Press Release 97/17

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Press Release 97/17

FAO REPORTS BANANA SUPPLIES COULD EXCEED DEMAND BY 1999; TRADE IN EMERGING MARKETS INCREASES SIGNIFICANTLY
Embargoed for 00:30 gmt, Wednesday 7 May


However, China’s entry into the market and emerging markets in Central and Eastern Europe may absorb some of the projected surplus


ROME, May 7 -- The UN Food and Agriculture Organization (FAO) reported today that under existing production and trade conditions, banana supplies could exceed demand by the end of the decade. FAO projections show global banana exports, put at 12.87 million tons in 1999, facing an import demand of 12.22 million tons, resulting in a 650,000 ton surplus.

However, the very recent entry of China into the market could combine with emerging markets in Central and Eastern Europe to absorb some of the projected surplus, according to FAO. The projections were made available at a meeting of government representatives, including banana exporters and importers, traders and consumers gathered to discuss complex market and trade policy issues and to develop measures to improve banana production and trade.

Opening the 15th Session of the Intergovernmental Group (IGG) on Bananas, Dr. Hartwig de Haen, FAO Assistant Director-General and head of the Economic and Social Department, said, “Bananas are among the most valuable of the agricultural commodities entering world trade, and the crop also plays a very important role in food security. Bananas rank among the top half-dozen crops as a food resource in most developing tropical countries.”

According to FAO, bananas are the most important tropical fruit in world trade. “For many countries the banana sector is of vital importance for economic and social well-being,” said de Haen.

In central and eastern Europe and areas of the former USSR, banana imports have increased very significantly since the early 1990s,” according to FAO. “If all countries of the area are considered, average weekly imports in 1995-6 amount to around 1,680,000 boxes or 1.4 million tons annually, compared with 220,000 tons in 1991 and some 600,000 tons in 1993,” according to an FAO study prepared for the meeting.

The implication of growing banana imports by the emerging markets of central and eastern Europe is that these markets will account for some 17 percent of global imports at the end of the decade compared to 12 percent in the mid-1990s, while only moderate growth would occur in traditional major markets, says FAO. However, additional sales in the region are currently possible only by granting significant price concessions. Such price concessions could result in declining revenue for exporters who need positive returns to maintain a stable market supply,” according to the FAO study.

FAO reports that per capita banana consumption in major markets increased over the last decade, but real prices have generally declined. As the growth and revenue prospects for banana exports tend to be weak, countries dependent on banana exports as a significant source of foreign exchange and employment have intensified the search for ways to improve the viability of banana cultivation , or they are looking for ways to enhance the returns from bananas including the possibility of diversification to additional economic activities.

China’s emergence in 1996 as a significant importer of bananas is an important development in light of the projected banana surplus compared to import demand, according to FAO. Should China’s imports continue to grow at current levels, the projected banana surplus will be reduced. Though Chinese per capita imports are very low, FAO says that even modest gains in their imports could have a significant effect on exports and potential export earnings for developing countries.

FAO has suggested that the IGG identify necessary measures to meet the challenge of improving the economic viability and sustainability of the banana economy. Some issues of importance cited by FAO, include: encouraging banana consumption in underdeveloped markets, including markets in developing countries and countries in transition; continuous and sustained market promotion; fostering investment in diversified crops as well as in bananas and expanding trade.


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