We indicate at the start of 2020 when pandemic was imposing on the world of the industry unprecedented constraints and radical changes in lifestyle and consumption that itw as going to be obvious that production and material costs would undergo significant variations affecting the entire supply chain.
In this context one of the most notable effects remains without context that the increase in transport costs affecting not only the maritime sector but also that of land transport too. This explosion of these costs, if it can be partly explained by the increase in demand in certain sectors and in particular that of the medical one, appears as the forseeable effect of the decrease in transport capacities by the shipping companies since several years allied to the imposition of new standards on the protection of the environment imposed on her .Meanwhile awaiting the delivery of their ships to gas – all the leaders have placed huge orders – shipping companies had to resolve to reduce the rate of rotation of their vessels causing a traffic jam phenomenon similar to that which can be observed in our highways during the great summer transhumance….A container carrier currently covers the Asia-Europe journey in 70 days compared to 35 days is two years old !
During this period of time factories all over the World continue to produce accumulating products in ports which are currently saturated, thereby creating a general congestion of the latter where hundreds of ships are waiting , thus participating in the increase in costs to be passed to the clients…The cost of a container departing from CHINA has been multiplied by six going from $ 1200 to $ 7 200 per 20’on average ! Although some stabilization is underway there is no drop in logistics prices that can be foreseen or announced for 2022 or even 2023.
The Covid 19 World management obviously also actively participated in this confusion when many Asian ports were blocked under the effects of various lockdown. – and even today following questionable decisions for their negative effects on economic life of the country – ..but also blockades of containers following the concomitant strikes affecting the UNITED STATES and AUSTRALIA.
Chinese tomato production was desappointing during the summer 2021 but anticipated due to the difficulties encountered by local factories in reaching agreement with their farmers on a raw material price which fell from 420Rmb per kg during 2020 at 525 Rmb per kg on average during the 2021 harvests. It remains to be seen whether the next discussions to be carried out with farmers and planned after the TET holidays will lead to hope for better of those Fob prices of 2022. According our current opinion volume question certainly with prices which will remain in the current state of affairs firm and very similar at the opening to those currently in force.
It is enough clear that this increase in costs has impacted most industries but also farming which, having intially digested theses increases by cutting back on their margins ,are now forced to proceed with the necessary increases for their budgetary balance sheet in order to cover the increases since March 2020 in raw materials ,plastics 120%,steel 60%, wood 130%, crude 46%,energy in general 15%,cardboard by 10% and environmental taxes (CO2 emissions) .
Thus the consumer goes and will have to pay for this general disruption resulting from what a certain number ,in their function of decision-makers,have generated as « new »standards without really officially worrying about the human and economic consequences in the short and medium term.
And INDIA in all of this…
Its geographical location, its largest democracy in the world, its demography and its plurality -one billion three hundred million of inhabitants – its immensity – six times the area of France -and its number of small farmers -the world’s second largest agricultural area -entangled in a government reform that they do not want to hear about, do not allow it to differentiate itself from the rest of the World. All sectors combined INDIA faces the same problems but also must arrange the sensitive sector of local climatic hazards and its consequences on the economy of the country. Beyond dependence on the monsoon , which contributes on average to 80% of annual rainfall, Indian agriculture is aslo likely to be strongly affected by the effects of climate change in the event of an increase in temperature above 2°C by 2050.
The same causes produce same effects. Widely affected by Covid 19 and desorganized as never before,INDIA had seen its costs climb like the rest of the World and its ports blocked and congestioned. Shipping companies have even done better ( !) increasing in two years the cost of transporting a 20’ container to European ports from $ 700 to $ 8000 today !!!
Due to its situation and the fragility of certain local processing industries , farmers, beyond a market lack of labor,remain apprehensive about the quantities to be used intended for exports .A good number of sowing programs ,especially for pickles -for which INDIA has remained a key player in exports since 1995 – have been revised down to 40% in some regions by the factories concerned , giving rise to fiers for the first semester 2022 a relative shortage strongly supported by the weather conditions at the start of the year particularly in Tamil Nadu.
Even if factories are working by all means to contain their manufacturing costs the cost of transport from India now represents , to date, on average € 0.45 per drained weight kilo(February 2022 value) against € 0.08 per drained weight kilo two years ago !..which also serve as the basis for calculating customs duties on imports. As no chance to escape for the time being at the end of the chain consumers will bear the brunt of the party and will have to pay for these cost increases despite possible crop relocation programs that will only solve a part of the problem.
For the 2022 agricultural productions to come the World fruit and vegetable industry will have to take into account these new parameters and transform to face this situation marked by an imbalance between production and demand and a spectacular increase in costs.