The strike in Peru seems to finally have come to an end. "After delaying the start of the season due to a demand for higher prices in the Malingas region, the Ministry of Agriculture called a meeting with the main mango suppliers to settle the matter and find solutions. After 5 hours of constructive deliberation, the consensus was to find grounds to avoid further disruptions in the mango supply chain and transportation routes", explains Matthew McGeary from Asica Peru, mango supplier.
Notwithstanding, certain concerns remain prevalent in the minds of some in the mango industry whom are continuing to search for options to maintain a steady price throughout the season and avoid the lows of least year's peak weeks. The aforementioned issue starts and ends at market level, in which Peruvian mangoes play a pivotal role in supplying year-round retail programs in the months that other origins are not available; and as such should not be treated as a bulk commodity. On the other hand, although Peru exhibits macroeconomic stability it’s important to point out that it is a country with free-market economic principles, and all parties in the Peruvian mango supply chain also need to be realistic in their expectations and needs.
Effects on the market
According to Matthew this strike has undoubtedly had a great effect of the US and European markets. "The US has been extremely tight on large sized fruit, causing a large demand for sizes 6,7,8, and even 9 count. Ecuador has proven to be a small crop this year, with some exporters even shipping loads with a substantial volume of size 14. Europe meanwhile has been dealing with the opposite sizing problems in many cases. As Brazil is ending the Kent/Keitt season with mainly big fruit; causing a demand for sizes 9, 10, and 12 (although there is also information from Brazil that there are some small sizes still to come)." He says that without the Peru crop to fill in these gaps, markets remain with a high demand, only being negatively affected by old fruit and fruit with quality problems. Promotions have also been effected, as retail stores have been forced to delay regularly scheduled weeks due to lack of fruit availability.
"Additionally, starting the season later will curb the steady rise in volume that is characteristic of the first weeks of the season, causing a higher initial volume to leave the country. It is not expected that this will have much effect on pricing, as high demand paired with an expected 30% reduction in total volume from last year should keep the market steady", continues Matthew. He states that it's important to note that there is some debate in the region with regard to the specific percentage of reduction in volume this year, with some growers even reporting up to 45% less than last year. Furthermore the “peak” of the Peruvian crop is expected to be pushed back until end of January departures (if there are no major changes).
Prices
Having this unique situation has brought to light some incongruities between the loading prices in Europe and the US and the production cost in Peru, which needs to adjust for lower yields this season. "There is a constant demand to push prices down at the time of loading by customers, often resulting in losses for mango suppliers in Peru. Just as it is the responsibility of suppliers to ensure quality on arrival of the product and comply with the requirements of their programs, it is the responsibility of the importers to ensure the quality of the programs in which the product ends up and maintain stable market conditions." The exporter explains that loading containers without a fixed program results in an oversupplied spot market, is pushing prices down across the board. This strike has given a glimpse of what can happen, and both suppliers and customers need to work together so that prices remain fair for everyone.
Matthew concludes: "Asica Peru is committed to supplying mangoes and avocados to our customers in the US and Europe by efficiently controlling the entire supply chain, while making a positive difference in our industry and community with our Helping Hand projects."
For more information:
Matthew McGeary
Asica Peru
Peru
T: +1.949.370.5419
E: matthew.mcgeary@asicagroup.com
www.asicagroup.com