rices at all the major retailers had been stable for months at 68p per kilo until Tesco took the decision last week to raise the bar to 79p. Since then Morrisons and Sainsbury’s have matched them and it remains to be seen how long it will take the other supermarkets to follow suit.
The move can partly be explained as a response to greater balance in the marketplace, as most of the major production regions have been fighting their own particular battles recently. Floods earlier in the year and high humidity levels leading to incidence of black sigatoka disease in the world’s largest exporter’s plantations of Ecuador have hampered production.
A tightening of supply from Colombia is also weather-related and Costa Rica has been down on volume. “This means there has been a healthy balance between supply and demand,” says one industry insider. “As a result the wholesale markets have not come under pressure with too much fruit heading their way or a lack of demand.”
Conversely, problems in the Dominican Republic led to a glut of fruit. A scare on organic fruit found to have molecules of DDAC compound in its skin led to two German supermarkets suspending their orders and consequently large volumes from the Caribbean country were diverted to the conventional rather than organic marketplace. Although producers in the Dominican Republic ceased using the post-harvest product containing the DDAC molecules immediately, it did mean that there were surplus volumes on mainland European markets for several weeks, with volumes also being diverted to the UK.
Despite the latest shelf-price increase, the supermarkets’ practice of consistently selling at just 68p has wiped nearly four per cent off the value of the UK banana market, but worst of all it has not led to an increase in volume; Kantar Worldpanel figures actually show a decline of 1.4 per cent year on year. A 2p reduction in average price paid per kilo has sliced £15 million off the UK market value.
“Look at the impact of that 2p realistically,” says one trader. “On the basis that consumption in the UK averages 14kg a head, and at 68p a kilo compared to €1.40 in continental Europe, the difference in that price runs into hundreds of millions of pounds in lost profits, not just for retailers but for the whole chain, right back to the squeeze on producers. There is no law against it, but it is selling below cost.”
Looking ahead, the summer months in Europe can be a time of downward pressure on bananas as competition with summer fruits and good availability combine. That does not appear to be the case this year with miserable rainy conditions in the UK potentially sending shoppers reaching for wintry comfort foods such as bananas. The tightness of supply also leads sector analysts to forecast continued strength in the marketplace until September.
Another possible issue looms on the horizon: the Caribbean is braced for the hurricane season from June to November, which is always a threat to banana production in the vulnerable Central American and island plantations. “I think the banana market should therefore remain well balanced from now until the end of the year,” says the trader.
In other news, the Ghanaian government has said it expects Ghana’s exports to the EU to increase. Following Compagnie Fruitière gaining Fairtrade certification for its subsidiary Golden Exotics Ltd, trade and industry minister Hannah Tetteh said last month that the removal of quota and tariff restrictions on Ghana’s fruit going into the EU would act as a fillip to the sector. After Ghana signed up to an interim economic partnership agreement with the EU, more foreign investment has been attracted to the west African country. Tetteh said Ghana will also receive help from the EU under its Banana Accompanying Measures programme to the tune of €6 million to help it address the production challenges facing growers in the country.
Ghana’s banana exports to the EU have grown from 4,000 tonnes six years ago to more than 50,000t. -
TOUGH TIMES FOR ECUADOR
This has been a year to forget for the Ecuadorean banana trade and, as Americafruit’s Gill McShane reports, things are not getting any easier
The Ecuadorean government has declared a state of emergency for the South American country’s banana industry for the third time in almost a year.
Some $5 million in assistance has been pledged to help alleviate the situation given that exports have fallen 16 per cent in the first five months of 2012, according to reports by El Comercio.
The emergency period will last for eight weeks in an attempt to support small producers who are receiving prices of less than $2 a box for their bananas (the official price is $5.50), Ecuador’s agriculture minister Javier Ponce said last week during a visit to meet growers in Babahoyo, in the province of Los Ríos.
The $5m will go towards fumigating the plantations of small producers who represent 85-90 per cent of Ecuador’s banana production, Ponce said.
The government will also use the money to buy bananas from those producers who have unfulfilled contracts to sell their fruits.
Over the weekend, Ecuadorean president Rafael Correa announced that his country’s government will be creating a banana export company to sell the fruit and avoid what he described as the “exploitation of small producers”.
According to figures from the Ecuadorean Banana Exporters’ Association (AEBE), national exports have been in decline since January, with weekly shipments down by around 780,000 boxes in the first five months of the year. During May 2012, sendings totalled 22.5m boxes, compared with 25.2m boxes in May 2011.
Since June, AEBE said the weekly shortfall has reduced to 500,000 boxes but it claims exports are still under four million boxes per week, while volume is usually around 4.5m boxes per week at this point of the year.
AEBE attributes the decline to a fall in demand for fruit on northern hemisphere markets, coupled with the financial crisis in several European countries. These factors are compounded by low banana productivity in Ecuador itself as a result of severe flooding earlier this year which has resulted in a lower export offer. -
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