Banana battles as prices are slashed and deals are broken

It seems fitting that, in a period where the sale of bananas has been prevalent across the media, talks in the battle over EU export tariffs have been led by Europe’s new high-profile foreign minister, Baroness Ashton.

As FPJ went to press, Ashton said the EU is “on the verge” of resolving its long-running disagreement with Latin American countries over the bloc’s import tariffs on bananas.

World Trade Organisation (WTO) judges have ruled more than half a dozen times that the EU’s policy on banana imports breaks global trade laws by favouring producers in African and Caribbean nations over those from Ecuador, Costa Rica and Colombia.

The 16-year dispute is likely to see import taxes on bananas from Latin America slashed from €176 (£155) a tonne to €114 over the next seven years. Countries in Africa, the Caribbean and the Pacific, which have traditionally had special access to Europe’s markets, have already expressed widespread concern, with the president of the Ivory Coast contacting the WTO in an attempt to protect his country’s share.

But the market has reacted favourably to the news. Shares in Fyffes jumped eight per cent last week, while Chiquita will look to capitalise on the situation, with its fortunes apparently on an upward curve.

Del Monte and Dole both reported third-quarter losses this month, but will hope the deal works in their favour. The latter enjoyed success with its five-day initial public offering, raising the company $415m (£374.7m) to help repay existing debts.

The EU tariff policy currently costs Ecuador alone $209m a year and it is thought the deal would further secure its position, along with Costa Rica, at the summit of UK importers’ lists in coming years.

The news will be welcome for Costa Rican banana companies, as the product is set to be leapfrogged by pineapple exports, which outstripped bananas in value terms during the first nine months of 2009.

Elsewhere, farmers in India’s Punjab region are increasingly turning to bananas as a more profitable option to traditional crops.

Since it was first introduced across four hectares in 2006, banana farming has expanded to 121.4 hectares today and is expected to grow steadily in the coming years.

Meanwhile, in the UK, banana rows broke out again after Asda slashed retails to 38p a kilo. Fears were immediately stoked that the low prices would be passed back to producers and, despite the retailer’s vehement denial that it was doing this and insistence that it was absorbing the losses through other products, there are concerns that the true value of bananas may be reduced.

One insider tells FPJ: “People do not shop at a different supermarket just because of the price of bananas. I don’t think consumers pick up any more bananas if they are cheaper and the problem comes if they forget how much they should cost and turn their backs on them when retails come back up.

“You cannot pick, pack and ship for that price long term and, although I don’t think it has been passed down the supply chain yet, it would be if it stayed like that.”

Retail prices at Asda are currently at 77p/kg, still down on August’s 84p/kg, but analysts believe the product could hit 99p/kg across the supermarkets in the lead-up to Christmas. Wholesale prices were low during late October and the first two weeks of November before picking up.

One importer says the forthcoming months should be more stable: “Supply has been good and there have been no major weather issues. We did have some rain in Cameroon, but that’s down to a traditional rain pattern.

“The increasing price of oil has been a concern - there has been some speculation and doubt in the industry about shipping lines, so 2010 may well be a ‘suck it and see’ kind of year.

“There is nothing to stop the banana price wars happening again, although maybe it will occur in other fresh produce lines before they try to cut the price of bananas again.”

Whatever the outcomes of the proposed tariff deal, Ashton will undoubtedly have her work cut out in appeasing all parties, with increasing political pressure over the elements of the issue relating to poverty battling against trade interests from around the globe. International collaboration and co-ordination will certainly be key in an issue that seems to be at its beginning, rather than at its end.

Thornton makes bananas stand

iN THE end I thought “this has to stop”, prices can’t keep getting lower and lower as the pressure will just keep being pushed down the supply chain, says Andrew Thornton, who owns two Budgens stores in north London and has donated all his profits on bananas in November to plantation workers in Costa Rica.

I had been watching the price of bananas per kilo getting cheaper and cheaper and coming more and more onto my radar, so when Asda’s price hit 38p a kilo, I realised it just wasn’t right. It just didn’t make sense for a product like bananas to become so cheap, so I thought it was about time someone took a stand and explained to our customers what was going on. Everyone I have talked to has realised the price has gone down, but they have not thought about why that is.

If you think about it, especially in the context of the previous banana and milk wars, food is never going to get cheaper in the way other sectors do. The price of computers has come down dramatically as it has become cheaper to manufacture their components and technology has advanced. This is not the case with bananas - there is a finite number of inputs to get them to the consumer.

So I introduced Play Fair, Trade Fair and got people wearing badges with the slogan and Andy Warhol’s iconic banana from the Velvet Underground’s album cover. I want my customers to really understand what is going on and, with many of the top banana contracts up for renewal in January, we need to ensure the price is not low now, to prevent these kind of prices becoming permanent.

After studying reports from Banana Link carefully, it is clear that whenever there have been price cuts they have been passed down the supply chain to the weakest link in it - the plantation workers. We hear stories of exploitation and labour issues and the worry is that, if there is already exploitation on plantations, low prices will make this even worse. Fairtrade is a way we can address that and I have been working with the organisation and looking at whether I can move to selling entirely Fairtrade bananas.

At the end of the day, there are broader issues around fairness beyond profitability and what is the right thing to do. I definitely think our customers are looking for ‘value for values’ and we have seen no decline in sales of Fairtrade, local produce or even organics, which obviously have been hit harder nationwide during the recession. I think people have cut back on more basic, boring products to allow them to still think about the ethical side of food, as well as the environment, which is a linked issue.

Thankfully, bananas at Asda are back to 77p a kilo and I would like to think we had something to do with that. We had a good amount of media coverage from the trade and national press. People have really engaged with the campaign online and at the point of sale. Online magazine Ctrl.Alt.Shift even created a humorous film criticising Asda’s tactics, taking a light-hearted look at a serious issue. Supermarkets are never going to be able to absorb these losses and it’s a responsibility we all take as consumers, as well as me as a retailer, to decide whether this is an acceptable practice.