Australia: banana prices likely to start downward bend

Banana prices are expected to begin falling in coming weeks as the north Queensland crop starts to ripen and more fruit is brought to market.
For consumers who have been paying up to $15 a kilogram after supplies of the fruit were hit by Cyclone Larry, the fall in price will a relief.

And it could help to contain inflation, which has risen above the Reserve Bank's 2-3 per cent comfort zone, partly driven by the record banana prices. The spike strengthened the arguments for last week's 25 basis point interest rate rise, hurting households already facing a more expensive fruit bowl.

In March, the category-five Larry decimated the north Queensland banana industry, which produces about 90 per cent of the Australian crop, and the price of the fruit rocketed. Bananas, which used to cost about $3/kg, are now selling for about five times as much in most supermarkets. The price of the fruit and rising fuel costs were blamed for last month's official rise in interest rates.

But AMP Capital Investors chief economist Shane Oliver said yesterday that consumers had already felt the bulk of the pain. "Things should start to get better but it will be six months or so until we are back to where we were before the cyclone went through," he said. But for north Queensland banana farmer Robert Mayers, the return to production will not guarantee profits.

Having lost his entire crop when Cyclone Larry tore through the region, Mr Mayers fears the price of bananas will plummet when growers return to full production. "I'm a farmer so I am the eternal optimist, but I'm not really confident I will get $14 a carton in November," he said. "I need $14 a carton to cover costs such as packaging, boxing, fertiliser, wages, everything." Mr Mayers owns a 22ha banana plantation at Miriwinni, just north of Innisfail.

He expects banana prices to drop to less than $10 a carton for growers by November, giving consumers much-needed relief from the record high prices, but not necessarily benefiting the farmers. To overcome a price crash later this year, the banana farmers will stagger the timing of the release of their crops.

While the move has angered consumer groups and come to the attention of the Australian Competition and Consumer Commission, growers say it is necessary to prevent an exodus of farmers from the industry and guarantee a consistent supply to consumers. "If we let it all come in, we'll have fruit for the next four months and then be back in the situation we have now," Mr Mayers said. "If we don't stagger it, we won't have the production to carry us through and take us off that cycle."

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