Banana companies differ in reactions to EU policy
Banana companies differ in reactions to EU policy
European Union representatives agreed Nov. 25 in Brussels to establish the new banana tariff of 176 euros per metric ton. This pertains to "dollar" bananas sourced from Latin America, to give preferential treatment to growers in countries that are historically connected to Europe or colonized producing areas such as Martinique, the Canary Islands and Guadalupe.
This new tariff is expected to be a highly controversial discussion topic when the World Trade Organization convenes in Hong Kong in mid-December. One news service reported Nov. 30 that Honduras will pose a challenge with WTO against a European Union plan to more than double the tariff that Latin American banana exporters pay to sell their fruit in the European Union.
The United States, Ecuador and the European Union agreed in 2001 that a new EU tariff-only banana import regime would go into effect Jan. 1, 2006. This will replace a quota system that has been in place since 1993. Europe has been allowing the imports of dollar bananas only through a limited number of importers who had licenses to import limited volumes of dollar bananas. Dollar bananas have also paid a 74 euro per ton tariff under the outgoing regime. Those licenses will be removed, and, through a very complex formula, the European Union market will be open to free (but highly taxed) trade. Within these rules, there is motivation for banana shippers to establish strong records of sales volume in Europe in 2006, Juan David Alarcon, chief executive officer of Turbana Corp. in Coral Gables, FL, said Nov. 30.
The new EU banana policy is applauded by Dole Fresh Fruit Co. in Westlake Village, CA. Dole President and Chief Operating Officer Richard Dahl told The Produce News Nov. 30, "We have been a proponent of the termination of the license-quota regime that really has been in place for 14 or 15 years. Dole has been on the side of an open European market and moving into a non-quota system from the very beginning."
Mr. Dahl noted that five years ago, international agreements on the current quota system established Dec. 31, 2005 as the "sunset" for quotas "to come to a close. Dole certainly is a proponent of that coming into place."
Mr. Dahl said that the 176 euro per metric ton tariff that has been proposed by the EU "is significantly higher than the 75 euro per ton that is the current rate" atop the current and vanishing quota system. He added, "There is a lot of speculation on what the right rate is. Dole's position was that we wanted tariff-only, but at as low of a rate as was reasonably possible."
He said that Latin American banana suppliers had hoped the 75-euro rate would remain in place. Such a rate will be continually urged as the EU banana policy is finalized in coming weeks. He noted that there "is a possibility that we may see that rate come down lower than 176, and we certainly would be supportive of that."
Compared to the quota system, Mr. Dahl said, in which a few companies had licenses, "this absolutely is a more level playing field. The quota system was an unlevel playing field. Those who had licenses could sell their licenses." As a result, some European firms found it more profitable to sell licenses than bananas. Buying licenses cost "a substantial amount" of money and put Dole "at a competitive disadvantage compared to those people who had a large license."
Fresh Del Monte Produce Inc. in Coral Gables, FL, announced its support of the European Union decision. "We have always maintained that the tariff-only system is the only system that will correct the injustice suffered for years by Fresh Del Monte as well as other supplying companies under the current quota and licenses system," Mohammad Abu-Ghazaleh, Fresh Del Monte's chairman and CEO, said in a statement.
Chiquita Brands International Inc. in Cincinnati expressed disappointment with actions taken Nov. 25 among representatives of the European Union's member states to endorse a proposal to introduce a tariff of 176 euro per metric ton on imports of Latin American bananas next year. As far as Turbana's immediate interests are concerned, Mr. Alarcon said, "In the U.S., we feel that next year will be a strong market."
This fall, Fyffes PLC in Dublin, Ireland, bought a 50 percent share of Turbana. Fyffes is Europe's largest distributor of fresh fruits and vegetables, and buys nearly half its banana supplies from Uniban, Turbana's parent company.
Mr. Alarcon said that Fyffes has benefited from being a major licensee to import dollar bananas for the EU market. He expects Fyffes to be among the banana companies suffering what may be a couple of difficult years as banana trade resettles in Europe, but he is confident that Fyffes will be fine in withstanding the change.
Over the last decade, Fyffes has purchased banana-ripening facilities in Italy, Spain, the Czech Republic, Germany and Sweden. This established distribution chain is helpful on a continent where retailers tend not to have their own banana-processing infrastructure, according to Mr. Alarcon.
The European Union's banana import policy shifts are the latest reason that U.S. produce buyers should expect strong banana prices in the United States next year, according to Mr. Alarcon.
Latin American banana supplies are currently reduced because of the tropical storms and hurricanes in 2005. He expects bananas in the U.S. market to be priced in the range of $8 to $10 f.o.b. in the first quarter of 2006. "Next year will be very strong, and U.S. contracts will be stronger next year as well," said Mr. Alarcon. "Companies need to take positions in Europe so significant quantities will be diverted from the U.S. to Europe."
This new tariff is expected to be a highly controversial discussion topic when the World Trade Organization convenes in Hong Kong in mid-December. One news service reported Nov. 30 that Honduras will pose a challenge with WTO against a European Union plan to more than double the tariff that Latin American banana exporters pay to sell their fruit in the European Union.
The United States, Ecuador and the European Union agreed in 2001 that a new EU tariff-only banana import regime would go into effect Jan. 1, 2006. This will replace a quota system that has been in place since 1993. Europe has been allowing the imports of dollar bananas only through a limited number of importers who had licenses to import limited volumes of dollar bananas. Dollar bananas have also paid a 74 euro per ton tariff under the outgoing regime. Those licenses will be removed, and, through a very complex formula, the European Union market will be open to free (but highly taxed) trade. Within these rules, there is motivation for banana shippers to establish strong records of sales volume in Europe in 2006, Juan David Alarcon, chief executive officer of Turbana Corp. in Coral Gables, FL, said Nov. 30.
The new EU banana policy is applauded by Dole Fresh Fruit Co. in Westlake Village, CA. Dole President and Chief Operating Officer Richard Dahl told The Produce News Nov. 30, "We have been a proponent of the termination of the license-quota regime that really has been in place for 14 or 15 years. Dole has been on the side of an open European market and moving into a non-quota system from the very beginning."
Mr. Dahl noted that five years ago, international agreements on the current quota system established Dec. 31, 2005 as the "sunset" for quotas "to come to a close. Dole certainly is a proponent of that coming into place."
Mr. Dahl said that the 176 euro per metric ton tariff that has been proposed by the EU "is significantly higher than the 75 euro per ton that is the current rate" atop the current and vanishing quota system. He added, "There is a lot of speculation on what the right rate is. Dole's position was that we wanted tariff-only, but at as low of a rate as was reasonably possible."
He said that Latin American banana suppliers had hoped the 75-euro rate would remain in place. Such a rate will be continually urged as the EU banana policy is finalized in coming weeks. He noted that there "is a possibility that we may see that rate come down lower than 176, and we certainly would be supportive of that."
Compared to the quota system, Mr. Dahl said, in which a few companies had licenses, "this absolutely is a more level playing field. The quota system was an unlevel playing field. Those who had licenses could sell their licenses." As a result, some European firms found it more profitable to sell licenses than bananas. Buying licenses cost "a substantial amount" of money and put Dole "at a competitive disadvantage compared to those people who had a large license."
Fresh Del Monte Produce Inc. in Coral Gables, FL, announced its support of the European Union decision. "We have always maintained that the tariff-only system is the only system that will correct the injustice suffered for years by Fresh Del Monte as well as other supplying companies under the current quota and licenses system," Mohammad Abu-Ghazaleh, Fresh Del Monte's chairman and CEO, said in a statement.
Chiquita Brands International Inc. in Cincinnati expressed disappointment with actions taken Nov. 25 among representatives of the European Union's member states to endorse a proposal to introduce a tariff of 176 euro per metric ton on imports of Latin American bananas next year. As far as Turbana's immediate interests are concerned, Mr. Alarcon said, "In the U.S., we feel that next year will be a strong market."
This fall, Fyffes PLC in Dublin, Ireland, bought a 50 percent share of Turbana. Fyffes is Europe's largest distributor of fresh fruits and vegetables, and buys nearly half its banana supplies from Uniban, Turbana's parent company.
Mr. Alarcon said that Fyffes has benefited from being a major licensee to import dollar bananas for the EU market. He expects Fyffes to be among the banana companies suffering what may be a couple of difficult years as banana trade resettles in Europe, but he is confident that Fyffes will be fine in withstanding the change.
Over the last decade, Fyffes has purchased banana-ripening facilities in Italy, Spain, the Czech Republic, Germany and Sweden. This established distribution chain is helpful on a continent where retailers tend not to have their own banana-processing infrastructure, according to Mr. Alarcon.
The European Union's banana import policy shifts are the latest reason that U.S. produce buyers should expect strong banana prices in the United States next year, according to Mr. Alarcon.
Latin American banana supplies are currently reduced because of the tropical storms and hurricanes in 2005. He expects bananas in the U.S. market to be priced in the range of $8 to $10 f.o.b. in the first quarter of 2006. "Next year will be very strong, and U.S. contracts will be stronger next year as well," said Mr. Alarcon. "Companies need to take positions in Europe so significant quantities will be diverted from the U.S. to Europe."
