Banana supply is slim right now–unusually so for this time of year. "We have a lot of gaps on the East Coast and on the West Coast. Everybody is looking for fruit right now," says Andy Thomas-Stivalet of Kavidac Produce
Why is the banana supply so particularly tight? For starters, there is lower productivity on many farms in Central America because back almost four years ago, numerous producers stopped fertilizing due to the increases in the costs of fertilization. "In bananas, you start feeling the brunt of that 18-20 months and onward after that happens. It's being felt throughout the banana world," he says.
Add to that the state of farms in countries such as Ecuador, Costa Rica, Mexica, Guatemala, Honduras, and more–many of which are going under, thanks in part to the fertilizer issue which can almost trigger a death spiral in some banana companies. "Once you start cutting fertilizer and things that make your fruit grow, there's no way out of that," says Thomas-Stivalet. "Once you cut, you get an influx of cash flow but you're never going to be able to get back to that level of fertilization unless you have that same amount of capital expenditure for that. Once you start on that route, it's a race to the bottom."
Bananas farms consolidating
In turn, consolidation is underway with companies taking the opportunity to buy the farms and making the investment necessary to fix them and bring them to an acceptable level of productivity.
On top of all of this is also the tariff issue, namely the potential blanket 10 percent tariffs that the U.S. had placed on products being imported into the U.S. that is currently under review. "Couple all of this together and we are seeing much higher prices for bananas than we would usually see at this time of year. I suspect we'll have a summer of really high banana prices," says Thomas-Stivalet.
He adds that Mexico, which is exempt from the 10 percent tariff should it go through, fruit from this country has become increasingly valuable. However, with the tighter supply pushing up pricing, the tariff-related pricing had almost hidden within that new price. "So we are not going to see a big push for people searching for Mexican fruit or fruit from lower tariffed countries until the prices stabilize and lower. Then people will notice," Thomas-Stivalet says, adding that retail pricing has increased generally by about .5 cents/lb., a price increase growers have long been asking for.
No change in demand
What is interesting is that the higher pricing hasn't necessarily impacted demand, which has stayed steady. "Even with the higher prices, bananas remain the cheapest item at the supermarket. For big retailers, it's the number one item sold," says Thomas-Stivalet. "So I don't see demand slowing down."
Looking ahead, supply will gain traction again. "In our estimates from our growers in Mexico and Guatemala, fruit supply will increase in the next 10-13 weeks," says Thomas-Stivalet, noting this is the timeframe when generally banana supply increases. "It's not been an abnormally hot summer–it's been cool in some areas so that pushes things later on into the summer months. So while we will see a lot of that fruit come online, I just don't know if it's going to cover the amount of fruit that has exited production."
For more information:
Andy Thomas-Stivalet
Kavidac Produce
Tel: (+52) 962-625-3303
[email protected]
https://www.kavidac.com/