During the first five months of this year, Ecuadorian banana exports to China increased by up to 540.77%. This phenomenon continues as Ecuadorian bananas have been gaining momentum in the Chinese market.
The recent typhoons that have greatly affected several regions of China, such as Guangdong and Hainan, where most of the Chinese local bananas are produced, have led to a rapid increase in the price of the local fruit. This, in turn, has made the imported bananas be more favourable for Chinese consumers. But is the drop in Chinese production the only reason behind the newfound popularity of the Ecuadorian bananas?
Zuxiang Xia, former deputy director of Chiquita's Office in China who has had more than two decades of experience in the Chinese banana market, spoke with Fresh Fruit Portal about the recent banana-mania.
According to Xia, the price of the local banana has been peaking since March, as a result of the adverse weather conditions and the subsequent fall in the volume of production in Hainan and Yunnan, two major banana producing regions in China. In addition, Philippine's banana production, which the Chinese import a lot, was also affected by typhoons. All these factors contributed to increased imports of bananas from Ecuador.
Xia said that there had also been a decline in imports of Philippine banana because most of the Chinese importers of this fruit were private.
"The Philippines exports a stable amount of bananas to Korea, Japan and the Middle East every year. This is because importers in these countries have signed long-term agreements with Filipino exporters," he stated.
"However, this is not the case of Chinese private importers, who have only signed short term agreements. Thus, there is a degree of volatility in the banana trade between China and the Philippines," he added.
Xia added that short-term arrangements induced an increased risk for private importers.
"As soon as the bananas come ashore, they can only remain refrigerated for up to one month. Hence, the order and price of Philippine bananas in China is established on a weekly basis, which also introduces fluctuations in the market," he said.
According to Xia, even though shipping the bananas from Ecuador to China takes between thirty to forty days, the competitive prices for Ecuadorian bananas, versus those of the Philippines, has led many importers to prefer them.
In addition, Xia said that the South American bananas in general had a high quality and most of them have obtained permission to be imported by the Chinese authorities. However, only Ecuadorian bananas, and to some extent the ones from Costa Rica, maintain a visible presence in China.
Regarding prices, Xia said he expected these would drop both for domestic bananas and imported ones because the new season begins in late October, when local bananas from Canton and Hainan reach the market.
"At the end of the day, the fruit and vegetables market continues to be a game of supply and demand," he said.
The Changing Face of the Chinese banana import market
Xia said he considered banana imports complemented the national supply as the Chinese banana had two decades of history. Among the imported bananas, the Ecuadorian fruit complements the Philippine bananas. Despite the popularity that the Ecuadorian bananas have won in recent months, the volume of imports is still dependent on the production and price of the Philippine fruit, which still dominates the Chinese banana import market.
In previous years, the Chinese banana import market was dominated by three large companies: Chiquita, Dole and Del Monte, and there was virtually no room for smaller players in the industry.
"Every deal we made was for more than 200,000 boxes," Xia said.
However, in recent years Chiquita and Del Monte have reduced their presence in China, which resulted in the emergence of small private importers.
In 2010, Chiquita decided to leave the Chinese market, mainly because of the volatility in prices of imported bananas and the lack of established rules in the market.
"The price of imported bananas depended on national bananas, which means it could be between 0.5 RMB and 1.5 RMB per kilo. As private imports increased in this small segment of the market, price competition has become extremely intense," he said.
Del Monte was the first international brand to enter the Chinese market in the early 1990s. They started selling bananas to the China Fruit Company, until five years later, when they decided to handle all the business themselves.
Del Monte was known among Chinese consumers as the red lantern because their logo resembled one. Chiquita, in turn, ventured into the Chinese market in 1997, and Dole in 1999, which fundamentally changed the Chinese banana market.
Dole: introducing maturation techniques into China
According to Xia, the entrance of the international giant, Dole, to China went beyond changing the market structure. Dole brought important ripening techniques for the banana industry.
"Del Monte and Chiquita were traders, which means that they were only responsible for shipping the un-ripened bananas to China and had no role in the subsequent processing step. Dole was different, as it was also very involved in the ripening of bananas and distribution to various final ports. First, they built a ripening room near the Port of Shanghai in Waigaoqiao, then, several more in Xiamen and other port cities. This is why Dole is still in the game nowadays," said Xia.
Dole leads the sector with the largest market share and is followed by the Sumitomo Group from Japan. The Sumitomo Group has its office in Nanjing, China, and is the owner of the Gracio banana brand and has its own large-scaled banana plantation in the Philippines.
Currently, nearly all banana imports to China pass through the port of Dalian or through the port of Shanghai.
"Dalian is a trading port, which means that the green unripe bananas are sent to Dalian before they are distributed to several processing centres in northeast China. Shanghai is quite different in this aspect, as it is also a consumption market," said Xia.
"The banana plantation sites in China are located in a few regions, but some of these places proved to be incompatible. The regions frequented by typhoons are definitely not the places where banana plantations should be grown. Some producers, however, chose to grow their banana crops there displaying a lack of care in planning. Besides that, we still have much room for progress in research and product promotion. We need to invest more in building research capacity," he said.
Source: Fresh Fruit Portal