Supply issues keep Polish banana prices up

2016 hasbeen an extraordinary year for the banana market in Poland. The lack ofproduction in Central America has made the banana prices very regular,throughout both the winter and summer seasons. Prices typically fall afterEaster, but this has not happened this year with the increased pressure forproducers to supply, resulting in a price increase.

"I visited our partners in Ecuador two weeks ago and witnessed avery comfortable situation for local banana producers who have been able to sellbananas for prices above the set government prices, also in the summer time. Prices did notrise a lot during the winter season, but they also didn't go down once thesummer season arrived, offering steady levels in a usually difficult period.It is a good signal for the industry and looks like a promising year forproducers." said Bartosz Szatkowski, General Manager of Polish bananaimporter Quiza.

El Nino has had a big influence on production areas in Colombia and CostaRica, leaving Ecuador to cover the European banana supply with a production decrease of 30%. Many in the industry have been caught off guard, especially in thespot market. European importers who did not contract enough fruit to cover thesummer sales are now finding themselves under pressure to cover supply.

"Planning summer banana sales in Europe is always up to speculation. Mostwouldn't usually think of planning large banana import volumes during thesummer season, but those who did are now finding themselves in a goodsituation. Many companies are searching for volume, even on the back ofsummer." said Szatkowski.

Banana sales have remained strong, despite the increased competition of summer fruitsuch as strawberries and stonefruit. The cooler weather has also had someinfluence on sales.

However, Szatkowski said that the structure of today's market, dominated by concentratedretail, has brought more security for distributors, compared to the past whenmost trade was done with wholesalers and traditional retailers.

"Most distributors don't feel the seasons like they used to, due to steady orders from supermarkets. They only feel the impact of weather conditions,once it has reached extremes. This year has been good for long term strategiesbecause the market is moving steadily and one can observe it very well."said Szatkowski.

Exchange rate and Brexit
With Poland still not in the Eurozone, recent events, such as last Friday’s EUreferendum result in Great Britain, can be potentially catastrophic for bananaimporters and traders who are fully dependent on currency exchange rates.

"We never know what is going to happen with the Polish Zloty. What happenedlast Friday in Great Britain was really catastrophic for Polish bananaimporters who must exchange local currency to USD. We have no control over thecurrency, and predicting the behavior of financial markets is pure gambling. Insituations where there are such strong fluctuations in the currency exchangerates, it makes any cost structure calculations, financial analysis or preplanningalmost impossible. We may calculate ourfixed costs establishing certain selling price levels, counting on gaining amargin but when payment time comes we are fully dependent on financial markets’behavior. Today a banana importer and trader must be also a currency analyst. Hedgingcurrency transactions can be more important than actual fruit trade.

Unfortunately, asking suppliers to wait a week to make payments until the situation improves is not an option." concluded Szatkowski.