Melon Production Crisis in Central America leads to Higher Prices in the US

The Central American melon season goes from around December to May, with high seasonal availability in the US from January to April. However, this year, the Central American campaign has been through various challenges that have affected the product's availability and prices in the different markets. As a result, the melon production and export industries of Guatemala, Honduras, and Costa Rica, are facing one of the most significant risks and threats to the sustainability of their business.

High Input Costs all Through the Region

Agriculture-related input costs have substantially increased in the Central American region due to the COVID-19 pandemic, and melon production has not been an exemption of the affected crops. The melon industry has been experiencing increases of 40% to 50% YoY in the price of packaging materials such as cardboard, which is an important raw material. Additionally, the increase in the prices of commonly used fertilizers has been registered to reach a 120% YoY growth. Over the last few weeks, fertilizer prices in the region have increased further due to the Russian-Ukrainian conflict.

The substantial increase in input costs has made the prices of melons climb and has also considerably reduced the production volume this year. According to Jorge Calderon, Tridge’s Engagement Manager in Costa Rica, this year’s melon campaign had an unusual start as fewer planting areas were used. “Fewer hectares have been planted in Costa Rica this year. Everyone has reduced the area under melon cultivation or has used the area to plant other crops, which could cause a product shortage”, he explained.

A very similar trend has been seen in Honduras, where it has been reported that the melon production volume for the 2021/22 campaign is expected to be reduced by around 30%. High production costs in the melon crop have led producers to grow more profitable crops like papaya with higher demand in the local market.

Although production decline has not been reported in Guatemala, there has been a substantial increase in the export price for melons. According to Pablo Mazariegos, Tridge’s Engagement Manager in Guatemala, Guatemalan melon export value increased by 23% YoY in Jan-22. “During Jan-22, the Guatemalan melons export value was USD 15.5M, an increase of 23% compared to USD 12.6M in Jan-21, despite the fact that melon exports in Guatemala have decreased by 36% YoY in volume” explained. The value increase is mainly due to a substantial price increase. According to the Guatemalan Agricultural Ministry, in W3 of April-22, the price for melons in the Guatemalan wholesale market stood at USD 1.21/kg, which is a 34% YoY increase.

Additionally to the increase in input, freight brokers in Central America have reported a demand increase of up to 95% for contracts in Q1-22, while the remaining 5% are destined for spot deals only and seasonal crops. As a result, spaces in vessels are scarce, and sea freight costs from Central American ports to the US have increased by approximately 80% YoY.

US Melon Market Directly Affected

The challenging 2021/22 Central America campaign has brought a substantial increase in prices with less availability for the US market, the largest melon import market globally. In 2021, the US imported USD 343.5M of fresh melons, with 80% imported from Central American countries. Guatemala would be the primary melon supplier to the US with 56% of the import share, followed by Honduras with 21.5%, and then by Mexico with 19.8%. The US largely depends on melon production in Central America for its supply.

The Mexican melon season was steady in volumes and not too high in prices, making prices in the US stable for Q1-22. However, with the shift to Guatemalan and Honduran supply, US prices have increased substantially. According to Tridge’s Index Chart, in W3 of April-22, the price of Guatemalan melons in the New York wholesale market registered a 95% YoY increase, amounting to USD 1.69/kg. Prices also recorded a 26% WoW increase over the previous week.

Similarly, in the same week of April, in the Chicago wholesale market, the price for the Honduran origin melon has registered a 51% YoY increase. Contrary to the Guatemalan, Honduran melon prices, have been rising since Feb-22, when they reached USD 1.36/kg and represented a 75% YoY increase.

Mexican melons are the ones that have shown a more moderate increase as supplies from Mexico remain steady. However, cost increases have also affected Mexican melon production, with fertilizer costs skyrocketing up to 140% YoY. As a result, Mexican-origin melon registered a 15% YoY increase in W3 of April-22.