Stone fruit will seek out a balance between supply and demand

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The highly important stone fruit campaign for the Spanish fruit and vegetable sector due to its high invoicing is getting ready to balance supply and demand.

In order to stay abreast of developments, operators and employers are debating different formulae that allow a satisfactory campaign with a good end.

This year, the classic problems of any campaign (weather conditions, qualities, sizes, etc.) have the added situation of geopolitical uncertainty that the Ukraine war entails.

A few days before Spain starts harvesting its first stone fruit, from the very beginning of the campaign, the sector is full-on facing a commercial setting that is very different to any known before. For this reason, and also in order to be able to pass on the increase in costs to the distribution, market management steps are being worked on to balance the supply and demand.

The sector and Spanish employers are studying ways like the ones carried out in 2014 due to the Russian embargo. “These steps will be taken beforehand so that the markets are not distorted and the campaign turns as normal as possible,” the Manager of Fepex, José María Pozancos explains.

The executive states that “when the market is balanced, the costs are passed on because everyone needs to buy and sell. A very recent example of this happened with tomatoes this season.”

In any event, “at Fepex we are remaining very watchful of the different variables: what the campaigns in European producer countries will be like; what the movements in third countries will be, particularly in Turkey and Egypt; what consumer behaviour will be like in a crisis economy; and, finally, how to look for a model to ensure that the sector can pass on the significant increase in costs.”

Due to all these circumstances, the only solution involves balancing the supply and demand using market management steps, where withdrawal is one of the most effective steps and using a scope that does not remain only in the Producer Organisations, to obtain greater efficiency.

The Spanish stone fruit offer has a very fragmented business fabric and the idea is to prevent guerrilla warfare regarding prices. Produce is often sold at a loss “because it is more profitable to lose 20% than 100% of the production. This need could destroy companies. Therefore, at Fepex, we are insisting on a Food Chain Law where the costs are calculated for the whole campaign and not for each transaction.”

Accordingly, Joaquín Gómez, the Manager of Apoexpa, qualifies that it must be made very clear that the supply must be adapted to the demand. “If produce has to be destroyed or used for animal feed, it will have to be done. If we don’t do this, we could enter a dynamic of dropping prices which, with the costs that we have today, could turn this into a devastating campaign.”

Gómez advances that “we will have to see what this war leaves us as Eastern European countries are an important market for the production from Murcia, with fruit sizes that are not consumed on the western markets.”

On this point, the executive explains “we don’t know whether, with the logistics expenses that we are suffering from it is worth exporting fruit to these countries. We could have the paradox that the transport might be more expensive than the fruit itself.”

Furthermore, the employers’ representative from Murcia points out, “we must be very watchful about productions from Turkey which is keeping its doors open to Russian trade, although this is not worth anything due to the collapse of its payment systems.”

The Turkish potential is significant in the stone fruit range, but the fact that it is a world power in cherry production must be particularly taken into account. “Labour costs have no match compared to western expenses and the only point that could slow Turkey down from flooding the markets is the logistic factor.”

This is the same case with Egyptian productions which, in the case of grapes, represent a serious concern for the Region of Murcia, the main producer of Spanish table grapes.

The sector is seeking solutions now because “the rise in electricity costs is weighing the operators down, spreading to the actual irrigation with the need to pump water up from the wells. And don’t even mention pallets, containers, petrol, etc. And all of this without any certainty that the distribution is going to pass on the prices.”

 

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