Industry buyers can expect lower supplies and higher prices as the Colombian peso continues to appreciate against the U.S. dollar. Inflation and peso re-evaluation is forcing exporters to look for solutions to stay in business.

The Colombian peso recently reached its highest point since July 1999: the exchange rate reached 1,773.05 pesos per dollar yesterday, according to Bloomberg, and is expected to rise to 1,750 pesos per dollar within the next month.

This is bad news for flower exporters whose revenue has been steadily decreasing due to the re-evaluation of the peso, inflation and rising fuel costs. According to a recent report presented by The Association of Floral Importers of Florida (AFIF), prices in the U.S. flower market have decreased by 3 percent per year (on average) since 2002, creating a cumulative 13.7 percent decrease in revenue received by farms.

"What that means is that all exporters get less money for their exports," says Jose Azout, president of Transflora in Miami, explaining the product that was once worth $100 in the U.S. is only now worth about $62.

At the same time, inflation in Colombia — which by law dictates labor costs — has driven a 31.4 percent increase in production costs. 

Further eroding margins, freight costs have also increased 61.5 percent between 2002 and 2007 due to rising global oil prices and less "players shipping boxes to the U.S.," Azout says.

All these things compounded have made it difficult for Colombian flower growers, causing some to go bankrupt, and leading others to possibly follow in their footsteps, explains Augusto Solano, president of Asocolflores, the Colombian Association of Floral Exporters. "Income has decreased, costs are going up and then there's the oil prices," he says. Farms "have already shut down this year. The situation has been hard."

To make ends meet, exporters are searching for alternative solutions. This includes increasing their production with more and newer varieties as efficiently as possible using available technology and exporting more to Europe, Solano says.

"People are trying to get better prices wherever they can," Solano explains. "People are looking at other markets willing to pay a little more to help with costs."

The bottom line, says Christine Boldt, executive vice president of AFIF, is that prices are going to be raised and that members of the industry need to understand why. "The price of getting product to the United States has increased significantly," she says. "The cost of production has gone up multiple levels, multiple times. We're not just raising the prices, the prices need to be raised."

The time for raised prices is already here, says Kevin Priest, AAF, of Cleveland Plant & Flower Company in Parma, Ohio. "So far [I haven't seen] a shorter supply but [have seen] some price increases, especially in the cost of airfreight," he says. "This is definitely affecting our landed costs and so [it is] passed along as higher selling prices."

And the consumer, adds Azout, will have to take some of the increase, because "no one in the industry can afford to absorb all the costs themselves."

--Kori Kamradt
kkamradt@safnow.org

 

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