Banana prices not expected to peak at Chinese New Year

The Chinese Spring Festival takes place between the 7th and the 13th of February. Usually, demand for fruit rises during this National Holiday week. However, Owen Zhang, banana import manager at Goodfarmer, does not expect banana prices to rise sharply this week. “'The economic situation is currently unstable. Many migrant workers already turned home due to lack of jobs in big cities. This will bring urban consumption down. Most dealers find it hard to make correct assumptions about demand during the Spring Festival, which can lead to oversupply, pushing prices down. The weather has not been positive for the industry either. The extreme cold of the last week, which is expected to last, makes consumers stay at home. This makes it extra difficult to predict how sales will go.

Goodfarmer is one the biggest banana importers in China. In the long run, Owen is convinced that demand for bananas in China will grow. “China's population is ageing. Bananas are a soft fruit, well liked by older people. Healthy eating trends are becoming more popular and bananas fit well in these diets. Finally, bananas, different to other seasonal fruits, have become available all year around on the market.”

Owen forecasts three forces to shape the banana import market in 2016: domestic and international overproduction, weak alternative export markets including the Middle East, and the downswing of the Chinese economy, including the devaluation of the Yuan. Owen: “The Chinese market has started to suffer from domestic oversupply. 2016 is estimated to be a peak year in terms of output for local growers. In 2014, the banana market was strong and prices were high. This increased domestic production and banana output ballooned in 2015. If nothing extreme happens regarding weather conditions or other natural calamities, output will even be higher in 2016. In addition, banana production in Yunnan, Laos and Myanmar has gone up. Currently, conservative estimates show that, each day, 25,000 tons bananas are arriving by truck to China. This number is far higher than it ever was before. If demand does not pick up, prices could end up below last year's prices.”

“Secondly, in 2015, some of China's banana importers started to loose money because the market was coming down. They pushed this effect back to the growers. China, but also other international buyers such as the Middle East, have been buying at a lower price from the Philippines. As a reaction, banana growers tried to reduce the (management) costs of their farms. Most of the bananas from the Philippines are sent to China, and we expect this year's quality to be lower than in previous seasons. Bananas from the Philippines might struggle to meet high-end market demands, but could do well in the middle to low-end markets.”

The devaluation of the Yuan is the third factor impacting China's banana imports. “In 2015, the Yuan lost 5% of her value and China's GDP growth was the lowest it has been in 25 years. The national economy is entering a restructuring phase and the Yuan will continue to face downwardspressure. This will affect the costs of imported goods and will make China a less competitive buyer.”

For more information:

Owen Zhang
Goodfarmer
www.goodfarmer.com
Contact number: +86 151 6540 3388+86 151 6540 3388
Email: owen@goodfarmer.com