Posted on October 5, 2010
Today’s insightful installation is by Bill Shodowski of dvfloralgroup.com
I’ve used the newsletter in the past to give you a glimpse of what is going on “down on the farm” when it comes to production and weather related issues. This week we will break from tradition and talk about an issue that has…and will continue to plague production and availability of product destined for the United States.
Things are not really good in Colombia where a lot of product has been sourced over the years. That might be putting it mildly. For the past 20 years, Colombia was counted on to provide for the U.S. wholesale and retail communities. In recent years, there has been a reversal from optimum conditions to one’s that, frankly, look pretty sad.
The Colombian Peso keeps getting stronger against the U.S. dollar. This means that the Colombian farm is getting less for their sales. In 2003…the exchange factor was 2.876. That provided the Colombian farmer a pretty good profitability margin. In August of 2010, that exchange factor was reduced to 1.812…and it is expected to further reduce to 1.750 in 2011!
During the years where the exchange rate has been plummeting…costs have been going up…at an alarming rate. You name it..salaries…fertilizers…plastics. Virtually everything that is needed for crop production has increased in price. Yes…inflation has hit Colombia.
As a result some farms are being forced to close…some are going bankrupt…and others are facing the Colombian version of Chapter 11. Since 2006, there has been a reduction of more than 18% of the hectares planted in Colombia. A hectare is a unit of measurement equivalent to 10,000 square meters. A hectare is approximate 2.5 acres…actually a little less. A loss of almost 20% in 4 years is cause for concern as it has reduced significantly all varieties of fresh cut flowers for export…mainly roses, carnations and mini carns.
My crystal ball gets a little bit cloudy as I attempt to look into the future. There is nothing that I see on the horizon that tells me that situations in Colombia are going to reverse themselves anytime soon. In fact…production in the impacted areas will continue to decline….and the farms will ask more for their product. At this time it is a matter of their own survival.
While this might all sound “too doom & gloom”…it’s reality. We at DVWF and Transflora are not “sitting on our hands” watching this collapse. In fact, we are aggressively seeking out new production areas from across the globe. We are big on California produced product…and are looking at other areas to get the best quality product….coupled with the most aggressive pricing to help you satisfy your customer.
Again…the purpose of this update is not to scare you…but to help make you aware of production issues that the industry is currently facing.