FOOD & BEVERAGES: The Season's About-Face
Recent Western Cape Business News
ALTHOUGH the 2009 citrus season prospects turned out better than expected at the start, the year has been tough, says Capespan GM marketing Sarel Joubert.
A few negative issues were faced when the season commenced in March/April:
• the Russian market, important for citrus, collapsed in October 2008 and the 2009 citrus season forecast for this region was quite negative
• an abundance of Egyptian oranges in the Middle East
• an over-supply of Spanish oranges and lemons in the European market
• uncertainty on buying patterns for the 2009 season because of the economic downturn
• the South African currency started strengthening versus its major trading currencies at end-March.
“Looking back at the past five months and these concerns facing us, it’s amazing how circumstances can change in a relatively short time frame,” Joubert says.
When the Russian market started recovering, all commodities of the citrus volume shipped from South Africa from beginning April until end-July were 27% higher than in the same 2008 period. US$ values earned to date were lower than in 2008, but in line with 2006 and 2007 earnings.
The Brent crude oil price increase from $40 a barrel in March to more than $60 a barrel from June onwards is supporting the Russian economy. This has caused vigorous buying power that’s filtering through to acceptable citrus sales rates. It’s anticipated that the Russian market will hold its own and end on a good note for SA citrus, according to Joubert.
Due to the overhang of Egyptian oranges and Spanish lemons, the Middle East started extremely late. “We priced aggressively for movement and also to motivate buyers in switching to SA product. The strategy worked and market values for both oranges and lemons improved steadily as we progressed into the season.”
Throughout, the European market situation was difficult because of excessive Spanish stocks. The South African industry responded well and shipped 29% less citrus until end-July than in 2008. This represents 6.6 million fewer citrus cartons into this market segment. At 5.5 million, oranges represent the biggest share of the reduced volumes shipped. Providing the market some space, it spurred a difficult but average market scenario.
“As we thought, European summer holiday sales were slow, but the market’s showing encouraging signs and we expect a positive finale. Despite the recession taking its toll, the smaller volumes shipped to this market will pay dividends during the September to November sales months.”
“All markets decelerated because of the gloomy economy and we definitely noticed that consumers have been spending less. The effect of this also can be seen in the liquidity of some of our clients and their buying patterns. To counter the slowdown, we ensure that clients and consumers are offered the best quality, service, presentation and so forth. Indications are that the effect of the current recession will still be felt during the 2010 sales period.”
“Compared to our trading partners, the South African currency generally did strengthen from April onwards. This contradicts the trend during the past few years when the rand weakened or remained stable during the citrus marketing period.”
“As manifested in the 2009 citrus season about-turn, the fruit industry is a ‘living creature’ and predictions into the future should be kept to the minimum.”
“Thus, we won’t venture into commenting about the 2010 season at this stage,” Joubert cautions.
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