eBusiness Weekly
Russia is a sizeable market for South African fruit, and the fallout of that country’s invasion of Ukraine could create problems for local producers.
The deciduous fruit industry exports about 5.5 million cartons of fruit to Russia annually. Overall, South Africa exports approximately 8 percent of its fresh fruit to Russia, according to Justin Chadwick, CEO of the Citrus Growers Association (CGA).
Specifically, the export of pears to Russia has increased markedly in recent years and is currently at risk. Russia received about 21 percent of South African pears in the 2021 season.
Russia blocked the import of pears from Europe a few years ago, which opened an opportunity for SA pears.
Stone fruit has also started to do well in the Russian market in recent years, with plum exports being 47 percent higher year-to-date compared to the previous season.
Russia was also the fifth biggest importer of South African citrus last year.
The immediate concern, however, is for pears. Pear producers are currently harvesting and many have in recent years increased their production to cater for the growing Russian market.
The market could now be closed off to them due to international sanctions against that country.
There are two major challenges at the moment, says Roelf Pienaar, managing director of Tru-Cape Fruit Marketing, the largest exporter of South African apples and pears.
The first is uncertainty about the flow of payments or finance from Russia to pay for the fruit, and the second relates to shipping.
A few of the big shipping lines have stopped shipping to Russia. Some smaller companies are still offering a service to Russia, but this is expensive due to surcharges and their service could change at any point due to the situation in Ukraine.
In addition, certain Russian banks have been banned from the SWIFT payments system, which means cross-border payments are not possible.
“On the payment side we are discussing with the banks, because on the one hand our fruit has been shipped prior to the crisis in Ukraine and we need to get paid for that. We are waiting for more information on the possible flow of funds,” says Pienaar.
“In the meantime, we are trying to find homes for the product we cannot deliver there. Luckily we have a footprint in many countries. Ultimately we keep monitoring the situation closely.”
Tru-Cape usually exports about 17 percent of its pears to Russia and about 6 percent of its apples. The value of Tru-Cape exports to Russia is about R100 million a year. Its exports to Ukraine are insignificant.
“Our harvest season is only just starting and we had the Russian market in mind with our planting the last few years,” Pienaar says. “We worked hard to expand our footprint in the Russian market by connecting directly to retailers there as well as through third party importers.”
Pienaar adds that the uncertainty created by the crisis in Ukraine has just added to what has been a challenging past 12 months. The biggest obstacles currently relate to logistics in the total supply chain. Costs increases this year will be another major obstacle. These increases are across the value chain – not just in South Africa, but also in the market. This is not only driven by freight-cost increases, but also due to increasing production costs of more than 15 percent.
“It all adds up. We remain positive but things are complex. We are currently harvesting and estimate about an 6 percent increase volume compared to 2021. The harvest will only be done in a few months’ time,” says Pienaar.
Containers with pears from Tru-Cape Fruit are currently still on its way to Russia. These shipments – from Rotterdam to St Petersburg – were sent before the crisis in Ukraine started. Pienaar foresees these will still manage to go into the Russian market.
The South African deciduous fruit industry organisation, Hortgro, says it is particularly concerned about whether local fruit that was earmarked for Russia – and has particular specifications for that market – will be absorbed in other markets.
“Given the global increases in production input costs, logistic costs and international pressure on shipping, the availability of cargo containers and the impact of Covid-19, the war in Ukraine could not have come at a worse time. The industry hopes that diplomacy will prevail,” Hortgro said in a statement.
Citrus
In 2021, the Russian Federation was number five in terms of export destinations for South African citrus, importing 11.2 million cartons of 15kg each, according to Justin Chadwick, CEO of the Citrus Growers Association (CGA).
“Currently our local citrus industry isn’t impacted by the conflict in Ukraine as our export season has not yet started. However, should it not be possible to export citrus to the region once the 2022 season kicks off, then fruit destined for Russia may end up in other markets – which could lead to an oversupply with resultant lower prices,” explains Chadwick.
“The major concerns at this stage would be the disruption to our logistics chain and payment schedule. The CGA has been engaging with exporters who are aware of the present risks and will manage these based on their commercial decisions and will consider alternative options, should the risk increase.”
The CGA continues to monitor the situation and engages with stakeholders across the value chain in order to try to mitigate the impact of the Ukraine conflict on the upcoming season.
