Saudi Arabia and the Gulf

The 2024 Fresh Produce Landscape

The start of 2024 has brought a wave of unforeseen challenges to the forefront of the fresh produce market in the Kingdom of Saudi Arabia and the broader Gulf region, compelling industry players to embark on a journey of strategic adaptation and resilience. The year began with a cautiously optimistic projection that disruptions in the Red Sea's logistical pathways would be a brief obstacle, soon to be navigated and overcome. However, the unfolding reality has starkly deviated from initial expectations, revealing a complex web of logistical, economic, and operational challenges that have exerted profound impacts across the entire supply chain.

The ripple effects of the Red Sea logistical issues have been far-reaching, touching every corner of the fresh produce sector. Initially perceived as a temporary glitch, these disruptions have morphed into a persistent bottleneck, hampering the smooth flow of goods and creating a domino effect that has reshaped market dynamics in unexpected ways. The resulting scenario has been one of acute supply chain disruptions, characterized by delays, increased transportation costs, and a precarious balancing act of supply and demand.

This complex sequence of disruptions has necessitated an agile and strategic response from industry stakeholders, compelling all of us to continuously reassess and adapt our strategies in real time to protect our operations. Such dynamic adjustments are crucial for maintaining a steady supply of fresh produce to consumers while trying to mitigate the negative effects on the business due to unpredictable market conditions.

Bananas: A Ripple Effect of Disruptions

Bananas have likely been the most affected by the Red Sea disruptions, with numerous shipments being combined. This led to shortages in early January and, subsequently, a significant drop in prices due to oversupply and quality issues stemming from extended transit times. Additionally, a substantial increase in volumes shipped from Ecuador to the Middle East occurred, initially perhaps to circumvent a temporary ban in Russia affecting some Ecuadorian exporters. This situation may have also arisen because other markets were not absorbing enough volumes, tempting some "less cautious importers" to purchase more fruit while spot prices were low. Such temptations can prove costly not just for them but for the entire industry. Moreover, higher transportation costs from origins have further escalated costs for importers, complicating operations and challenging the maintenance of reasonable margins that justify the imports. Specifically, in Saudi Arabia, over 1 million extra boxes were shipped compared to the same period in 2023!

GLOBAL STAR SELLING PRICES 2022- 23-24 - ECUADOR BANANAS

UAE WS MARKET PRICES 2015-2024

Apples: Elevated Prices, but Squeezed Margins

In the first quarter of the year, apple imports were predominantly from Europe, though this year has seen an increase in arrivals from the USA, which had significantly dwindled since 2020. Overall, market prices for all apple varieties have been favorable in the first quarter, higher than in previous years. However, these prices have not been sufficient to offset the additional shipping costs, leaving importers with very slim margins despite the higher selling prices. Consequently, the benefits have once again accrued to the shipping lines. Regarding logistics from Europe to Jeddah, the only change for some shipping lines was to introduce a feeder vessel servicing the Red Sea route to Jeddah. Meanwhile, other liners continued their operations as usual, but the freight cost has seen an increase, surpassing 1.5 USD per box in some instances.

Citrus: The Egyptian Predominance Under Price Scrutiny

During the first quarter of the year, citrus imports are predominantly from Egypt, with occasional shipments from Turkey, Spain, and Morocco. However, the seasonal surge of Egyptian citrus faced challenges due to persistently low market prices. This situation raised concerns about the sustainability of growers' and exporters' operations, as they struggle to cover costs and maintain profitability in a market overflowing with produce but offering little in the way of lucrative price points. Market prices for Egyptian citrus have been notably low, as is typical for this time of year. The question arises: how can growers and exporters manage their costs with such low price realizations?

Stone Fruit and Grapes: Quality and Supply Chain Woes

The Red Sea's closure significantly impacted stone fruit and grape shipments destined for Jeddah, leading to diversions and delays that compromised quality. South Africa, a major supplier for the Middle East, saw its shipments rerouted to India, only reaching Jeddah 60 days later via the Mediterranean, with the produce's quality severely affected. The stone fruit market, though experiencing smaller volumes, remained relatively stable. In contrast, the grape market was doubly hit by poor quality arrivals and an oversupply from India, exacerbated by the inability to export the usual volumes from India to Europe due to the Red Sea blockade.

Dammam Port Congestion: A Growing Bottleneck

The redirection of shipments to Dammam port, catering to supplies from the Far East, India, and the Southern Hemisphere in response to the Red Sea disruption, has led to significant congestion. This bottleneck causes vessels to endure extended waiting times for berthing, leading to further delays in cargo clearance and additional transportation costs.

This scenario poses a major concern for the citrus season from South Africa, which has just commenced. With the entire industry now shipping solely to Dammam port, significant congestion and delays are anticipated to be major issues in the coming months.

The first quarter of 2024 has highlighted the vulnerabilities and complexities within the fresh produce supply chain in KSA and the broader Gulf region. The unexpected prolongation of the Red Sea issues underscored the critical importance of resilience and adaptability within the industry. As stakeholders navigate these turbulent waters with very low margins due to unstable markets and elevated cost, the lessons learned from these disruptions could pave the way for more robust supply chain strategies, ensuring the continued flow and market stability of fresh produce in the face of unforeseen challenges.

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