The New Zealand kiwifruit sector is responding to rising fuel costs and uncertainty linked to developments in the Middle East, according to Michael Franks, chief executive of Seeka.
"Our job is not to panic but to professionally manage our way through this predicament," Franks said.
The immediate impact is on diesel costs for transport operations, including moving bins from orchards to packhouses and exporting fruit to ports. Seeka has introduced a fuel adjustment factor (FAF), which adjusts payments to transport operators in line with weekly diesel price movements.
"If we didn't pay them for the extra cost of fuel for handling our fruit, they would not be able to carry on and would run out of money," he said.
"So, the more sensible and more mature way is to put the FAF in place; the first week it was 6% more, and the second week it was 15%. We have a rate that we pay them per bin based on the distance they transport our fruit, and, of course, the growers will have to pay, but at least we will get our fruit to market."
Franks noted that grower returns may be affected, although fuel represents only one component of total transport costs. Shipping continues, but there is uncertainty around market conditions.
"For example, what will it do to demand and consumer trends, and will the people who supported us in the past continue to do so?" he said.
He added that container availability, which was a constraint during the COVID period, is currently less of a concern, as relatively few container ships transit through the Strait of Hormuz. The region is primarily a destination market rather than a transit route.
Franks said the main concern is how quickly fuel supply chains recover once conditions stabilise, including refinery operations and crude supply compatibility across regions.
"As I understand it, this is not just as simple as you go somewhere else and get your crude around the world, which is quite different, and not every refinery can take every type of crude. Our fortunes are what is happening in Korea and Singapore, in terms of where we get our fuel from," he said.
He also noted that supply issues extend beyond fuel, including fertiliser sourced from Western Sahara and petrochemical inputs used in packaging materials for the kiwifruit sector.
Source: Rural News
