South Africa. Citrus Annual. Dec 2013 Jan. 6, 2014
For MY 2013/2014, South African total citrus exports are forecasted to be strong as a result of a favorable exchange rate and a good production year for most citrus fruits; but the impact of upcoming policy changes in the European Union remain to be seen.
For MY 2013/2014, Post does not expect exports to reach the record set in MY 2012/2013 due to lower expected volumes of grapefruits. However, a favorable exchange rate and a good production year for most of the other citrus fruits should result in another solid export season. The industry continues to do market outreach, which is helping SA be known as a reliable exporter of quality citrus fruits. Despite increased competition in global markets, SA citrus production and exports have been increasing as industry adopts varieties that are in demand globally, shifts to improved management practices to improve fruit quality, and a continued favorable exchange rate.
The citrus season in South Africa (SA) typically starts in April and ends in September. However, the harvest time and marketing years (MY) vary depending on the type of fruit.
There is a one year lag between the SA MY and the U.S. MY. For example, SA MY 2012/2013 for grapefruit is equivalent to March 2013 to February 2014 in the USDA PSD tables.
Export season outlook:
For MY 2013/2014, post does not expect total citrus exports to reach the record set in MY 2012/2013 due to lower expected volumes of grapefruits. However, a favorable exchange rate and a good production year for most of the other citrus fruits should result in another solid export season. The export season for MY 2012/2013 is considered by the SA industry as a record year in terms of citrus fruits packed and exported. The favorable exchange rate and growing demand in markets in the United States, the Middle East, and Russia, helped SA export record volumes. In addition, the industry continues to do market outreach, which is helping SA be known as a reliable exporter of quality citrus fruits.
Post is following closely any new policies that can add additional restrictions to the European Union (EU) market for SA exports on the 2014 shipping season. Citrus exports to the EU were banned for most South African citrus fruits on November 28, 2013 for the rest of the 2013 shipping season. The measure was taken by the EU Commission over fears with the fungal black spot disease. The ban did not affect SA exports to the EU in 2013 as the measure was imposed after the shipping season ended, which usually happens in October. The ban could be extended into 2014 if need be, but the EU Commission has not made a decision yet.
After technical discussions on November 25, 2013 between the Animal Plant Health Inspection Service (APHIS) and SA’s Department of Agriculture, Forestry, and Fisheries (DAFF), APHIS granted a pilot program for the 2014 shipping season to reduce the cold treatment schedule to 22 days as a mitigation method to reduce False Codling Moth. If the one year pilot program is successful, the new 22 days schedule will stay in place for future shipping seasons to the United States from SA.
Post forecasts a lower grapefruit production for MY 2013/2014 at 375,000 MT as a result of the grapefruit production cycle that exhibits a phenomenon of alternate yields for different years: a low-yield year will be followed by a high-yield year, and 2013 was a high-year yield. The fluctuations are more distinct in the northern growing regions of SA.
Post estimates MY 2012/2013 total South African grapefruit production at 410,000 MT as a result of good rainfalls in the eastern part of the country, new trees that came into production, and higher yields as a result of South Africa’s grapefruit production cycle. Post revised downward MY 2011/2012 production to 300,000 MT based on industry data. Star Ruby variety is still covering most of the plantings as it is the most globally favored variety.
Post estimates 2013/2014 domestic consumption of fresh grapefruit to remain flat at 5,000 MT on stable consumer demand. The industry keeps its focus on the export market as local consumers have not acquired a strong taste for grapefruit. Efforts to increase awareness of the healthy attributes of the fruit are underway, but much work is still needed in the domestic market.
Grapefruit is also processed for juice, the majority of which is exported to the EU. The left over pulp following commercial juice extraction is an important source of grapefruit oil which is used as a flavoring in many soft drinks. The inner peel is a source of pectin and citric acid, which are both used by the food industry to preserve fruits, jams, and marmalades. Naringin is also extracted from grapefruit peel, and gives tonic-water its distinctive bitter flavor. Finally, the grapefruit peel oil is used in scented fragrances.
Post forecasts FY 2013/2014 imports at 500 MT, higher than the previous year, as a result of a lower forecasted domestic production. Post revised down its MY 2012/2013 estimates for imports at 320 MT as a result of a good domestic crop and trade data. Although South Africa is not a major grapefruit importer, imports typically come from Spain and Israel. These countries dominate the market for SA imports and, as a counter season producer, fills the demand gap towards the end of the calendar year.
Post forecasts exports of grapefruit for MY 2013/2014 at 215,000 MT based on a lower domestic production. South African grapefruit enter the European Union duty-free under their bilateral Trade Development Cooperation Agreement (TDCA); however, exports to the EU in 2014 are in danger if the 2013 ban due to CBS is re-established by the EU Commission. The EU has not made a decision yet about banning SA citrus for 2014 shipping season; therefore, Post estimates assume that the market will be open.
Post revised its export estimates for 2012/2013 grapefruit exports to 242,000 MT based on final trade data and expected higher production compared to 2011/2012. Japan and Europe are the SA’s major export markets. Japan imposes a ten percent Most Favored Nation (MFN) duty on SA grapefruit. Russia, which is becoming an important market for South Africa, imposes a five percent or $27.96 /ton (whichever is the greater), while Canada, Hong Kong, and the UAE apply a zero percent MFN tariff on South African grapefruit imports. South African grapefruit can enter the United States duty free under AGOA.
Post forecasts MY 2013/2014 oranges production (Valencia and Navel) at 1.5 million MT as a result of good weather and continued growth of exports markets such as the Middle East. Post revised down estimates for MY 2012/2013 total South African oranges production at 1.4 million MT based on industry data.
South African oranges are primarily comprised of two varieties; Valencias and the Navels. Producers prefer Valencia oranges over Navels for their growing characteristics that enable higher yields and maintain a longer shelf life than Navels.
The two leading regions for Valencia production are Limpopo and Mpumalanga (although Valencia oranges are also grown in Eastern Cape and Western Cape on a smaller scale). Close to half of Valencias are grown in Limpopo, which is characterized by warm to hot climatic conditions needed for Valencia production. The main cultivars for Valencias are Delta and Midnight, and the harvest season extends from July to September.
The three leading regions for Navel production are Eastern Cape, Western Cape, and Limpopo. Unlike Valencia oranges, Navels require cool growing conditions as can be found in the provinces above. The main cultivar for Navels is Palmer, and the harvest season extends from June to July.
Post estimates 2013/2014 fresh local orange consumption to remain flat at 140,000 MT on static consumer demand. Fresh oranges are still popular in South Africa and are widely consumed.
Post estimates for 2012/2013 imports is revised down at 400 MT based trade data. These limited imports come in the country around the months of November and December to close supply gaps and satisfy year long demand.
Post forecasts exports for MY 2013/2014 at 1.2 million MT based on strong demand, favorable market conditions, and a weak Rand. Exports to the EU are in danger after some shipments were found to have CBS disease in 2013. Since the issue is still under discussion and exports have not been halted for the 2014 shipping season, our numbers do not reflect a closure of the market.
Post kept its estimates for MY 2012/2013 orange exports at 1.1 million MT based on a good crop and a relatively weaker Rand. Although the Netherlands has been SA’s traditional market, industry reports show that citrus shipments are increasing to new markets like the Middle East and Russia. These markets are recovering from the global recession, while sluggish demand persists in Europe, the UK, and Japan. Another reason is that Egypt has increased production over the years, and it is exporting good quality oranges to the European market. Egypt has a freight advantage in the European market over South African producers.
Post forecasts 2013/2014 deliveries of domestic oranges for processing to be at 160,000 MT, the same as the previous year. Post revised down its estimates of 2012/2013 oranges destined for processing to 160,000 MT as a result of a lower domestic orange production. Producers in SA divert their fresh orange production for the export market, instead of the processing sector, because producers receive a higher premium for fresh fruit in export markets. It is also expected that growth in total fruit/vegetable juice volume sales over the next few years is expected to be slightly slower than that recorded last five year. This will be mainly due to increasing maturity.
Industry statistics for orange juice (200911, 200912, and 200919) are largely unavailable in SA given the highly competitive nature of the industry. The production, supply, and distribution data are comprised of information extracted from various sources and represent Post’s best effort to estimate statistics for frozen orange juice concentrate.
Post estimates 2013/2014 domestic consumption for orange juice to stay at 7,400 MT, as consumers switch to lower-cost beverages due to budgetary pressures. Lingering price sensitivity among South Africans in the wake of the recent downturn and inflation pleasures restrict growth in fruit/vegetable juice consumption. The negative impact of the effects of the crisis had on juice consumption was compounded as rising raw material costs and inflationary pressures continued to push unit prices upwards.
Post estimates 2013/2014 SA imports of frozen juice concentrate at 1,500 MT, higher than the previous year, to compensate for the lower excepted deliveries of domestic oranges to processors.
Post forecasts exports of frozen orange juice for 2013/2014 at 14,000 MT, the same level as the previous year, as a result of lower carry over and fewer oranges destined for processing. Post revised its 2012/2013 export estimates of frozen orange juice concentrate at a lower level as 2011/2012 at 14,000 MT. The main export markets for SA orange juice are Netherlands, and other African markets like Zimbabwe; Mozambique, and Angola.
Post forecasts production for MY 2013/2014 of soft citrus production at 160,000 MT on relatively good weather in major producing areas. Post estimates for MY 2012/2013 soft citrus production was kept at 160,000 MT on good weather conditions in the Eastern Cape and younger orchards that started to mature.
Soft citrus grows best in the cool climatic conditions of the Eastern Cape and Western Cape regions. The SA soft citrus varieties are Clementines, Mandarins, Naartjie, and Satsuma, with Mandarins being the most popular cultivars. Post estimates planted area for soft citrus in 2012/2013 at 5,300 ha on growing consumer demand overseas.
Post estimates local consumption of soft citrus at 10,000 MT in 2013/2014, as domestic demand remains flat. The small size of soft citrus along with its easy-peeling nature and seedless characteristics make soft citrus a desirable snack for all consumers.
Post forecasts soft citrus imports at 900 MT for the MY 2013/2014 to provide year-round supplies. For MY 2012/2013, post also estimates soft citrus imports at 900 MT. South African production can meet most of its domestic demand.
Post forecasts soft citrus exports for MY 2013/2014 at 130,000 MT based on growing market opportunities in the Middle East and a favorable exchange rate. Post estimates for MY 2012/2013 soft citrus exports are revised up at 133,000 MT, higher than the previous year as a result of final trade data. The United Kingdom remains the leading importer of soft citrus from South Africa, but exporters are focusing on the Middle East and Russia as growing markets for South African soft citrus.
EU member states impose a 1.6 percent preferential tariff for South Africa for all naartjies originating from South Africa. Russia imposes a five percent or $41.93 /ton (whichever is the greater) general tariff Most Favored Nation (MFN), while Canada, Hong Kong, the UAE, and Saudi Arabia impose a zero percent MFN duty. South African naartjies enter the U.S. duty-free as a result of AGOA preferences.
Post forecasts production at 265,000 MT for the MY 2013/2014 as a result good weather conditions in the major production region. In addition, returns for producers continue to be attractive, which is creating an incentive to produce more. Planting area is estimated to be 5,000 ha. SA is currently the 6th largest producer of lemons, with a global production share of about 5 %.
Post lowered its final estimate for 2012/2013 lemon production to 245,000 MT as a result of damages from hailstorms in the Western Cape Province. Post estimates planted area for lemons in 2012/2013 at 4,900 ha.
Post forecasts 2013/2014 domestic consumption of lemons at 12,000 MT on stable demand. Lemons are used as flavorings for grilled or fried poultry and fish dishes. Lemon juice can also be used in the drink, cleaning and pharmaceutical industries. In the food industry, lemon juice is used as a flavor agent, in cakes, tarts, biscuits, candies, ice creams and salad dressing sauces. In the drink industry, it is used to make lemonade, smoothies, juices and liquors. In the cleaning industry, lemon juice has been used as a degreaser and disinfectant, due to its high concentration of citric acid, which can inhibit the proliferation of some molds and bacteria.
Post forecasts 2013/2014 import of fresh lemons to be marginal as a result of sufficient domestic production to supply the domestic market and relatively low domestic consumption. Post forecasts imports to be at 100 MT to ensure all year round fresh lemon supplies.
Post estimates for 2012/2013 imports of fresh lemons are slightly higher at 150 MT as a result of SA’s lower crop compared to last year.
Post forecasts exports for the MY 2013/2014 at 170,000 MT as result of a favorable exchange rate and the assumption that the EU market will continue to be open for SA. It is expected that demand in Middle Eastern countries and Russia will continue to be strong.
Post estimates MY 2012/2013 lemon exports are revised slightly higher at 175,000 MT as a result of increasing shipments to markets in the Middle East and Russia and final South African trade data. The Middle East continues to be a major importer of SA lemons. In addition, markets like Canada provided new opportunities to SA exporters. Exports to the Canadian market jumped from 2,620 MT in 2012 to 6,654 MT in 2013.
Possible trade disruption to the European Union
Citrus exports to the EU were banned for most SA citrus fruits on November 28, 2013 for the rest the 2013 shipping season. The measure was taken by the EU Commission over fears with the fungal black spot disease, which is not currently found in Europe. The ban did not affect exports to the EU in 2013 as the measure was imposed after the shipping season ended, which usually happens in October; however, the ban could be extended into next year if need be. The EU Commission has not made a decision about the 2014 season yet.
United States cold-steri protocol
After technical discussions on November 25, 2013 between the Animal Plant Health Inspection Service (APHIS) and SA’s Department of Agriculture, Forestry, and Fisheries (DAFF), APHIS granted a pilot program to reduce the cold treatment schedule to 22 days as a mitigation method to reduce False Codling Moth. If the one year pilot program is successful, the new 22 days schedule will stay in place for future shipping seasons from SA to the United States. All SA exports under the pilot program will be destined to the ports of Newark and Philadelphia; however, if the program is successful, SA will also have access to Houston and New Orleans in 2015 and beyond. The change in the cold treatment schedule is critical for the SA industry as local officials maintained that the former provision of 24 days resulted in losses between six and 15 percent of a shipment due to cold damage.
In early 2013, South Africa experienced several labor strikes in various economic sectors demanding higher wages. The situation did not affect the citrus industry, since the strikes began after the MY 2012/2013 packing season. The strikes resulted in an increase of the minimum wage to R155/day. The new minimum wage policy will have an effect in producers’ revenues, but FAS/Pretoria does not foresee an impact in production or trade in the upcoming shipping season. It has been reported as of November that new farm workers in SA’s Western Cape region started to organize new strikes demanding further labor action. FAS Pretoria will continue to follow the situation