60% of the industry operating at a loss or just breaking even globally, latest survey reveals

60% of the industry operatingat a loss or just breaking even globally, latest survey reveals

Production and trading costs and prices in global supply chains for fruits and vegetables Results of the 2024 industry survey.

the Coalition's second global survey underscore the enduring challenges faced by suppliers of fresh fruits and vegetables in the wake of the COVID-19 pandemic. Despite some moderation of the cost rises, the industry continues to grapple with substantial cost increases across various inputs such as construction materials, fertilizers, fuel, machinery, and shipping services. While a majority of respondents have managed to increase their average selling prices, most remain unable to fully offset rising costs,leading to over 60% of the industryoperating at a loss or just breaking even. This financial strain has further hindered their ability to invest in critical areas like capital equipment, innovation, and expansion, essential for long-term sustainability, including adaptation to climate change.

Addressing disruptions in the global supply chains

The analysis presented is based on the results of the Coalition's second global survey on the impacts of rising costs on suppliers of fresh fruitsand vegetables. Respondents (88 in total)included fruit and vegetable producers, shippers, packers, wholesalers, distributors and other supply chain partners from Asia, North and South America, Europe, Africa, and Oceania. This report presents the results of a survey conducted in the spring of 2024 by the Global Coalition of Fresh Produce into production and trading costs in global supply chains for fresh fruits and vegetables. The aim of the 2024 survey was to assess whether the industry has shown improvement following the unprecedented cost hikes experienced during the COVID-19 and post-COVID-19 periods, by comparing current responses with thosereceived in the previous survey, carried out in early 2023.

Cost increases

The vast majorityof suppliers of fresh fruitsand vegetables continueto face substantial cost increases, more than four years after the onset of the COVID-19 pandemic. Over four fifths of all respondents cite that they have seen the costs of labour, fuel and gas, fertilizer, electricity and shipping go up further over the course of the past year Although the increases have moderated somewhat compared to last year, the scale of the cost rises remainsconcerning. Similar to the previousyear, the prices of construction materials (+56%), fertilizers (+33%), fuel and gas (+31%), machinery and equipment (+30%) and shipping services (+28%) have seen the most significant increases.

Please refer to the first graph on Average cost increases, 2024 and 2023.

Selling prices rized 15% in average

Operators have struggled to command higher prices for various reasons, including intense price competition in the fresh produce market, limited consumer purchasing power, and a lack of bargaining power with buyers. The realitythat produce suppliers are price takersrather than pricemakers means they cannot fully pass on the increased costs to their customers. 86% of respondents report an increasein their average selling price compared to last year, with an average rise of 15%. However, 63% of respondents indicate that they have been unable to raise their selling prices sufficiently to offset the rising costs. As a result, despite the overall increase in average selling prices, rising operating costs have led 61% of the globalindustry to eitheroperate at a loss(25%) or break even (36%).Alarmingly, more operators are operating at a loss in 2024 (25%) than in 2023 (19%).

Please see the graph 5: share of compagnies able to adjustyour selling price to compensate for rising costs.

Record low share of compagnies making profit since Covid-19

While fluctuating profit margins were a common occurrence in the industry in the pre-Covid period (2015–2019), the share of operators who are making a profitin the post-Covid era remains at an all-time low. Please refer to Figure 7 on Profitability, pre- and post-COVID.

Investment and strategic growth

More than three quarters of respondents indicate that increasing production and operating costs have forced them to postpone or cancel investments, particularly in property and capital equipment, as well as in innovation and expansion (please refer to Figure 9). Many respondents mention delaying essential investments in capital equipment, such as irrigation systems or fencing, and are unable to expand production due to insufficient funds for additional inputs. Alarmingly, rising costs are also constraining operators' ability to invest in research and innovation, which are crucial for the long-term sustainability and resilience of the industry. The impacts of these cost increases will continue to be felt for years, as they limit investments that are essential for future growth and adaptation.

In many instances, increasing production and shipping costs continue to influence strategic and operational decisions.For instance, exportersare consolidating shipments, decreasing shipment volumes, or opting to ship only the highest-quality produce to minimize losses during transportation. Additionally, several producers are scaling back their production capacity by, for example,leaving fields fallow,in order to mitigate further financial losses.

Please refer to Figure 9: What types of investments have been affectedby rising costs.

Economic sustainability of fresh produce businesses

Approximately one fifth of respondents believe that the impact of rising costs will diminish by the end of 2024. However, four fifths of respondents do not foresee a near-term easing of these impacts, especially with expectations of continued fuel price increases. Many respondents argue that once input prices rise, they seldom return to previous levels. Others point to current geopolitical tensions, including climate change, ongoing conflicts, transit disruptions in the Red Sea and the Panama Canal, and inflationary pressures, all of which are unfavourable for stabilizing production and trading costs. Moreover, over two thirds of respondents express concerns about the medium-term (two to three years) economic sustainability of their operations. In other words, nearly 70% of respondents are considering the possibility of closing their operations within the next two to three years. Yes 6%

Strategic responses needed

Strategic responses to these challenges include consolidating shipments, reducing production capacities and delaying investments, reflecting the industry's adaptive capacity amidst economic uncertainty.

Government support has been virtually non-existent, exacerbating the financial pressures faced by operators. Looking ahead, the outlook remains daunting with ongoing geopolitical tensions, climate change impacts, and persistent inflationary pressures expectedto prolong cost escalations. Consequently, a substantial proportion of respondents fear for the future economic viability of their operations, with nearly 70% considering the possibility of closure within the next two to three years. While the industry has shown resilience in adapting to immediate challenges, the path to sustainable recovery and growth hinges on addressing the systemic issues driving cost increases and ensuring adequate support for long-term investment and innovation.

About the Global Produce Coalition

The Global Coalition of Fresh Produce brings together fresh produce associations from around the world,based on their joint vision to createresilient global value chains for fruits and vegetables that bring a myriad of economic, environmental and societal benefits. The Coalition’s mission is to voice solutions to address disruptions in global supply chains for fresh produce, including – but not limited to – rising costs, and share and promote best practices.

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