The appeal to shipping companies meets “an arrogance that surprises me”

The Eastern Cape is ending its citrus export season on a frustrating note as they have had to pack two-week volumes on MSC Carole (next week MSC Domitille will omit Port Elizabeth).

Planning EU orange shipments is complicated this season: due to new cold weather requirements, some exporters stopped packing Valencia last week; fruit packed this week cannot be cooled in time to be loaded onto MSC Carole (luckily loading for the UK can continue until Thursday).

In turn, the MSC Carole will omit Cape Town on its northbound voyage, disrupting Western Cape exporters’ planning to service their UK and European schedules (at this stage they expect to be able to load from Cape Town on the MSC Polaris still on its way). However, when a vessel misses a port, these volumes miss their intended slot in a schedule and represent a missed market opportunity.

The additional European chain that Maersk introduced in June in Port Elizabeth to cover the Eastern Cape during the citrus season was a temporary measure and the last ship left last week, leaving plenty of fruit still bound for the European Union since the Eastern Cape.

The Eastern Cape Ngqura Container Terminal

Export profitability is eroding
Port operations from Cape Town have also been spotty this season, as there is not always enough equipment or slots available. Exporters sometimes say they have containers, but there is no room on the ship, or that shipping companies send a smaller ship without notice.

“It has been an extremely difficult season,” says a Western Cape citrus exporter who does not want to be named. “The main contributing factor has been the associated costs, of which the shipping costs are totally out of control. There is nothing a grower, packer or exporter can do to negotiate more favorable rates or attempt to adjust the cost structure downwards.

He adds that all the approaches to shipping companies have fallen on deaf ears “with an arrogance that surprises me”.

“Shipping companies do what they want, not caring that due to shipping costs, products can no longer be exported profitably.”

Shipping costs double annual production
In his latest bulletinCitrus Growers’ Association CEO Justin Chadwick notes that with shipping companies increasing prices by 128% between the first quarter of 2020 and 2022, “growers are paying nearly double to ship their fruit, whether what it cost to produce it in an entire year.”

“In order to hedge against further price increases and ensure price stability in the future, the CGA has engaged with other fruit industries on the possibility of taking control of their shipping, a study by feasibility to be completed by the end of September”.

Chadwick observes that while citrus exports continue to grow steadily, the majority of local growers face the very real prospect of significant revenue losses this year.

“Experienced industry commentators are of the opinion that less than 20% of citrus growers are likely to achieve yields above break-even by the end of the 2022 season.”