South America is a major product supplier for the North American continent and there were once many ship shipping options available. However, more recently shipping companies have reduced the number of direct shipments.
“We are seeing a sharp decline in service,” says Luis Acuña, president of Viva Tierra Organic. The company mainly imports organic apples and pears from Chile and Argentina. “Most products that are shipped from South America to the United States now have to be transshipped through Central America. “This drop in service from shipping companies has a significant impact on our business,” Acuña said.
Containers often miss their connection, leading to increased transit times, delays and lower product quality upon arrival. Transshipment increases the margin of error. Ironically, as the level of service has gone down, shipping costs have gone up 100% on most routes.
Producers seem to be the hardest hit when it comes to price increases. Their costs of inputs such as fertilizer, fuel and labor have increased dramatically. In addition, each sea freight load has an impact on the producer’s net return. To make the situation a little more bearable for the producers, Viva Tierra took smaller margins.
“We have a business relationship with these producers, and they ask us to help them, to improve their situation,” Acuña said. “A lot of these growers that we’ve worked with for years and they’re small family operations, not big companies. They try to stay in the game because it’s their passion and their families have been involved in fruit growing for several decades. However, it becomes more and more difficult to survive.
Chris Ford of Viva Tierra adds that the company has a unique business model. It follows the seasons with the aim of providing the best seasonal fruit. “As a result, not only do we source from close to home, but we import fruit from other regions, which incurs additional costs.
Source: Viva Tierra
Will consumers keep an appetite for the tropics?
Andres Ocampo, CEO of HLB Specialties, faces the same challenges. His company imports tropical and exotic fruits like papaya, rambutan, dragon fruit, etc. “Shipping rates from Central and South America to North America have nearly doubled in the past three years,” Ocampo said.
All of the price increases combined create the risk that tropical and exotic products will become too expensive for the consumer. “There is a limited amount of these additional costs that we can pass on to the consumer before they lose their appetite for tropical produce,” he commented. “This inflation, combined with the risk of recession, creates an uncertain environment for us. Our items are simply not the first line of purchase for the consumer.
Nonetheless, Ocampo is grateful for the increase in sales his company has seen since the pandemic began. “Thanks to the bold choices of our retail customers and consumer interest, we have been able to make once-undiscovered exotic fruits a strong presence in the North American retail landscape.”
HLB Specialties markets its products in North America and Europe. “Demand in Europe is already starting to weaken,” Ocampo explained. As a result, Latin American producers are shifting their focus from Europe to North America. “Not only does the North American economy seem more stable, but the strength of the dollar is also working in favor of producers. Since the US dollar is so strong, it is more attractive to send products to North America.
Source: HLB Specialties.
Chris Ford of Viva Tierra Organic fears the excessive shipping rates are a permanent increase. “I don’t think trust rates are going to go down,” he said. So far, it’s been a one-way street, with shipping companies raising their rates without having to argue with shippers. “It’s an opportunity they’re taking advantage of,” Ocampo added. “Everyone faces thin margins and struggles to survive. At what price do these shipping companies want to continue to make these extreme profits? »
For more information:
Viva Tierra Organic
Tel: (+1) 954-475-8808