A new report by the Global Coalition of Fresh Produce (GCFP), an international thinktank comprising industry associations like Freshfel Europe, IFPA, CPMA, and Shaffe, reveals two significant findings. First, amid an unprecedented surge in production and operational expenses due to the pandemic, approximately 60% of the globally traded fresh fruits and vegetables are now being sold at prices that barely break even or result in losses. Second, this cost escalation has substantially curtailed investments in new projects, implying that the consequences of this inflationary trend will linger for an extended period.
The report, based on a survey conducted in early 2023, investigates the mounting production costs of fruits and vegetables on a global scale and analyzes their ramifications on both the industry and consumers.
Ron Lemaire, the chair of GCFP, comments on the motivation behind the survey, stating, “We conducted this global survey to illuminate the challenges faced by participants in the global fresh produce supply chain. The narrative presented in this report will facilitate collaboration among the industry, its partners, and government entities to comprehensively address the current impacts of rising production and operational costs.”
The report emphasizes that fresh produce producers worldwide encountered unprecedented cost surges during the COVID-19 pandemic, regardless of their geographical location. These increases were attributed to elevated expenses in areas such as fertilizers (up 60% worldwide), construction (up 48%), fuel and gas (up 41%), shipping rates (up 40%), and electricity (up 40%).While the report notes that most operators managed to raise their selling prices, with increases of 11% in Europe, 13% in Oceania and South America, 14% in North America, and 23% in Africa, these price hikes were deemed insufficient to offset the surge in production and operational costs. Consequently, nearly three-fifths of the global fresh produce industry now find themselves either selling at a loss or barely breaking even.
Additionally, these heightened costs have influenced strategic and operational decisions, leading to some producers reducing their output, while certain traders have scaled back their export activities or transitioned to produce with lower shipping expenses.
Furthermore, a staggering 80% of respondents revealed that they had opted to delay or cancel investments in their businesses, encompassing not only capital and equipment but also innovations and expansions. This suggests that the enduring impacts of rising costs will persist for years to come, as underscored by the report’s authors.