This Tuesday, October 24, banana producers and exporters will meet for the second time to reach a consensus and set the price of a box of bananas for 2024. The producer sector argues that it is currently cheaper to export the fruit due to falling prices and some costs, an argument that supports its demand for by increasing the price of a box from $6.50 to $8.01 or at least $7.50. The executive director of the Association of Ecuadorian Banana Exporters (Aebe), José Antonio Hidalgo, answers and explains why his sector is trying to maintain the current price.

The manufacturing sector indicates that they could accept up to $7.50 as the price of a box of bananas by 2024. Would they accept that increase?

This price increase could lead to a decrease in demand for Ecuadorian bananas. International buyers may look for more affordable alternatives, especially if competitors in Ecuador can offer lower prices. Furthermore, price increases could undermine the efforts that Ecuador makes through its trade agreements, as the product becomes less attractive despite the preferential terms obtained through such agreements.

With the $7.50 proposal, there is a risk of losing competitiveness in various markets, distorting the perception of the Ecuadorian banana sector and creating a situation of long-term instability and vulnerability in international markets.

There was no agreement between producers and exporters to determine the price of bananas for 2024, next Tuesday they will try again

Why is the export sector trying to keep the price as it is, at $6.50?

In order to remain competitive and prioritize formality by encouraging more fruit contracting by 2024. Furthermore, our proposal covers reasonable profit and all components based on optimal national average production levels, where any scheme of differentiation between parts can be managed according to their certificates, sustainable efforts and national or international circumstances, but with a base of $6.50.

The production sector assures that cartons and freight have become cheaper and that the export of a box of bananas is now $1.70 cheaper, which is why they are asking for a better price. It’s true?

The local cardboard industry in Ecuador has seen an intensification of internal competition, which has led to a decrease in the cost of cardboard for banana exporters. This situation led to an average drop of 23%. This reduction represents a significant reduction in export costs.

Why is this cost cutting happening?

It comes from the seasonal nature of banana production. Falling demand during the low export season motivates cartoners to cut prices to maintain sales and production. These dynamics suggest a significant vulnerability to price fluctuations, predicting that the end of a period of low demand is likely to lead to an end to reductions in carton prices, a re-establishment of previous costs or even an increase in them.

So is it a benefit or not for the export sector?

This does not represent a net benefit for the export sector. In reality, it acts as a form of “compensation” for the extremely high prices of previous years, exacerbated by extraordinary circumstances such as the pandemic and its consequences, as well as other war conflicts. Therefore, more than financial relief, it represents a market adjustment, highlighting the sector’s ongoing exposure to price volatility and the need for more resilient and predictable input procurement strategies.

At the same time, producers noticed a favorable trend in terms of agricultural inputs. Reducing costs not only eases financial pressures, but also increases your ability to sustain your farming practices. A reduction of 12% in fertilizers and 6% in fungicides represents an opportunity to reinvigorate banana plantations that have suffered during 2022.

The technical table for the determination of the minimum support price for bananas for 2024 was placed with the third proposal

Cost reduction might be an advantage for Ecuador, but what advantages do competitors have over us?

Ecuador stands out in several aspects that contribute to its reputation and quality in banana production, such as its commitment to a living wage. However, in the global competitive arena, other banana-producing countries have their own strategic advantages that allow them to compete effectively, despite Ecuador’s advantages.

For example, while Ecuador has introduced strict regulations to ensure the quality and welfare of workers through the Banana Law, some competitors operate under looser regulations. This allows them to quickly adapt to market changes, adjust prices and potentially operate with higher profit margins.

In the case of countries like the Philippines, the proximity to key Asian markets gives them a significant advantage in logistics costs (same situation with the United States and crossing the Panama Canal for our cargo going to the European Union). Lower transportation costs translate into more competitive final prices in these markets, making your products more attractive, especially in price-sensitive regions.