Latin American melon exporters ask supply chain to help absorb added costs

The melon and watermelon production and export industry of Guatemala, Honduras, Costa Rica, and Panama is facing one of the greatest risks and threats to the sustainability of the business, as it faces the highest percentage increase in the cost of essential supplies and raw materials required for the production in its history, as a result of the collateral effects of the COVID-19 pandemic on global production, supply, and logistics chains.

During the second and third quarter of this year, we are experiencing major increases ranging from 40% to 50% in the price of Kraft paper (essential raw material for the manufacture of cardboard boxes), 30% to 35% in the price of Modified Atmosphere Packaging Bags, 15% to 20% increase in the prices of plastic mulch, 20% to 25% increase in the prices of irrigation drip tape, 25% to 30% increase in the prices of fertilizers: OAP, MAP and Urea among others.

As if this situation was not serious enough, the global logistics crisis has caused a shortage of spaces and containers that consequently has led to an unprecedented increase in the logistics costs (Rate per 40’ container) of importing raw materials and exporting our products.
According to forecasts from logistic experts, it is expected these conditions to continue until the end of 2022, so the scenario for the industry is very serious and threatens with the closure of companies.

It is important to consider that melon and watermelon production are intensive crops that require a higher amount of labor compared to other agricultural crops. Because of this, the increases in the interannual minimum wage have a significant impact on production costs. Since the beginning of the COVID-19 pandemic, new processes have been developed to keep the operation running and ensure the safety of workers, which generates an additional cost in materials and biosafety supplies.

Today, melon and watermelon are already highly expensive to produce due to the high standards and certifications required to export to global markets, all these together with the increases described above, have a direct negative impact on the competitiveness and economic sustainability of the melon and watermelon industry, which already suffers strong effects of climate change, for which many producers are forced to close operations.

For all the above mentioned, the producers and exporters of melon and watermelon in the Central America region which represent one of the main sources of supply of melons and watermelons for markets located in the northern hemisphere (North America,

Europe, and the United Kingdom) during the window of the winter, on which more than 60,000 families depend directly and 200,000 more indirectly (Central America). We invite in the most attentive way all the members of the value chain to find alternatives and solutions of mutual responsibly and contribute to mitigate the financial impact that is expected for the next export campaign, that should not be only absorbed by the grower/ exporters, consequently ensuring the sustainability of our business in the long term.