volumes - likely to be lower than last year, but not to the same drastic cut as satsumas.
The main issue facing the sector over the next three months (and probably longer) is pricing. We need sterling to rise again in order for Israel to become the country of choice for growers once more. At the moment, we are not looking like a good bet, so we are busy convincing growers that we need to be part of their plans for the future, which means keeping technically up to date with the UK and continuing to support customers with the good-quality fruit associated with Agrexco.
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