The Ecuadorian banana industry is relieved that sense prevailed in last week's ban from Russia. Now they can focus on more pressing challenges such as the effect of the recent heavy rains on the banana plantations and 'unconventional' market demand, says Hugo Castro, sales manager of Hugo Fruit. "With the constant rains the usual high demand from all markets is lacking."
Maria Jose and Hugo Castro.
"A Russian delegation of phytosanitary inspectors are supposed to come to Ecuador. As an industry we are used to these types of inspections. Friends of mine are from some of the companies that were on the list from Russia. Initially there was chaos and nervousness, while companies continued to load normally and their gamble paid off. The cargo is on the way and safe," states Castro.
He says the unconventional global market demand is a bit strange. "In the markets we are facing an unconventional demand for this time of the year. Usually the first 20 weeks is the high season in Ecuador with high demand from everywhere. I don't feel the high demand from a commercial perspective. We are able to sell every banana, but there is no single market putting pressure on us or demanding a lot of bananas. Production is helping to maintain a reasonable price, there is more supply, the investment done are coming into reality, the fruit is heavier, there's more boxes per hectare for this period than last year."
He says the El Niño weather phenomenon that has brought drought and dry weather to other parts of South and Central America, has brought constant hard rain to Ecuador over the past three weeks. "Although it is not affecting production yet, and it can lead to flooding, causing the banana fields to be saturated. This leads to fruit that can be very sensitive when it travels. We will begin harvesting this 'rainy' fruit in the next two weeks. We have 13 weeks of inventory on hand for cases like these," explains Castro.
The focus of Hugo Fruit is to open new markets. "Our focus right now is on niche markets of Japan, South Korea, China, Poland and Germany, all of these markets require speciality packing, traceability and a lot of chemical controls with MRL's as our main focus right now."
Last year the company exported 40 containers of bananas per week on average. This year their aim is to reach 50 containers on average depending on the high season and low season demand, as well depending on how things go on the production side says Castro.
Other aspects, that Castro says they are watching carefully as an industry, are the effects of the shipping delays and movements given the huge volumes of fruit they export around the world. This has caused exporters and buyers to move to the less fancied spot rates. "There are other elements like the logistics of the supply chain, shipping costs due to the Red Sea and Panama Canal delays. Even in the Panama Canal, all the fruit destined for Russia had to go via Argentina, on the longer route, due to these delays and weather conditions. Before we could say we sign a yearly contract, nowadays every 10-15 days the prices are reviewed. It also affects the carton price. When all these come together, it is a big debate, not only is it something the exporters have to fight every week and month. It's a demand and supply price, in the end we will reach it. The world was moving faster than before. There's a lot of movement, nowadays, with the economic crises, interest rate increases, slower commercial activity etc. The big players in the industry are reducing their contacts, and deal with exports on a spot basis.
"The spot market is not the stable way to do business, because there's a lot of uncertainty. We are the only country that has a banana law. We compete with others from Central America, that constraints our way to adapt to the new banana reality. On the spot market there's no price and volume commitment," concludes Castro.
For more information:
Hugo Castro
Hugo Fruit
Tel: +593 999423369
Email: gerencia@hugofruit.com