Summary
The current Covid-19 disruptions of Kenyan exports to Europe, particularly along triangular supply chains to the UK, highlights the importance of shortening supply chains by wherever possible, contracting with the final retailer and shipping products directly. For exporters who can get to grip with current logistical challenges, rising EU demand for fruit and vegetables and rising prices could yield commercial benefits to counter-balance some of the Covid-19 disruptions. This is particularly the case since labour shortages in the fruit and vegetable sector as a result of disruptions to migrant labour flows could depress European fruit and vegetable production throughout 2020.
While in the two weeks to 20th March ‘Kenya’s fresh produce exports to the European Union… dropped 46%’, this was largely a result of the collapse of cut flower sales in Europe, with fresh fruit and vegetable exports holding up reasonably well. According to the CEO of the Agricultural Employers Association (AEA), Wesley Siele, ‘the fresh produce sector was stable’, since ‘supermarkets mainly in the UK, Sweden, and Russia were still ordering fresh produce from the country’. The largest market effects were in the out-of-house dining market component, which saw the rapid cancellation of fresh produce orders (1). However, according to the EU Agriculture Commissioner Janusz Wojciechowski, ‘the consumption of fresh fruit and vegetables in the EU has been booming in recent weeks. Spain, Italy and the Netherlands report 40% increases, and Germany up to 100%’, with demand ‘expected to stay strong during the containment period’ (2).
CEO Siele took the view demand for fresh produce like vegetables and fruits would ‘stabilise in the coming days as the affected countries contain the pandemic’ (1). However, this appears to be an over-optimistic view given the extension of social distancing and lock down measures. In addition, the closure of the EU’s external borders to non-EU nationals for 30 days, alongside similar global movement restrictions, has seen the widespread cancellation of scheduled passenger services, which carry fully 80% of fruit and vegetable sector air freight.
With most of these flights having been grounded, it is reportedly ‘very difficult to find suitable flights’ (3) to the Netherlands, which handles fully 30% of the EU’s extraterritorial imports of fruit and vegetable products (4). The authorities at Schiphol airport have however moved to reallocate freed up passenger flight slots to cargo flights, although it will take time for new landing rights to be taken up.
Okisegere Ojepat Chief Executive of the Fresh Produce Consortium of Kenya has highlighted how this is having a very real impact on air freight rates, which tripled in the two weeks to 27th March. As logistical difficulties mount in Kenya and the Covid-19 pandemic begins to spread in Kenya itself, farm workers are being ‘sent home on mandatory leave because orders cannot be shipped’. This is seen as most acute in the green beans and peas sector where Kenya is a major supplier to the EU market (5).
Kenya is not the only country affected, with exporters from Ethiopia, Ghana and Madagascar reporting many export markets around the world closing, with only a few niche markets remaining open (6). There are also reports that ‘cargo flights from Suriname and the Dominican Republic have now been cancelled’, making it increasingly difficult to get air freighted fruit and vegetable exports to markets in the EU. In the case of Surinam, the only cargo space available was on special repatriation flights organized for Dutch citizens wishing to return to the Netherlands (7).
For Kenya getting goods to Europe is just one dimension of the logistical challenge now being faced. For triangular supply chains, which use distribution hubs in a single EU member states to serve multiple EU markets, logistical challenges are increasingly faced in regard to the onward movement of cargoes, as the free movement of goods across internal EU borders face delays as Covid-19 related movement restrictions and public health requirements are introduced (see companion epamonitoring.net article ‘Collapse of European Cut Flower Demand Threatens Immediate Future of Kenyan Cut Flower Sector’, 19 March 2020).
These problems of on-ward trade are being compounded by a shortage of drivers, personnel shortages at border posts as staff fall ill or show symptoms of Covid-19, as well as the rising cost of refrigerated containers (8). Addressing these problems is likely to prove politically complicated given the different response times of EU member states in moving to ‘lock downs’ aimed at containing the pandemic and the different approaches taken to testing.
While efforts are underway to ensure a coordinated approach to facilitating the cross-border movement of essential goods, so far EC efforts to establish ‘green lanes’ to fast track cross border freight movements have only been taken up by 3 EU member states (9). Against this background these problems of cross border cargo movements are only likely to intensify in the coming weeks.
In is against this background that fruit and vegetable exporters in Latin American countries are exploring the scope for organizing air charters to deliver cargoes more directly to target markets (10). This is seen as particularly important given the rising prices of fresh fruit and vegetables which is underway as demand surges (11). Current price rises could continue, given the disruption to migrant labour supplies to the agricultural sector which the Covid-19 pandemic has given rise to (12).
However, these price increases will not be universal. The recessionary effects of the containment measures introduced in response to the Covid-19 pandemic (13), are likely to see demand fall for certain products where ACP countries have a growing export interest, such as mangoes and avocadoes. These broader economic effects of the Covid-19 pandemic will need to be considered, as ACP fruit and vegetable exporters seek to adjust to the current Covid-19 market disruptions and post Covid-19 trade and market developments.
There can be little doubt there are turbulent times ahead for ACP fruit and vegetable exporters, with ACP exporters needing to be nimble in responding to the challenges faced.
| Comment and Analysis Kenya’s experience of the impact of the Covid-19 pandemic on exports suggests exports directly contracted by supermarkets are less seriously affected by transportation disruptions than products that go through the hands of multiple intermediaries. Particular problems are seen as arising along triangular supply chains where disruptions of international freight movements are being compounded by delays in and cost increases for onward freight movements (12).In light of the tripling of air freight rates in recent weeks the option of addressing this dual challenge by moving over to a system of direct shipments to customers using charter flights now needs to be given serious consideration. In the case of Kenya this could give renewed impetus to efforts to re-establish direct cargo flights to less utilised UK airports.As early as June 2017 direct cargo flights from Nairobi to Doncaster/Sheffield airport in the north of England were initiated (see companion epamonitoring.net article, ‘Hard’ Brexit Could Create Fruit and Vegetable Shortages in the UK’, 23 November 2017). However, the last recorded flight along this route (which at its peak handled 11 flights per month), was on the 6th August 2019. This suggests there were some operational problems faced in re-directing cargoes to chartered services flying straight from Nairobi, while existing routes via ports of landing in EU27 member states continued to operate without interruption (see companion epamonitoring.net article, ‘What Challenges Does Kenya Face in Ensuring Continuity in its Current Access to the UK Market?’, 17th March 2020). The transport disruptions which the Covid-19 pandemic has given rise to, could see a resurgence of interest in utilising more direct routes in serving UK markets for short shelf life products. Such interest could be enhanced by the consequences of the current suspension of UK/EU ‘face to face’ trade negotiation, which has followed on from the social distancing measures introduced to contain and stretch-out the spread of the pandemic. Unless UK government policy regarding the date of departure of the UK from the EU customs union and single market is adjusted, a ‘no-deal Brexit’ would appear to be back on the table as of the 1st January 2021. This would then require Kenyan exporters to undertake a fundamental rethink of their use of triangular supply chains in serving UK markets for short shelf life fruit vegetable and cut flower exports. Against this background if the earlier operational constraints can be addressed, then a resumption of a direct cargo service from Nairobi to Sheffield/Doncaster airport could prove of considerable value. This is particularly the case since the disruption of migrant labour flows to the UK as a result of the Covid-19 pandemic could create fruit and vegetable shortages in the UK in the second half of the year, with favourable prices then emerging for those exporters who can get to grips with current logistical challenges. Given the likely extent of labour shortages in the UK, the opportunities this could generate extends to increased scope for local value-added packing of fresh and chilled products prior to export. What is more, given the devastating impact of freight service disruptions on the Kenyan floriculture and horticulture sector, state support, if necessary, to a resumption of direct freight services from Nairobi to Sheffield/Doncaster could represent a valuable form of support to beleaguered Kenya floriculture and horticulture producers. Beyond Kenya the Covid-19 pandemic can be seen as creating both the necessity and opportunity for a rethinking of the routes used in serving UK markets, so as to bring producers closer to the final retailers of their products. Shortening the supply chain would appear to be an important means of mitigating future potential transportation disruptions in serving the UK market. |
Sources:
(1) Freshplaza.com, ‘Export of fresh produce from Kenya down 46 percent’, 20 March 2020
https://www.freshplaza.com/article/9201196/export-of-fresh-produce-from-kenya-down-46-percent/
(2) Freshplaza.com, ‘Fruit and vegetable demand in Europe is booming’, 1 April 2020
https://www.fpcfreshtalkdaily.co.uk/single-post/2020/04/01/Fruit-and-vegetable-demand-in-Europe-is-booming
(3)Freshplaza.com, ‘Air traffic slow, cargo flights get priority for free slots at Schiphol’, 18 March 2020
https://www.freshplaza.com/article/9200097/air-traffic-slow-cargo-flights-get-priority-for-free-slots-at-schiphol/
(4) Freshplaza.com, ‘Dutch export turnover for fruit and vegetables rises to € 11.9 billion’, 10th January 2020
https://www.freshplaza.com/article/9178583/dutch-export-turnover-for-fruit-and-vegetables-rises-to-eu-11-9-billion/
(5) The Independent, ‘European shops could face shortages of fruit and veg but green lanes may help supplies’, 27th March 2020
https://www.fpcfreshtalkdaily.co.uk/single-post/2020/03/27/European-shops-could-face-shortages-of-fruit-and-veg-but-%E2%80%98green-lanes%E2%80%99-may-help-supplies
(6) COLEACP, ‘First feedback from African exporters’, 19th March 2020
https://eservices.coleacp.org/en/actu/first-feedback-from-african-exporters
(7) Freshplaza.com, ‘Now that cargo flights from Suriname and the Dominican Republic to the Netherlands are scrapped, exotic vegetable prices are rising’, 24th March 2020
https://www.freshplaza.com/article/9201852/now-that-cargo-flights-from-suriname-and-the-dominican-republic-to-the-netherlands-are-scrapped-exotic-vegetable-prices-are-rising/
(8) freshplaza.com, ‘Overview global impact of Coronavirus’, 20th March 2020
https://www.freshplaza.com/article/9201157/overview-global-impact-of-coronavirus/
(9) Guardian, ’EU leaders clash over economic response to coronavirus crisis’, 26 March 2020
https://www.theguardian.com/world/2020/mar/26/eu-leaders-clash-over-economic-response-to-coronavirus-crisis
(10) Freshplaza.com, ‘We continue to look at viable alternatives such as renting air charters’, 25th March 2020
https://www.freshplaza.com/article/9202462/we-continue-to-look-at-viable-alternatives-such-as-renting-air-charters/
(11) Daily Mail, ‘Cost of fruit, vegetables and other groceries set to rise amid the coronavirus pandemic’, 2 April 2020
https://www.fpcfreshtalkdaily.co.uk/single-post/2020/04/02/Cost-of-fruit-vegetables-and-other-groceries-set-to-rise-amid-the-coronavirus-pandemic
(12) Rabobank, ‘Fresh produce foodservice demand has “virtually stopped” in Europe, NA – Rabobank’, 2 April 2020
https://www.freshfruitportal.com/news/2020/04/02/fresh-produce-foodservice-demand-has-virtually-stopped-in-europe-na-rabobank/
(13) FPC, ‘US and Europe already in recession’, 26 March 2020
https://www.fpcfreshtalkdaily.co.uk/single-post/2020/03/26/US-Europe-already-in-recession