Willemien Viljoen, tralac Researcher, comments on South Africa’s expanding citrus fruit and grape export markets

Citrus fruit and table grapes are some of South Africa’s most important agricultural products, especially in terms of export earnings and employment. In 2016 citrus fruit was South Africa’s most significant agricultural export, followed by wine; fresh apples, pears and quinces; and fresh and dried grapes. For the year, South African citrus fruit to the value of US$ 1.67 billion and grapes to the value of US$ 435 million was exported across the globe. South Africa’s global exports of citrus fruit and grapes have also increased by 7 percent and 2 percent, respectively over the last four years. Due to the importance of these two fruit sectors and the potential to increase capacity in these sectors local producers and exports have set their sights on Russia, Bulgaria, Portugal and Canada as markets to expand exports to. To establish whether these markets show potential for penetration and/or expansion, current market conditions, possible opportunities and challenges need to be considered. This is the aim of this note – to provide a broad overview of the current trading environment for citrus fruit and table grapes to identify some challenges in these markets which South African exports need to consider.

Citrus fruit – oranges, lemons and grape fruit

In 2015 Russia was the main importer of citrus fruit in the world (and Canada 7th), while Spain accounted for 30 percent of world citrus supply. Between 2012 and 2015 total world citrus trade increased by 1.4 percent. South Africa is the third largest citrus exporter in the world; citrus exports accounted for 1.5 percent of South Africa’s total exports for the year. The trading relationship and competitors in the four specified markets are exemplified by the following:

• Between 2012 and 2015 total world trade in oranges declined slightly, from US$ 9.7 billion in 2012 to US$ 9.3 billion at the end of 2015. Over the time period South Africa, Egypt, Australia and Italy were some of the countries which increased their supply. Import demand from Canada, United States, China and the United Arab Emirates showed an increase during this period. In 2016 South African orange exports mainly flowed to the Netherlands (19%), United Arab Emirates (10%), Saudi Arabia (9%) and Hong Kong (6%). South African orange exports to Hong Kong, China and Portugal have shown a dramatic increase between 2012 and 2016. However, orange exports to Canada and Russia decreased by 1 percent and 15 percent respectively, over the same time period. Between 2012 and 2016 there has been an 11 percent decrease in Russia’s orange imports. In 2016 South Africa was the second largest orange supplier to Russia (following Egypt) and Canada (following the United States). South Africa was the main orange supplier to Portugal (63% of total imports) and the sixth largest orange supplier to Bulgaria (4% of total imports).

• Between 2012 and 2015 there has been a significant increase in the world demand for lemons; countries which have seen a dramatic increase in imports include the United States (19%), Canada (14%), United Kingdom (13%) and Poland (10%). The main supplying countries of lemons during this time were Spain, Mexico, Turkey and South Africa. Total world lemon trade increased by 10 percent over the time period. Between 2012 and 2016 South Africa increased its lemon exports by 24 percent; mainly to countries including Vietnam, Albania, Portugal, Canada, Georgia and the Netherlands. In 2016 Russia was South Africa’s fifth most important destination market, Canada eight and Portugal eleventh. Russia has shown a decline in lemon import demand. Although South Africa is the third largest supplier of lemons to Russia, Turkey and Argentina accounted for 74 percent of total lemon exports in 2016. The United States and Mexico accounted for 67 percent of lemon exports to Canada, while Portugal imported lemons mainly from Spain. In 2016, South Africa did not export any lemons to Bulgaria.

• In 2015 the total world grape fruit trade amounted to US$ 1.6 billion. The main importing countries were Japan, Netherlands, Russia and France; while the main grape fruit supplying countries were China, United States, Turkey and South Africa. Between 2012 and 2016 South African grape fruit exports increased by 3.4 percent; mainly to the United States, China, Portugal and Belgium. South Africa’s grape fruit exports to Bulgaria and Canada also increases, while export to Russia declined by 0.6 percent. In 2016, Russia mainly imported grape fruit from China (47%) and Turkey (31%); Canada mainly imported from the United States (60%); Portugal mainly imported from South Africa (85%); and Bulgaria mainly imported grape fruit from Turkey (73%). Although South Africa falls within the three main supplying countries for Russia, Canada and Bulgaria; export volumes are low compared to current competitors (ranging between US$ 459 000 and US$ 15 million).

Table Grapes

In 2015 world grape exports amounted to US$ 7.7 billion. The main exporting countries for the year were Chile (17%), United States (12%), China (10%) and Italy (9%). South Africa ranked the sixth largest world exporter of fresh grapes for the year. Between 2012 and 2015 world table grape exports increased by 2.8 percent. The growth in exports can mainly be attributed to a growth in global table grape exports from China and Peru. In 2016 South Africa’ table grape exports amounted to US$ 435 million, 23 percent less than the US$ 568 million exported in 2015. In 2016 Canada, Russia, Portugal and Bulgaria accounted for 3 percent, 2 percent, 0.24 percent and 0.005 percent respectively of South Africa’s total table grape exports. This shows that only a small percentage of South African table grapes is currently being exported to the four potential markets and that the opportunity might exist to increase exportation. However, an important determining factor is the current competition in the markets:

• Between 2012 and 2016 South African table grape exports to Canada increased by 67 percent, while exports to Russia, Portugal and Bulgaria decreased.

• Russia’s imports of table grapes declined by 23 percent over the last four years. Although overall import declined, countries including Tunisia, Azerbaijan, Kyrgyzstan, Belarus, Armenia and Egypt increased their table grape exports over the period. In 2016 the main supplying countries of table grapes to Russia were Moldova (13%), India (12%), Chile (10%) and Peru (10%).

• Canada’s table grape imports increased slightly (0.4%) over the last four years. The countries which have seen the most growth in their fresh grape exports to Canada is South Africa, Peru and Mexico. In 2016 South Africa was Canada’s fifth largest table grape supplier, accounting for 3.76 percent of total imports. However, the United States and Chile remains Canada’s main supplying countries, accounting for 76 percent of total table grape imports for the year.

• Over the last four years there has been a 4 percent growth in global exports to Portugal. Most of this growth can be attributed to an increase in exports from France and the Netherlands. In 2016 Portugal mainly sourced table grapes from Spain (61%) and Chile (22%). South Africa ranked fifth, supplying only 4 percent of Portugal’s import demand for table grapes.

• Bulgaria is not a large importer of table grapes, importing an average of US$ 3 million worth of fresh grapes over the last four years. In 2016 Bulgaria mainly imported table grapes from Greece and Italy with South Africa accounting for only 1 percent of Bulgaria’s table grape import demand.

What does the analysis show? South Africa is one of the main citrus fruit and table grape suppliers in the world. However, a lot of the trade in these products still flow to traditional markets in the European Union and the United Kingdom; although there has been some movement with increasingly more citrus fruits and table grapes being exported to Asian markets and the Middle East. Russia has seen an overall contraction in market conditions which can hamper expansion plans. Canada has seen an overall increase in import demand, especially looking at table grapes and lemons. Although Portugal has been a traditional market for South African exports; South Africa has significantly increased its exports of oranges, lemons and grape fruit to Portugal over the last four years. Bulgaria has not been a major destination market for South Africa exports; however, this may be due to the size of the market. Based on the analyses there are some challenges which will play a role in the export penetration or expansion strategies:

• The main competitors in numerous of these markets are near the target markets, which can influence the relative cost of production and competitiveness of South African products. However, Egypt is a very interesting case, as South Africa is increasingly competing with Egypt in the Russian market for oranges.

• Many of the existing competitors in the markets have the same seasons as South Africa. Thus, South African producers must find a competitive edge above countries like Chile and Peru; other than merely the seasonal availability of the product. Competitive opportunities to consider include competing based on low price-high quality, identifying niche markets or offering differentiated products (supplying alternative fruit varieties or changing supply timing.

• Tariffs and preferential access can play a role. In all these markets (except citrus exports to Canada) South African products face some level of tariff on imports. Although these tariffs are generally low (below 10%), they can have a price implication vis à vis current competitors in the market.

• Citrus and table grape trade are subject to sanitary and phytosanitary issues, food health and safety issues and strict labelling and packaging requirements; this is also the case for exports to Russia, Canada, Bulgaria and Portugal. All these costs should be factored in any expansion plans.

• The changing trading environment can also play a very important role – with Brexit on the horizon and the United States becoming inward-looking – any expansion or penetration plans need to be dynamic to respond to the changing policy environment that can have a significant impact on opportunities and challenges in existing and new markets and with existing competitors, including Canada, Mexico, the European Union and the United Kingdom.

Tell us what you think.

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Sources:

TradeMap (www.trademap.org) and MacMap (www.macmap.org)

Fresh Plaza (http://www.freshplaza.com/article/134982/south-africa-main-citrus-supplier-to-russia)

Farmer’s Weekly (http://www.farmersweekly.co.za/agri-business/bottomline/the-changing-face-of-sa-fresh-fruit-exports/)

South African Table Grape Industry (http://www.namc.co.za/upload/other_trade_publications/Russia%20Fresh%20Fruit%20Market%20Research.pdf)

SAFE (http://safe.co.za/SAFENews/?p=276)