Banana market situation in 2005 and early 2006
Preliminary results for 2005
Preliminary figures indicate that world banana exports contracted in 2005 relative to 2004 by a small margin. The fact that exports did not contract significantly comes as a surprise, considering that some of the traditional banana exporters are located in areas affected by what has been described as the most intense Atlantic hurricane season in history. A total of 28 storms were identified of which a record 15 became hurricanes, and 4 reached maximum strength (Category 5).
Names of particularly destructive hurricanes, such as Mitch in 1998, are "retired" for a few years. This season a record five names were retired, including Dennis, Katrina, Rita, Stan and Wilma. The hurricane season was so long that six additional names had to be added to describe the storm activity that continued until January 2006. Although the hurricane season does not appear to have affected Latin American banana supply in late 2005, its impacts were extended to the first half of 2006. Countries like Ecuador that were spared the fury of hurricanes in 2005, benefited in early 2006 from a tight supply situation and firm prices.
In Central America, Honduras was hit firstly in mid-October by hurricane Wilma which caused moderate damages to banana plantations. One month later tropical storm Gamma destroyed an estimated 2 000 hectares of banana plantations. Total exports in 2005 are provisionally set at 508 000 tonnes, a decrease of 3.7 percent in volume terms relative to 2004. Guatemala was on course for a bumper crop in September with exports up 21 percent year on year relative to 2004. However, banana (and coffee) plantations were affected by hurricane Stan at the end of September, which entered the Yucatán peninsula affecting also banana plantations in Mexico. Guatemala's banana exports in October contracted by one-third relative to September, but despite Stan, provisional data indicate that aggregate exports in 2005 increase by about 7 percent in volume terms relative to 2004.
Central American countries that were not hit by hurricanes still sustained bad weather conditions for banana production earlier in the year. Costa Rica banana exports were affected by heavy rains in the first half of 2005, when exports were down 16 percent year on year. However, production recovered in the second half and exports are provisionally set to fall by some 11 percent in volume terms relative to 2004. Exports in Panama continue their downward trend of the past 10 years, and this time are forecast to fall by almost 10 percent in volume terms relative to 2004. As with Costa Rica, the fall is partly due to heavy rains in January that affected the Atlantic coast, but also partly due to farmers abandoning banana production or shifting to other crops like pineapples and melons.
In the Caribbean, Jamaican banana exports are expected to decrease to below 12 000 tonnes (28 700 tonnes in 2004 and 42 000 tonnes in 2003) due to hurricane damage. The first and most destructive was Dennis in July. However, it was followed by two others that hampered reconstruction efforts: Emily one week later and Wilma in October. Production in the Dominican Republic and the Windward Islands was not significantly affected by hurricanes this season, though WIBDECO (Windward Islands Banana Development and Exporting Company Limited) informs that Saint Lucia exports declined 28 percent in 2005 because of farmers abandoning production.
In South America, only preliminary estimates for 2005 are available for Ecuador, the world's largest exporter. The crop developed under normal weather conditions and earlier official estimates pointed to higher exports relative to 2004. However, recent data from AEBE (Asociación de Exportadores de Banano del Ecuador) indicate that exports may have fallen slightly (less than 1 percent), although other press reports estimate the fall to be substantially higher. In Colombia exports were up 20 percent inthe first half of 2005 and by the end of the year are expected to expand by at least 7 percent relative to 2004. In the Philippines exports may have expanded by 6 percent in 2005, a performance that makes this country the second largest exporter in the world. In Africa, aggregate exports from Cameroon and Côte d'Ivoire are expected to decrease by 10 percent relative to 2004.
The tight supply situation in Latin America and Africa in 2005 helped banana prices to recover in world markets. Import prices in the United States were up 25 percent, not only because of the lower supply, but also due to the higher reefer rates which on average were some 10 percent up from 2004. Preliminary data indicate the European Union import prices grew by an even larger degree, which some market analysts blamed not only on the tight world supply and higher reefer rates, but also on a shortage of import licenses. Conversely, prices in Japan fell from the previous year due to substantially larger imports from the Philippines.
Situation in early 2006
In January 2006 the European Union changed its tariff rate quota banana import system to a tariff only system of Euro 176 per tonne for MFN suppliers. The new system includes a duty-free quota of 775 000 tonnes for ACP suppliers which is mostly assigned on a first-come-first-serve basis. Preliminary data released by the EU indicate that import volumes and domestic banana prices had not changed significantly in the EU during the first quarter of 2006 relative to the same period in 2005, but it is difficult to determine the extent to which this was due to the supply situation or to the new import system. The appropriateness of the tariff level chosen continues to be debated amongst stakeholders, some of whom have expressed their intention of challenging the tariff level once again at the WTO because they believe it to be too high.
Reports for the first quarter of 2006 indicate that the world banana supply may be stable. The drop in shipments from Honduras, Panama and Colombia appears to be compensated by a rise in exports from Ecuador and Costa Rica. However, exporters appear to be shifting exports from the United States to Europe, which could explain why import prices have increased in the former and fallen in the latter. Evidence of shifting country of destination is not conclusive, and more data would be needed to assess whether this would explain the different prices observed, or rather other non-attribution factors such as fruit quality. In Asia and the Pacific, tropical cyclone Larry destroyed 90 percent of all banana plantations in Australia in March 2006, but the effect is not felt widely in the region because the country neither exports nor allows banana imports on phytosanitary grounds.
Import prices in the United States in the first quarter of 2006 continued their upward trend, and were 4 percent higher year on year. Prices in the European Union, however, appear to have declined, with data from the World Bank pointing to a fall of 30 percent year on year for the first quarter of 2006. It is difficult to determine to what extend this decline may be caused by the tariff level chosen under the new import system, the new market supply structure following the abolition of licenses, differences in product quality or lower reefer rates. Nevertheless, a strong downward pressure in North America and Europe is likely in the second half of 2006 owing to the expected rise in supply from Latin America, provided normal weather conditions prevail. The magnitude of the price drop will also depend on the strength of demand from Europe under the new import regime, which is yet unknown.
NET EXPORTS
NET IMPORTS
IMPORT PRICES
Last update: May 2006
