Summary
The EC has established a new fruit and vegetable market observatory. The value of this market observatory for ACP producers crucially hinges around the product coverage and the level of detail provided through the activities of the observatories. If it is to be of value to ACP producers the fruit and vegetable market observatory needs to cover products of particular interest to ACP producers (e.g. onions) and regularly provide data on EU exports to all ACP countries in products which are of concern to ACP producers. This is essential given the disparity in size between EU production and the size of most ACP economies, where even small export volumes in EU terms can have serious market disturbance effects in individual ACP countries. The work of the market observatory in the citrus sector could help ease some of the pressure from EU producer interests for the stricter application of EU SPS controls, given the unjustified allegations of market domestic citrus market crisis in Spain.
On February 22nd 2019 the EC announced the launch of two new market observatories including one for certain fruit and vegetables. The product focus of the fruit and vegetable market observatory will be on tomatoes, apples, citrus fruit, peaches and nectarines (1).
As with other existing market observatories for crops, sugar, meat and milk, the fruit and vegetable market observatory will be available online and will ‘provide a wide range of market data complemented by market analysis, short-term outlook reports and medium-term prospects’ reports. The work of the fruit and vegetable market observatory will be supported by ‘a board of market experts for each sector’ who ‘will meet regularly to discuss the markets’ state of play and data’ (1).
This needs to be seen in a context where in the EU the fruit and vegetable sector accounts for 24.1% of EU agricultural output value (1). In 2017 the value of extra-EU vegetable imports reached a total of 4,868.9 million, with some 8.3% (or €403 million) being sourced form ACP countries. Fully 56% of these EU imports from ACP countries originated in EAC countries, Ethiopia, Zambia and Zimbabwe. Almost 41% of ACP originating EU vegetable imports originated in Kenya, where they accounted for almost 13% of the value of total imports from Kenya (2).
In 2017 the value of extra-EU fruit imports excluding bananas) reached a total of 16,564.6 million, with some 14% (or €2,320.9 million) being sourced from ACP countries. Fully 78% of these EU imports from ACP countries originated in South Africa (2).
The focus of the newly established market observatory needs to be seen in the context of growing concerns which came to the fore in January 2019 over the functioning of EU markets in the citrus sector. This saw Valencian citrus producers making accusations of abusive practices along the citrus supply chains. Unfair trading practices highlighted by the Valencian citrus producers focused on:
- ‘the breach of contracts;
- payment defaults; and
- the alleged detection of an abusive amount of discards during the fruit handling process’, which can amount to 70% of production in some cases (3).
The most frequent complaint was over ‘the sudden refusal by certain commercial operators to harvest all, or a part, of the grower’s production, as agreed in the contract document’ (3).
There are in addition many cases of operators in the citrus sector failing to pay for the fruit contracted or attempting to renegotiate contracted prices, or who seek supply commitments without any agreement on prices to be paid (3).
However it is unclear precisely what role the new market observatory will play in identifying abuses trading practices in the sectors to be monitored and how the work of the observatory will interact with new EU regulations on the elimination of UTPs (4) (see companion epamonitoring.net article’ ‘Calls for Stricter EU Measures Against UTPs’, 1 November 2018 and ‘Proposed EC Regulatory Initiative on UTPs Needs to be Extended to ACP-EU Supply Chains’, 8 September 2017).
It is more likely that the data generated by the new fruit and vegetables market observatory will provide a fuller picture of the relationship between imports and the functioning of EU markets of concern to EU producers. This could then avoid some of the controversy which has arisen over the impact of imports on the current price crisis in the Spanish citrus sector (5), by providing regular and systematic analysis of trade flows in sensitive products.
In the tomato sector a focal sector for the fruit and vegetable observatory, EU per capita consumption of tomatoes is falling, with an almost 3% decline projected by 2030. EU tomato production is relatively stable but with producers moving into higher value tomato varieties (e.g. cocktail, cherry and miniature tomatoes). This move over to higher value varieties is pushing down yields. EU producers are ‘extending the production seasons in all producing regions’ against a background of a strong increase in imports from Morocco (+34% over the past decade) (6). According to Italian tomato producer representatives ‘table tomatoes from Morocco are a problem in winter as they drives our prices down’. Competition from Morocco is also seen as an issue by Spanish tomato producers (7).
The launch of the fruit and vegetable market observatory with a focus on tomatoes can thus be seen as timely given the changes underway in the sector. The situation on the EU tomato market is likely to be severely affected by a no-deal Brexit in a context where the UK is ‘a major market for EU-27 exports of fresh tomatoes, importing 72% of total EU-27 exports’. The Netherlands and Spain, were the UK’s main trading partners for fresh tomatoes accounting ‘for almost 85% of EU-27 exports to the UK in 2017/2018’ (6). Any disruption of this EU27/UK tomato trade could have important trade diversion consequences and even displace fresh tomatoes into processing as a means of clearing EU markets and supporting prices in the face of Brexit related disruptions to the fresh tomato trade between the EU27 and the UK.
Up to 2030 EU tomato exports are projected to increase 1.6%. per annum up to 200,000 tonnes per annum. However the ‘extra-EU trade in processed tomatoes is stronger than for fresh tomatoes’, with EU exports expected to continue to increase by 1% per annum up to 2030, reaching 2.7 million tonnes by 2030, at which point the EU will have become a net exporter of processed tomatoes (6). These projected increases however do not factor in any potential Brexit related trade disruptions in the tomato sector.
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The usefulness of the EU’s market observatories for ACP producers crucially hinges around the product coverage and the level of detail provided through the activities of the observatories. For example, the Milk Market Observatory, which provides useful production and trade data for most commodities, does not cover fat filled milk powder (FFMP). This is an increasingly important EU dairy export product in its trade with Africa. This needs to be seen in a context where the EU is by far the largest global exporter and Africa is by far the largest market for EU FFMP exports (see companion epamonitoring.net article, ‘Strong Expansion of EU Fat Filled Milk Powder Exports to West African Markets Resumes’, 19 April 201). EU exports of milk powders (FFMP, SMP and WMP), alongside the global price effects of high EU skimmed milk powder stocks has served to transform the commercial context for the implementation of dairy sector development programmes in ACP countries aimed at developing local milk-to-dairy supply chains. Equally while it regularly reviews monthly trends in EU milk powder exports this covers only the top export destinations and does not cover trends in EU exports to smaller ACP markets where trade volumes though small in EU terms can have a disproportionate impact on the functioning of local ACP market given their size relative to the individual ACP market targeted. This is an important factor to bear in mind in the face of any Brexit related disruptions to EU27/UK trade in the tomato sector Against this background for the EU market observatory for fruit and vegetables to be of value to ACP producers, it will be necessary to ensure that it covers products of particular interest to ACP producers and regularly provides data on EU exports to all ACP countries in products areas of concern. This needs to be seen in a context where given the relative volume of production in the EU and in individual ACP economies even small increases in export volumes in EU terms can have very large market disturbance effects in individual ACP countries, for individual vegetable products. Given efforts by African governments to develop tomato production for local markets (8) and the roll which EU exports of tomato paste play in clearing EU market (fully 60% of UK tomato production goes into the processing industry), the inclusion of tomatoes in the fruit and vegetable products to be subjected to close monitoring, could prove of value to ACP countries, if comprehensive EU export trade data for ACP markets was regularly updated. In terms of the product coverage of the fruit and vegetable market observatory, onions would appear to be an important product from an ACP perspective. For example, many ACP countries in West Africa are seeking to develop production of onions for the local market in a context where 6 West African countries are among the top 10 destinations for Dutch onion exports. These markets play a critical role in the Dutch onion export trade taking fully 73% of exports in the first half of the 2018/19 onion export season. This needs to be seen in a context where the Netherlands accounts for over 15% of the global trade in onions (9). This onion trade is likely to become a matter of concern if a no-deal Brexit were to undermine the Netherlands-UK onion trade, since the UK was the 3rd largest market for Dutch onion exports in the first half of the 2018/19 season (3 times more than the second largest EU market for Dutch onion exports, Belgium). Any disruption of this trade could lead to increased exports to West African markets (see companion epamonitoring.net article, ‘Dutch onion exports hit further record highs with West African markets playing a critical role’, 30th October 2017). This could undermine efforts to develop local onion production in West Africa. These efforts have included the use of seasonal restrictions on imports, which in Senegal have encouraged investment by EU traders in local onion production (see companion epamonitoring.net article, ‘Gambia Withdraws Import Ban on Onions and Potatoes’, 22nd May 2017). Top 10 destinations for onion exports from the Netherlands first half 2018/19 export season (tonnes)
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Sources:
(1) EC, ‘Commission to launch new market observatories for wine and fruit and vegetables’, 22 February 2019
https://ec.europa.eu/info/news/commission-launch-new-market-observatories-wine-and-fruit-and-vegetables-2019-feb-22_en
(2) EC, Market Access Data Base
http://madb.europa.eu/madb/statistical_form.htm
(3) freshplaza.com, ‘Citrus crisis leads to breach of contracts, defaults and excessive fruit discards’, 18 Jan 2019
https://www.freshplaza.com/article/9063030/spain-citrus-crisis-leads-to-breach-of-contracts-defaults-and-excessive-fruit-discards/
(4) Wrekin Conservatives, ‘MEP says ‘New EU retail rules will protect farmers even after Brexit’, 30th January 2019
https://www.wrekinconservatives.org/news/mep-says-new-eu-retail-rules-will-protect-farmers-even-after-brexit
(5) elconfidencial.com, ‘No evidence that citrus crisis is caused by imports from third countries”’, 28 January 2019
https://www.freshplaza.com/article/9066185/no-evidence-that-citrus-crisis-is-caused-by-imports-from-third-countries/?utm_campaign=highlights&utm_medium=email&utm_source=01-02-2019
(6) EC, ‘EU Agricultural Outlook for Markets and incomes 2018-2030’, text, December 2018
https://ec.europa.eu/info/sites/info/files/food-farming-fisheries/farming/documents/medium-term-outlook-2018-report_en.pdf
(7) hortidaily.com, ‘The supply of Moroccan table tomatoes worries European producers’, 9th April 2019
https://www.hortidaily.com/article/9091940/the-supply-of-moroccan-table-tomatoes-worries-european-producers/
(8) The Eagle Online, ‘FG determined to boost tomato production – Enelamah’, March 7, 2019
https://theeagleonline.com.ng/fg-determined-to-boost-tomato-production-enelamah/
(9) Onion Today, ‘Top 3 Dutch onion export countries even more important’, 28 January 2019
https://www.freshplaza.com/article/9066040/top-3-dutch-onion-export-countries-even-more-important/