30 April 2020
Author: Ron van der Ploeg
AALSMEER, Netherlands: Royal FloraHolland on Wednesday 29 April started to ease supply regulations incrementally over the next five weeks.
Basing its decisions on the latest global market insights, Royal FloraHolland announced yesterday it has started to phase out the supply regulations, which was implemented on 24 March 2020.
The auction’s safeguard measures are a combination of a temporary adjustment of minimum prices and ‘maximum daily volume per product group and grower’, based on the grower’s total supply volumes in 2019 (direct sales and clock sales combined). In this quota system, the auctioneer plays a crucial role as he or she decides daily what portion of products a grower can auction off in a specific product group. At times, this decision is often not more than 30 to 40 per cent of products the grower usually puts to auction.
Royal FloraHolland now observes how the number of unsold flowers and plants are slowly decreasing, partly thanks to the supply regulation. However, the world’s famous hub for flower trade is quick to add that things are certainly not back to normal. A statement of the auction reads, “The market situation varies significantly between countries and per product group. We realise that we are not back to pre-crisis levels, but we are starting to see some glimmers of hope with several product groups recovering.”
Royal FloraHolland operates within the Competition Act, based on European regulations. Restricting supply is only permitted in exceptional situations because of the disruptive effect on the market. As an emergency measure, the auction house has temporarily introduced a supply regulation to limit the extreme percentage of unsold flowers and plants. Now that the percentage of unsold products is dropping for several products, the safeguard measures will be phased out incrementally.
Royal FloraHolland cannot stop the supply regulations abruptly. “Our Product Commissions, auctioneers and buyers will constantly provide us with the latest market insights so we can determine whether we can continue the supply regulation for a particular product within the applicable regulations. We compare the current volumes, both through the clock and through direct sales, with the volumes sold through the relevant channels in a comparable period last year. The closer the volumes sold are to last year’s volumes, the more reason there is to phase out the supply regulation. In that case, we assume that an extreme percentage of unsold flowers and plant will not happen.”
In addition, the auction will look at the percentage of unsold products of a product group in recent weeks compared to the same period last year. The higher that percentage, the more reason there is to keep the supply regulation for a more extended period.
The aim is to phase out the supply regulation within the coming four weeks, depending on market conditions. As of Wednesday 29 April, the scheme already expires for Alstroemeria, Amaryllis, Balcony and Terrace Plants, Tree Nursery Products, Seasonal Flowers, Summer Flowers and Tulips.
Royal FloraHolland is aware that stopping supply regulation on the short term, can lead to an imbalance in supply and demand for a product group. As such, the auction will continue to monitor market developments carefully. If extreme situations reoccur, it may temporarily decide to introduce the supply regulation again for certain product groups.