Cyclone ETA to the rescue for European contract banana prices in 2021?
- Published on 16/11/2020 - Published by Market News Service of CIRAD
- Free
European banana market
The Atlantic cyclone season is definitely dragging on. Cyclone ETA, which recently hit Nicaragua in week 45-2020, and climbed up Central America via Honduras, Guatemala and Belize before escaping towards Cuba, left behind a trail of very serious human and material damage. For readers of a certain age, the intensity of cyclone ETA was equivalent to that of Cyclone Mitch, which devastated this part of the world in 1998. For the agricultural sector, and particularly the banana sector, there was major damage. It is still a tricky matter to estimate the losses so soon after such a big climate vagary, but already 10 000 ha of banana plantations have been registered as affected, to degrees ranging from complete destruction (especially Honduras) to flooding (especially in Guatemala), which could, depending on the rate of water discharge, lead to the complete loss of the harvest and a big reduction in the production potential over the first half of 2021.
Under these conditions, there will doubtless be a new tone to the discussions between the upstream and downstream segments in Europe over the contract prices for 2021. While initial estimates raised fears of a fall to a historically low level (see https://www.fruitrop.com/en/Articles-by-subject/Direct-from-the-markets/2020/Aldi-Europe-banana-contract-price-for-2021-lower-than-ever), hundreds of thousands of boxes lost every week, over a period of months, will now shift the balance. Given the recent climate vagaries in the Philippines, production peaks which are now past (Colombia, Costa Rica), as well as a potential trade-off by Costa Rica and Ecuador in favour of the USA (to make up for the reduction in Central American export potential), a start to the year with a low supply pressure now seems to be the likeliest scenario.
