Sourcing problems send banana prices skyward
Sourcing problems send banana prices skyward
Banana prices are rising as farms in Central America and Ecuador have suffered severe weather, which has reduced supplies below demand levels.
Brian Kocher, president of Chiquita Brands North America, alerted Chiquita customers in a Feb. 22 letter that the Cincinnati-based marketer would invoke the force majeure clause in its contracts, and banana prices would rise $2 per box for pickups, effective March 2.
Chiquita said in a Feb. 26 press release, "As widely reported, a series of dramatic adverse weather conditions throughout Central America, as well as prolonged rainfall and major flooding throughout the banana-growing areas of Ecuador, have substantially reduced the industrywide availability of bananas that supply both the North American and European market. Due to these industrywide conditions, Chiquita Brands International Inc. is working with its customers to take steps that will enable the company to continue providing fruit in as fair and reasonable manner as possible.
"While the company believes these steps are an appropriate response to these dramatic and hopefully temporary supply issues, the devastation within Ecuador has been substantial, and it is not possible to assess at this time when industry volumes may recover from this severe shortage," the press release continued. "Ecuadorian President Rafael Correa declared a state of emergency on February 20th, and has ordered troops to help thousands of flood evacuees. An estimated 25,000 hectares (about 62,000 acres) have been destroyed and up to 80,000 [hectares] affected, according to the ministry of agriculture."
Heavy rainfall, clouds and lower-than-average temperatures are delaying Ecuador's fruit maturation by as much as five weeks.
Ed Loyd, manager of investor relations and corporate communications for Chiquita Brands International, said that the 2007 tropical storm season caused significant disruption to several banana-producing islands in the Caribbean and destroyed thousands of hectares of production across the Dominican Republic. Adverse weather conditions have also led to decreased productivity in Guatemala, Nicaragua, Honduras and Costa Rica.
Tom Phelps, director of supermarket produce operations for Niemann Foods Inc. in Quincy, IL, told The Produce News March 4 that Dole Food Co. said in late February that its prices would also be rising. Mr. Phelps said his banana retail prices had gone from 49 to 59 cents per pound, "with potentially moving up past that."
"The severe weather conditions in the Latin American region have shortened the supply of bananas throughout the industry," Bil Goldfield, communications manager for Dole Food Co. in Westlake Village, CA, told The Produce News March 4. "The cold weather in December reduced our growth and the rain and flooding have impacted supplies further. Banana supplies were tight prior to these weather issues and we had seen prices creeping up. We hope these effects are temporary, but parts of Latin America are in the rainy season now. So we don't know how long it will be before volumes return."
Philadelphia banana distributor Mark Levin of M. Levin & Co. Inc. said March 3, "We have been doing this all of our lives. We've never seen bananas this high."
Mr. Levin said that the price on the street, wholesale, ranges from $19 to $22. "The retail has never been as high as it is now. It is just one of those situations beyond our control."
Mr. Levin continued, "Supplies are definitely down and if you are willing to pay, you can get it, but you have got to be sure you can sell it. At the higher prices, customers are starting to balk."
Retailers are becoming accustomed to high retail prices, which, by comparison to other produce commodities, are still inexpensive per pound, according to Mr. Levin.
Banana prices started to gradually rise in mid-February, said Mr. Levin, who noted that he was aware of the Chiquita price increase. "We are waiting to see who follows suit."
He added, "We have seen short-lived price jumps in the past, with labor strikes, transportation issues, bad weather and hurricanes. Those were all momentary glitches in the system. This is the real deal. It's not a glitch. It will go on, and it's too soon to tell when it will end."
About Feb. 10 the banana market "was strong. It usually goes up at this time of year." Mr. Levin said banana quality "is fine and not an issue. The bananas are just fewer and farther between."
Brian Kocher, president of Chiquita Brands North America, alerted Chiquita customers in a Feb. 22 letter that the Cincinnati-based marketer would invoke the force majeure clause in its contracts, and banana prices would rise $2 per box for pickups, effective March 2.
Chiquita said in a Feb. 26 press release, "As widely reported, a series of dramatic adverse weather conditions throughout Central America, as well as prolonged rainfall and major flooding throughout the banana-growing areas of Ecuador, have substantially reduced the industrywide availability of bananas that supply both the North American and European market. Due to these industrywide conditions, Chiquita Brands International Inc. is working with its customers to take steps that will enable the company to continue providing fruit in as fair and reasonable manner as possible.
"While the company believes these steps are an appropriate response to these dramatic and hopefully temporary supply issues, the devastation within Ecuador has been substantial, and it is not possible to assess at this time when industry volumes may recover from this severe shortage," the press release continued. "Ecuadorian President Rafael Correa declared a state of emergency on February 20th, and has ordered troops to help thousands of flood evacuees. An estimated 25,000 hectares (about 62,000 acres) have been destroyed and up to 80,000 [hectares] affected, according to the ministry of agriculture."
Heavy rainfall, clouds and lower-than-average temperatures are delaying Ecuador's fruit maturation by as much as five weeks.
Ed Loyd, manager of investor relations and corporate communications for Chiquita Brands International, said that the 2007 tropical storm season caused significant disruption to several banana-producing islands in the Caribbean and destroyed thousands of hectares of production across the Dominican Republic. Adverse weather conditions have also led to decreased productivity in Guatemala, Nicaragua, Honduras and Costa Rica.
Tom Phelps, director of supermarket produce operations for Niemann Foods Inc. in Quincy, IL, told The Produce News March 4 that Dole Food Co. said in late February that its prices would also be rising. Mr. Phelps said his banana retail prices had gone from 49 to 59 cents per pound, "with potentially moving up past that."
"The severe weather conditions in the Latin American region have shortened the supply of bananas throughout the industry," Bil Goldfield, communications manager for Dole Food Co. in Westlake Village, CA, told The Produce News March 4. "The cold weather in December reduced our growth and the rain and flooding have impacted supplies further. Banana supplies were tight prior to these weather issues and we had seen prices creeping up. We hope these effects are temporary, but parts of Latin America are in the rainy season now. So we don't know how long it will be before volumes return."
Philadelphia banana distributor Mark Levin of M. Levin & Co. Inc. said March 3, "We have been doing this all of our lives. We've never seen bananas this high."
Mr. Levin said that the price on the street, wholesale, ranges from $19 to $22. "The retail has never been as high as it is now. It is just one of those situations beyond our control."
Mr. Levin continued, "Supplies are definitely down and if you are willing to pay, you can get it, but you have got to be sure you can sell it. At the higher prices, customers are starting to balk."
Retailers are becoming accustomed to high retail prices, which, by comparison to other produce commodities, are still inexpensive per pound, according to Mr. Levin.
Banana prices started to gradually rise in mid-February, said Mr. Levin, who noted that he was aware of the Chiquita price increase. "We are waiting to see who follows suit."
He added, "We have seen short-lived price jumps in the past, with labor strikes, transportation issues, bad weather and hurricanes. Those were all momentary glitches in the system. This is the real deal. It's not a glitch. It will go on, and it's too soon to tell when it will end."
About Feb. 10 the banana market "was strong. It usually goes up at this time of year." Mr. Levin said banana quality "is fine and not an issue. The bananas are just fewer and farther between."
