In the last few weeks there have been major changes in how we do business, how the markets are responding and how we get that product to market.
Neil Barker has been in the business for many years and sold his company BGP last year but stayed on in an advisory role, a valuable resource in times like these.
“It is a very interesting situation; markets are generally subdued. China is back at work and things are moving but it’s not full of confidence and bustling along like it usually is,” explains Neil.
“We start with our Australian mandarin harvest next week with bigger production and more interest due to increased demand for vitamin C. I am very cautious about the season because around half of it goes to China. While the importers there are still very keen the fruit still has to be bought by the consumer. The bigger volumes will get to market by the end of May and by then I’m hoping that the levels of confidence will be restored, and people will be out buying fruit.
“It’s hard to say what will happen in terms of the discretionary spend, will people have the confidence to buy an expensive piece of imported fruit or will they opt instead for cheaper piece of domestic fruit?”
There is no social benefits system in China but the Chinese have always had a very high savings rate, 35% of the GDP is savings while in other countries it may be as low as 3 or 4% - so in general in China a lot of people will have savings to fall back on.
“The citrus market is not too bad, crops in Egypt are finishing early and because they are in lock down there is no huge supply. The limited volumes being shipped from Egypt are finding quite good demand at higher prices.
The citrus market in the Gulf area is strong, according to Neil and that maybe because of shortages coming out of Egypt. In Asia, Singapore and Malaysia the markets are quiet because of the lockdown. This is also true in the Philippines where there is no public transport and people are restricted in leaving their homes.
Logistics
“In supply countries there are ongoing problems with arranging shipping. It has always been difficult getting empty containers but the huge and prolonged build up of full containers in China in January caused significant disruption to the return of empties to supply countries. At the time about 10% of the world’s refrigerated containers were stockpiled in China because they couldn’t be cleared through the ports.
With port terminal problems developing in several main ports causing delays and increased costs the Shipping Lines responded with significant Surcharges and increased rates making trade extremely difficult. Right now there is no Line that will accept cargo for Manila due to the difficulty in discharging cargo at the port terminal.
Container volumes through the Port of Los Angeles fell 30% in March and this decline is evident across all trades. As a result Shipping Lines are reducing and combining services in an effort to maintain load factors and stay afloat. The result is delays, longer transits, and little predictability, making life as a fruit exporter very difficult.
While it sounds like doom and gloom there are signs that the markets are stabilizing, the new shipping regime is established, and we can continue to supply with increasing confidence. While markets might be subdued we know that people need to eat and that fresh produce is an important part of the diet.
It will be interesting to see the long term effects on confidence levels and peoples zest for life and whether globalization as we have experienced over the past decades might be moderated a little with more home grown food.
Neil Barker
BGP International
Tel: +61 3 9686 3300
Email: neilb@bgp.com.au
Website: www.bgp.com.au