"We have recently experienced a period of oversupply from Brazil into Europe, which has been building for the last few months. This is a reaction to fragmentation within the export market," said Rob Cullum, Managing Director at Pacific Produce. "There are too many exporters and brokers in Brazil who expanded over the last few years due to high returns in the traded market; this is what is now causing this issue. Every week, the predicted volume (from Brazil) was for a decrease in exports, but then the reality was the opposite. During the summer months, the market managed to handle this with lower prices or vessel delays, causing temporary shortages. However, now that Autumn is here – consumption drops and the high volumes compound the problem – this will leave some difficult conversations between exporters and traders – the loss of expected return will be significant – who is going to lose the money?"
Demand has been normal for limes; it is a steady item buoyed by sunshine. The headwinds are the finances of the consumers; the product has a heavy reliance on the hospitality sector, which is under huge pressure.
"There has generally been an oversupply, but with intermittent quality and logistics, this created a bumpy ride. Big volumes, but lower quality coming from Brazil, have been the norm for a while. The average quality has taken a step down, but as with all products, there is a range of qualities from different suppliers."
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Supply countries
Brazil is the main player for Europe and dictates the tempo of the market. Central America is focused on the USA supply – some volume comes to Europe, but it is much smaller than in the past. Colombia is also focused on the USA, but is making ground with technically approved farms, and a small percentage will reach Europe.
The Peruvian season will start soon, and the USA is also the main destination due to the timing matching the lower season of Mexico, which creates some space in that market – a reasonable percentage will come to Europe for programs. Vietnam, a regular supplier to Europe, is still suffering from extended journey times.
Even with reasonably large volumes in alternative sources, the reality is that Mexico still dominates the USA, and Brazil, the same for Europe.
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Logistics
"Logistics is still a problem; vessels continually skip ports or get redirected to other ports. The normal port of entry for Brazil was London Gateway, but that has now shifted to Southampton because Gateway simply cannot handle the volume of traffic. For us, this solution is much better than simply skipping and then returning to feeders up to 2 weeks later. Lime shipping time is critical for quality. However, Southampton is more expensive for inland logistics due to distance, so it adds to the cost, and cost accuracy is essential for fresh produce; any deviation from the original plan is very painful. We are not alone in the lime industry with this situation. This is not confined to the UK either; there are problems everywhere, and we have had to adapt and try to build contingency wherever possible."
Lower export volumes from Brazil are finally happening, but according to Rob, this is not a cause for celebration for the market price. Consumption will continue to dip with colder/wetter weather; balance is always key.
"Prices in Brazil rise as a natural reaction to lower export volumes, but prices in the market do not always follow. The lime is very reactive; there needs to be 2/3 weeks of genuine undersupply for the market to rise. This is complicated by mixed quality. Every year is different, and I would not make a big bet in either direction on the market price! Our mission is to continually supply to our customers and not give them the problem of volatility."
For more information:
Robert Cullum
Pacific Produce
Tel: +44 (0) 1865877801
Email: [email protected]
www.pacificproduce.co.uk