Article 03 January 2020
Global berry production has significantly increased to meet the burgeoning demand over the past decade. As the demand for berries has increased, the pressure on production has amplified; leading to greater swings in prices and increased volatility in the market.
In the UK, a so called “berry boom” has occurred; caused by health conscious, smoothie sipping consumers, who increased their annual spend on berries to $1.97 billion in 2016, from $797 million in 2012, according to ASDA. As consumption rose, UK production of berries has also increased to meet the demand, leading to the production value of British berries (strawberries, blueberries and blackberries) surpassing 500 million tripling over the past 15 years (FAO Stat). The “berry boom” isn’t isolated to the UK; the value of production of berries in the EU’s top 5 producers equates to over 2.2 billion euros, which has more than doubled from just over 1 billion in 1991.
Away from Europe, Chinese production growth has outstripped any berry market in the same period. Chinese strawberry production has grown rapidly, from 600,000 tonnes in 1993, to 3.37 million tonnes in 2017; 30% of global strawberry production. This production remains in country to meet the growing Chinese demand. On the contrary, Spanish strawberry production has rapidly increased, making Spain the world’s largest Strawberry exporter in 2016, exporting 315,000 tonnes of strawberries.
A major factor which could increase volatility in the UK is the Brexit risk at large. Indeed, the biggest risk to the UK’s berry market is lack of certainty regarding the status of the 31,000 seasonal workers from the EU who the industry relies upon for picking the fruit, post Brexit. EU workers represent 95% of the seasonal fruit pickers work force. A temporary scheme has been put in place in the interim to allow EU workers to work in the UK in 2019 and 2020, even in the event of a no-deal Brexit, but beyond this there remains uncertainty. This requires a larger amount of administration, the fees of which are paid by the growers.
The added administration burden, plus the weakening pound, may also deter some EU workers from being attracted to the jobs. In addition to this, the UK has also opened a pilot scheme for up to 2,500 non-EU workers for farm hands, which will run until 2020 and will be used as a measure for future policy. While these measures will mitigate the risk of berry farmers in the UK lacking seasonal workforce in the interim, no guarantee lies beyond 2020; leaving uncertainty beyond this point.
Effectively managing price risk is critical for businesses operating in the berry sector, particularly with uncertainty ahead and increasing demand in this booming market. Price protection contracts can be an appropriate tool in this industry, given there are no derivative markets available with liquidity to accurately offset berry price exposure. Stable has several price indexes for berries within Europe to mitigate the increasing volatility in the markets.
Interested in speaking with our analysts about their perspective on the global berry market? Want to find out more about how we can help businesses manage berry price volatility? Contact Stable today.
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