Finding substitute or emerging markets to sell goods that were destined for the People’s Republic of China is the solution adopted by several coffee and macadamia producers and exporters in response to the ban on their products entering the Asian country. As a result, at least one hundred containers with these products, ordered by Chinese customers, have been redirected to nearby countries.
Since May 27, when the first restrictions on imports of Guatemalan goods were announced, companies have had to place their products in other neighboring markets, where they are redistributed by Chinese importers.
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The measure has contractual implications, which are assumed by the buyers, since the contracts are classified as FOB (port to port), so each of the parties must fulfill their commitments and the buyers are responsible for removing their merchandise from the port.
Meanwhile, the schedule for shipments of goods destined for China has been suspended due to restrictions or, in a given case, the buyer himself indicates to which neighbouring port the required product is to be shipped.
The Guatemalan delegation to the World Trade Organization (WTO) asked the Chinese delegation for an explanation regarding the restriction on entry of Guatemalan exports, but no official response has been made.
Key market
José Chávez, executive director of the Association of Coffee Exporters (Adec), explained that at least 75 containers were sent to Taiwan, Singapore, Japan and South Korea, including those that were in transit at the end of May or beginning of June and other shipments that left later.
Most of the shipments were received in Japan, as they are owned by companies or businesses that operate in Shanghai, but which also have roasteries on Japanese soil, where the raw material can be processed or stored.
The director said that the Guatemalan product is used to make mixtures with grains from other countries, according to various formulas, so the Chinese market is important for buyers, and one of the objectives is to avoid the loss of that market. “If this situation continues, these preparations and the companies that process them might be affected, just when Shanghai was becoming a hub of food products.”
“Most of the shipments were received in Japan, since they are owned by companies or businesses that operate in Shanghai, but that also have roasteries on Japanese soil, where the raw material can be processed or stored.”
José Chávez, Executive Director of the Association of Coffee Exporters
In any case, producers and exporters hope to know the positions of the intermediaries – known as brokers– to make the respective shipments and it is expected that it will not affect the 2024-2025 harvest, which would start next October.
Place at a lower price
When asked regarding this, Flor Gámez, secretary of the National Macadamia Association (Asomac), reiterated that this issue is one of the problems affecting her sector, impacting the marketing chain.
He explained that there are currently eight containers in port that were already in transit and might not be stopped, in addition to the fact that they need the re-export documents and are currently working with the Guatemalan Association of Exporters (Agexport) to expedite the procedures and thus sell to other destinations, even if at a lower price. The containers initially detained were seven that were redirected to Vietnam.
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“Purchases are closed with clients in China, but we cannot move forward if they are not allowed to clear the shipments that are being held up through customs,” said Gámez, adding that 70% of the product is destined for that market and 30% for other buyers.
“With the support and assistance of the Vice Ministry of Foreign Affairs, we have contacts with potential buyers in other countries, but negotiations are not as fast as expected; currently we must try to sell in kernel -which is the shelled macadamia- to other destinations” (normally, shelled macadamia is sold).
Regarding potential substitute markets, he added that India is a market that attracts attention and the United States is a very large niche, even though they produce in Hawaii, according to the World Macadamia Organization (OWM), of which Guatemala is a member.
“The containers initially detained were seven and were redirected to Vietnam”
Flor Gámez, secretary of the National Macadamia Association
He concluded that the problem of macadamia producers is very complex because they were facing low prices in the global market, then the problem of containers in China – which pushed up freight rates – and now they have the serious problem of climate change, since the heat during the flowering period affected almost 33% of the harvest.
Coffee market
According to statistics for the 2022-2023 harvest, coffee exports to the Asian market as an economic bloc accounted for 22% of the total, occupying the third position, since 49% goes to North America; 26% to Europe and 3% to other markets, according to the National Coffee Association (Anacafé).
Of the Asian market, 12% corresponds to Japan, 4% to South Korea, 2% to Taiwan and another 2% to the People’s Republic of China, 1% to Malaysia and another equal percentage to the rest of Asia.
In terms of total foreign currency, coffee exports in the previous harvest amounted to US$944.4 million.
Contingent measures
Fernando Zuluoaga, manager of the agricultural sector at Agexport, reported on the contingent measures that are being developed on various work fronts.
He said that there is communication with the authorities of the Ministry of Economy and Foreign Affairs, regarding the high-level efforts they were making to find out the official Chinese version of the situation, and thus, for exporters to have clearer information regarding what happened.
As for finding new substitute markets for these agricultural raw materials in the future, he noted that the business intelligence and market development unit uses two state-of-the-art information platforms called Brain y Connecting Best Markets which allow agro-export companies to prospect potential markets. These tools are available to Agexport members.
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