The beginning of the last quarter in July brought a price uplift and short-lived hope for the banana category, which has seen value decline year on year by 1.4 per cent.
The market is valued at £577 million and as industry sources have consistently argued, the declining values are having no upward effect on volume, with sales in fact falling by 1.8 per cent, according to Kantar Worldpanel data for the 12 months to 2 September.
Summer is traditionally a time of slowdown for banana sales as the fruit competes for consumers’ favour with summer lines such as melons, berries and stonefruit, but this season demand has been surprisingly healthy and a slowdown is only now starting to bite.
One supplier said: “Weather issues earlier in the year in major source countries such as Ecuador, Colombia and Costa Rica have had an impact on availability, so all sources have been tight.”
In Costa Rica, producers have been contending with dry conditions, which has had an impact on output and national banana organisation Corbana calculates that incomes will be down $2-3m this year as a result. Land given over to banana production has declined over the past 10 years by some 12 per cent and although Corbana expects a slight recovery to the tune of five to 10 per cent, according to reports in the Costa Rican press, growth in the banana sector in the Central American country is more likely to come from increased productivity and yields. Speaking to El Financiero, Corbana president Jorge Sauma said the sector was trying to raise yield by 100 boxes a hectare to 2,600.
Costa Rica is also looking to broaden its reach in terms of export markets; forays into the Russian market have proved profitable and assessment of the opportunity offered by the Middle East is ongoing, while Asian markets do not look quite so tempting given the unfavourable prices achieved so far.
Meanwhile, output from Ecuador, the world’s largest exporter, has been exceptionally affected as high levels of rainfall earlier in the year have led to major problems with the fungal black sigatoka infection. Official figures indicate that some 10m boxes have been knocked off output for the first half of the year and the forecast is for a similar decline in the second half. The national government in the South American country has had to intervene in order to fund a spraying programme to help small-scale producers combat the disease.
“What has been happening in Ecuador is the number-one reason why supply has tightened and the market has stood up well,” said one wholesale market supplier. “Prices have held at around the £13 mark right through the summer compared to £6-10 a box last year. It is only in the past week that we have seen some resistance in pricing, so it will be interesting to see where things go from here.”
None of this of course has had any impact whatsoever on supermarket pricing in the UK. Apart from the blip in July when prices rose briefly to 79p a kilo in a move led by Tesco and followed by Sainsbury’s and Morrisons for up to a month, fruit has been consistently pegged once again at 68p. This is in stark contrast to what is going on in continental Europe, where the major multiples are selling at €1.40 a kilo and even the discounters at €0.99 are outstripping the UK high street price, which equates to just €0.85.
All the UK’s major multiples are steadfast in their assurances that they are taking the hit on pricing and that it doesn’t affect growers, but the trade continues to argue that selling the product at a loss is hurting the sector long term as retailers keep prices down.
In other developments, Costa Rica is leading a consultation process to try to re-establish the Union of Banana Exporting Countries (UPEB) set up in the 1970s. The original members of the organisation are Guatemala, Honduras, Nicaragua, Costa Rica, Panama, Colombia and Venezuela, and Ecuador is also being invited to join.
GHANA RIPE FOR SOCIAL INVESTMENT
Institutional democracy and brisk economic growth can deliver an expansion of the west African country’s banana industry to the benefit of many. Tobias Gourlay reports
Back in July last year the World Bank elevated Ghana from its low-income classification to lower middle-income status. Oil, which was discovered off the coast in 2007 and came on stream in 2010, is a driver, along with gas and agriculture, but a stable democracy helps keep the country on the right track too.
At the end of 2008 John Atta Mills won a presidential election by less than 50,000 votes, but the result was respected and Mills governed peacefully until his sudden death in July. His vice-president has taken charge until the end of the four-year cycle in December and Hanna Tetteh, minister of trade and industry, is confident the strength of the state’s institutions will ensure another transparent electoral process and the “result will reflect the will of the people”.
Tetteh says there is a long-term government plan to direct oil revenues towards “productive infrastructure investments, so that people can do business in Ghana and locate in Ghana, and be competitive. At the end of the day, nobody’s going to come and set up if they don’t think they’re going to make money.”
Although Ghana’s banana business is young, Compagnie Fruitière, the France-based company that produces more fruit in Africa, the Caribbean and the Pacific than anyone else, arrived almost a decade ago. Its subsidiary, Golden Exotics, has increased exports from 34,000 tonnes in 2007 to 60,000 tonnes in 2012. It accounts for around 90 per cent of the national export total and is now working to raise its volumes of Fairtrade fruit.
An historical connection makes Britain an accessible destination for Ghana’s exports. Dole Fresh UK, Compagnie Fruitière’s UK division, has recognised this opportunity and aims to increase the presence of Ghanaian bananas in the UK. With retailers such as Sainsbury’s, Waitrose and The Co-op pledged to sell only Fairtrade bananas, Golden Exotics’ idea is to boost its market share in Europe while increasing the money it generates for social programmes at home. “This year we expect to get around $500,000; next year we expect $5m,” says corporate affairs manager George Kporye.
Tetteh believes the Fairtrade premium paid by European consumers can improve local communities, so long as they are consulted about what they need. Fairtrade investment from other industries has focused on education, and health and sanitation. “All over the country, education is seen as the major investment that allows social mobility.”
Compagnie Fruitière also plans to establish ‘nucleus plantations’ around which smallholders – local farmers typically operating on up to 10ha – can cluster, gaining technical support. “Banana production is intensive,” says vice-president Pierre Arnaud. “With more than 2,000 plants per hectare, farming techniques can be difficult for small growers.” The development of a hub-and-spoke network should bring new transport efficiencies too.
“In this way,” concludes Tetteh, “you are not just building a large, multinational plantation. You are expanding economic opportunity across the whole community: people can then think not just about being employees of Golden Exotic, but being partners of Golden Exotic.”
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