As the banana industry continues to see steady supplies being produced worldwide, banana growers producing those volumes are increasingly being challenged by more certification demands and escalating costs.
“The main problem today with the banana world is not production. It’s logistics,” says Juan Jose Pons, the coordinator of the Ecuadorian Banana Cluster which represents banana growers.
As it is for growers of many commodities, the logistics issues are layered starting with accessing containers. Pons notes that approximately 80 percent of the world’s production of containers is in China and COVID-19 has affected the number of containers being produced in a year. It’s also affected the manufacturing of ocean vessels. “So there’s an aging fleet which means there’s less supply of conventional vessels,” he says.
So the vessels that are available are, in turn, charging inflated rates. “Right now it’s $10,000-$15,000 per container depending on which route you’re working,” says Pons.
The costs of carton
And then there’s packaging. “Fruit is exported in cartons made out of paper that needs to be imported to manufacture. But the cost of importing paper has increased and the paper costs itself have also increased because of logistics and COVID,” says Pons. For example, a carton box of bananas generally had an average price of $1.40-$1.45 and that has gone up to $2.25 for that same box.
And then there are certifications required to import bananas which are different worldwide--anything from FDA standards to green policies and more. “This generates enormous demand on the production of products being produced in the tropical world and the demand for these certifications make it more and more difficult to be accepted into certain markets,” he says.
However--isn’t all of this something growers and shippers of many commodities in the produce world are dealing with? Yes says Pons. But the structure of the way bananas are sold is what is severely impacting banana growers worldwide. “Bananas are used as a promotion for retailers--the lower price of bananas attracts consumers and is used to sell them other products so the supermarket as a whole makes money. It’s based on the promotion of bananas,” says Pons.
With the cost of bananas remaining lower and relatively stagnant, Pons says the pressure of all of the logistics, packaging, certifications and more costs are being passed down to growers and what’s needed is shared responsibility of those costs between all agents in the supply chain.
“It has a social cost on producers, but particularly small producers,” he notes. “In the value chain of producers, the financial squeeze is being pushed down the line. You don’t have the power to squeeze the shipping lines or the paper manufacturer. So who is getting squeezed? The producer. And this affects the standard of living of producers and creates a major problem, particularly in the economies that demand transportation to get products to market.”
Making consumers aware
While increasing consumers’ awareness around the growing costs involved in producing bananas and how that could affect in-store pricing is needed, Pons is imploring retailers to take more responsibility for the costs of bananas. “There’s a lot of hypocrisy,” he says. “On one side the corporate social responsibility department promoting social responsibility and on the other side you have the purchasing department squeezing the hell out of you for the prices and not taking the cost for what it is.”
In fact, Pons says in the past decade, banana prices in the European Union--the most regulated market with certifications--have not increased and have actually gone down. That said, in December, German grocery chain Aldi agreed to increase the price of bananas by €0.09 per kg. “However, cartons themselves have increased by €0.70. Freight from Ecuador to Rotterdam for example which used to be €2,500 right now is € 5,000 to €6,000,” he says. It is just not enough he adds.
So where to from here? While the Ecuadorian Bananas Cluster continues to try and grow awareness around the issue, Ecuadorian producers continue to work on productivity, compliances and maintaining good agricultural practices.
There are also opportunities of other sorts that could potentially help the issue. With banana consumption being most popular with the younger and older end of the demographics, markets such as the EU, USA, Japan and Korea are mature markets for bananas. “However due to COVID and the growing interest in produce, that could create higher demand on a product like bananas,” says Pons. And also demand for banana by-products such as banana leaves for example.
“And there’s also enormous potential in emerging markets like Northern Africa, the Arab countries and China. “These are the markets of the future for the banana industry,” says Pons.
For more information:
Juan José Pons
Ecuadorian Banana Cluster
[email protected]
https://www.clusterbananerodelecuador.org/