Weakening Rand improves income but drives up logistics costs

Tight apple stocks stimulate demand but pear bottleneck in Europe

South Africa’s lower apple supply has a positive effect on demand in worldwide markets and exporters are seeing good movement on apples. 

Apple exports to Europe, whose own supply is lower, is 66% up on last year (YTD from week 1 to week 23) in response to strong prices. Europe is, at this point in the season, the fourth largest recipient of South African apples after the Far East/Asia, the UK and Africa.

For exporters, given the lower volumes, it’s a balancing act between meeting commitments and going for opportunities as they arise. There are fewer large fruit than last year and Royal Gala are more or less finished. Smaller fruit size will have the strongest determining effect on this season's grower income.

It was a good year for colour on Pink Lady and Sundowner (Joya). As a result, Pink Lady apples form a strong segment of the Cripps Pink/Pink Lady packet.

The only market that’s under pressure is Malaysia, which received a lot of Fuji apples that would have gone to Taiwan (shipments there have since restarted after a ban instituted last year has been lifted).

Very difficult pear market 
It’s a different story for pears. Europe is a very important market for South African pears but their carry-over pear stock continued for longer than usual, so that European supermarkets only switched over to Southern Hemisphere by the end of May, while coldrooms were filling up. South African pears (primarily Packhams, Abate Fetel and Forelle) are competing with Argentinian pears.

“Our marketing window for pears is much shorter than usual,” says a topfruit trader. “The average fruit size of Northern Hemisphere pears was smaller, the quality was marginal. South Africa specifically also has many small pears and the nett effect is that the market is very challenging. We have about a month left on our pear marketing in Europe, but it won’t be easy.”

There are some questions whether the Middle East will be able to absorb the pears, particularly small counts, sent there. Buying power has decreased, many firms in Dubai have closed, regional wars are adversely affecting the economy. “We’ve long warned the South African industry about the Middle Eastern market,” says a topfruit trader. “Over the past three or four years our industry has grown with double digits in the bi-coloured pear segment.”

Weakening Rand
The South African currency has reached a six month-low as the economy shrunk by 2.2% over the last quarter. The Rand-Dollar exchange rate is R13.30 to US$1.

While a weaker Rand has a positive effect on farm income, particularly with regards to fixed retail programmes, logistics costs are priced in US dollar and consequently become more expensive.

“A weak Rand will definitely help, it is a bonus if it’s going well, but when rated as a factor that influences income per hectare, a better packout percentage or bigger sizes have more of an influence,” Gert Marais, category manager for apples and pears at Delecta Fruit, points out.

Hannes Pienaar, Capespan head of topfruit, says: “It’s very difficult to make up for lower volumes through price. The apple harvest is down by around 15% but that’s an average, some producers are down more than that, and you can’t offset that by a weaker Rand.”

The recent weakening doesn’t have a tangible effect on their marketing strategy, traders say.

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