Increased in container freight costs
Internationally freight rates have experienced unprecedented increases over the past two years. According to a recent article in Ocean Network Express, by the end of 2021, Japanese carrier group Ocean Network Express (ONE) was expecting profits of $15.4 billion, over 4.4 times more than 2020 profits of $3.48 billion. During the past year, Maersk revealed that their shipping rates had jumped by 80%.
These steep increases are also affecting the South African Fruit export sector and stakeholders in the industry have expressed their deep concerns about the effect of these increases on the sustainability of the sector. At the end of 2021, CGA’s Industry affairs manager Paul Hardman was quoted as saying that since 2020, freight rates had increased by 40 per cent, and that during 2022, costs were expected to increase further, by between 50 and 75%. Hardman concluded that when the cost of getting fruit to the market outstripped returns for the fruit back to the farm, the possibility of exporting to certain markets will need to be re-evaluated.
Export fruit farmers are deeply concerned about ongoing increases in production and shipping costs for their fruit and to ensure the economic sustainability of the South African fruit export sector, exporters will need their trading partners to take these escalating costs into account into account in their negotiations on pricing and returns.
Freight cost increases are affecting all Southern Hemisphere fruit exporting countries
While these sharp increase in shipping rates are creating problems for South African fruit exporters, these global increases are having similar impacts on other Southern Hemisphere fruit exporting countries. This has emerged from the press release by SHAFFE, The Southern Hemisphere Association of Fresh Fruit Exporters in their announcement of the Southern Hemisphere Fresh Fruit Trade Congress, which will be taking place on the 30th of March 2022.
Anton Kruger, CEO of South Africa’s Fresh Produce Exporters’ Forum will be one of the panellists at the congress. Kruger confirmed that steep increases in logistical costs along the supply chain are a major concern to the sustainability of the sector.
With increasing logistical and input costs, with a continuing Covid-19 pandemic and changing societal expectations towards quality and sustainability of the fruit, this year’s Congress-theme “The new reality of Southern Hemisphere exports” has been chosen deliberately, to discuss the current state of play of the industry considering these new challenges.
Article by Louise Brodie