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Perspectives for ACP banana producers as EU banana market price collapses

06 September 2011

Between June and August 2011, EU banana prices collapsed, with bananas ‘being sold for as little as 1 to 3 dollars (fob) in Ecuador’. A Fyffes representative attributed the price collapse to overproduction in Ecuador and the EU’s new import licensing system, which had seen more importers enter the EU banana trade. Some importers maintain that Ecuadorian bananas were being sold at below cost price.

The EHEC (E-coli) outbreak in May 2011 impacted on consumption of a range of fresh fruit and vegetables, depressing EU consumer demand for bananas as well. This development was compounded by the austerity programmes under implementation in a number of EU member states. Good spring weather, which saw the early arrival of EU-produced fruit on the market was a further factor depressing demand for bananas on the EU market. However at the beginning of August the market was beginning to stabilise.

The political turmoil in the Middle East and North Africa also appears to have been an important factor. This not only interrupted payments for bananas already delivered, but more significantly led to the loss of a market for 1 million boxes of Ecuadorian bananas per week. These bananas were then directed to an EU market where consumption was already depressed. This relative oversupply appears to have contributed to the EU price collapse, despite earlier Ecuadorian efforts to manage supplies to the market. Further supply management measures are now under consideration, with exports being reduced by as much as 30 to 40% to aid price recovery.

Meanwhile in Jamaica at the beginning of August a further phase of the EU-supported Banana Support Programme was agreed with the Banana Board of Jamaica. During the forthcoming phase of the programme, ‘the EU will provide support for extension services, the establishment of nurseries in selected areas of the island and promote other agricultural crops in areas that have seen a decline in the production of bananas.’ According to press reports, since 1999 the EU has provided US$58.1 million through the Banana Support Programme to assist with the restructuring of the Jamaican banana sector.

Among non-traditional ACP banana exporters, Ghana in the past 6 years has expanded its banana exports from 6,000 to 65,000 tonnes, with 90% of these exports destined for the EU market. The successful expansion of Ghanaian banana exports is attributed to the duty-free access of investors to all imported inputs and packaging materials.

Across the continent in Uganda, banana production increased by 2.7% last year as a result of a US$13 million World Bank programme of research on food crops and high value non-staple foods and government programmes to provide subsidised loans to small and medium-sized enterprises. Analysis however highlights the need to manage producer prices, especially during periods of bumper harvest, when the surplus of supply over demand can severely depress prices.

Editorial comment

Given the restraint in the volume of Ecuadorian bananas exported in the first 5 months of 2011, demand factors appear to be the critical factor influencing price trends, in the context of a more liberalised import regime. It is too early to tell what impact EU banana price trends between June and August 2011 will have on export earnings of ACP banana exporters.

Under earlier Lomé Conventions, the STABEX instrument would have provided a financial cushion in the face of dramatic price declines. In the current era, however, no such support is available. This gives added importance to getting to grips with the issue of strengthening the functioning of ACP–EU banana supply chains.

In an African context, the EU banana price trends highlight the importance of strengthening the functioning of national and regional banana supply chains. This includes getting to grips with basic issues ranging from:

*           improving disease control in the banana and plantain sector and promoting regional disease control policies;

*           assisting the development of producer associations and strengthening the position of banana producers within supply chains; and

*          research into the development of banana-based value-added food products and improvements in storage and transportation of bananas. 


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