Industry at a cross-roads as logistics cost peak

Exorbitant logistics costs remain one of the major concerns of the South African fresh fruit industry. According to Mitchell Brooke, logistics development manager of the Citrus Growers’ Association of South Africa (CGA), if the ever-increasing costs are not addressed sooner rather than later it will become near impossible to reverse the adverse effect on fruit growers across the country. “Research into production and logistics costs reveals the costs are peaking at highs never before experienced in the country,” he said. “These escalating costs are from production right through to transport, port and shipping charges. This puts massive pressure on growers to get the returns needed to remain profitable.” According to Fruit South Africa (FSA), the fruit industry is facing some very real supply chain challenges at present – ranging from escalating production costs and increased logistics costs to inefficiency and ineffectiveness of ports in the country. “The inefficiency of our ports is in itself driving the high cost of seafreight, which is passed back to growers,” the organisation said in an open letter earlier this year. “The recessionary trading environment at global level is levelling off and at worst deflating the returns of fruit sales, and the focus on sustainability is being driven at supply chain level.” Brooke believes finding an answer to the escalating costs remains a massive challenge in itself. “The logistics costs are based on three factors – starting with production where there are a lot of inflationary costs that impact. From harvesting right through to packaging the costs are high – be it for material costs to package fruit, electricity, diesel costs or labour costs. All of this impacts on the price,” he says. “The input costs on carton prices are peaking at present. Secondly, transportation in South Africa is expensive as one is reliant on road – and with the diesel price recently at the highest it has ever been, this cost has escalated tremendously in recent months despite the diesel price having come down slightly.” The third factor, port costs, is one of the major concerns. “Besides the fact that the port and shipping costs are high, the inefficiencies being experienced at port level are increasingly becoming a concern that negatively impacts on the supply chain.” Brooke said with shipping lines having increased freight and bunker rates, the perishable industry was facing some tough times ahead in finding solutions. According to the CGA, it is important for the industry’s supply chain to work efficiently and effectively if the industry is to weather the challenging times. It says everybody in the supply chain stands to lose if solutions are not found to keep the industry sustainable. “While we are all struggling to come up with an answer to address the cost issue, it is imperative that the industry works together in finding a sustainable solution,” said Brooke. CAPTION: ‘Massive pressure on growers to get the returns needed to remain profitable.’