Cold Link Africa June 2022 | Page 17

INCORPORATING COLD CHAIN
ASSOCIATIONS

Industry sustainability is under threat

By the South African Table Grape Industry , AJ Griesel - chief executive officer

We deem it important to remind industry role-players that the timely marketing of quality grapes in preferred export markets at certain price levels determines the success of our industry .

Amidst the backdrop of extensive media coverage that the current harvest has received , the reality is that the industry ’ s sustainability is at risk - due to the combination of numerous factors at play within the broader environment .
As the season draws to a close , we echo our producers ’ sentiment and concern . The industry ’ s reliance on worldclass infrastructure including dependable electricity supply , functioning and effective ports , as well as good road infrastructure represent the building blocks of our logistical chain and are critical for our sustainability .
The urgency of this matter cannot be overemphasised ; hence SATI remains in constant contact with Transnet , through various forums , to ensure that the Cape Town port remains on the agenda . Waiting periods experienced this season simply
cannot be repeated , as these have a direct impact on the quality of our grapes . Obtaining the necessary input from industry leaders , especially regarding logistics , remains a priority . International disruption of shipping remains a concern , however we have little control over the matter .
The cost pressures our industry is experiencing are not unique to South Africa and have garnered the attention of international industry organisations such as the Southern Hemisphere Association of Fresh Fruit Exporters ( SHAFFE ). The Russia- Ukraine conflict has exacerbated an already inflationary environment , especially in terms of inputs such as fertilisers , chemicals and fuel . Labour rates , which form a significant part of the cost structure , continue to rise and are not sustainable . Large-scale investment to ensure that our vineyards are renewed and that we remain internationally competitive places further pressure on the industry .
Competition in our traditional markets , specifically from South America , has led to larger volumes of grapes being available and therefore places downward pressure on market prices . Increased global inflation , specifically the high figures prevalent in Europe and America , worsen this economic situation and support what we already know – grape prices at certain levels are simply not sustainable .
Recent Covid-19 related restrictions in China have highlighted the fact that this market is simply not conducive at certain
times . Market development of new markets remains a strategic priority , however structural challenges exist which urgently need to be addressed .
The above synopsis provides perspective into the challenges our industry faces , and although we have not touched on all aspects in depth , our objective is to provide a balanced viewpoint considering a large harvest in volume is not necessarily the measure of sustainability .
In conclusion , we assure constituents that we are aware of challenges currently being faced and remain committed to protecting our producers ' interests .
SATI can influence some of the matters and challenges highlighted above more than others . We will continue to advance these issues whilst working actively with all role-players to raise the level of urgency in finding solutions and communicating the impact it has on our industry .
NATIONAL OVERVIEW The harvesting season has concluded for the Berg River region , and only the Hex River region is still expected to be packing in the next weeks . To date , national intake volumes have reached 77 366 298 cartons ( 4.5kg equivalent ), which represents a 4.4 % increase in comparison to week 15 in 2021 . The season has produced high volumes of table grapes , mainly due to good weather conditions and new cultivars that came into full production . Farmers have persisted
Nati Melnychuk | Unsplash
Increased volumes of export produce does not indicate a healthy sector .
despite numerous challenges experienced .
The Hex River region has packed their last grapes for the season , consisting of mostly Crimson Seedless . This region has packed 313 898 cartons ( 4.5kg equivalent ) in week 15 , and it is anticipated that they will exceed 25 million cartons . Although the yield has been high and exceeded estimates , numerous challenges have been experienced this season . A dramatic increase in input costs and significant logistical challenges have impacted production and exports . It is important to take these factors into consideration when evaluating the season ’ s high yield . Farmers have remained resilient to rise above challenges and continue to produce the quality of table grapes South Africa is renowned for . CLA

CGA update : In for the long term

By the Citrus Growers Association

“

Wall Street is always too biased toward short-term profitability and biased against long-term growth .” Peter Thiel As previously reported , the talk of Fruit Logistica in Berlin in April was the unprecedented shipping rates that were on offer for 2022 . There were a lot of complaints about the arrogance shown by shipping line management – a take it or leave it approach – and charging what they can because they can , and not because they should .
The reason they can is because of the shortage in containers – with congestion at many ports around the world , and most noticeably in the USA and China , containers are standing still for longer than they are travelling – some say only a third of containers are in rotation – others say 50 %.
Whatever the correct figure – when the congestion eases more containers will be in circulation and supply constraints will be eased . In addition , reports indicate many new ships and containers are being built . I would imagine most top management at
the shipping lines are paid bonuses based on profit – the higher the profit the better the bonus . So , if rates can be hoisted up to unprecedented levels , short term profits are made and large bonuses earned .
But what happens when the congestion eases , and the new ships and containers come into the market ? There will then be an oversupply , shipping lines will be trying to attract cargo . Freight rates could tumble , and the profits could become losses . Meanwhile , the shipping line management have banked their bonuses and can move off to greener pastures . Apart from the cargo owners , who is most financially inconvenienced by this scenario ? The owners of the shipping lines . Shipping line owners or representatives of shareholders need to take cognisance of this unfolding story – and think carefully about incentivising management to chase short term profits at the cost of long-term sustainability .
This scenario does not only extend to shipping lines – throughout the chain those who invest in the assets do not necessarily manage the assets or set the prices and terms of engagement . In many cases , management of cold stores , transport , distribution warehouses and others in the supply chain are taking advantage of the logistics mayhem and hiking their rates – because they can .
Andy Li | Unsplash
Shipping rates are by far the largest hinderance to exporters currently and while shipping executives get profit bonuses now , when the industry again becomes saturated , businesses will likely be in the red as competition grows .
Here again , owners and shareholders of these assets need to watch carefully what management are doing . The one group that both own and manage their assets are the citrus growers – and they are in for the long haul . This week a large shipping line released their amazing results – with great fanfare they boasted about their abnormal profits and how they have the “ ability to help customers overcome logistic challenges ” – the biggest logistics challenge is freight rates which is of their making !!
Most fruit exporters will not survive at present freight rates – but those who are in for the long haul find ways to survive – and those ways will probably exclude those who are the cause of the problem .
CGA STATISTICS BOOK Portia Magwaza ( CGA Research Economist ) has completed the 2022 Industry Statistics book . This book will be available from 22 May 2022 on the CGA website . CLA

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