Banana production is heading into a perfect storm around costs.
On supplies of bananas, the industry is heading into an overproduction window that’s seen annually at this time of year. “This year it started in week 31 and will end in week 43,” says Andy Thomas-Stivalet of Kadivac Produce. “Though the increased supplies might be lower this year because we haven’t seen the same price drops that we saw last year. For example, usually the market price per box is around $7-8 in the Gulf in late May into June and we’re still at $10.”
Multiple regions are in production with bananas and all of them have approximately 10 percent more volume.
Supplies are currently coming from a number of growing regions including Mexico, Guatemala, Honduras, Colombia and Ecuador. “Everybody has 10 percent more volume than what they usually have,” says Thomas-Stivalet.
However demand is softer this year. “We don’t see demand moving the way it should. Usually demand picks up in this time period but it’s extremely weak and I think we’re in for a rough end of the year,” says Thomas-Stivalet, noting that when school starts up again, demand for bananas should increase.
All costs rising
And then there’s inflation. “I’ve never seen inflation like this happen,” he says. “The price increases we haven’t seen in the past 20 years we’ve seen in the past three months.” The price increases include an 18 percent increase in carton, 35 percent in glue, 14 percent in corner board, 12 percent for plastic inside the boxes, 14 percent on the plastic bags protecting banana stems, a five cent increase/box for pallets, a 14 cent increase per box for fertilizer, a one cent increase/box for plane fuel and more. “We’re looking at a 48 cent increase per box all within the last three months internationally. These are crazy numbers. Ten cents makes or breaks a year for producers,” adds Thomas-Stivalet.
Thomas-Stivalet says inflation has led to a 48 cent increase per box of bananas, all within the last three months internationally.
What’s even more worrying is that Thomas-Stivalet doesn’t see the increases stopping--some materials ordered for banana production are getting canceled and suppliers are coming back with new rates. “Prices are changing every week. It can be up to 10 percent from one week to the next and I don’t know where it ends,” he says, noting that bananas are particularly affected by price increases given they’re the cheapest fruit per pound.
So what now? Thomas-Stivalet says it’s likely material surcharges will be passed along to customers though that may not happen until week 43 when overproduction eases. “And I’m more worried about what happens three months from now," he says. "If what happened in the last three months happens from here to the end of the year, that would be the worst scenario."