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2 February 2022 – The profitability and economic sustainability of the citrus industry is in jeopardy due to the hike in input and service costs, according to the Citrus Growers Association (CGA).
The organisation’s chief executive, Justin Chadwick, said in his weekly newsletter last week that indications were that this was set to continue. “This has included increases in shipping costs that can only be described as alarming,” he said.
In November, southern African citrus growers had delivered 161.6 million cartons of local citrus across the world last year, an increase of 18.6 million cartons when compared to 2020. This was despite an extremely difficult and complex season that put the entire industry under severe strain.
The sector faced a number of serious challenges including the global shipping crisis, stringent additional phytosanitary measures by the EU that cost the industry more than R4bn annually, as well as serious operational challenges at South African ports.
In November, CGA said while the sector’s exports had seen impressive growth, the global shipping crisis saw logistics’ prices soaring, while the slow turnover of ships caused major uncertainty in shipping schedules and backlogs at ports across the world.
As a result, it said there had been a dramatic increase in logistics’ prices (on average freight costs increased by about 30 percent to 40 percent when compared to last year) and a global shortage of containers, which meant cargo had to be stored at ports and across the supply chain for longer periods and at a greater cost.
On top of this, vessel schedules also became erratic as a result of shipping lines responding to a strong demand on the East-West trade routes.
These changing schedules meant growers were also unable to optimise between markets, in particular the fast-growing Far East market. Shipping to the Middle East from southern ports in the country became near impossible at times, which meant growers had no choice but to ship from the Durban port infrequently.
Chadwick said: “As the biggest employer in agriculture, many families depend on the industry and entire rural towns and villages exist to support it along with its input and service providers. Food security is not just about availability of food but also the means to afford the food, which citrus farms provide to employees.”
South African farmers incurred higher costs in the 2021/22 season with the hope that a favourable weather outlook and higher commodity prices would be financially rewarding. But, as now observed, the excessive rains delayed planting in some regions and in other areas damaged the crops. This meant that the 2021/22 season could be a financially costly year for farmers who experience losses in yields due to floods.
Last year saw rising input costs as fertiliser and agrochemicals with herbicides such as glyphosate, atrazine and metolachlor were up in price by 99 percent, 33 percent and 32 percent, respectively, in September last year, compared with the corresponding period in 2020. The exact price trend persisted in major fertilisers such as ammonium nitrate, urea and potassium chloride, whose prices were up by 107 percent, 58 percent and 125 percent, respectively, in September last year, compared with September 2020.
These overall increases were on the back of supply constraints and disruptions in production lines in major global fertiliser and agrochemical-producing countries such as China, India, the US, Russia and Canada.
The higher shipping costs and oil prices also contributed to these price surges, along with firmer global demand from an expanding agricultural sector.
The civil unrest that gripped South Africa in July last year also hit the sector. Source (Business Report)