Pricing pressure on bananas ahead

Supplies of bananas are going up. “It’s the summer months so supply is higher than it has been. It’s slightly higher than other years as well,” says Andy Thomas-Stivalet of Kavidac Produce.

Right now bananas are coming from Ecuador, Costa Rica, Honduras, Guatemala and Mexico, all regions which have slightly more production. “It’s been an El Nino year so there’s been more rain and more rain usually means more heat and more humidity so that allows the plants to produce more,” says Thomas-Stivalet, adding this is a change from the past six to eight months where production numbers had been lower.

At the same time, the demand for bananas is strong. However, the market price for bananas is low given there is more fruit available. “Even with the increase in demand, what is being brought into the country right now is higher than what the market price can sustain,” he says.

More bananas to the U.S. likely
In contracts though, many retailers are heading into contract season and change is ahead for banana supplies. “A lot of producers selling to Europe are going to be forced to bring their fruit to the U.S. or other markets in Asia given the limit testing that the European Union is introducing for bananas,” he says. “It’s getting more and more strict and I think we’ll see a large amount of supply being offered to retailers in the U.S.”

That’s likely going to put downward pressure on pricing. However, growers and shippers also continue to contend with cost increases. “We thought that it was going to be an advantageous year for growers where we could go to retailers and ask for similar pricing to last year. However now banana producers in Central America are facing a strong increase in the cost of labor and more importantly a much weaker dollar,” he says. “That’s really put a dent in the ability of many producing countries to be able to make selling in the U.S. economically viable. The devaluation of the dollar, in most banana-producing countries, represents a 10-15 percent reduction in income. Many producers, who already have razor-thin margins, are priced out of the market at these exchange rates.”

However, some notable banana-producing countries such as Honduras and Guatemala, have their currencies pegged to the U.S. dollar. “They’re not experiencing the same revaluations of their currencies with respect to the dollar that other countries are and they’re better poised to continue offering bananas at the same prices,” adds Thomas-Stivalet.

For more information:
Andy Thomas-Stivalet
Kadivac Produce
Tel: (+52) 962-625-3303

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