All of the key players in the UK grape market have spent the last three months on a constant search for product, with both South Africa and Chile suffering weather-induced shortages and no real fall-back option emerging.
“If you had sat down in September and written down a mischievous list, detailing everything that would have to happen to screw up the European grape market,” said one importer, “then that list would now reflect precisely what has happened in the last few months.”
Initial volume forecasts in South Africa have proven to be way above the mark, as various climatic effects have chipped away in every region. The Orange River has seen its volumes slip from 17 million cartons down to 12m cartons, while the Western Cape has dropped its volumes from 28m to 22m cartons, and will probably come in below that when all is said and done. Virtually every area has been hit, with hail early on and persistent rain. The Hex Valley has been singled out as having taken a real battering by importers.
So supply from South Africa has been understandably inconsistent. Shortages led to a far higher dependency than normal in December and January on airfreight, with red grapes also in that equation, unusually. Volumes have never quite caught up to the level where importers can relieve themselves of the jitters. Airfreighted fruit has also come in from Chile, but the shortage of cargo capacity means UK importers find themselves competing against each other for space on passenger planes, and inevitably driving prices higher.
Chilean grape exporters have experienced a slow start to their season, with the worst winter freeze in more than half a century delaying the crop by nearly four weeks in some northern production areas. As a consequence, at the end of January, sendings to the UK were 56 per cent down year on year. Although this had more of an effect on the US than the UK, the exchange rate situation at the moment is making Europe a more attractive proposition for Chileans as volumes pick up again.
Grapes generally have been short, with the Californian and Brazilian crops also coming in lower than normal, and Argentina’s volume halved by weather issues; so Chile’s product has been in demand and prices rose sharply in the US. However, the strength of the euro against the dollar will oblige Chilean exporters to switch their attention away from their large North American customer base and onto the old continent, where buyers are scrabbling about for product at the moment and, more importantly, returns are higher.
There may be problems in the UK with prices at the moment, but Chilean growers and exporters have also been bemoaning inflexible attitudes to promotions in the US, which have seen a significant quantity of grapes, particularly Thompson Seedless, sold at levels that cannot even meet the costs of production in Chile.
As has been seen in the past, periods of short supply can very quickly be transformed into serious oversupply when snap decisions to divert fruit coincide with volumes rising naturally. And with the later regions also experiencing delays of different lengths, there is a clear and present danger that the market will experience the type of concertina effect that has caused such damage in the past. As supplies move southwards, Ovalle has a 15-17-day delay, Aconcagua is about 10 days late and the Central region is around five days behind schedule. As they come on stream at staggered intervals anyway, the impact could be considerable.
More rain in Chile last week has thrown further doubt on the grape job, but above the weather, one source says there are more factors at play. “There are two major issues in Chile at the moment, and this does not help at all,” says the source. “First, there are serious problems with the labour force, which have been documented in FPJ in the last couple of months. Second, with all of this fruit coming into play at the same time, there is going to be a massive pressure on the packhouses in Chile, which will not have the capacity to cope with it.”
Prices began to drop back in the US last week after a period of decent returns, and a fair amount of fruit was loaded in the north of Chile. The UK market will be hoping that sensible marketing decisions are taken over the next few weeks, to ensure that Europe is not flooded with unwanted fruit in February and March, at a time when the price structure here cannot realistically take the strain.
A number of sources agree that there is a definite shift in grape sources to move away from the UK supermarkets wherever possible, as the returns elsewhere are generally proving higher. “It has been a good year to have fruit rejected by the supermarkets,” said one. “Once it’s been repacked and sent into the wholesale markets, the returns have been far higher at times.”
Importers have been unable to build their usual stock positions - the contingency fruit that either rolls in when shortages occur, or ensures a seamless transition from South African to Chilean fruit in a better year. “The UK can handle something like 300,000 boxes a week at this time of the year,” said an importer, “but there has been a fraction of that coming in and most importers are working hand to mouth, with nothing much to speak of in store.”
The need to find more markets and diversify the risk has been recognised by exporters, with many increasing their emphasis on opening up new channels in eastern Europe and Russia, and the Far East. Exporters’ association Asoex has altered its promotional outlook to reflect this developing trend.
South Africa too has begun to cast its net further afield, and while this does not necessarily mean less fruit for the UK long term, in the short term it might require a change of strategy.
Back in the now, “the next four to six weeks will remain tight, there’s no doubt about that, but I don’t think there will be huge volumes coming forward even after that”, said another importer. “These are tough times for the grape category.”
Another said: “It really is up to the retailer/supplier relationship to work this one out. It has been a disappointing start to the year, which will inevitably have knock-on effects. South Africa is relied upon to set the scene for the year, and when the category has not been able to build up a head of steam, it’s hard for the grape that follows to make a big impression in a flat market.”
EPC MAKES INROADS IN GRAPES
EPC Farms Egypt has been known as one of the foremost potato importers from Egypt into the UK and European markets since 1987, and now we have extended our activities and invested in the grape sector, writes Dr Ihab Tadros, chairman of Egyptian Producers’ Consortium (Ltd).
This venture in fact has its roots as far back as 1995, when EPC first invested in reclaimed land in Behira, on the Cairo-Alexandria desert road. We converted that land into a highly productive vineyard of Superior and Crimson Seedless grape.
I had always had an interest in the reclamation of desert land in Egypt, for conversion into properly productive agricultural land, because I believe wholeheartedly in starting with “virgin” land if you are going to be successful in the field of agriculture. Our potato business was built on the same foundations, as we began in 1987 with a similar concept, and now we are hoping to repeat this with grapes.
Times have certainly changed and, although we built the pyramids a long time ago in Egypt with our bare hands, we are now firm believers in the adoption of technology to continue our climb up the ladder.
I have travelled extensively, to Chile, South Africa, Italy and other grape- growing regions, to learn how to grow grapes professionally, and until now growers and exporters in those countries have handled grapes better than the Egyptians, I would have to admit. We are learning quickly and we have a niche window in the UK in May and June, which we are more than capable of filling; and our improving handling techniques will be beneficial to both Egyptian exporters and European customers.
We realised that the only way to gain full control of the supply chain was to learn from past mistakes and implement some of the methods that I have experienced and witnessed around the world. And to offer the level of traceability our customers require, we have built our own packhouse, pre-cooling and coldstore facilities in the middle of the vines. This has already proven itself to be one of the best investments made by EPC over the years, because already we are seeing the payback right through from the quality of the grapes to the extension of shelf life on arrival in the market.
By putting all of these facilities under one roof, we have also been able to reduce handling costs, and that has allowed us to become more competitive too.
Therefore, top-quality and competitively priced GlobalGAP-certified grapes from EPC Farms Egypt will be in the UK and Europe this year, when we believe the whole industry is going to benefit from our efforts.
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