Gains offset by rising costs

The good news:

It is fair to assume growers, supplying greenhouse vegetables into the wholesale markets, have achieved higher returns than what may have been expected.   As we inch closer to labour weekend prices are usually already on a decline as volumes increase due to the natural light and temperature inclines.   In the supermarket, prices of some produce have stayed higher, than I have observed, for the same periods in past years.  This indicates to me that volumes are lower than expected as an industry whole.   Other factors, including food service reopening, due to easing of covid-19 restrictions, may have contributed to high prices being maintained. 

The not so good news:

As an industry we depend heavily on materials that can only be supplied from international manufacturers.  The two big ticket items, that require substantial container space, are substrates and fertilisers.  There are many other items, such as clips, acids, hygiene products and chemicals (the list could go on) that are also critical.  Talking with growers from both the North and South Islands there are three major issues:

1. The increase cost of transporting the product.
2. Containers arriving on time and to the correct ports.
3. The general cost increase of the products.

All three of the above are significant and will, in my opinion, almost gobble up any gains achieved until some key issues are addressed.

1. That shipping costs have gone up astronomically since the beginning of Covid, this is understandable with the delays and factors totally out of the control of any grower.   The price of containers has increased approximately 3-4 times pre covid prices.  My question is “Is this the new normal?” or with the world re-opening and countries managing to live with covid – will the prices ever go back to pre-covid times? The additional cost of shipping only increases the cost of production, which means the people to ultimately pay the price will be the end consumer.
2. Containers arriving months later than expected, sometimes to different ports, nowhere near the usual destination, has created additional and unexpected transport costs for businesses.   When I was working with importing substrates the idea was to allow a minimum of four months from ordering to ensure on time delivery.  I would say you now need to consider ordering your product at least eight months, if not a year, in advance.
3. There is also most certainly going to be a sharp increase in the price of raw products that need to be added to the additional import costs and inevitable delays.  All of these factors are of a major concern to all, not just growers, that import and rely heavily on containers coming in and out. 

The two big ticket items:

Fertiliser:

This is something we are unable to do without, we need fertiliser and growers will have to absorb these costs to maintain production and quality.   I would definitely be having the conversation, with your supplier, in regards to how much they advise you store.   If everyone goes out and bulk buys this could leave the industry in a precarious position where some growers may be short.  This is a delicate situation.

Substrates:

I’m aware of several properties, that generally change substrates annually, are having to re-use them for a second year, this is not ideal. In my opinion it will potentially have a negative impact on production, with increased root health issues towards the second half of the crop cycle (based on long crops).   I would definitely order substrates a minimum of eight months in advance, or else you may find you are growing for three seasons in the same substrates. 

 In conclusion:

Gains achieved by growers are already being swallowed up by other operational increases, if shipping issues are not addressed with urgency, this will be another cost to bear.

Article written and compiled by Stefan Vogrincic

All Article’s checked and edited by Marie Vogrincic

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