Global frozen raspberry market remains under the shock of ultra-low prices. EastFruit described this situation very well and provided very accurate forecast for its further development on the verge of the season in this article.
Well, we were right – global prices for frozen raspberries are indeed still going down and the reason is the same – Ukraine. However, there are a few very interesting moments in this process, which EastFruit analysts would like to emphasize.
First of all, Ukraine is harvesting everbearing or remontant varieties of raspberries now. While these raspberries usually have better quality and sell at a higher price than summer raspberries, in 2023 it is the other way around – prices for everbearing raspberries are lower.
Secondly, there is now a new very popular quality category of frozen raspberries, which was previously not very popular in the frozen fruit and vegetable trade. This category of quality is called by market participants “frozen raw material of raspberries”, although it would be more correct to call it “a pig in a poke”. How does this category work?
Let’s imagine a freezing plant in Ukraine which looks more like a small “workshop”, because usually small enterprises are engaged in such a business. This workshop does not have significant storage facilities, as well as adequate space and equipment for sorting and packing the products. In addition, the company does not want to take on any market risks, and is ready to be content with a small but guaranteed margin.
Such a “workshop” or, sometimes an intermediary working with several such “berry freezing workshops” in Ukraine, agrees with the buyer, for example, in Poland, that they will carry out a procurement of raspberries, freeze them and supply them at a fixed price without any additional handling. Often, such operations can even receive pre-financing, although the financial conditions for such a business could be very diverse. Finally, raspberry procurement is organized with basic quality requirements followed. Berries are frozen and shipped immediately without inspection and sorting.
The recipient of such “frozen raw materials”, which in most cases is a Polish freezing company or a trader, runs this product through its sorting likes and receives several quality categories. As a rule, buyers have powerful and modern sorting machines that allow processing of a large volume of frozen raspberries.
At the same time, the buyer, of course, risks, because it is not known how which quality category will be in the batch in which percentage. That is why this scheme can only work if the price of raspberries is very low, and this is exactly what many suppliers from Ukraine are assuring now.
Unfortunately, in this case, the Ukrainian freezer earns several times less than the Polish intermediary and all added value stays in Poland. Also, this brings down prices on the global market as a whole and significantly hinders the possibility of selling frozen raspberries by those Ukrainian exporters who have processing equipment and storage capacities and who offer higher quality categories. This also makes it impossible to increase prices for raspberries paid to farmers, which, in turn, may lead to the uprooting of part of the plantations for next year’s harvest. Although for now we see the determination of Ukrainian producers to wait out this season without reducing the area under raspberries hoping for better prices in 2024.
However, this seemingly not very profitable practice has its own objective reasons. See some of the spelled out below:
- Volumes of raspberry production in Ukraine have increased dramatically in the recent years. It is more difficult to process all of it as there has been no new investment since the start of Russia’s full-scale military aggression against Ukraine.
- Labor shortages. According to market experts, manual inspection of frozen raspberries is 3-6 pallets per shift for 10 people, depending on the quality of raw materials. This means that 1 truckload with 32 pallets can be completed in one week on average. It is difficult to quickly freeze / process / ship if the enterprise uses manual labor, which is a prevailing type of handling in Ukraine.
- Lack of storage and sorting capacity, which we have already mentioned.
- Market risk reduction. Considering massive missile attacks by Russians on civil infrastructure, specifically energy supply in Ukraine in the winter and spring 2022/23, many processors in Ukraine would like to fix some profit, although small. Also, given the negative experience of last year, when traders and freezers who stored raspberries ended up with huge losses, willingness to store is much lower.
- Energy prices in Ukraine keep going up, which makes it more costly to store frozen raspberries.
- Increasing processing volumes, even at a plant with already large capacity, is an opportunity to reduce the cost of production in general and increase overall profitability.
Of course, such a business also negatively affects Polish berry growers, who end up being unable to sell their raspberries at a high enough price to cover their production costs. Therefore, their indignation at the situation is not surprising.
“When the Polish berry growers demanded a ban on the imports of raspberries from Ukraine, they, in my opinion, were very close to doing a huge favor for Ukraine. After all, this would force the Ukrainian freezers to invest in sorting and marketing, which would inevitably lead to a sharp increase in the income of the Ukrainian raspberry industry. A similar example was the ban on the supply of fruits and berries to Russia, which led to a sharp increase in the export earnings of Ukrainian horticulture. At the same time, the income of the Polish raspberry industry, which now earns tens of millions of euros from the resale of Ukrainian products, would drop sharply. These additional revenues gained by Ukrainian raspberry growers and freezers will be reinvested into expanding production. As a result, in a few years Ukraine would be able to bypass Poland, and possibly even Serbia, in the ranking of the largest exporters of raspberries in the world,” says Andriy Yarmak, an economist of the Investment Centre of the Food and Agriculture Organization of the United Nations (FAO).
The expert emphasizes that although the current season has been very difficult for raspberry farmers around the world, it lays the foundation for more successful next seasons. “The reduction in the price of frozen raspberries was necessary to return this berry back into the recipes of dairy, confectionery, tea, alcoholic beverage, and food producers. See our article “Raspberry price cycles” where we warned in advance about this necessity of price reduction, which most of the industry players rejected as “impossible” at that time. However, growing raspberries is not a one-season business, so those who continue to invest in quality and efficiency will be able to see much more satisfying price levels in the future,” says Andriy Yarmak.
“Actually, now is probably the best time to invest into new raspberry plantations, as nursery material is really affordable”, adds FAO expert`.
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