Dilemma of Fruit and Vegetables Exporters

India is the second largest producer of Fruits and Vegetables in the world after china. As per APEDA India exported fruits and Vegetables (in FY 18-19) worth USD 1470 .0 MM which comprised Fruits worth USD 692.0 MM and Vegetables worth USD 777.25 MM. Though India's share in the global market is still nearly 1% only, there is increasing acceptance of horticulture produce from the country. The major destinations for Indian fruits and vegetables are Bangladesh, UAE, Nepal, Malaysia, UK, Sri Lanka, Oman and Qatar.

Recently I interacted with group of Agri entrepreours (approx. 300), who were willing to enter into Fruits and vegetable exports, but somewhat they are confused. They are well equipped with local market and supply chain, but were confused about overseas market operations and uncertainty. If any new Agri Traders explores Fruits and Vegetable exports then Middle East (particularly Dubai-Al Aweer Market) comes as first natural choice. Because of logistics advantage and ample demand of fresh fruits and vegetables, Dubai has become the main market for the Middle East.

Fixed or Commission Deals:

 Fruits and vegetables are perishables commodity hence prices are very fluctuating. Every day basis on fresh arrivals of the stocks, its prices get fixed. Fruits and vegetable exporters being out sider of the destination market, are unable to gauge price fluctuations.

Here comes the dilemma for new exporters, most of the fruits and vegetables exports are done on commission or fix deal basis. There apprehension and trust issues with international brokers makes their decision making difficult. Most of the fruits and vegetable markets are operated by Commission agents and they charges around 5-7% of total sales price. But because of lack of transparency and covert sales deal, most of the time exporters are left with lower margin or loss however agents pocket hefty margin i.e 5-7% on it. Some of the trading Company in Dubai, Srilanka and Vietnam has the started the concept of Fix deal Consignment, where in profit margin of consignment is pre decided (i.e 4-5 %). Now a days I found lots of new exporters are always in search for such fix deals where they can be sure about net realisation of their consignment even though profit margin is very thin. But dilemma remain the same for Fruits and vegetable exporters, whether they should go with Fix deal (which gives 4-5%) or Commission deal (which is unpredictable).

Some of the solution exporters looks for:

a.     Set up their own trading set up at international destination ( but its very costly at the initial level)

b.     Looks for ECGC Cover in fixed price export deal ( but ECGC has set up stipulated limit of one party and is reluctant to provide cover on new parties)

c.      Tie up/JV with some large Overseas importer (Fruits and vegetable market participants are still not very regulated in even overseas)

I welcome the opinion or suggestion from Market experts who can address the problem.

# APEDA #FRUITS #VEGETABLES #EXPORT #ECGC #AGRICULTURE #ONION #AGRIPRENEURS #ENTREPRENEURS #BROKERS #EXPORTS #FIEO