Articles in the national press that announced earlier this month that banana prices are going up 30 per cent following a third-quarter loss announcement from Chiquita have mystified the trade.
“It’s rubbish,” says one market analyst. “Prices per kilo are down to 67p a kilo at the multiples. Everyone is struggling and would like prices to get back to a sensible level, but that simply isn’t happening.”
And one trader admits to being confused. “I don’t understand what is going on and where prices are going,” he says. “Everyone is talking about costs going up, and yet there is this real dichotomy on bananas, which seem to be the only products not showing price inflation, as supermarkets continue to use them in their price wars.
“And yet with all this, the rate of sale has just not changed. All that is happening is that sales of loose bananas are still going down, while pre-packs are going up. The only change I see is that with a four-to-five per cent price differential, we might see more consumers switching over to loose as they tighten their belts.”
And at the multi-nationals, last week’s third-quarter announcement from Chiquita that it would experience a “significant” loss for the period due to mounting costs caused consternation. The comments were swiftly revised as share prices fell 30 per cent in a day, and other banana multi-nationals, such as Del Monte, also saw their prices slide by up to 20 per cent in a single day.
Chiquita then said losses were likely to be in line with the same quarter last year. In a statement, Chiquita ceo Fernando Aguirre said that the upcoming three-month period is traditionally weak for the banana industry, and that the company expects improvements in its operating performance for both its second quarter and full-year 2008 results.
“We would like to clarify that, assuming continued pricing and foreign exchange trends as well as current cost expectations, the ‘significant loss’ anticipated in the third quarter is expected to be roughly in line with the loss incurred during the third quarter of 2007,” Aguirre said. That loss was $0.57 (29p) a share excluding items.
Meanwhile, next month will be a busy one in the banana political calendar, as the fourth round of negotiations over the free trade agreement between the EU and Central America is scheduled to kick off on July 14. Trade ministers and their missions to the EU in Brussels from all the countries concerned will be in attendance and, in the case of Costa Rica, a delegation including exporters and producers will also be held in the Belgian city during the negotiations.
“Costa Rica is the only country in which public and private sectors hold a uniform position,” says Jorge Sauma, ceo of the Costa Rican banana association, Corbana, but he admits that there is still a long way to go for his country in the talks.
“The free trade agreement will be a long process… However, we know that there are also negotiations taking place in Geneva [at the World Trade Organisation], so we have to wait and see what will happen there in order to achieve something more in the free trade agreement.
“The success of Doha negotiations depends on what Latin American countries get from the EU. This means that the EU has to propose something if they want to finish Doha negotiations, but right now, we need to wait to see if we will have advanced in this matter. Otherwise, the EU will forget about Doha negotiations.”
Looking at export volumes, the latest figures available for Costa Rica show that totals for the country for the first four months of 2008 are down on the same period last year by about 9.4 per cent, to 33.9 million boxes, but this is still well above the three-year average for 2002-04 of 32m boxes, and totals for both 2005 and 2006.
Significantly though, sendings to the EU appear to be climbing year on year, rising on 2007 levels by 260,000 boxes - 1.5 per cent - to 17.9m boxes, while sendings to the US fell by over a quarter in the same period. Sendings to other markets leapt from a very low base of 46,172 boxes to more than 1.3m.
“Because of the social and environmental investment and, of course, the international recognised quality of our bananas, we only export to markets [where we can achieve] high prices,” says Sauma. “However, we are looking at the Middle East market and the Russian market, both of which could be interesting markets for our bananas.”
And a recent agreement with a major multi-national gives Sauma further cause for optimism. “Corbana sees a positive future for the banana industry,” he says. “Recently, Del Monte has agreed a big deal in order to enlarge its banana and pineapple operations.
“This means that on the one hand we can have good expectations for the future, and on the other, it also shows trust in Costa Rica. Also I think we may expect a big change in the banana market going forward: bananas were previously always considered as an oversupplied market, but now it seems that might change in the future,” Sauma adds.
PORTSMOUTH PREPARES FOR FUTURE
Portsmouth is positioning itself as the fruit port of the future, since the acquisition earlier this year of MMD by the council-owned port, says David Spencer, commercial manager at MMD Shipping Services Ltd.
As of last week, following the announcement from Portsmouth Commercial Port that Fyffes is increasing the volume of bananas it ships through the port by 35 per cent, Portsmouth is now responsible for up to 65 per cent of the UK’s banana imports. This new service will arrive from Belize and Guatemala carrying approximately 1,200 pallets, and it is anticipated to increase each week with predictions of up to 1,500 pallets per ship - so Portsmouth really is the UK’s number-one banana port.
This is great news considering the terminal, MMD Shipping Services Ltd, was only purchased by Portsmouth Port back in February of this year. There were fears that the loss-making company could be in danger of folding, resulting in the loss of local jobs. As our port manager Martin Putman says: “At the time, we strongly believed that the purchase would enable economic growth, especially for freight coming into Portsmouth. It’s not been an easy ride, and we expect it to become a profit-making concern by 2010, but the biggest success is in the additional banana tonnage we have been able to secure.”
Portsmouth works with many of the major banana importers such as Fyffes, JP Fresh, Windwards, Pratts and Mack. Recognising the needs of our customers, and facilitating those needs, has been the key to MMD’s success to date.
But it’s not all bananas. Around 30,000 pallets of pineapples are imported from Costa Rica and around 50,000 pallets of citrus from Morocco each year.
What makes Portsmouth Port so attractive to fruit importers is that it is the first deepwater fresh produce terminal travelling up the English Channel, so many ship owners can go on to second ports on the continent such as Rotterdam, Antwerp and Hamburg.
MMD is able to offer a fully integrated service to all its customers, whereby delivery services are available to meet up with designated ripening centres and retail distribution centres. In addition, we operate a 24/7 service whereby ships can be discharged any time and warehouses are open all day and all night. This is vital in terms of remaining as flexible as we possibly can.
An added future attraction will be the opening of the Intermodal railway service in Portsmouth, helping to transport fruit far quicker to ripening centres in the north of England.
In recent months, MMD has seen an increase in investment from ship owners in larger, refrigerated ships, with a trend towards larger on-deck container capacity. Recognising the fruit trade’s needs, MMD has made significant investment in mobile harbour cranes and container handling equipment, in order to provide for the new ships.
Talking to our customers, customs facilities are also a major concern for them. MMD is currently applying for AEO status, which will streamline and expedite facilities at the port for all fruit importers. AEO is now becoming a recognised way of handling customs, and is the way forward for the fruit- handling business.
Recognising the changing patterns of influence within the fruit trade, and providing flexible, streamlined services to accommodate them, is vital if a commercial port such as Portsmouth and its shipping firm MMD is going to retain its competitive advantage. If recent investment is anything to go by, the future’s looking a banana shade of bright!
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