“The banana market is expecting a perfect storm”
“It’s a complex situation in the banana market all over the world. Whereas, at this moment prices are extremely high. Many producing countries have only low volumes of banana available, which pushes the prices to the extreme. However, the statistics of production estimates in all producing countries are going to move relatively the same way, if the weather conditions are stable. Meaning to say, from March/April on the bigger volumes are expected in all producing regions. Peak volumes will come from South America, Central America and the Philippines, which are in an upward production cycle. If this is really happening, we can expect a huge oversupply in the worldwide market”, explains Hugo Castro, general manager from Ginafruit, Ecuador.
Hugo explains that an important factor in the banana production is the weather. “It’s still a product from nature, so it’s unsure if production will change because of weather circumstances. If it will go as expected, too much fruit will be available on the world market. At the same time, demand slows down in Europe and Russia because of the warm weather. During summer months, consumption of banana tends to go down. This means we can expect a perfect storm. ”
“The production curve used to be totally different, but it has changed in only 2 to 3 years’ time. Ecuador used to be the king of the peak season in terms of available volumes. We had our biggest volumes when demand was high, which is around this time of the year till week 20 approximately. The weather conditions have changed, so, cold weather and the rain cycle have been shifting over the last few years. This means our peak of production is no longer during the peak of demand, but it’s the opposite”, continues Hugo.
According to the producer and exporter currently the prices are extremely high. These prices are not driven by a high demand, but mainly because of the low supply. “Producers want to benefit from these high prices by selling their fruit on the SPOT market. Which makes it more difficult to set up programmes for the rest of the year. We hope that soon they will understand that it’s impossible to have these prices the whole year. The most sustainable way of working in the banana business is to set up agreements and programmes, given that it is a fruit that is produced every week, all year long, non-stop and hence needs to be sold regularly, not only on the high season.”
Trade agreements and opening new markets will help to dispose of the extra fruit. “Exporting to new markets such as Iran, Iraq, Qatar, Oman, Algeria, and the Middle East will help. Moreover, we recently reached an agreement with a German supermarket. This is a great success for us, because supermarkets don´t easily switch from supplier. As well, the South American market is huge, some people just don´t see the potential. Opening the Brazilian market for Ecuadorian bananas is a great breakthrough. Nonetheless, I expect them to become a seasonal importer as they also have their own banana production.”
Hugo concludes that the big question will be at what price the bananas are going to be sold during the high production peak. “If all producing areas come out with their big volumes at the same time, prices will fall drastically.”
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Publication date: 1/17/2018
Author: Kelly den Herder
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