Documentation prepared for the second conference of the World Banana Forum, held in February 2012, revealed radically different developments in the EU and US banana markets since the initiation of reforms of the EU banana regime. A paper prepared by the French agricultural research centre CIRAD noted that in the US, the spot import price increased by 5% in 2011 to set an all-time record level of US$16.50 per box. This resulted in a doubling of the spot price from 2004 to 2011. US consumption of bananas also increased. This saw major exporters favouring supplying the US market, since this contrasted sharply with the situation on the EU market, where prices were reported as having been ‘in freefall’, with the EU market responding with far greater sensitivity to world banana market developments.

With periodic supply disruptions since 2006 linked to weather events and disease outbreaks, CIRAD notes that world banana supply since then ‘has never been normal’. It reports EU prices as little changed in 2011 compared to 2010, which in turn was consistent with average price levels over 2007–10. In real terms, however, this has meant a price decline of 0.7% per annum in the euro value of bananas sold on the EU market. Import prices recorded in France have fallen even more dramatically in real terms, declining by an estimated 7

The CIRAD analysis also sounds a cautious note for ACP strategies aimed at targeting fair-trade and organic market components, noting that the rapid increase in supplies of fair-trade/organic bananas could well weigh down the selling price of these products. The emergence of private labels and certification schemes is likely to further compound the challenges faced in fair-trade market components. In this context, a tendency towards price convergence between organic and conventional bananas is held to already be underway. This is seen as posing particular problems in the Caribbean, where the spread of Black Sigatoka disease is raising costs and reducing production of organic bananas.

These trends on the EU market could well be compounded by the ‘revolution’ taking place in the shipping of bananas, with dedicated refrigerated containers, or ‘reefers’, replacing traditional container vessels (see Agritrade article ‘Increased use of refrigerated containers opens alternate supply opportunities for banana exporters, forthcoming, 2012). This is allowing major retailers to directly import bananas, circumventing the traditional supply chains. Symptomatic of this was the report in November 2011 of the start of Panamanian exports of bananas directly to the Spanish supermarket Mercadona. Although the volumes are small at present, Mercadona purchases 30 million kg of bananas and 10 million kg of plantains a year.% in constant terms since 2006.

This scenario needs to be seen against the background of increasing production costs, with the index rising from 100 in 2006 to 126 in 2011. As a consequence, suppliers to the EU market ‘are squeezed between falling returns and increasing production costs’. Currency movements further complicate the situation.

According to the CIRAD analysis, the decrease in the real value of banana prices compared to production costs has fallen particularly heavily on West African banana producers whose currencies are tied to the euro and for which the EU is the ‘sole export destination’.

Looking forward, CIRAD projects the impact of the ongoing process of the reduction of banana tariffs charged on Latin American bananas in the context of exchange rate volatility. Analysing production costs in Ecuador and Africa, CIRAD notes: ‘with the customs tariff applied in 2012 (€136 per tonne) and with an exchange rate of USD1.3 to 1.4 to €1, the competitiveness levels are equivalent in the two zones’. Tariff reductions thus significantly undermine the competitive position of African suppliers, as does any increase in the value of the euro against the US dollar.

In this context it should be borne in mind that from 2012 to 2017, the import tariff on Latin American bananas is to decline from €136/tonne to €114/tonne, with a further drop after 2020 to €75 /tonne for suppliers whose governments have concluded FTA agreements with the EU with these types of provision included.

CIRAD argues that EU Banana Accompanying Measures (BAM) programme funding should be ‘devoted entirely to improving competitiveness and increasing value-added’.

The CIRAD analysis also sounds a cautious note for ACP strategies aimed at targeting fair-trade and organic market components, noting that the rapid increase in supplies of fair-trade/organic bananas could well weigh down the selling price of these products. The emergence of private labels and certification schemes is likely to further compound the challenges faced in fair-trade market components. In this context, a tendency towards price convergence between organic and conventional bananas is held to already be underway. This is seen as posing particular problems in the Caribbean, where the spread of Black Sigatoka disease is raising costs and reducing production of organic bananas.

These trends on the EU market could well be compounded by the ‘revolution’ taking place in the shipping of bananas, with dedicated refrigerated containers, or ‘reefers’, replacing traditional container vessels (see Agritrade article ‘Increased use of refrigerated containers opens alternate supply opportunities for banana exporters, June 2012). This is allowing major retailers to directly import bananas, circumventing the traditional supply chains. Symptomatic of this was the report in November 2011 of the start of Panamanian exports of bananas directly to the Spanish supermarket Mercadona. Although the volumes are small at present, Mercadona purchases 30 million kg of bananas and 10 million kg of plantains a year.

Despite these long-term trends EC programming guidelines for the 2012–13 BAM programme for 2012-13, published in January 2012, highlighted the increase in EU imports of ACP bananas between 2007 and 2010 (+21.5%) and the ACP’s growing share of total EU imports (up from 18% in 2007 to 23% in 2010).