A new report highlights how the soaring production and operating costs seen over the past three years have left around 60 per cent of supply unprofitable, meaning that the majority of fresh fruit and vegetables traded around the globe is now sold at a loss or breakeven price. That is the finding of a new report by the Global Coalition of Fresh Produce (GCFP), an international thinktank which brings together industry associations including Freshfel Europe, IFPA, CPMA, and Shaffe.
The report, which is based on the results of a survey conducted in early 2023, looked at the increasing cost of fruits and vegetable production around the world, as well as its impacts on the industry and consumers.
“We conducted this global survey to shed light on the challenges experienced by actors in the fresh produce supply chain worldwide,” said GCFP chair Ron Lemaire. “The narrative highlighted in this report will help the industry, its partners and all government levels understand the current impacts of the increase in production and operating costs, and work together to address them.”
The report states that producers of fresh fruits and vegetables around the world experienced “unprecedented increases” in production and operating costs during the Covid-19 pandemic, regardless of where in the world they operated. Those increases, the report says, were driven by costs of fertiliser (+60% worldwide), construction (+48%), fuel and gas (+41%), shipping rates (+40%), and electricity (+40%).
Most operators were able to increase their selling prices, the report finds, with rises of 11 per cent in Europe, 13 per cent in Oceania and South America, 14 per cent in North America and 23 per cent in Africa. However, these increases were “not enough” to compensate for the rise in production and operating costs, the coalition discovered, leaving nearly three-fifths of the global industry “selling at a loss or breaking even”.
Higher costs have also affected strategic and operational choices, it notes: “Certain producers have reduced their output, while some traders have reduced their export activities or switched to produce with lower shipping costs.”
In addition, the rising costs appear to have greatly reduced the amount of investment in new projects, which means the effects of inflation are likely to be felt for some time. Eighty per cent of respondents noted that they had chosen to delay or cancel investment in their businesses, not only in capital and equipment but also in innovation and expansion.