HELD in Gqeberha, the fourth CGA Citrus Summit attracted over 600 delegates and high-profile industry executives. Presenters included Transnet CEO, Portia Derby, agricultural economist, Wandile Sihlobo and Citrus Growers’ Association (CGA) CEO, Justin Chadwick.
In Chadwick’s online newsletter last week, he highlighted the presentation “Levers of change to shape the future of the South African citrus industry,” prepared and presented by Tracy Davids and Kandas Cloete from the Bureau for Food and Agricultural Policy (BFAP).
Chadwick noted that this presentation gave some serious food for thought. After initially outlining the leading position that citrus plays in the South African agricultural landscape (7% of gross value of agricultural production; leading export earner and employer), the presentation outlined the major challenges facing the industry.
Domestic risks included:
- the port and logistical challenges leading to delays and quality claims;
- downward price risk as more products come into the market;
- cold chain interruptions as a result of rolling blackouts which impacts quality and storage costs;
- cost price inflation (particularly labour);
- erosion of capital base due to forced sales;
- exchange rate fluctuations;
- weather conditions and conflict/social unrest.
Global risks include:
- supply growth from southern hemisphere competitors;
- freight rates (still higher than pre-pandemic levels);
- large and deep recessions in developed economies leading to lower demand for imported goods;
- more stringent market access requirements from the EU leading to technical barriers to trade;
- invasion of Ukraine and its extensive impact.
As a result of these risks, it is BFAP’s projection that 4 000 hectares of citrus could be removed in the next decade.
On the positive side, it is expected that prices in the market have bottomed out and are anticipated to grow over the next decade, while some costs could ease going forward.
The BFAP baseline model shows that 2023 will be a challenging year, with improvements thereafter.
To change the baseline to a more profitable and sustainable position will require that the entire value chain make a contribution – collaboration and coordination are required to navigate the storm.
Chadwick explains that three scenarios that would improve industry sustainability were then presented.
The first is a drive towards more marketable fruit size and quality; requiring changing production practices to improve fruit size delivered to the packhouse, reduce fruit supplied into the processing marketing channel, improve exports through increasing export packouts, shift to class 1 fruit and a more desirable count distribution.
The second is to reduce the risk of market oversupply by commodity and week through early warning systems. This requires an understanding of the markets’ tipping point, collaboration and information sharing so as to supply the right fruit at the right time.
The third scenario involves improving market access and preferential trade agreements. This involves government-to-government negotiations to improve South Africa’s competitive position.
A combination of these scenarios will put the industry on a path to profitability and sustainability.
The presentation can be viewed on the CGA’s YouTube channel.
