As soaring freight rates to markets such as the US and South America turn almost at a par to the value of the product shipped, gherkin exporters plan to cut production from next season starting December-January.
Surging freight rates have dealt a major blow to the Indian gherkin exporters, who are losing markets in Europe, a major consumer, to other producers mainly Turkey.
‘No respite in sight’
Over the past eight months, freight rates to Europe have jumped from $600 per tonne to around $3,500. Similarly, for the US the freight rates have jumped from $2,400 per tonne to $8,000.
“The freight rates to US and South America are almost now getting closer to the value of the product exported, which is around $10,000 per tonne,” said Pradeep Pooviah, CEO, Blossom Showers Agro, a Bengaluru-based exporter. “With no respite in sight, I don’t have any option but to cut the production by around 30 per cent,” he said. About 30-40 per cent of the deals are priced on CIF (cost, insurance and freight) basis, where the exporter bears the cost of freight and insurance, while the rest are on FOB (free-on-board) basis.
“Even in case of FOB deals, buyers are postponing or cancelling orders as gherkins from origins like Turkey, Eastern Europe and Vietnam are cheaper,” said Shivaram, President of Indian Gherkin Exporters Association. As inventories pile up in processing units, people are cutting down production. As of now, there is a big impact, but it is too early to say how this will affect the exports going forward, Shivaram said.
Advantage Turkey
“There is complete chaos due to the freight price hike and we are unable to meet the delivery commitments,” said Vivek Nayak, CMD of Ken Agritech in Hubballi. Producers in Turkey — who have the land route access to Europe and have the advantage of weaker currency and nil duty — are displacing Indian exporters, Nayak said. Moreover, the Indian produce attracts a duty of 14 per cent for consumer packs and 9 per cent for bulk packs.
Gherkin production is mainly concentrated in Karnataka, Tamil Nadu, Andhra Pradesh and Telangana, Over half of the 50 gherkin processing and exporting units are located in Karnataka, the major producer.
Production of gherkin happens under the contract farming model, wherein the processors/exporters supply the inputs to farmers and buy-back the produce. An estimated 60,000 acres is under gherkin in these States and close to one lakh farmers are engaged in the cultivation. Over 99 per cent of the gherkin produced in the country is exported.
Source : The Hindu Businessline
