"Transport absorbs most of the margin"

Slowdown in citrus sales and rock bottom retail prices

Citrus sales have slowed down after the week previous to the St. Nicholas celebrations in Central Europe. At the same time, some supermarket chains are selling Spanish oranges at rock bottom prices, according to reports from various associations and agricultural organizations.

The Valencian Farmers Association (AVA-ASAJA) and LA UNIÓ de Llauradors (Growers' Association) have asked the Agency of Information and Food Control (AICA), under the Ministry of Agriculture, and the Directorate General of Trade and Consumer Affairs of the Regional Government, to open an investigation on nine supermarkets for allegedly selling citrus at a loss and for appropriate measures to be taken.

Both agricultural professional organizations have made a detailed study on various supermarkets and have found that nine of them have likely incurred sales at a loss, which are prohibited by law. It so happens, moreover, that some of these retail chains did not sign the Agreement of Good Trade Practices in Food Contracting, recently promoted by the Ministry of Agriculture to improve the functioning of the food chain.

In the same context, Asaja Córdoba has issued a press release denouncing the promotional activities carried out by Carrefour, with oranges being given away for free with purchases of over 40 Euro at one of its stores in Madrid. To prove this, Asaja has provided a ticket obtained at the store, where you can read that a 4 kilo net of oranges is being given away with purchases of over 40 Euro.

The Ministry of Agriculture, through the Study of the Value Chain and Price Formation of the Citrus Sector, states that the breakeven point for in terms of profitability at retail level is of 1.08 Euro/kg for oranges and 1.19 Euro/kg for mandarins, VAT included. All prices below this level therefore entail losses for the producer; most supermarkets, if not all, set prices below this breakeven point, with prices ranging from 0.59 Euro/kg to 0.99/kg for oranges and from 0.89 Euro/kg to 0.99 Euro/kg for mandarins.

Sales have slowed down and transport absorbs most of the margin
The consequences of these actions by supermarkets are already clear, as there is already a significant slowdown in purchases of citrus fruits to producers and a great concern amongst growers about the possibility of this leading to a drop in prices at origin.

"There is no justification for supermarkets acting in this way; it is a trading strategy with a negative impact on the structure of the citrus market and which may seriously jeopardise the development of a campaign that had promised to be reasonable for all parties involved in the chain," pointed out sources from both organizations.

Exporters also report falling prices. "We hope it does not get worse, because it is nonsense for this to be happening in a campaign with an almost 25% drop in production volumes; a direct result of the weather conditions at the time of the flowering. Consumer prices have increased compared to last year, but unfortunately this margin is not absorbed by the primary sector, but by the transport sector. At this time of the year, there is usually an increase in the volume of export and therefore greater demand for transport services, so prices soar exorbitantly; something which the Central European industry takes advantage of to ship all kinds of products in returning trucks at bargain prices. In such circumstances is when we remember how much we need to move forward in the creation of a European railway network," explains a Valencian exporter.

Moreover, he notes that "a lot of promotions have been carried out in Central Europe on the occasion of the St. Nicholas celebrations, and with these markets already supplied, demand this week has dropped. We still hope prices will rebound next, now that Christmas is around the corner."

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