Let’s take an overproduction (expected) of avocados, a first overdue harvest that overlaps with the next, and of course Array.. Covid-19 crisis. This leads to a complicated over stock to sell in Europe, where avocados are a very popular product.
All cases combined to make this 2020 Peruvian lawyers cross tumultuous!
Jean-Claude Mercier Ganoza, Chief Operating Officer of Fruglobe, in Lima and a longtime capexo spouse, recalls this unprecedented season.
How was the beginning of the crusade? “The season has started well, with a favorable market driven through a strong call for healthy fruit in Europe, in order to combat Covid-19. This clever news as Peru expected the 2020 harvest to be 25-30% higher than in 2019. Therefore, no one surprised by the volumes. The quality is also intelligent, with a dry matter at 23-24%. »
“But after a season start overdue in Olmos, the harvest was overtaken by Chavimochic’s and this (expected) overproduction became over-stock! Peru sent 600 to 700 boxes between weeks 19 and 24. 73% of shipments were shipped to Europe, resulting in a significant drop in costs on arrival. However, this has not necessarily replaced point-of-sale costs for consumers. The United States won only 15% of shipments, which generated an imbalance, with excess stock in the European market.
“How do we make this difference in exports between Europe and the United States, when North America is the largest avocado market in the world?” The United States has two major exporters: Mexico and California. As a result, they depend less on other exporting countries such as Peru. In fact, they only had Peruvian production in June. Mexico can produce avocados year-round, so the threat of disruption is limited to the United States. »
What was the effect of the Covid-19 crisis in Peru? “Peru is the seventh country with the highest of infected people in the world. The Covid-19 affected the way we painted in the first few weeks because the country was strictly closed. The curfew didn’t help the situation. However, it is believed that food companies, such as ours through the government to be of first need, were able to continue our activity, thanks to special authorization and the installation of barriers and masks. We can paint as much as possible normally, however, the anguish of poor health is in everyone’s mind.”
Is Peru the only exporting country in this oversimplesment scenario? “Mexico was in a similar scenario in April. Due to Covid-19 and declining demand in the U.S. market, the country was only able to ship 30 million tons of avocados in 3 weeks, rather than the forty-five expected in this period.
Has this excess of stock allowed you to explore new markets? “Of course. This is an opportunity to offer our products to Asian countries like Thailand, Korea or China. These markets are still hesitant, but promising.”
The reorientation of our stocks towards these countries has allowed us to achieve a decent balance and remuneration for our producers.
What about the next few months in the European market? “We expect the market to slow down and in the first week of August in Europe. Peru has already learned classes and redirected or reduced its volumes to Europe. However, it takes time to get rid of old stocks. We plan to send 400 to 500 boxes a week to Europe, in order to achieve a balance that suits everyone.
If promotional movements were launched through supermarkets, providing advantageous prices, we believe this would help increase demand. It is imaginable to move volumes while successfully reducing margins. »
Can we face this in the next few years? It’s probably possible, yes. Every year, Peru has new farms to meet the demand of the developing market (12-15% expansion consistent with the year for Europe, 8% for the United States). In fact, a new overlap in the harvest is possible. In addition, from year to year, a lawyer can bear much or very little fruit. This makes it difficult to make accurate predictions. Knowing how to estimate the quantities needed for each market location is our biggest challenge, in order to scarce or over-stock. »
What will it tell you about this campaign? “I think there was a significant error of judgment in the component of the main Peruvian exporters, for not trimming their volumes when we had some visibility into the shipping data. These weeks deserve to have been treated more accurately, spacing the volumes for a fair flow, week after week. The purpose is never to overload a market with too many boxes. With such a giant source and demand, it can be difficult to achieve this and this requires a higher point of planning and communication between all induscheck out players, from origin to destination. Market diversification is very vital to achieving a well-balanced origin, to meet the demands of our consumers around the world. Carriers seem in a hurry to access a very reasonable market spot, but in the end, when their boxes arrived in Europe, their costs were affected in a component way. This volatility in the avocado market is one of our biggest challenges. At Fruglobe, we seek to have an incoming source, each and every day of the year, from multiple origins in order to obtain a sustainable source of products for our components and consumers.
For more information: Francois Bellivier Tel: 01 41 23 00 Mobile: 06 75 03 76 54 f.bellivier@capexo.fr www.capexo.fr
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