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Ecuador: Complications for banana producers

Things are getting complicated for the banana industry. The new price, $6.55 dollars, proposed by a group of exporters and producers and decreed by the government, shakes the most important market of the country, Russia, and one emergent had rebounded, China.

Some companies affiliated to the Association of Production, Marketing and Export of Bananas (Acorbanec) began receiving alerts from their importers: they are not willing to pay more for the Ecuadorian banana, which excludes it from the competition.

The sustained devaluations and the economic crisis in Russia, a nation that buys 25% of Ecuador's exportable supply, have led them to decrease banana imports by 300,000 boxes per week. That fruit is diverted to Poland and other Eastern European countries, the Mediterranean and Turkey. Hence, the spot price in Ecuador is $4 dollars, said Richard Salazar, spokesman for the group.

Russian importers pay their Ecuadorian suppliers in dollars, but most of them give their Russian customers, including supermarkets, credit for 15-30 days in rubles, to facilitate marketing. "When customers pay importers in rubles, they have losses as the currency has lost purchasing power." Domestic exporters are being paid late because Russian buyers rely on banks and exchange houses to get dollars and send them to Ecuador, especially now, when there are exchange controls in Russia, he said.

Chinese buyers are beginning to stop new banana negotiations in cash, as they are analysing what happened in Russia. They are even asking to negotiate contracts with lower prices because, according to a report from Acorbanec, there would be an oversupply of Ecuadorian fruit.

China's banana purchases in 2014 grew impressively as a result of the political problems it has with its traditional supplier, the Philippines. Ecuador was exporting 300 containers a week, but the negotiations with nearly closed contract prices for 2015 are nearly ending, especially when there is more Philippine fruit entering the market. The new ministerial agreement eliminates the 208 CH box and makes the product $1.10 dollars more expensive.

On October 31, Acorbanec asked Javier Ponce, Minister of Agriculture, to maintain the minimum support price ($6) so they wouldn't lose the markets they had earned, to high priced bananas. Instead he called the analysis of compensatory measures for farmers.

On the other hand, Minister Ponce welcomed the agreement that the advisory committee arrived at; "We believe this new price does not affect competitiveness. It is a truly historic event as it is the first time representatives of producers and exporters have reached an agreement on the negotiating table and that is what we are ratifying with our decree. It's obvious that some areas won't agree with this decision, because that is perfectly normal," said the Minister.

The Minister said he was optimistic and that he expected Ecuador would export 300 million boxes in 2015, as they had exported 250 million boxes in 2014.

The minister also said that, starting this week, they will be in discussions with these two sectors, so that the new price for a box of bananas is met.

He also noted that they had the best expectations for the global market, except for Russia, which has had drawbacks in recent weeks, but that things were gradually getting better in that country.

 

 

Source: Expreso


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