The transition from northern to southern hemisphere supplies from mid-May went seamlessly and since then, trade has remained on an even keel, with supply meeting demand and prices at a decent level.
However, the sector has struggled to keep sales moving, given that summer is traditionally a slow time for the citrus market and this has been compounded by fluctuating exchange rates and the pull of alternative markets to the UK.
But this season, South African supplies came into their own a little later than planned and volumes from South America have been lighter than usual, keeping prices higher than the levels that had been initially anticipated.
“Overall, returns have been decent and they have been higher compared to the five-year average for citrus,” says an insider. “It seems as if the UK has accepted that it will have to pay more for citrus because of the weakness of sterling. However, the continent is short of fruit in general - UK programmes are being honoured, but surplus volumes are not there.
“It has been a fairly flat period and we have had to work hard to stimulate any kind of growth but, in general, the market is performing better than expected - six week ago, growers in South Africa were downbeat about their prospects, but their fears have not yet come to pass. Volumes have held up but, relatively speaking, it has not been a lively trading period.”
So far this season, South African production has faced few challenges and growers and exporters have found themselves dealing with a high-quality crop. “We did have some unseasonal winter rain in the north, which disrupted harvesting and influenced export pack-outs,” says one exporter. “Some fruit failed to colour up sooner due to a warmer start to winter. But in general, normal conditions prevailed. In the Western Cape, we did have some fairly big storms that did cause damage and impacted on packing - but they are used to winter rainfall.
“We will definitely end up with fewer volumes exported across all sectors other than grapefruit,” he continues. “The total will be about six to eight per cent less than the record 2008 crop. This is primarily influenced by lower demand and holding back on all but the most sought-after fruit.
“Hopefully, nothing unusual will influence the rest of the season. Given the lower crop, there is less congestion at the ports, which is normally an issue in July and August. In addition, lower oil and fertiliser costs have been an advantage.
“The only concern is in terms of industrial action. In South Africa, it seems as if every day another sector is out on strike - we hope that this will not happen in any of the links in our supply chain.”
The South African easy-peel offer is popular with the UK market and this season, the estimate has been adjusted from 7.4 million 15kg cartons to 7.1m cartons. As normal, the UK has absorbed most of the volumes, taking in 46 per cent of the total, while northern Europe took 19 per cent and Russia 10 per cent. Satsuma production was lighter than anticipated, ending on 1.72m cartons, against an original estimate of 2m cartons. Clementines are nearing the finishing line, with 2.5m cartons of the predicted 2.9m cartons packed.
“It has been a reasonably good trading period for South African satsumas and clementines because there has not been as much volume coming out of Chile, Argentina and Uruguay,” says an importer. “South Africa has shipped the same volumes year on year, but enjoyed a better market.
“Easy peelers are driving the citrus market, whereas in other sub-categories, you have to promote to stand still. TNS figures show that expenditure on easy peelers grew by five per cent in the last three months, while volume was up slightly by 1.5 per cent. To put this in context, expenditure on oranges rose by just 0.4 per cent, while volumes were up by four per cent.”
South African grapefruit has not had an easy ride, with poor returns in Europe and sales to Japan down 20-25 per cent on the five-year average. The predicted export volumes have decreased from an initial estimate of 15.1m cartons to 13.5m cartons, partly due to holding back smaller sizes and failing to get the right internal quality. To date, 95 per cent of the expected crop has been harvested and packed, and 85 per cent has been shipped, so the forecast should be achieved.
South African Navel oranges have seen a reduction in estimated export volumes, from 21.6m cartons down to 19m boxes. To this point in the season, 90 per cent of the predicted volumes have been packed and 70 per cent have been shipped.
“The European market has been difficult to start with as a result of the presence of unwanted smaller oranges from the northern hemisphere - but good-sized South African Navels did get a lot of interest,” says one exporter. “This year’s Navels were of excellent quality. Valencia oranges have started with a vengeance - 10m cartons of the 40.5m predicted boxes are already packed and 5m have been shipped. The tempo is really picking up, with 2m-3m cartons packed every week.
“But the northern hemisphere has done what it complained about South Africa doing in 2007 - flooding the market with unwanted smaller oranges at the end of their season,” he adds.
South African lemon exporters have kept clear of Europe, where the huge northern hemisphere lemon crop is still being harvested and has resulted in some poor returns. The initial estimate of 9.4m cartons has been revised down to 8.6m cartons. The Middle East has made up a key market, receiving 43 per cent of exports, while the Far East and Russia have taken 13 per cent each. So far, 75 per cent of the predicted volume has been packed and 55 per cent shipped.
The next three months are set to throw up some challenges for the citrus category, especially when children go back to school in September, when suppliers are bracing themselves for some price pressure. However, the major players are aiming to keep promoting to avoid building up stocks ahead of the switch back to the northern hemisphere.
“The general feeling is that citrus could be advantaged by [the economic downturn] as it is generally a lower-priced commodity, as opposed to other exotic or more perishable products,” says an insider. “There is obviously an effect and citrus is not immune, but it may be less impacted than these other higher-priced alternatives.”
A good crop is expected out of Spain, with the first easy peelers starting in October.
ORGANIC CITRUS HOLDS ITS OWN
Sun Valley Bio Fruit, Frutas Franch and Be Organic are trading partners on a pan-European basis. The group combines organic citrus production from Sun Valley in South Africa’s Eastern Cape and Frutas Franch in southern Spain, enabling it to give continuity of supply of organic citrus 52 weeks of the year, says Andrew Poulton of UK-based Be Organic.
The three companies are in step with the latest market demands and the most recent indications show that customers are looking for both increased late Navels and more late easy peelers. In response to these demands, the group has planted Autumn Gold and Nadorcott in both the northern and southern hemisphere.
On the organic front, we saw a drop in demand in most markets from the levels of July 2008, especially from the main high-street retailers. Since January, the market is below where it was but it has stabilised, which shows that there is a loyal base of organic consumers. We need to win back the wavering customers with the right price, availability, quality and, above all, taste. If we get the first three right, the fourth is a fact and then we will get repeat purchases. We stand out from the competition by providing a one-stop shop for citrus customers, giving them year-round supply of good-quality fruit and planning our picking against demands to avoid the peaks and troughs or feast and famine situation, thus prices remain stable.
The main challenge in growing organic citrus is Mother Nature, whose little helpers (we call pests) have ways of adapting their game plan. The only way we can deal with this is constant monitoring of what is happening in the orchards, thus giving the trees every assistance within our powers through research and development.
But we have identified three clearly defined sectors for organic citrus across all of Europe. The first are the major retailers, which in the UK are at best treading water. However, recently, one major group has re-supported organic heavily and sales have been excellent. Others have moved towards discount ranges in conventional lines and are losing some of their traditional AB-type customers.
The local and box scheme movement has done exceptionally well in the last three years, gaining from supermarkets changing direction. One strange but perhaps not astonishing fact is that they always seem to have a blip during school holiday periods, which must indicate that their main support is rooted with health-conscious families with young children.
The organic processing sector is fairly small but vital for the producer, allowing them to cash in on fruit that is too cosmetically defective for whole fruit outlets but which, at the same time, has extremely high internal qualities in terms of juice and brix levels.
When it comes to marketing organic citrus, we need to be realistic in terms of the marketplace and general demand. Our customers still need to understand that our cost structure requires a premium to survive, therefore we need to strike a balance that suits all parties and, at the same time, continue to make the public aware of the health and nutritional benefits of choosing organic.
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