Banana prices stay up despite greater supply

07/01/2011 01:50:00 PM
Fred Wilkinson

banana prices stay up despite greater supplyU.S. banana supplies have returned near normal levels after storms and floods destroyed crops in some major Latin American growing regions, leading to shortages, though sources expect retail prices to remain above last year’s levels in part because of higher fuel costs.

Many banana suppliers were short on supplies during the first three months of 2011 after bad weather in Colombia and other countries last year cut production, said Juan Alarcon, chief executive of Turbana Corp., a Coral Gables, Fla.-based grower and importer.

More recently, “supply is getting to a normal situation” and more in line with demand, Alarcon said June 29. Banana volumes in the U.S. market “should be normal from now until the end of the year,” barring any additional weather problems, he said.

“We don’t expect an undersupply,” Alarcon said.

With very little domestic production, the U.S. relies almost entirely on Guatemala, Ecuador and other Central and South American countries for banana supplies. Bananas are one of the top-selling fresh produce items, and a steady supply is crucial for food retailers.

No. 3 in produce department

Bananas are the third-biggest fresh produce item at the U.S. retail level in terms of dollar sales, trailing tomatoes and apples, according to FreshLook Marketing Group, a Hoffman Estates, Ill.-based researcher. During the 52 weeks ending May 22, banana sales at U.S. supermarket chains totaled $2.47 billion, or 6.6% of overall produce sales totaling $37.3 billion.

Many retailers scaled back banana promotions earlier this year because of insufficient supplies, as importers declared “force majeure” — unforeseeable circumstances that prevent someone from fulfilling a contract — on some shipments, Alarcon said.

In quarterly reports, Chiquita Brands International Inc., Dole Food Co. and Fresh Del Monte Produce Inc., the three largest U.S.-based fruit companies, said the weather problems led to lower shipments and tight supplies during the first quarter, raising their costs, though the companies offset that by charging higher prices.

The three companies, which account for about 85% of U.S. banana imports, according to analysts, declined comment for this story.

Prices

While supplies have grown, the effects of last year’s weather woes linger in banana prices that have risen faster than many other fruits. The higher prices also reflect high oil prices that have increased shipping costs, Alarcon said.


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