Spain: Citrus fruits and the coronavirus domino effect

This is a hard blow to the citrus sector, as China is the third most important destination for Valencian citrus outside the EU, after Canada and Switzerland.

The good perspectives that existed after the upturn in sales to China in 2019, when demand rose by 63% compared to 2018, almost reaching 45,000 tons, seem to be dissipating.

The Citrus Management Committee (CGC is its acronym in Spanish), a Spanish sectorial organization, says that the corona effect on the European market “has to be defined yet”, as the crisis broke out weeks before the period of greatest commercial flow began. They point out that “China was, together with Canada, the third country destination with the highest growth, and now, especially relevant as long as the US tariffs are maintained, there are great outlook”.

Collapse of Chinese ports

Due to the quarantine imposed in different areas and the restrictions on the goods movements, among other elements, the Chinese container terminals in the major ports of Shanghai, Xinyang, Tianjin and Ningbo have collapsed and forced in many cases the diversion of shipments to other ports in the region, such as Hong Kong, Malaysia, Vietnam or Taiwan.

The situation has left containers in limbo, not unloaded for days or even weeks, as is the case with imports of summer fruit and stone fruit from the Southern hemisphere (around 20,000 tons of cherries from Chile, as well as other produce from Peru and Argentina), increasing the cost of refrigerated containers by 30-50%.

The effects for Spain could also have repercussions on its trade with other non-EU markets. “It is not a particular situation for citrus fruits because it affects all perishable goods”, CGC explains.

“We have to accept an increase in price which is becoming stronger every day and this could damage our competitive position in non-EU markets and worsen our dependence on the European markets, where we already sent 91-93% of our exports”.

Competitors of Spanish citrus fruits

In the midst of this scenario, Spain’s direct competitors regarding citrus fruits, such as Egypt, which in 2018/19 exported 200,000 tons of oranges to China, could divert a large part of their production to Europe, causing a price imbalance in the continent.

“Spanish orange production that was going to China will now try to be sent by lorry to Europe. In the case of Egypt, its exporters will have to assume an increase in container cost, but we cannot forget they have much more margin that we do because their production costs are much lower than those in Spain”, the organization points out.

Last year, Egypt exported almost 300,000 tons to EU countries, consolidating its position as the leading non-EU supplier in the Mediterranean, in direct competition with Spain.

Price volatility

The fruit trade within Asia is also being considerably affected, because China is a major supplier of apples, pears and grapes to Southeast Asia, as well an significant importer of tropical fruits from the region.

As far Spain is concerned, a very specific example would be Indonesia. Its garlic imports are 90% dependent on China. With a current price increase of 24%, Indonesian importers are looking for alternative sources of this produce in countries such as Spain and Argentina.

Opportunities for consumption

The coronavirus also represents an opportunity for the fruit and vegetable sector. Consumers are looking for foods that are perceived as beneficial to health even with preventive effects, mainly as team of experts convened by the China’s National Health Commission reported that vitamin C can increase immunity to the virus.

It should be recalled that sales of produce high in vitamin C, such as citrus fruits and kiwis, soared during the SARS crisis in 2003.

Source: fruittoday.com