Pineapple business tough but tasty

Bathurst is home to the giant spiny structure known as the ‘Big Pineapple’ – the largest pineapple structure in the world. Bathurst is the furthest south that pineapples are grown in the world faring relatively well despite taking a longer time to grow than countries like Thailand, which is the South Africa’s fiercest global competition.

Pineapples are an important export industry for South Africa, but as the pineapple experts explain, this lip-smacking fruit does not come without its challenges. Presently, challenges facing the industry include large increases in input expenditure, rising minimum wages, a crisis in the global economy and the impact of the so called ‘fertilizer fiasco’.

“Currently, given that pineapples paid for by the factory [Summerpride] are based on ZAR/USD and market selling prices, farmers are under extreme pressure to survive,” said Wendy Tobbell, the sales manager at summerpride Foods.

Summerpride is South Africa’s largest single fruit processor. It processes 75% of South African pineapples and supplies 90% of canned pineapple consumed in South Africa. In addition, more than one million cases of the fruit are exported to 25 countries around the world.

“Prices for fruit in 2012 are as they were in 2009.  Who can survive at these levels especially with farming costs rising annually?” added Wendy.

According to Tobbell, the company produces between 85000 and 95000 metric tons of pineapple annually for the juice market.

“When yielded through the factory this produces 10000 to 15000 tons of juice concentrate,” she said.

Pineapple Production

There are two varieties of pineapples commercially grown in the South Africa, the Cayenne and the Queen. Both varieties are grown in the Eastern Cape. The crop that is most suited for canning, however, is the Cayenne pineapple. The Queen variety is mostly grown in the Hluhluwe district for both the local and export fresh fruit markets. The focus in the Cacadu District, Eastern Cape, is on producing pineapple concentrate.

“Summerpride’s variety is the smooth Cayenne and is sourced from 23 growers, all of whom are shareholders in the company,” said Tobbell.

Within the Eastern Cape pineapples take about 1 to 1.5 years to flower. The first crop is usually harvested after 18 to 24 months. Commercial pineapple plants are only harvested every two or three years, because the fruit gets smaller with each year of plant life.

Pineapples and the economy

The Eastern Cape together with KwaZulu-Natal are the two main pineapple growing areas within South Africa.

The agricultural sector plays an important role in the growth of the South African economy. Although the sector has a relatively small share in GDP (2.5% in 2010), it is a key contributor to growth. This is apparent when considering that the sector is a major provider of employment and a solid earner of foreign exchange. The sector is also important since it has strong ties with the manufacturing sector, providing it with raw materials and being reliant on manufactured goods.

According to the department of agriculture and fisheries, the gross value of production for the pineapple industry was approximately R174 million in 2009/10.

Mark Harris, chairperson of juice company Summerpride Foods, believes the pineapple industry has a good future, although that depends on diversification. For example, Summerpride focused on canning in the past but high costs triggered a switch to juice production.

Competition

According to Harris, the selling price of pineapples is largely impacted upon by production in Thailand. Thailand and Indonesia are huge global players in the pineapple industry, with Thailand supplying between 70% and 80% of the world’s pineapples.

“We’re not cheap producers and can’t compete with countries like Thailand and Indonesia in the global market, as they are much lower cost producers,” he says.

Since 89% of Summerpride’s pineapple juice is exported, global competition is an important factor. However, according to Tobbell, South Africa only contributes around 3% of the world pineapple market.

“Being that South Africa only contributes such a small percentage of the world market, we unfortunately have to be market followers and not market leaders,” said Tobbell.

“The Company exports to blenders worldwide and also supplies the local market with 90% of its pineapple concentrate needs,” said Tobbell.

Locally there is little competition as Summerpride is the only surviving pineapple factory in South Africa. “But, from a concentrate side, international market prices have a huge impact on the industry, as customers will always check if product is not available cheaper internationally,” Tobbell added.

According to the department of agriculture and fisheries, prices realised in pineapple exports were on the rise until 2008, indicating that the pineapple market is strongly driven by market forces. In 2009 prices reacted strongly to increased supply throughout the world, resulting in a 41% decline in net realisation for South African pineapple exports. The net realisation increased again in 2010, following a decline in the quantity exported by South Africa during the same period.

Potential challenges

According to Tobbell, there are various challenges within the pineapple industry.

“Over past three years we have received an average per annum of 85 000 metric tons with no increase in tonnage being delivered mainly due to delayed fruit deliveries due to cold weather conditions, which in turn delays the natural flowering of the plants.”

Potential challenges in the market include currency fluctuations, the world economic crisis, market demand, weather phenomenon, product quality, continuous rises in freight charges, and substitutes with cheaper products.

“Blenders may use more apple or orange in a juice blend and limit pineapple percentage in recipes,” said Tobbell.

Soil

“Soil preparation is the most vital part of the process, because you are sitting with that plant in the ground for four years. Any mistake that you make in planting, you sit with that problem for four years,” said Mike Japp, the Bathurst Pineapple Grower’s Association chairperson.

Some of the dangers that can stop healthy pineapple growth, among pests and disease, is the potability of rotting from standing in water for too long. Most other problems are easily preventable with chemicals or a foliar spray.

“Soils can vary, they just don’t like clay soil, and it has to be a well-drained soil, which is why a lot of pineapples are grown on slopes, or on built up ridges,” said Japp

Fertilizers

“Because we export, we have very strict record-keeping from fertilizers to chemicals, traceability goes right back to the day the plant was put in the ground,” said Japp.

This is along the strict lines of the international Good Agricultural Practices (GAP) Act.

A court case is currently pending based on a batch of imported fertilizer, distributed by a company in 2007, with unacceptable amounts of the heavy metal toxin cadmium, which resulted in the loss of European Union certification for a big crop of pineapples.

Sales of pineapples sold in the local markets declined by 9% between 2009/09 and 2008/09, this was partially due to the cadmium contamination, according to a report by the department of agriculture and fisheries.

To-date, government has contributed R 12 million to enable stressed pineapple growers to continue farming. The Eastern Cape Development Corporation has granted a further R 28 million to the pineapple industry in an attempt to facilitate rejuvenation of the industry

Human resources

The pineapples industry requires a labour-intensive process, requiring harvest, picking, maintenance and planting throughout the year.

“It takes two years to grow a pineapple. Then another two years to grow your second crop. Then after that you knock it all down and start again,” said Japp.

According to the department of agriculture and fishing industries, the pineapple industry employs approximately 1 400 workers in the canneries or processors. An additional 3 500 workers are employed in the farms and ancillary industries. It is estimated that 35 000 people are dependent on the industry for their livelihood.

Summerpride foods currently pay 48 salaries, and 103 wages, and 45 seasonal employees.

In 2011 the minimum hourly wage was R7.04, the minimum weekly wage was at R317.51 and the minimum monthly wage was R1375.94. The 2011 minimum wage was 4.5% higher than the 2010 minimum wage.

Return on investment

Only after two years will pineapple growers potentially see their first profits. One hectare is able to produce an average of 30 tons of pineapples.

According to Tobbell, the average price paid per ton of pineapples in 2011 was R914.93. However, it must be noted “this was an extremely good year market wise, which unfortunately turned in 2012.”

While the number of pineapples sold in the markets has been declining during the past five years, prices received have been increasing. The average price of pineapples sold in the local markets in 2009/10 was R4 136.00 per ton. This was 12% higher than the average during the previous year (2008/09) and 54% higher than the average price five prior to this (2004/05).

Looking to the future

There are many challenges facing the South African pineapple industry with market declines being of great concern. The small international market share of the industry means South African sellers are price takers, this coupled with rising prices in South Africa and the effect of the exchange rate has left the pineapple business in a long-term decline rate.

Diversification and ingenuity remain the key in sustaining profitability in South Africa and the pineapple waste beneficiation project is one such initiative.

This project hopes to utilize material that would otherwise go to waste and the first test product, which has been in development for years, has now successfully reached the market.

A dietary fibre powder which has binding and water retention properties with likely applications in baking, meat processing, and dairy industries are extracted from the pulp of the pineapple after processing.

This will likely be the first of many products derived from the pulp, skin, leaves, and stems of the pineapple plant, which could help sustain and even expand the industry in the years to come.

By Leigh Jarvis

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