Demand from foodservice channels for fresh produce in Europe, North America and New Zealand has fallen off a cliff during recent weeks in the Covid-19 pandemic, according to Rabobank.
However, the Netherlands-based company said in a report that overall sales volumes of fresh produce are expected to remain at pre-pandemic levels or even to increase. This is due to at-home meals including a higher proportion of fruit and vegetables compared to out-ofhome meals. During mid-March 2020, fresh produce retail sales increased over 30% year-on-year in the U.S., while frozen produce sales doubled as hoarding and eating at home become more prevalent. "The ‘healthfulness halo’ around fresh produce could be a positive demand factor that ends up lasting longer than the Covid-19 outbreak," Rabobank said in the report. The company also highlighted that businesses supplying the foodservice sector have been impacted severely by lockdowns, as many of them cannot easily change to other clients as these have different requirements. The share of foodservice sales in total fresh produce sales varies widely among countries - with around 20% in Europe and 25% in New Zealand. Rabobank explained that although most fresh produce sales have been transferred from foodservice to retail, this isn't the case across the board. "Specific items that rely heavily on foodservice are lettuce, fresh herbs, asparagus, and red currants," the company said. "One specific, young sector potentially being impacted by this is vertical farming, as many of these farms are highly exposed to local foodservice clients.
Forced by these difficult market circumstances, growers are looking for alternative sales channels, like delivery of vegetable boxes or selling directly from the farm via a drive-through." Logistical challenges in the Covid-19 pandemic Some of other major concerns and uncertainties in the fresh produce industry at the moment are logistics and labor, Rabobank said. The industry has been faced with numerous logistical challenges caused by border closures, FreshFruitPortal.com port lockdowns, flight cancellations, and other hiccups, the report said. While borders have not closed for the transportation of essential products, including fresh produce, in some places there have been delays which lead to increased costs. And the sudden high retail demand in some countries has also resulted in higher transportation costs, Rabobank said. "The uncertainty about the situation and potential new challenges popping up are affecting the market. For example, just after the Covid-19 outbreak in China, a shortage of sea containers was reported, but this situation has been improving over the course of March," it said. "Still troublesome are the flight disruptions that have resulted in problems for some specific items that are flown on passenger jets, like premium exotic fresh fruits and cut flowers." Prices of globally traded products, like tropical fruits, are reported to be "extremely volatile" since the Covid-19 outbreak. In addition, changes in exchange rates will also potentially affect trade flows. "As a global recession is now more imminent, money is flocking to safe-haven currencies, like the US dollar," it said. "This will negatively impact export demand for the US, but positively impact export demand for countries that are net food exporters, like New Zealand." Labor concerns for fresh produce Another major concern has been the safety and availability of employees, both on farms and in packing and distribution. Growers and packers are having to deal with extra costs for recruitment and also for measures related to the required social distancing, like additional work shifts, the report said. In the US, there is uncertainty about seasonal labor from Mexico, while the fresh produce sectors in Australia and New Zealand rely quite heavily on people from the Pacific region and backpackers for harvesting and picking fresh produce.
