The banana market is seeing some unusual activity currently.
Andy Thomas-Stivalet of Kadivac Produce notes that this is the time period where supplies of bananas usually increase. “But supplies are relatively flat as they’ve been through the beginning of the year and that’s a bit concerning,” he says. “While I expect supplies to start picking up in the next few weeks, that’s not what I’m hearing from our suppliers. Things are relatively stable. But they should theoretically be going up.”
Supplies overall are coming from Ecuador, Guatemala and Mexico.
At the same time, demand for bananas also usually increases after Memorial Day. “But customers have cut down on orders slightly,” says Thomas-Stivalet. “Bananas are a fairly stable commodity. While this drop in orders isn’t huge--maybe five to 10 percent--it’s not typical.”
However, demand is returning on foodservice. “The markets we’re in we do see that the foodservice accounts have recuperated. There is movement but we haven’t seen a drop yet in the retail side,” adds Thomas-Stivalet.
As for pricing, multiple variables could impact pricing sooner than later. “Right now with demand slumping slightly and supplies not where they should be, whatever hits first will dictate what happens with price,” says Thomas-Stivalet. “If supplies come up within the next few weeks, then prices will drop.”
Force majeure factor
Then on the spot market, force majeure clauses could also play a role. Thomas-Stivalet notes if the clauses are removed within the next few weeks to a month, that may also impact pricing and the negotiating of banana contracts within larger produce companies that are taking place between now and August.
Likely being factored into those contract negotiations are increasing production costs. “We see a lot of price increases on everything related to producing bananas--so plastic, cartons, pallets. Even the chemical companies whose glue is used to glue the boxes together has raised prices a significant amount,” says Thomas-Stivalet. “I think it’s inflation related. It’s the only thing that explains everything moving at the same time, internationally too.”
And then there’s also shipping costs. Thomas-Stivalet estimates shipping costs have increased by some 30 percent. “Overall we’re in a weird situation where a lot of things are going to affect the price and it’s just a matter of timing to see what it is that really affects it,” he says. “I think they're dropping the force majeures, the freight costs are going to get passed onto consumers and then we’ll see what happens with the supply.”