Tridge’s December webinar, “Major Global Events in Agricultural Trade in 2022 and Expectations for 2023”, looked back on another eventful year as 2022 winds down. The webinar featured two presentations by Tridge’s Global Market Analysts on the citrus and nut industry. This was followed by a panel discussion by Tridge’s representatives. Click on the link to watch the full webinar, or continue reading for a summary.
Main Events in Citrus Trade in 2022 & Expectations in 2023
The Russia-Ukraine conflict was one of the major events that affected agricultural markets, leading to an increase in the cost of citrus production. Comparing the cost of production in March 2022, to the year before, it increased by as much as 21% YoY in several European countries. Numerous European producers are switching from citrus production to tropical fruit production, which is providing a better return on investment.
Logistic disruptions complicated citrus trade throughout 2022. Heavy flooding in many areas of South Africa led to road and port damage, while port congestion and vessel unavailability exacerbated the situation. Another blow to the South African industry was the EU’s new cold treatment regulation to prevent the spread of false codling moth. Despite these challenges, South African citrus exports increased by an estimated 3.7% YoY in 2022. However, this increase is lower than the initial estimates. Several other key citrus-producing countries were also affected by adverse weather conditions, for example, heat waves in Egypt and drought in Tunisia.
Main Events in Nut Trade in 2022 & Expectations in 2023
China’s macadamia production has consistently fallen short of estimates made in recent years, despite the country expanding the area under macadamias to as much as 300,000 ha. Several years ago, projections for production in 2022 were as high as 150-190,000 mt, but eventually, the crop could be only 50-65,000 mt. One of the reasons for production falling short of projections is that planting occurred very rashly at altitudes that are higher than suggested by most research.
Throughout 2022, nut prices were driven lower by a global oversupply, as well as weak demand. Global tree nut production could be as high as 5.24M mt in 2022/23. Nut production has increased by an average of 5% over the last 5 years. Based on new areas planted globally under nuts, this trend is expected to continue or even accelerate over the next decade. On the other hand, nut consumption decreased in 2022, due to high inflation and economic uncertainty. Despite nut prices being at decade lows, consumers are still opting for cheaper snacks. More expensive nuts, like cashews and pistachios, have seen the biggest decrease in consumption in some key markets. In the latter parts of 2022, food prices started to decrease. This could lead to increased consumption in 2023, however, due to a large carry-over from 2022, prices are expected to remain low.
Tridge’s panelists were asked about some of the events that stood out in their markets in 2022. Lucia Manrique gave insights into the Peruvian market from a logistic perspective, Mehmet Unluyurt into the grain and pulses market, with a focus on Türkiye, and Elton Greeve, into the South African fruit industry.
What are the major events that happened in your market?
Lucia pointed out that Peru still had to deal with the consequences of the Covid-19 pandemic and the subsequent logistic and supply chain disruptions throughout 2022. Port closures, container shortages, vessel unavailability, and changes to freight insurance, among others, continued to push product prices higher. The Russia-Ukraine conflict, which triggered a rise in inflation, made several traditional export markets less lucrative. Imports were also affected, and Peruvian fertilizer imports from Russia dropped by as much as 50%, leading to shortages and sky-high prices.
Mehmet elaborated on how the Russia-Ukraine conflict affected the consumption of grains and pulses. The supply of these staples was hampered by the conflict, yet the demand for them increased. Due to high inflation and economic uncertainty, consumers switched from more expensive animal protein to grains and pulses. Among rising living costs, several countries implemented trade regulations aimed at keeping inflation under control, however, it had the opposite effect in many cases.
Elton Greeves gave insight into the effects of logistic disruptions and production costs on the South African fresh produce market. The biggest price driver in South Africa was the cost of getting food to the destination market. Floods at the start of the citrus season resulted in shipping delays of up to a month. Furthermore, the new EU cold-chain regulations complicated citrus exports to Europe, and consequently the Middle-Eastern and Asian markets were flooded with South African citrus. The apple, pear, and grape industries were also affected by adverse weather throughout the year.
How have suppliers/buyers responded to the major events?
Despite the severe challenges producers and exporters faced in 2022, the production of key agricultural products continued to expand in Peru, according to Lucia. Peru has become the world’s largest exporter of grapes, blueberries, and asparagus. The logistical challenges forced suppliers to explore new markets, which led to more resilient and efficient supply chains.
Mehmet pointed out that major importers of grains and chickpeas have a heavy reliance on only a few countries, like Russia, Ukraine, Argentina, Australia, and Canada. All these countries, with the exception of Canada, were affected by political or weather events. Countries that rely on a small number of suppliers, need to become more self-sufficient and expand their supply network.
South African producers and suppliers reacted proactively in response to logistical problems, according to Elton. In the citrus industry, suppliers preempted logistic solutions, working with logistic companies and the government to overcome some of the challenges. The South African citrus industry has learned to put a critical focus on logistics during the peak citrus export season, from challenges that were faced in previous years. However, decreased profits for fruit producers in 2022 mean less capital can be reinvested in the industry.
What are some expectations for the upcoming year?
According to Lucia, the agricultural industry is vital in Peru and will keep expanding and finding new markets. Logistic disruptions could continue in 2023 in some Peruvian ports, but freight costs are expected to decrease throughout the year, bringing some relief. The challenges of recent years forced the supply chain to digitalize and become more efficient, a trend that could continue into 2023.
Mehmet focused on the outlook for lentils, chickpeas, and grains. For the most part, lentil prices could be driven by India’s demand. India has been aggressively stocking up on lentils since the pandemic, but a large crop in Canada and Australia could bring some relief from the supply side. Global chickpea supplies could be affected by adverse weather in Mexico and Argentina. The outlook for grain will depend heavily on the Russia-Ukraine conflict. The Black Sea Grain Corridor has resolved several supply shortages and is offering a temporary solution to North Africa’s heavy reliance on imported grain.
South Africa’s table grapes, stone, and pome fruit production and demand outlooks are positive for 2023, according to Elton, but the blueberry industry is facing tough competition from South America. While logistical challenges remain, several structures are already in place to counteract these challenges. The citrus industry will focus on managing logistics, pricing, and quality, especially to Middle Eastern and Asian markets.
Click here to view the recording of the webinar, or click here to view the slides.