Discovery Organics | MARKET REPORT – FEB. 10TH, 2017
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MARKET REPORT – FEB. 10TH, 2017

MARKET REPORT – FEB. 10TH, 2017

Even in a tragically over-supplied market…

It’s just another conversation today – will update you next week with any looming market changes. (Kind of boring writing market reports when there isn’t much news, other than a little rain down south.

Apromalpi-Artemio

Yesterday a customer told us that he can buy organic Mangos for $8.50 a case in Vancouver.  I said right back to him – “we can’t do that.”  I wasn’t thinking, “oh, we’re not going to make a sale here,” but instead I was thinking – “oh, those poor growers who aren’t going to get a penny.”  And after 10 trips to Peru, I’m pretty well versed in how this shakes out.   When markets drop (usually because there’s dozens of containers worth backed up in warehouses in L.A.,) everyone in the line-up still makes their money – the growers take their risks with California importers, and wait for weeks and weeks to find out how much they are going to get paid. Their fruit is ALWAYS on consignment, with no guarantees.

So let’s take $8.50 and work backwards.  The wholesaler here is presumptively making $1.50, so we’re at a landed cost price of $7.00, and then all the costs before that are in US Dollars, so we’ll convert that $7.00 down to $5.10 US right away.  It costs about $1.40 US to get those mangos up here from the importer in L.A. (trucking and border charges, inspections etc.)

The importer in L.A. doesn’t work for free and is taking in $1.10 US. …or more… The sea freight from Peru is also about $1.10.  The mangos are bought from growers by a packer/shipper in Peru.  They make a humble margin of .25 cents per box, and it costs them about .75 cents to grade, size, and sticker, and in the case of mangos going to the States, they also have to go through the “thermal bath” process that increases the temperature to about 40C for a time to kill any bugs.  The growers are also charged for the actual cardboard box – about 50 cents.

Here’s the math: I work down to the actual grower return, and it’s $0.00.   And the grower had to pay for harvest and transport to the shed.  As well as looking after his trees for a year, adding compost, irrigating etc.    All the costs are on the left, and the ever-declining return on the right column.

Wholesale           8.50           8.50
Wholesale Margin           1.50           7.00
Convert to US           1.90           5.10
Freight from L.A.           1.40           3.70
Importer Margin           1.10           2.60
Freight Peru           1.10           1.50
Packer Margin           0.25           1.25
Packer Costs (dip/pack)           0.75           0.50
Cardboard           0.50         (0.00)

 

Yes, we are more expensive!  Even in a tragically over-supplied market for the next few weeks, but we are doing good for the growers we have worked with for 8 years.

Let’s look at the differences.   For one, we pay twice as much for ocean freight ($2.20) to Vancouver, compared to L.A., but we aren’t paying for trucking nor an importers margin in L.A.  With the tens of thousands of dollars of social premiums we have sent to Apromalpi, and outright grants, since 2011, they were able to match funds with NGO’s and install an automated pack line, loading dock, cooler and a drying plant.  So their fruit isn’t shipped to Sunshine Export, or any other large packer.  It’s done in their own community, by their own people.   They have chosen to not spend the big bucks and put in the big thermal tanks for heat-treating, which means they’ve also walked away from selling into the U.S. and only exporting to us, and customers in Japan and Europe.

And the 30% culls they get when harvesting (not export grade), well, they dry them and sell Fairtrade Dried Mangos.  So this year, our return to Apromalpi is going to be around $4.56 per case U.S., ($6 bucks Canadian) which is one hell of a lot better than the $0.00 return the other growers are going to get, illustrated above.  That hot deal I described is not very hot at all, if you know what I mean.

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