The COVID -19 crisis has set the world upside down. It is still early to tell what the extent of the damage will be, but the early signs are not encouraging. The aggressive spread of the virus and the inadequacy of most of our health systems have spread panic, changed consumption habits, and cancelled events overall. Major entertainment events, trade shows, sports events and gatherings have all been cancelled or postponed. Florists, auctions and growers, all over the world, are dumping their beautiful flowers in the trash or compost pile.
So far, Italy has closed its borders and restricted all movements, with devastating effects to the industry. Italy is one of the major consumers of flowers in the world and their lockdown is affecting growers, traders, and cargo agencies alike. Spain will also go into lockdown, closing another major market for flowers.
Other countries have not taken these extreme measures, but flower consumption has gone down considerably. According to cargo agencies the exports from Ecuador to the world have fallen around 50-60%. For the upcoming week (Week 12) Ukraine, Poland, Russia, the US, Holland, and other major players, are expected to decrease their volumes considerably because of the measures taken by their governments. We are facing a major crisis, with no current precedence.
Worst case scenario
As growers the main questions we are all asking ourselves is: how long will this last? The best-case scenario is that we will all go into a 14-21-day isolation period, having an immediate effect on all exports. The worst-case scenario is that these partial lockdowns continue prolonging the situation and affecting the industry even further, for a prolonged period of time.
The best-case scenario is what most growers are hoping for as it will affect exports heavily all at once, with a relatively speedy recovery. Within a month we should be back to business as usual, or as close to it as it can be. Thus, growers may be able send people on vacation, cut down on personnel temporarily, and work on the structure of the plants; in other words: catch up on admin work and structural work for the future. This scenario also means that we will have a bountiful Mother’s Day season in all markets.
Dumping will be the rule
The worst-case scenario is one that will drag out the situation for months affecting exports from now into the wedding season. If we lose that season as growers, we will be well into the red before the end of Q2. The problem with this scenario is that, while some markets remain open, the supply that is being redirected to those open markets will cause a major over supply issue. Dumping will be the rule as everyone will be trying to make some money for their cashflow. This is currently happening, with some growers offering roses for $0.10 cents FOB Quito (20 cents below average price). This situation will be disastrous. As growers it is better for our industry to cut demand heavily, if not completely, over the next two to three weeks.
Because adapting to a scenario, where the world undergoes a partial lockdown for months on end is considerably harder, since growers are unable to cut personnel for a few weeks. The plants must eat, and they must be worked on consistently. It is a living product that requires constant care and supervision. Therefore, this scenario would most likely be accompanied by reductions on productive areas. However, depending on how long it takes, it might not be enough to keep companies afloat.
Please stay safe
The reality is that we do not know what will happen, the governments all over the world are reacting differently. All we can hope for is a speedy market recovery and the support of our banks and governments in order to get back on the saddle once COVID-19 is contained.
Hopefully we take hard lessons from this disastrous pandemic and become stronger together. In the meantime, please stay safe and strong.
Luis Cadavid
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