Banana price in 2024: producers ask for an increase to $8 a box, and exporters to stay at $6.50

With less than three months to go until the end of 2023, Ecuador’s second largest non-mining and non-oil export sector is already thinking about next year. In a few days, banana producers and exporters are expected to begin technical conversions to determine the new price of the fruit in light of the signing of contracts with various international destinations for 2024.

According to data from the Ecuadorian Federation of Exporters (Fedexpor), based in the Central Bank, from January to July, the fruit generated $2.295 million for the country, with a 19% growth in turnover and 8% in exported volume. However, the task of reaching an agreement is not an easy one for the sector, which in 2023, despite reaching a consensus on the price set for this year at $6.50, failed to maintain that approach to sign them. contracts for 100% of the fruit to be exported until next December, due to the decision of the production sector to sell part of its production to place (at market price and without contract).

Despite the deadlines for signing the contract, sales at spot prices were imposed for bananas in 2023

It is known from this sector that only contracts for 30% of the fruit have been signed, and the rest comes from sales in place. This was stated by Franklin Torres, president of the National Federation of Banana Growers (Fenabe). However, the leader points out that his sector is waiting for negotiations in the coming weeks, which will come with a proposal to increase the price of a box of bananas to $8.01, $1.51 more than the current price.

To support his point of view, Torres shows the studies that the sector will present at the technical tables. The analysis reflects a production cost per box of bananas of $7.28, plus a “reasonable” profit of 10% corresponding to $0.73 per box. These calculations of annual production and maintenance costs are based on an area of ​​50 hectares with a production of 2000 boxes per hectare.

The study includes six variables to calculate those costs per hectare: direct labor is calculated at $6,988.87 and indirect labor at $1,119.71; with supplies ($4,952.52), infrastructure and equipment depreciation ($358), miscellaneous materials ($88.87), and taxes and miscellaneous services ($1,055.50), resulting in a cost of $14,563.47 per hectare.

These are the annual production and maintenance costs of a conventional 50-hectare banana plantation in 2024, according to Fenabe calculations:

“Exporters will have to lower their ego level for direct, transparent and honest negotiations,” says the head of Fenabe.

The export sector, for its part, will come to the negotiations, which are scheduled for the second half of October, with the idea of ​​maintaining the current price of fruit, i.e. $6.50 per box. Among their arguments, reveals Richard Salazar, executive director of the Association of Banana Sellers and Exporters of Ecuador (Acorbanec), is the high sensitivity of international markets to the price of the fruit.

He explains that in the case of the European Union, its main destination, Ecuador has an important competitive advantage because these destinations calculate the price they pay for the fruit based on sustainable practices that Ecuador adheres to, such as paying a minimum wage and not labor exploitation.

“In the case of Ecuadorian bananas, we have surpassed the methodology they use to calculate, so this is an important competitive advantage. Other markets, especially Russia, are very sensitive to prices, you have to be very careful because price increases can affect shopping in the Russian market. In Russia, inflation is high, conflicts continue and there are internal problems, and the increase in prices could result in a decrease in demand,” explains Salazar.

Acorbanec’s latest export report, from January to August, places Russia as the top destination country for Ecuadorian bananas with 20.72% of shipments to the country. It is surpassed only by the European Union (29.89%), which is a bloc of 27 countries. The second destination country for local bananas is the United States with 9.39%, followed by the Netherlands with 7.27%, Turkey with 5.33% and China with 4.34%.

In eight months, banana exports increased by 7.17%, with Russia as the first country receiving the fruit and the EU as the first bloc

Salazar points out that the sensitivity of prices on international markets was one of the inputs that left the participation of the export sector at Fruit Attraction in Madrid, a fair that gathered delegations from 135 countries last week and at which Ecuador was the most well-fed for the second year in a row.

“This fair gives us several important inputs, price sensitivity. Bananas are an export product that depends on the world market, and the markets are very different from each other, but in any case, this is what the technical negotiation table is for… and by mutual agreement, establish a consensus for the minimum support price, and obviously we will go with the position of market analysis by market,” advances Salazar.

Price place remains high and exceeds $10 per case

Although exporters hope that this year the production sector will return to signing contracts for the export of fruit and stop selling at low prices. placeRichard Salazar, CEO of Acorbanec, admits that price is currently on the rise and averages more than $10 per case.

However, he emphasizes that there are markets such as the European Union, the United States of America, Japan and others that are destinations that buy fruit under contract, which would force producers to sign these obligations.

Exporters: 55% of the destination markets for Ecuadorian bananas are ‘spot’, the market eventually imposes itself

“Last year, the export sector had the need to conclude contracts, but many producers did not want to do so in violation of regulations. This year we will also discuss contracts, but we hope that just as exporters are obliged to respect, producers are obliged to respect the law, in this case when signing contract,” Salazar points out.

He clarifies, however, that it is not negative to sell place recognizing that there are more and more markets that use this form of marketing, which indicates that mechanisms for adaptation to these markets must be sought, but under the control of the Ministry of Agriculture and Livestock (MAG). Please note that it is for this reason that your sector has requested reform of the Banana Law to make the market inclusive and fair. place.