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While the impact is so far limited, it is a reminder of how fragile food supply chains can be. If disruptions worsen, they could stall the slump in food commodity costs that had started to filter through to cheaper grocery bills.
“Everyone is a loser here,” said Mr Nitin Agrawal, managing director of Euro Fruits, a major Indian grape exporter. The company usually ships to Europe via the Red Sea, but now uses the longer route, more than quadrupling freight costs and doubling transit times.
That means grape quality will suffer, and most European importers have agreed to higher prices of Indian grapes, which will make them more expensive for consumers, Mr Agrawal said.
The European Union generally relies on India for about a seventh of its table grapes, and more than 35 per cent at the crop’s peak in March to April, according to European fresh produce association Freshfel.
Mr Massimiliano Giansanti, president of farm group Confagricoltura, said Italian exporters, which sell about US$4.4 billion (S$5.9 billion) of agricultural produce to Asia, are worried that going around Africa will hurt freshness and add to costs for fruit like apples, kiwi and citrus.
It is also a headache for farmers who may have to cut their prices to make up for higher shipping costs.
“We have to sell even if prices fall as we can’t prolong the harvesting period,” said grape grower Sandeep Dagu Sandhan in India’s state of Maharashtra, where harvesting has started in some areas. “Exporters always manage to cover their costs. It will be our losses if prices crash.”
Wider worries
The shipping issues are also a concern for Europe’s exports of products like pork, dairy and wine, as well as imports of tea, spices and poultry – though the extent of any impact is unclear – according to CELCAA, which represents agri-food traders.
And ships carrying about 1.6 million tonnes of grain and headed for the Suez Canal were diverted to other routes in recent weeks, intelligence firm Kpler said. Most of that will be crops going to China and South-east Asia.
British grocery giant Tesco has warned that shipping disruptions could lead to inflation on some goods, and the Sainsbury’s supermarket chain is working with the government to cope with delays.
Fresh ginger prices have jumped more than a third since December at East London’s New Spitalfields Market. Mr Muhammed Patel of wholesaler Amer Superfresh, which usually sources from China, said suppliers are raising costs to account for longer journeys.
“Every now and then we have delays, but nothing like this,” Mr Patel said.
Some traders have even delayed cargoes. Britain-based coffee importer Mercanta briefly halted loading in East Africa while it awaited clarification of the route carriers will take. While it has decided to load again, any delays will slow sales to Europe at a time when shipments in the Americas also face constraints, including at the Panama Canal.
If a cargo heads south, “it will have to go on a very, very long transit and probably be more expensive”, Mercanta founder and managing director Stephen Hurst said.
Countries such as Uganda and Vietnam account for a big share of Europe’s coffee imports, and the Red Sea is a crucial artery for that trade.
While perishable foods are often transported in containers, some companies are switching to bulk carriers to ship coffee, according to the Vietnam Coffee Cocoa Association. That can make supplies harder to handle at places like ports and leave them more open to damage from the elements.
Pink salt from Pakistan is another example of buyers baulking. Mr Majid Mahboob Paracha, manager of international trade at Shahpur Industries, said his customer base has shrunk because buyers are unwilling to pay higher transport rates, with costs to ship a container to Europe running at quadruple the norm.
We have the product, but if they are not comfortable with the freight charges, we cannot force them,” he said. BLOOMBERG
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23-Jan 2024 Tuesday
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