Rosy new prospects for Ecuador – despite the challenges

The first half of the year for Ecuadorian-grown roses was perfect, with solid sales for Valentine’s, and Mother’s Day. With the usual slump in demand over the summer, it felt like life was back to normal after the pandemic.

The first half of the year for Ecuadorian-grown roses was perfect, with solid sales for Valentine’s and Mother’s Day. With the usual slump in demand over the summer, it felt like life was back to normal after the pandemic. FloraCulture International October 2022 edition focuses on exports of cut flowers for this South American country.

The first half of the year for Ecuadorian-grown roses was very good, with strong sales for Valentine’s Day and Mother’s Day, and with the usual slump in demand over the summer months, it felt like life was back to normal after the Covid-19 pandemic.

Ecuadorian flower exporters are directly impacted by Russia’s invasion of Ukraine, highly changeable markets, political unrest, inflation, and higher input costs. But the country’s growers have taken an active approach, finding alternative trade routes and are confident that the industry will continue to thrive in the long term.

With the motto “Let’s meet again”, Ecuador is ready for its EXPOFLOR 2022 tradeshow in Quito between 5-7 October. Booths are sold out; more than 2,000 visitors have registered -including buyers from across the world – and there is great expectation and optimism in the air.

But the last few years have faced Ecuadorian exporters with various hurdles, significantly rose exporters. First, the COVID-19 pandemic in 2020 brought challenges, mainly associated with logistics and transportation costs.

Then, political unrest in Ecuador led to strikes and road blockages. To add to the country’s problems, Russia launched a large-scale invasion of Ukraine on 24 February 2022.

For many years, these two countries and others in the region have been prominent buyers of Ecuadorian roses, with peak demand around International Women’s Day celebrations (March 8), precisely when the conflict began.

Ecuadorian exports – the statistics

To get a clearer sense of these events’ impact, FloraCulture International analysed Ecuadorian flower exports. We contacted EXPOFLORES (the Ecuadorian Association of Flower Exporters) and some key growers.

Fig. 1. Total cut flower exports from Ecuador by value (USD thousands) Source: ITC Trademaps, 2022.

Over the past decade, total cut flower exports have fluctuated, with a dip reflecting difficulties in the Russian market in 2015, which picked up until 2019, falling again since then (Fig 1). Total flower exports have increased substantially since 2020, and a shift towards the US market is evident.
Exports to The Netherlands have remained relatively stable over this period, and the ROW (rest of the world) category has gathered some strength, showing efforts towards diversification.

Moderate diversification trend

When analysing the product offer from Ecuador (Fig. 2), a moderate diversification trend is also apparent.

Fig. 2. Ecuadorian cut flower exports – product mix 2012 – 2021 (figures in USD 1000s) Source: ITC Trademaps, 2022.
* Gypsophila, Hypericum, Matthiola (stock), Hydrangea, ‘summer flowers.
** Bleached, dried or otherwise prepared flowers, mainly immortalised roses.

According to EXPOFLORES, Ecuadorian floriculture currently spans a little more than 6,000ha in production. Although roses still comprise about 70 per cent of the mix, a variety of flowers, including Gypsophila, Hypericum, cut Hydrangea, stock, and others often referred to as ‘summer flowers’, compose nearly 25 per cent of the product offer. Carnations and Chrysanthemums comprise about five per cent of the total product offer. Interestingly, there is an emerging category of ‘prepared cut flowers and buds’, mainly composed of immortalised or preserved roses. This category was valued at approximately $30 million in 2021.

Rose exports

An analysis of Ecuadorian rose exports over the past ten years (Fig. 3) shows that the main markets are the Russian Federation, the United States, and the Netherlands. In this last case, it is safe to say that a sizeable number of roses get re-exported to other countries in Europe and the UK.

Fig 3. Rose exports from Ecuador Source: ITC Trademaps, 2022.

Total rose exports peaked at nearly $700 million in 2014, lost some ground between 2015–2017 and especially in 2020, but showed recovery in 2021, mainly due to expanded access to the US market.

Belarus is getting a steady presence as a distribution hub for the region as well.

The impact of world affairs

How have recent world affairs affected Ecuadorian flower exporters? We first reached out to EXPOFLORES, who reported that the Russian market fell by about 11-13 per cent FOB between 2020 and 2021 and that from January to July this year, that fall has grown to 39 per cent. Substantial price increases in fertilisers, plastics, cardboard, paper, and other critical inputs and economic uncertainty have posed additional difficulties, significantly slowing down crop renovation, especially with new varieties.

But demand for Ecuadorian flowers is high, and EXPOFLORES focuses on strengthening market access worldwide. Currently, their priority is promoting negotiations leading to robust commercial ties with the USA and Canada, the Pacific Alliance, China, Korea and countries like Costa Rica and Mexico. They are particularly active in supporting negotiations conducted by the Ecuadorian Government to renew tariff exemptions for roses and extend tax-free access to all Ecuadorian flowers.

“Things were finally looking up after the pandemic, and we were gearing up for what we expected to be a great Women’s Day season when the war struck,” says Federico Santacruz of Everbloom Roses. Until the war, over 95 per cent of our exports went to Russia and countries in the region.

“March 2022 was the worst month on record for us,” he added, “our sales fell by over 80 per cent. From April onwards, we started actively exploring the US market for Mother’s Day, and by May, sales started to pick up, with some recovery of the Russian market.”

“Things were finally looking up after the pandemic, and we were gearing up for what we expected to be a great Women’s Day season when the war struck,” says Federico Santacruz of Everbloom Roses.

Diversifying towards new customers

The following months were encouraging, with very high demand, which they could not fill due to excessive rainfall and unseasonably cold temperatures, which affected crop times and yields. About 80 per cent of their sales are currently geared toward the Russian market. Still, they have managed to diversify towards new customers in Germany, the US and potentially the Netherlands.

“A relative disadvantage is that our products are specifically geared towards the Russian market,” Federico explains, “and other markets have different requirements.”

Expanding the colour mix and introducing new varieties with different size buds and stem lengths to cater to these different ranges of customer preferences takes time and money. Securing a more permanent commercial relationship with new clients takes time. “After an encouraging first half of the year in the USA, sales plummeted in the summer months,” he said. But they are definitely on to finding new opportunities and even exploring sea freight which they have not done before. New prospects have emerged, for example, in the Caribbean and Chile.

At the height of the pandemic, air freight costs from Ecuador increased by 50 to 70 per cent. Now they have started to go down by as much as 15 per cent.

‘Measured’ increase for 2023

We contacted Esmeralda Farms, part of the gigantic Sunshine Bouquet organisation, with farms in Colombia and Ecuador and a strong presence in the US market, to get additional views.

“The first half of the year was perfect, with strong sales for Valentine’s Day and Mother’s Day, and for the first time, a slump in demand over the summer months, it felt like life was back to normal after the COVID-19 pandemic,” said Eduardo Chiriboga, Commercial Director.

The second half of the year has been satisfactory; for 2023, he expects a measured increase of about 5-7 per cent, not the crazy high demand seen in 2021.

“Inflation in the USA will no doubt slow demand,” he noted, “we are already seeing this in the mass market, although not as clearly at the wholesale level,” he added.

In Europe, predicting the future is more complicated. Demand is strong, but a euro devaluation is increasing costs, and there is much economic uncertainty. Skyrocketing energy prices are placing a strenuous demand on local production in the Netherlands. This may reduce production areas, especially for Chrysanthemums and Gerberas, possibly opening opportunities for growers outside Europe to fill the void.

We then discussed specific hurdles faced during the pandemic and whether they solved them. “Flower transport became a nightmare as we all know,” Eduardo said, “air-freight costs from Ecuador increased by 50-70 per cent.”

Now they have started to go down by as much as 15 per cent. Interestingly, the main reason is not directly linked to the flower trade: Brazil has significantly increased imports from the USA of late, thus providing larger freight capacity in planes going back.

“When planes are full both ways, prices go down,” says Eduardo, adding that he feels confident and optimistic overall. In closing our conversation, Eduardo, vice-president of the EXPOFLOR organising committee, expressed complete confidence in the show’s success this year.

“Booths are completely sold out, and we will be getting more visitors than ever,” he said.