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Send  Share  RSS  Twitter  25 Mar 2009

FOOD & BEVERAGES: Stirred, Not Shaken In Russia


Recent Western Cape Business News

It’s business as usual for Capespan in Russia despite the far-reaching impact of the credit crunch on this country.

Sliding to the weakest level in almost six years against the dollar, Russia’s rouble extended its decline to 24% since August 2008. And to avoid the currency’s sudden regression, Russia has spent $160 billion, or 27%, of its foreign currency reserves since beginning-August. Capespan CIS unit manager Maria Gmainer provided more background, “Against this backdrop, weakening oil prices threaten to deepen the country’s economic predicament. Ural crude, Russia’s main export blend, slid to $42.99 a barrel, below the $70 average required to balance this year’s budget. Plus, the dispute between Russia and Ukraine over natural gas, which resulted in supply disruptions to Europe, is depleting Russian income. Add to this the withdrawal of more than $200 billion out of the country since last autumn and one can understand Russia’s dwindling foreign currency. “Prime Minister Vladimir Putin has pledged to support the rouble to avoid sudden swings. But financial specialists predict another 20% drop in the future. Therefore, the uncertain situation may last for another couple of months.”

How has this affected the fruit business? Gmainer said importers suffered big losses caused by declining exchange rates and jumping market prices last year. They’re also struggling because delayed client payments have resulted in weaker cash flows. Nevertheless they’re trying to fulfil supplier payment obligations and managing this difficult situation. “All this has led to fruit being sourced via Europe and not fixing prices when loading in South Africa,” Gmainer explained. “That’s why Capespan Continent is delivering fruit via European ports from where importers take it by truck into Russia. Russian market prices aren’t predictable in advance. So to avoid further losses, prices are finalised prior to loading in Europe and set at European levels.”

As to the market outlook, demand for South African fruit was good, especially table grapes and stone fruit, she said. “The holiday season until mid-January was successful and we’re proud of the South African component in the Russian fruit basket. Regrettably, demand for table grapes in January has been higher than the supply.”

Prospects for the imminent pome season are positive and the first containers with Williams Pears were loaded in the second half of January. Apple shipments followed soon after.

While Capespan understands the need to minimise its risks, the company is supporting its Russian business partners, who are the best and most reliable customers in Russia. “This country remains a first-rate market for fresh South African produce - even when prices and volumes are tough to forecast,” Gmainer emphasised.

“The current situation might be more complicated than in other parts of the world. However, Capespan has confidence in continued fruitful business with this stimulating country.”

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