Fruit South Africa has recommended sales agents pursue higher prices to offset the negative effects of a strong Rand very high logistics costs for the coming season.

In its Production and Logistics Cost Trend Analysis for the first quarter, Fruit SA said higher electricity and fuel costs would put 'severe pressure' on the country's production price index (PPI) for the second and third quarters of 2011.

"Domestic Output is rather negative considering the winter peak electricity surcharge in mid peak citrus season. There is grave concern over the competitiveness of the Southern African fruit industry given the current outlook on the production index," the report said.

"On the back of the rising Diesel price, the truck CPK (process capability)value has increased to R11.10 (US$1.62) per kilometre (0.62 miles)– a 9% increase from 1^st quarter 2010.

"The CPK value is expected to increase to R11.70 in the 2^nd quarter of 2011 – an 8.5% increase on 2010 transport costs."

Fruit South Africa highlighted the average FOB (Freight on Board) cost has risen exponentially, while port, freight and container costs for exports to the European Union have also risen significantly this year.

"The data suggests that the total logistics cost from farm gate to the EU will be at the highest levels since 2008. The increase in average FOB rate is 35%, while the increase in total logistics costs to EU has increased by 42% over this period," the report said.

"This should be an important consideration for citrus producers who should pressurize for higher market prices to compensate for escalating logistics costs this year."

The report said the high value of the South African Rand was significantly affecting returned value from exports, with an average value of R9.57 to €1.00 during the first quarter of 2011, compared to R9.40 to €1.00 during the fourth quarter of 2010.

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Source: www.freshfruitportal.com