Insiders agree that the citrus market is looking in better shape than has in recent years, even with challenges in the shape of difficult production conditions in Spain, the obstacles presented by the exchange rate and competition from the sheer number of sources now playing the citrus game.
The latest from Spain is that the outlook for the campaign initially seemed to have improved, with the first half of the season seeing “reasonable prices” compared to previous years. However, returns started to fall with the effects of the storms that battered Valencia, with the rain, wind and frosts causing losses of up to €122 million (£107m), according to data provided by Spanish farming organisations.
At the same time, competition in international markets has intensified as more sources have come on stream and prices slumped again when supply from Turkey, Mexico and Greece reached the market.
However, Juan Bautista Juan Gimeno from of the regulatory council for Valencian Citrus PGI told FPJ that the situation is looking up for the first time in years. “One of the main reasons for this change is that the assessments are being more beneficial to producers, which is allowing them to cover the high costs of production and obtain higher returns on their crops,” he explains. “In any case, we are still in an economic crisis, which has also affected the agricultural sector - so we must be careful with expectations and hope that eventually, agriculture occupies the place it deserves.
“Since Valencian citrus gained the PGI, we believe that reducing costs and opening new markets have become critical issues in improving the health of the sector and achieving a total recovery of the citrus sector. Today’s citrus growers have very high costs that are not offset by sales of their fruit, but this investment would be balanced if, in opening new international markets, these products are revalued and gain a fair price for the trade. In short, our main point of focus is on business opportunities generated by the opening of new distribution channels in those countries that appreciate the virtues and qualities held by the Valencian citrus.”
The Spanish citrus sector performed well last year and exports reached 3.2m tonnes, up 2.5 per cent on 2008, as values also rose by 3.7 per cent.
But across other major supply sources, there are still a number of ongoing challenges facing the sector. Citrus producers in Argentina’s main lemon-growing area of Tucumán, for example, have started their season with a labour dispute. Workers are protesting and negotiating increased rates of pay, but stopping short of strike action. Roberto Sánchez, president of Tucumán citrus association ATC, says: “Costs have gone up a lot this season. In the case of the salary negotiations that are continuing, it is a difficult situation because ours is a labour-intensive business. We hope that in the short term, we will find the best solution for everyone.”
The dollar has lost ground against the peso over the past 12 months, which makes the situation more difficult and growers have less fruit on their trees.
“This year, we’ll have a moderate season in terms of volume, so we will have to be very well disciplined when it comes to marketing,” says Sánchez. “Recent rainfall has been good for the plantations and has helped bulk sizes up a bit. This could help us compensate for the lower volume of fruit.”
Growers are hoping that they will find a strong place on European markets given that this season there is not the same pressure from high volumes of late Spanish fruit. “We think demand will pick up for us in the second half of May and the first fortnight of June,” Sánchez says. “Our studies indicate that our volumes will strengthen in the second half of our season.”
CAPESPAN FOCUSES ON CITRUS GAME AHEAD OF SOUTH AFRICAN OFFER
South African citrus growers are picking their first Navels this week and the fruit will hit the market by the end of May. Here, Capespan trading director Martin Dunnett talks to FPJ ahead of the crossover from the northern to southern hemisphere.
What have been the major challenges for the citrus category over the last three months?
It has been tough largely due to the supply issues we have had to work with, caused by the weather in Spain. The exchange rate with the euro is a perennial problem, which means that we have not been able to secure good volumes from the traditional European supply source.
However, there has been a realisation that retailers must take into consideration the cost price of the fruit. This has taken time to filter through, but values are higher than they were last year. In fact, we have had a two-tier market over the last three months. Smaller fruit from Egypt has sold at lower values, typically around £6-7 for 15kg, while some of the larger fruit from both Spain and Egypt, from count 60-plus, has made up to £10.
There will be a shortage of citrus from Egypt before the South African season comes on stream, because growers and exporters there ship their fruit very quickly.
South Africa is picking now, but it will be a good month before volumes come into the system in any significant way and in the meantime, I expect volumes to be quite tight. This season, parts of the Eastern Cape in South Africa have experienced one of the most severe droughts in recent years, while northern parts of the country have enjoyed 10 days of rain, so Valencia supply from these areas should be fine.
The situation with the UK is that programmes will be fulfilled, but there won’t be any volumes shipped over and above what has been contracted.
What is the overall state of the citrus market?
I would say it is a concerned market. I met with wholesalers recently and even they have been putting prices down to get fruit through the system. There is no flow of fruit anymore; it has become much less fluid than what you would expect - there have been interruptions in supply and hold-ups as a result of market conditions.
How is demand expected to shape up through the summer?
The market will be led by supply and demand over the next few months, even with the improvement in the economy. The UK has had a change in its overall supply dynamics, which means that volumes will be sufficient but this will come at a price. Russia and eastern Europe have become attractive markets again and while we have been trying to secure back-to-back deals with grower operations, they have been wary of making those kinds of commitments with the volatility of the market currently.
What is Capespan working on?
We are looking to continue the process of developing our relationships with growers to link them directly with retailers, as this is very much an ongoing trend - more and more, supermarkets are demanding direct access so we are trying to facilitate relationships that work for both growers and retailers.
Alongside this, we are looking to develop our easy-peeler offer, the market for which is still growing in the market (up six-eight per cent annually). We have had significant interest in the ClemenGold offer and we are one of the key players in growing this brand in the UK and positioning it as one of the high-quality premium citrus offers on the market. Volumes are increasing every year and we have a very controlled production base, having chosen growers who are right for the job and can produce the best brix levels and virtual seedlessness.
And we will be looking to relaunch Cara Cara in early June because even though we have had six or seven seasons so far, volumes have been building every year.
At the same time, the South African grapefruit category will benefit from the overarching Beautiful Country, Beautiful Fruit campaign, which is helping to grow sales in the UK.
What are the challenges facing the citrus market?
Citrus will be value driven; those involved with the category must realise that the fruit has a global market and if you want to access the fruit, you will have to pay the right money - especially in the UK, where expectations are so high.
