Banana export contracts remain uncertain. MAG would have given an extension until January 15

It began in 2023 and the signing of contracts for the export of bananas for this year is still an uncertainty. The deadline that the Banana Law gives for signing these contracts is December 29 of the previous year, that is, the date expired last Thursday. Two days before that deadline, according to the export sector, only 25% of the contracts for 2023 had been signed; while from the producing sector they assured that this percentage did not reach 10%.

These first days of January the situation has not changed, according to Richard Salazar, executive director of the Banana Marketing and Export Association of Ecuador (Acorbanec), who revealed that the Ministry of Agriculture and Livestock (MAG) issued an extension of 15 days (until next January 15) for new contracts to enter a sector that in 2022 closed with losses of around $258 million and that in the first quarter of 2023 projects average falls of 10% in volume of exported fruit .

Banana sector leaves behind a 2022 with approximate losses of $258 million

However, Salazar calculates that the signature of these for that date does not exceed 30%; and the remaining 70% of the fruit will be sold in spots, that is, without a contract and with the international market price according to supply and demand, despite the fact that the minimum support price for the fruit for this year, set by the MAG and in agreement with producers and exporters, is $6.50.

However, the executive director of Acorbanec recalled that it is the producers who are reluctant to sign the contracts to take advantage of the price spots, which from week 1 to 51 of 2022 averaged $6.43, higher than the $6.25 minimum support price for that year.

“That finally denotes that this law (of bananas) does not adjust to the reality of the business. I think (sell spots) it is a natural way of adapting to the market,” said Salazar, who indicated that in any case there are markets with which contracts are being signed, which would be part of the 30% of the fruit that is exported this way. Those markets are the European Union, the United States, the United Kingdom and Russia.

Meanwhile, the markets to which the fruit will arrive through the spots they would be the Middle East, Eastern Europe, Africa, East Asia, Central Asia and a part of Russia.

For his part, José Antonio Hidalgo, executive director of the Association of Banana Exporters of Ecuador (AEBE), preferred not to give a percentage of what has been signed so far, although he assured that the export sector has pressured the MAG so that the contracts that are entering are registered as soon as possible.

“The authority is the one that has to manifest what it has entered because the processes are daily, everything changes daily. We hope that what is established in the law is complied with, as we have always stated, formality must prevail and according to the law, fruit that is not contracted cannot be exported,” said Hidalgo, who assured that it is the responsibility of the MAG to comply with the legislation.

On the strategy of the producing sector to sell the fruit at a price spots, Hidalgo indicated that “they are playing at a price-opportunity” and warned that when a season of low prices comes they will not have support to be able to exercise the appropriate legal processes.

High banana ‘spot’ price confronts exporters and producers and would complicate contracts for 2023

Meanwhile, Franklin Torres, president of the National Federation of Banana Growers of Ecuador (Fenabe), confirmed that there are no changes in the conditions of contracting the fruit, although he did not confirm that the MAG has issued the extension until January 15 for entry of new contracts.

“The contracting conditions for the fruit have not changed. The same contracts are offered with the previous vices of illegality and irregularity. The MAG is still not in a position to control these contracts and the exporters do not provide, as before, the security of compliance with these contracts,” said Torres, who added: “Unfortunately the banana business is currently a high-risk business caused by non-compliance with current Ecuadorian laws and signed contracts”.

This newspaper consulted the MAG on Tuesday about the current situation of export contracts for 2023 and the 15-day extension for the entry of new contracts, but until the closing of this edition there was no response. (YO)