Banana Supply Disruption
Posted on January 12, 2011
The purpose of this communication is to provide insight
into the recent supply disruptions that have caused drops in availability of bananas in Central
and South America.
While industry volume reductions at this time of year due to cooler weather (Northern
Hemisphere winter season) are somewhat normal, the rate at which available banana supply
is being reduced is unusual, extreme, and volatile. Additionally, there has been significant
rain in Costa Rica and Panama last week, with over 12 inches of rain falling in the 24 hours
ending on Friday, resulting in immediate supply disruptions.
Central America - Cooler weather, heavy rains, and lack of sunlight (cloud cover) has
significantly slowed the growth of the fruit (length and grade) reducing volumes. Exacerbating
the effect and magnitude is that this follows a period of very robust growing conditions in
August through October where fruit size specifications was being achieved at above normal
rate, pulling the production forward. This effect leaves less harvestable fruit to start
with in November and December.
Guatemala North – As you know, the flooding events of August/September in Guatemala North
destroyed 700 hectares of our banana production. At the time, the robust growing conditions
allowed us to compensate for this shortage. However, the recent growing conditions are not
offsets for the loss, of this level of production. We are currently evaluating all
rehabilitation options, including “chop back” and replanting. However, under either method we
will not have significant new volume until later in 2011. Another supplier also experienced
flooding in this area of approximately 2000+ hectares in late June/July, with the majority of
the area completely wiped out as they publically reported. We have no information on if/when
this reduction in industry volume will return.
Costa Rica – Last week there has been heavy rainfall, with over 12 inches in a 24 hour period.
We have experienced farms with flooding, access roads blocked, and collapsed bridges in multiple
areas. The flooding also caused a severe labor shortage as farm workers are staying home to
protect their houses and belongings from the rising waters. Industry harvesting has been
severely reduced. In addition to the harvest shortage, some volume harvested prior to the
rains has been trapped at farms with no access way to the loading ports. We are exploring all
options to recover the week’s harvest, but the recovery outlook is very limited at this time.
South America – La Nina effects continue to impact growing conditions in both Ecuador and
Colombia. Rain and cloud cover continue to hamper grade as these areas move into the normally
robust southern hemisphere “summer” growing season. Historically, normal growing patterns
in this time of year have volumes increasing in Ecuador, however no appreciable increases are
materializing. In fact, Ecuador weekly loadings have been approximately 20% to 30% below
historic norms. To compound issues further, European importers and independent operators who
were buying supplies in Central America in September and October are now being forced back into
Ecuador to load vessels, creating significant pricing pressure on purchase fruit in Ecuador.
Volume requirements continue to go unfilled even at these abnormally high pricing levels.
Demand – Retail demand in the U.S. has increased through November and into early December.
Banana volumes at large retailers are exceeding their 4 week averages by 5%-10%, creating further
pressure to meet sales demands. Open market pricing has increased $4.00/box -$5.00/box in the
last 3 weeks.
Based on the above supply disruptions, we anticipate that industry volume will be very tight
through April as normalized winter demand increases in the U.S. and Europe, will continue to
cause an imbalance in the supply/demand situation.
Any further weather events could present great challenges.
Chiquita Brands International, Inc. is a corporation organized and existing under the laws of the State of New Jersey, headquartered at 250 East Fifth Street, Cincinnati, Ohio 45202 USA.
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