Bananas in Latin America Crunch as Fyffes Plans to Raise Prices

Bananas, the world’s most-traded fruit, are getting more expensive after Latin American rains that were 60 percent above normal in Ecuador curbed output.

Exports from Ecuador, the world’s biggest shipper, may drop 10 percent this year, said Eduardo Ledesma, executive director of the Ecuadorean Banana Exporters’ Association. Rain damaged crops especially in Los Rios, the top producing province, he said. While Ecuador’s export prices have dropped 16 percent from a record in March, they are still 35 percent higher than the 10- year average, International Monetary Fund data show.

Banana exports rose to the highest in at least a decade last year, making it the most-traded fruit ahead of citrus, apples and pears, according to the World Trade Organization. Dublin-based Fyffes Plc (FFY) said this month it plans to raise prices because of higher fuel and fruit costs.

“Supply is relatively tight at the moment,” said Seamus Keenan, company secretary at Fyffes, Europe’s biggest banana supplier. “That’s to a large extent driven by some issues in Ecuador and Colombia, mainly weather issues.”

Ecuador declared a state of emergency in five provinces in March after above-average rainfall in the coastal region and southern Andean foothills washed away roads and houses and damaged more than 34,000 hectares (84,000 acres) of crops, including the top three banana producing regions in Los Rios, Guayas and El Oro.

Babahoyo Rain

Rainfall in Babahoyo, the capital of Los Rios province, was 60 percent higher than average in the seven months through August, according to data from Ecuador’s National Meteorology and Hydrology Institute in Quito. The region received 2.59 meters (8.5 feet) of rainfall in the February to August period, while the historical average is 1.62 meters, according to the agency known as Inamhi.

Latin American supplies were down “rather significantly” in the first quarter, David A. DeLorenzo, the chief executive officer of Westlake Village, California-based Dole Food Co., said on a conference call July 19. Low prices paid to farmers may crimp world supplies, he said.

Fyffes ranks globally behind Dole, Chiquita Brands International Inc. and Fresh Del Monte Produce Inc., it said in a Sept. 3 statement. Keenan declined to comment on the size and timing of the price increase.

Banana Trade

World production totaled 102.03 million metric tons in 2010, worth about $28.35 billion, according to the United Nations. Ecuador’s exports at 5.156 million tons accounted for 30 percent of global trade.

Ecuador produced 7.931 million tons of bananas in 2010, accounting for about 7.8 percent of world output, according to the UN’s Food & Agriculture Organization. The Latin American country’s harvest was the world’s fourth largest, after India, China and the Philippines.

Fyffes distributes 51 million cases of bananas annually, about one third of leader Dole Food’s 154 million cases, according to a Sept. 3 presentation on the company’s website. Fyffes started in 1888 and gets most of its bananas under long- term contracts with third party producers. A case weighs 40 pounds and holds about 100 bananas.

Precipitation in Ecuador and Costa Rica has been near-to-above-normal in the past 30 days, and the pattern may continue through November, Dale Mohler, a senior meteorologist with AccuWeather Inc., said by telephone yesterday from State College, Pennsylvania. Costa Rica is Latin America’s third- largest banana exporter after Ecuador and Colombia, according to the WTO.

Demand Rebounds

Export prices for Ecuador’s bananas rose 1.1 percent in July, the biggest increase since they climbed to a record in March, IMF data show. Demand tends to rebound during Northern Hemisphere fall and winter months because of declining competition from locally grown fruit, helping to support prices, said Keenan of Fyffes.

European wholesale bananas were about $1.04 a kilogram (2.2 pounds) in the week ended Aug. 26, 14 percent higher than a year earlier, according to data from the European Commission, the bloc’s regulatory arm. U.S. retail prices are little changed this year at 59.5 cents a pound after climbing 26 percent since 2004, Bureau of Labor Statistics data show.

Export prices in Ecuador during July were $966.85 a ton, down from a record $1,151.43 in March, IMF data show. Ecuador shipped 137.16 million cases in the first six months of this year, 10 percent less than in the same period a year earlier, according to the exporters group.

Wet weather “has considerably affected the plants,” Ledesma, of the exporters group, said Sept. 5 by phone from the coastal city of Guayaquil. “The excess of rain and the current cold climate keep the fruit from ripening and reaching the right grade.”

To contact the reporters on this story: Whitney McFerron in London at wmcferron1@bloomberg.net; Nathan Gill in Quito at ngill4@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net

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