Bananas and various vegetables on display in a fruit and vegetable store at Villeneuve d'Ascq, near Lille, northern France, in July 2020. The prices of fresh fruit from conventional agriculture have increased by 17% in France over one year. Photo: AFP / Denis Charlet

It is green, yellow, white and brown, it grows on trees, it looks like a boomerang, it has been with us for thousands of years and you can find it all over the planet and in many forms. What is it? Right, the banana. 

Over the past few decades, the banana trade has experienced an important rise thanks to the improvements made in shipping and ripening. Freshly harvested, unripened perishable products are loaded into the container and cooled to a holding temperature in a range of from about 14 to 21 degrees Celsius.

Use of very low oxygen concentrations and minimal ethylene concentrations can produce a fruit whose pulp is riper than indicated by the color of its peel. In other words, they ripen during transportation to the place where they will be sold.

The second stage of development in the banana industry came when people realized that the use of fertilizers and pesticides might lead to reduced soil fertility, over-exploitation of soil, and pollution. Besides that, at the beginning of the 21st century, Human Rights Watch found that in some countries banana workers were the victims of serious abuses. To be more precise, eight-year-old kids had been working on plantations in hazardous conditions.

To solve the problem, a series of certification initiatives of banana plantations have been introduced. One of them was Good Agricultural Practices (GAP), a set of rules that promote economic, social, and environmental stability, developed by the UN Food and Agriculture Organization.

Unfortunately, after 18 years we are still facing the same issues: Chinese banana plantations in Bokeo province, northern Laos, were accused of dangerous working conditions, as well as pollution. This August, a Lao farm worker was presumably beaten and tied up by his employers at a Chinese banana plantation in northwestern Laos in a dispute over working hours.

In March, Public Eye published a report raising allegations of labor rights abuse, including pesticide use, child labor, corruption, and lack of social security and living wages, on Ecuadoran banana plantations with links to Swiss-based Chiquita.

Apart from these negatives, the global banana market, excluding plantain, increased 10.2% in 2019, to a new record high of around 21 million metric tons. Strong supply growth has been registered in Ecuador, the Philippines and Panama. Some countries such as Costa Rica and the Dominican Republic experienced a slight drop due to adverse weather conditions. 

It is also worth mentioning that Ecuador continued to benefit from the scheduled tariff reductions under the European Union-Andean agreements in 2019, which facilitated imports into the EU market at a reduced rate of €83 (US$98) per metric ton throughout the year.

Overall, global banana production is estimated to have grown from 69 metric tons in 2000-2002 to 116 tons in 2017-2019 (an approximate value of $31 billion). Curiously, most of the global increase in production has taken place in the top producing countries that are also top consumers, particularly India and China, but also in Brazil and the Philippines.

In addition, income growth and rising health awareness in import markets have contributed to higher demand, with banana consumption rising substantially in the European Union and the Russian Federation, for example.

According to an FAO study, income growth and changing consumer preferences in both emerging and high-income markets will act as the main factors facilitating growth in trade, alongside improvements in transport and supply-chain management. Thus tropical fruits are expected to continue to be among the fastest-growing agricultural sectors.

On the other hand, we shouldn’t forget that we live in times of uncertainty, and the banana market is also subject to challenges, such as natural disasters or other crises like the one we are living through right now, the Covid-19 depression. 

Lockdowns to control the spread of the virus have affected the transportation sector, especially air freight. As a result, it could have a considerable impact on producers of perishable tropical fruits. On the other side, it might challenge production and supply to international markets.

We also shouldn’t forget about banana fusarium wilt disease, which has been severely affecting banana plantations in several growing regions since the late 19th century and continues to be a serious concern. Thus it could lead to higher consumer costs in importing countries.

Finally, if we take a look at the Central America and Ecuador banana spot price, we’ll see how it increased from September 2000 until September 2020. Compared with coffee, we could say that the banana market performed worse during the Covid-19 pandemic. 

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Talking about future prices, some were speculating that the recent eruption of the Sangay volcano in Ecuador had affected thousands of hectares of the country’s fruit and vegetable crops. In reality, growers are used to this sort of event, so they managed to minimize the overall damage. At least, that is what they said. Besides that, there is a worldwide oversupply of bananas and demand has decreased by about 30% due to the pandemic.

In conclusion, raising awareness about the positive nutritional value of fruit could retrieve an upward trend in the consumption of bananas and tropical fruit. On the other hand, the market is clearly oversupplied, which in the short term could push prices further down. For a full recovery, economic activity will need to rebound.

Igor Kuchma is a financial adviser who is passionate about economy and the capital markets in general. He has experience working with Russian, Spanish and American financial institutions. He helped to compile a course for the Series 7 exam, while some companies he has prepared investment portfolios and macro and microeconomic models in Excel, and has studied trends and historical data.