Banana : import price evolution

  • Published on 26/01/2015 - Published by LOEILLET Denis
  • FruiTrop n°229 , Page From 61 to 71
  • Free

Informations

PrintSave

Open/Close Shop

France: for the moment everything is going… averagely

In France as elsewhere, 2014 was a year marked by import prices slightly down on 2013. In the main article of this report, we mentioned the downward trend in volatility at all stages of the market, and the inter-annual stability of banana prices. This year, the stability (or near-stability) of import prices must be put into perspective. The analysis must be conducted at constant purchasing power. Although inflation is desperately low in France (0.5 % as at November 2014), as elsewhere in Europe (0.4 %), it is nonetheless aggravating the slight price deterioration. Furthermore, when factored in over the long term, its slow degradation effect of the product value can be seen. Indeed, if we take as a reference (excluding reductions, discounts, rebates, etc.) a price of 0.69 euro/kg for imports into France in 2014, its actual value (value at a constant euro rate) is no more than 0.62 euro at a constant 2007 rate. In other words, the actual value of a kilo of bananas has decreased by 5 % since 2007. We can be reassured by observing that the appeal of the banana on the shelf has grown equally, but we know full well that the banana has been and will be, in any case, the cheapest product in the fruit section. So why aim to further reduce its value?

And we are not yet approaching a turnaround in the process. The 2015 season does not offer bright prospects on the supply side for the moment. On the demand side, the supermarket sector will do what it is able and for what it is made: put pressure on purchase prices. On this matter, the consolidation of the French purchasing groups is not a good sign for the industry operators. They will only achieve salvation if they take back the commercial and marketing initiative. Commercially speaking, they can do this by offering something other than business as usual — i.e. Cavendish banana in 18.14 kg net boxes — by which of course I mean segmentation. And in terms of marketing initiative, they can team up, as they are trying to do within the AIB (banana interprofessional association), and develop joint initiatives to shape, coordinate and invigorate the sector. Not everyone is yet convinced of the virtue of such a collective movement, since the near-legendary independence of the banana operators, whether from here or elsewhere, facilitates the transfer of their potential power to their customer downstream. We will make the provocative observation that in this, they have an acute sense of morality, as defined by Aristotelean philosophy: perfect ethics!

banana constant and current euro
banana constant and current euro

Retail prices: “low price” positioning

While it is often easy, and the done thing, to point to the supermarket sector as the link in the industry that profits from the situation, we must also hail good behaviour. In our last two reports dedicated to reviewing banana prices for 2012 and 2013, we showed how the retail trade had once played the role of freeloader, taking advantage of the increase in world banana rates, and subsequently increased its margin while world prices stagnated. We are a long way from this conduct for the year just ended. Indeed, in a collective move, in 2014 the European distribution sector reduced, and sometimes slashed, its retail prices. Yet what may be the most surprising point is that it did so while import prices were stagnant (overall – 1 to + 1 %) practically across the board. We will not be far wrong in thinking that it is the appeal of the supermarket as a whole which is the desired effect when they lower the retail price of a staple product such as the banana. In a context of persistent gloom, defending market share is vital for each group, and a “low price” image is a vital weapon. Some troubled souls may be concerned about this steep deflation policy on a benchmark which is already rock bottom, in terms of price. It is doubtless good for the supermarket, in the medium term, but it is disastrous for the product. So we will settle for observing that this reduction for the moment has not been funded by the upstream links in the industry. Let’s hope that things keep going that way in 2015, with revaluation of the product at every stage, including and above all for the producers and banana plantation workers.

banana europe
banana europe
banana difference 2013- 2014
banana difference 2013- 2014

United States: too easy!

Cyclical analysts will struggle to find any pleasure in commenting on retail prices on the US market, such is their constancy, stable for three years at 1.32 USD/kg, with also a very low volatility. The only bump to report occurred in October 2014, when the price dropped to 1.28 USD, as was the case in October 2013. The explanation could be due to the supply exhibiting a distinct increase over these months. As in most countries, the banana is the most competitive fruit in the section, and its price is the most stable; making for a stark comparison with the apple (Red Delicious) and orange (Navel). The banana is half the price of the other heavyweights of the section.

The change in spot import price (the only one accessible) is more interesting. Indeed, the average annual price saw a fine trend this year. It gained 4 %, wiping away its under-performance of 2013 to reach 16.6 USD/box. Converted into euros and at the same market stage, the difference with the European market in 2014 rose to 2.5 euros/box, in favour of the US market, i.e. 140 euros/tonne. While comparison is no justification, it is very close to the level of customs duty levied on dollar bananas upon entering Europe.

At a weekly rate, the US Gulf of Florida region is registered an import price lower than that found on the East Coast, which was itself a notch below the prices charged on the West coast. The gap can be very significant, of around 2 to 3 USD per crate. As in 2013, some degree of price convergence over the three main inlet points was applied in the second half of the year.

However, we should guard against drawing general conclusions from a price benchmark that reflects only a very small part of the market, the non-contract part. While we might think that spot price variation has some influence on the contract segment, the effects are delayed and largely dampened.

banana usa
banana usa
banana usa 2
banana usa 2

The Russian yoyo

The Russian import price picked up again in 2014. It gained practically 1 USD per box to reach 14 USD/box CIF St. Petersburg. Volatility was also well up, exceeding 100 % as in 2012. Prices fell a little lower than usual (7.8 USD as opposed to 6 USD), and for a shorter time in August. Conversely, and while the end of the year was a period of better valuation, we saw prices come undone in November, dropping back below 10 USD for four weeks.

The analysis of the rouble provides another viewpoint of the market. The Russian embargo, worldwide protests, collapse of the rouble and drastic fall in oil and gas revenue have punctuated the cyclical conditions for Russia all of this year. The repercussions on the banana market have not been catastrophic for the moment, at least in terms of volumes absorbed (see main article). Conversely, the financial balance of the sector is precarious. Indeed, while prices at the retail stage increased by 13 % between 2013 and 2014, they gained nearly 30 % at the import stage due to the rouble abruptly plunging against the dollar. In December, the price per box even climbed to 630 roubles/box, whereas in dollars it was barely more than 11 USD. There is also restructuring in progress in the industry, favouring the establishment 0f distributors further and further up the supply chain.

There as elsewhere, we should note that the banana remains the undisputed star of the fruit section due to its price appeal. It is actually 16 to 27 % less expensive than its direct competitors, the orange and apple. The fact remains that the import industry will not be able to deal with a 28 % increase in its purchase prices every year. If the pessimistic forecasts for 2015 are realised, and we see a considerable increase in the world supply, operators’ desire to see a fall in import prices, offsetting all or some of the collapse of the rouble, could come true.

banana russia
banana russia
banana russia 2
banana russia 2
france and UK
france and UK
spain and germany
spain and germany

Click "Continue" to continue shopping or "See your basket" to complete the order.