They say a week is a very long time in football. But compared to the fluctuations and challenges in the banana market, dealing with an away defeat at Inter Milan or defending the personal misdemeanours of certain former England captains appears to be small fry.
In the last few weeks, banana importers have had to deal with fluctuating oil prices, shortages of supply, an increasingly tough exchange rate, dipping temperatures and slowing fruit growth.
Sales in the UK were hit by the weather in early 2010, with the cold and snow affecting independent retail, which makes up around 20 per cent of the market, as fruit was easily damaged and left unsold.
Typically cool temperatures for the time of year in the Caribbean and Central America - notably in Costa Rica - as well as the north coast of Colombia have been affecting supply, with cloud cover slowing fruit maturation and harvesting extending to 13 weeks after shooting in some cases.
With the production curve opposite further south, importers have turned to Ecuador - regularly in oversupply at the start of the year - for product. The scramble for fruit in the country actually led the price to shoot from $2-3 (£1.30-2.01) to $9-10 four weeks ago and, although the huge demand has fallen back a little, prices remain above average.
Supplies from the Dominican Republic were affected this quarter as the earthquake that hit Port-au-Prince, Haiti, drew Haitian workers back to their home country from the plantations of its Hispaniola neighbour. But it is likely that the new EC Regulation 669/2009, which came into force in January, will have a longer-term effect on the Dominican Republic, which, along with Thailand and Turkey is now subject to tests from the Foods Standards Agency (FSA) on imports, slowing up the process for highly perishable goods. One insider tells FPJ: “There are huge duplications with the system that exists and considerable additional costs. If you supply any of the major retailers in the UK, you will have to collate and supply residue-testing data, so it is simply duplication. Producers in the Dominican Republic are going through their government, but I feel more will be done through lobbying MPs and the FSA and working with the FPC.”
Elsewhere in the Caribbean, the eruption of a volcano in Montserrat has affected production emanating from Guadeloupe, with producers deciding to suspend operations for 12 weeks following the cascade of ash on 11 February. The volcanic dust has caused scarring and marking to the fruit and supplies to France and Spain could be down, putting pressure on sources to the UK. El Niño will remain the main concern for importers from Latin America, with all indications such as sea temperature suggesting it could well happen this year, following a quiet year for climatic intervention in 2009.
Oil prices will remain a concern for the Bunker Adjustment Factor, which allows for fluctuations on top of fixed shipping rates typically agreed annually, fluctuating considerably in the early months of 2010. The dollar continues to be unfavourable for UK imports, fluctuating at around $1.50 to the pound.
Despite this, there have been positive signs from the big players in the market of late. Most notably, Dole reported a fourth-quarter profit of $70 million (£44.8m), compared with $47m a year earlier, with the tightening of credit facilities and the sale of some assets. Chiquita has also narrowed its debt, reporting strong banana sales last week. Del Monte’s performance is understood to have improved ahead of reporting next week and Fyffes chairman David McCann said the company had “significant net cash resources” and would look to expand its operations in an interview in January.
The real impact of the World Trade Organisation deal on bananas, finally brokered in December, was always going to take some years to discern but delays in the ratification process will not have helped. According to DEFRA sources, the agreement still needs the signatures of some Latin American countries and to be ratified in the OJEU before the regulation and tariff level can come into force “not before early summer”.
Fairtrade Fortnight always signals an increase in coverage for bananas and now represents around 20-25 per cent of the UK market. But one source said: “We have seen an upturn in demand for Fairtrade, but a large proportion of the market is still due to Waitrose and Sainsbury’s having 100 per cent Fairtrade bananas. Unless another major retailer followers this, I don’t see the proportion increasing significantly.”
COLOMBIAN DEVELOPMENTS ADVANCE BANANA SECTOR
The Colombian banana industry has been working in a number of key areas to improve its offer in the last year. Juan Felipe Laverde, director of banana association Augura, gives an insight into the current state of play in the South American country.
Colombia has improved the quality of its products in the last year and has focused on gaining international certification. For now, 80 per cent of the area established for exports has a GlobalGAP certificate. Colombian producers are aware of the importance of reaching international standards, and are working together to produce the best bananas, following international requirements.
The banana industry is implementing more practices endorsed by international regulations and nowadays, Colombian bananas are allowed to be imported across Europe.
The UK now represents 13.6 per cent of Colombia’s destination markets, with 298,372 tonnes of bananas exported to the UK, up from 141,720t in 2008. Colombia exported 2.3 million tonnes of the product last year, an increase on 2008’s 1.8mt.
Colombian producers have made important investments in order to improve production techniques, among them the high-tech irrigation systems that have become common on most farms.
The sector suffered a strike for a month and a half in 2009 but the industry negotiated with the syndicate and made new deals for the next two years, until 2011. The labour force has improved and more than 18,000 employees are certified in labour competence.
The planted area for bananas is now at 44,531 hectares, down slightly from 44,901ha in 2008, according to the ministry of agriculture - however, the productivity has improved significantly. Production increased in the last year and the weather benefited production, as there was a lot of rain that helped growers to increase volumes.
The industry is developing important research that will help growers to produce better products and improve production techniques. One of the most important breakthroughs is in the field of disease resistance, especially for sigatoka. These developments improve the productivity and competitiveness of the sector.
The sector is also improving its logistics. In Colombia, the whole supply chain is owned by the banana business, so it does not depend on third parties and it tries to improve as much as it can. The most important innovation related to logistics is probably new technologies for transport, moving the product using refrigerated containers from the farms, so that the quality for the final consumer is better. The reduction of agro-chemicals is also proving a key area that producers are working on.
The new EU banana tariff, agreed following the World Trade Organisation negotiations, offers a great opportunity for Colombian producers that are aware of the huge opportunity they have to increase market share and develop the industry. Colombia has a big challenge - the business is doing well, but the market is very demanding. The country should consolidate its position and producers need to keep working on important certifications relating to labour, social and environmental laws.
COSTA RICA STRENGTHENS LINKS WITH EU
Europe has broken the 50 per cent threshold for Costa Rica’s banana intake for the first time in history, according to preliminary figures based on documents approved by Costa Rica’s Customs Office.
The EU remained the biggest importer of Costa Rican bananas for the second consecutive year, taking in more than half (53.5 per cent) of the country’s total banana exports.
Costa Rica exported 46.5 million boxes to the EU in 2009, compared with 51.3m boxes in 2008, representing a 9.4 per cent decrease or 4.8m boxes less than in 2008 - but still less than the 15.8 per cent overall decline in global exports.
For the last two years, poor weather conditions have affected the production performance of the Costa Rican banana sector. The first half of 2008 was marked by droughts, while the second half saw a considerable increase in rain, leading to severe floods in November 2008, which had serious consequences for banana production.
Last year was also irregular, with significant floods in February. Both incidents destroyed around 4,500 hectares (around 10 per cent of the total banana crop area), which were out of production until their rehabilitation.
Jorge Sauma, ceo of Corbana, told FPJ: “The performance of the UK market as a buyer and consumer of our fruit is satisfactory, as demonstrated by the fact that it has gained prominence in the imports of Costa Rican bananas. At the beginning of this decade, the UK was the sixth-most important destination for our bananas, absorbing five per cent of Costa Rica’s global banana exports and 11 per cent of exports to the EU. Currently, the UK is the fourth-largest destination for Costa Rican bananas (following the US, Belgium and Italy), representing eight per cent of total exports and 15 per cent of the total volume sent to the EU. Total Costa Rican banana exports to the UK reached 6.9m boxes in 2009.”
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