Despite Challenging Market Conditions, Customer Needs Remain a Priority
Due to the worldwide pandemic, labor shortages, and strong volumes in international and domestic trade, supply chain disruptions continue to impact trade as gridlock and high costs persists. Silva remains in a good position, however, to respond to our customers’ needs. As we adapt to difficult market conditions, we are putting customer needs at the forefront. We are utilizing our 20 processing lines to cater to specific customer demand, while also ensuring steady supply through storing over 6,500mt of raw materials and finished goods in our warehouses.
Fall Crop Results
The fall crop season has ended with varying results. The total production of red bell pepper was rather favorable, allowing for material costs to remain relatively stable. Yet, adjusting for continued unprecedented costs of international and domestic freight has had a negative impact on the cost overall. As previously reported, the supply chain is strained on equipment and labor while also facing sharply increased volume, driving the landed cost significantly higher despite favorable crop conditions. The market for green bell pepper was less favorable, with a lower output and limited carryover stocks, negatively impacting the cost of product.
The tomato market supply was distressed by U.S. and European action on human rights issues in Xinjiang province, PRC—an action we fully stand behind. As the Chinese market for tomato pivoted out of Xinjiang origin goods, it has driven fresh material prices up in other provinces. Another negative impact on dehydrated raw material availability was stronger competition for fresh produce this season. At Silva, we have committed to fully traceable tomato products, ensuring fresh produce and processing occurring without concern for potential forced labor while ensuring our supply.
The end of the year production cycle for carrot and spinach was negatively affected by rapidly increased costs of coal and cold temperatures. Coal prices have soared in China, for example, due to limited availability, trade imbalances with Australia, and continued efforts to reduce the domestic environmental impact. Concurrently, fall crop spinach was negatively impacted by below freezing temperatures affecting total fresh output. We are also seeing energy prices in Europe increase at a dramatic pace, negatively impacting the cost of goods. European output of carrot was favorable, but negatively impacted by cost increases due to the pandemic.
What’s Ahead in 2022
With rapidly increasing commodity pricing we expect a difficult 2022, to be candid. Commodity crops like wheat, corn, and soy have soared over the last 12 months, putting significant pressure also on vegetable crops. Silva continues to work with our global farming and dehydration partners to ensure a successful production season in 2022. Food commodities have increased over 20% in the last 12 months, and vegetable crops are seeing similar trends.
While we face unprecedented challenges, our commitment is toward our valued customers. Our strong relationships with our farming and producing partners ensure we are keeping our customer base supplied. Our supply chain network includes partnerships in over 25 countries—optimizing quality, availability, and costs. The marketplace has tested our supply chain and our resolve, where both continue resilient through these difficult times. We have maintained our flexibility through the COVID-19 pandemic, prioritizing on-time customer order fulfillment and agility to respond to customer demand. The current cost impactors are affecting all sectors in the food supply chain, and Silva prides itself with a transparent approach to ensure the success of our business, as well as that of our customers.