Banana prices: How much leaves Ecuador and how much comes in and is sold on international shelves?

The 2024 minimum support price (MSP) for bananas is no longer an unknown this Monday, November 6: it will be $6.85. This value, which represents an increase of 35 cents or 5.3% compared to the current value of $6.50, is only a base from which domestic exporters begin to negotiate with fruit importers in various destinations. internationally, where Ecuador is not the only supplier and its bananas, as well as those of its competitors, can reach and triple that minimum price when they hit the shelves.

The journey of this export until it reaches the table of those European, North American, Asian, African and Middle Eastern consumers, which has a total of 63 destinations to date, is full of values ​​other than $6.85 with that, in 2024, 43 pounds of fruit will be shipped which is in each box. For example, there is a minimum reference price (PMR) or FOB price set in the country which will be $2.16 for the next year, which is added to the PMS, resulting in the price of a box of bananas escalating to $9.01 and beyond left the country without need.

The role of the new Minister of Agriculture and Livestock influenced the producers’ decision to agree on a banana price of $6.85

What does this minimum reference price mean and what is it for? Richard Salazar, executive director of the Association for the Marketing and Export of Bananas of Ecuador (Acorbanec), explains that the difference between PMR and PMS is the cost of export, that is, of the fruit placed in the port. “This price is determined because the payment system for the uniform tax on bananas (IUB) is calculated based on the FOB reference price, in the case of exporters it is the difference between the FOB price minus PMS, on this difference 3% is what the exporter pays, but it is reference, it also depends on the conditions because sometimes the costs can increase so that cost changes, but in any case it is the minimum that must be declared for the export of a box of bananas. ” Acorbanec has 61 partners representing 43% of the total export of bananas in the country.

Meanwhile, José Antonio Hidalgo, executive director of the Association of Ecuadorian Banana Exporters (AEBE), explains that the minimum price is not always paid for the fruit, since the specifics of each producer’s effort are added to the base price, such as certifications, sustainability efforts, living wages etc.

However, from now on, other values ​​are added to the fruit that is shipped and moves to the destination markets, paid by the importer. Salazar admits that quantifying them is very complicated due to the variables of each market, but he talks about some of those costs as freight transportation, customs clearance at the port of destination, ground transportation to warehouses, ripening and distribution to supermarkets. With all these values ​​calculated for the fruit, it is revealed that, for example, the selling price of a kilogram of Ecuadorian bananas in Europe is on average around 0.99 euros, which at the current exchange rate is 1.07 dollars.

According to the latest monitoring of the weekly Fruitrop, part of an international platform that brings together partners specialized in market analysis with 25 years of experience, the average import price of a box of bananas in the European Union – in general, coming from Ecuador and from its competitors – was 13.91 euros last August ( 14.91 USD), in June 13.07 euros (14.07 USD), and in the United States and Canada 23.89 USD in August and 23.91 USD in June.

Between January and February, the import price rose to 17.43 euros ($18.68) in the EU, and in February it reached $27.59 in North America, according to the specialized publication.

The comparison of the price of bananas leaving Ecuador and how long they arrive at their destinations may be imperceptible to international consumers, but it does not go unnoticed by Ecuadorians who live in those countries and want to buy the fruit. Lissethe, for example, who lives in New York state, says that “here, 4 or 5 bananas are $1.50 at the supermarket, and if you go to a grocery store like Deli, sometimes it’s up to $1 a banana,” she says. migrant, who says she misses the prices of bananas in Ecuador.

Price place Banana stands for Ecuadorian export from informality

Price place This is another thing that the national banana sector takes into account when exporting. This is a way of negotiating without a contract and at the international market price, which, although not prescribed by the Banana Law in Ecuador, is the scheme negotiated by 55% of the market where Ecuadorian fruit reaches. This was the alternative that most producers decided to sell fruit this year, refusing to sign a contract with exporters.

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

According to Ačorbanec’s figures, the price place On average, it was higher than the minimum support price from 2016 to 2019 and 2022 and 2023. Only in the years of the pandemic, with the contraction of international markets and the collapse of prices, the MSP was higher than place.

According to the CEO of AEBE, the law needs to be updated to include this scheme and formalize 100% exports. “We are exposed, there are almost 70 markets, always with different environments, where each has its own way of negotiating. Annual contracting did not disappear with the updating of the law, because there are markets that remain in that contracting scheme, but there are also other actors in those markets who manage by other means of negotiation”, he analysed.

Is the minimum price a straitjacket for exporters?

For now, with PMS as the only option for formal negotiations, Hidalgo laments that despite the consensus with producers, that price of $6.85 for 2024 leaves the export sector without much flexibility to negotiate, in a global environment of high inflation. in different destinations. “In that international environment, also with the conflicts (Ukrainian-Russian and the war in the Middle East) that are still going on outside, we have to monitor it, we are left without much elasticity, but there is a consensus that we have to move forward and that is precisely that there is a formalization of the banana sector in full for next year, to sign 100 percent of the contract,” says the manager.

However, the existence of a minimum price is a double-edged sword for the banana sector, on the one hand it gives them formality and helps them sign contracts with markets that are used to negotiating only once throughout the year, such as the United States and Europe, but it is also a straitjacket when you negotiate with them because you have a floor that your competitors do not: Costa Rica, Colombia, Panama, Guatemala and others, because most of them deal with international prices. , explains the head of AEBE.

In the last six years, five projects to reform the Banana Law passed through the Assembly. None progressed

“They negotiate between the parties, these are contract markets, they are the ones who come with more competitive offers, because we cannot lower the official price, that’s why they got a lot more space,” says Hidalgo. According to AEBE data, in 2022, Ecuadorian bananas would reach 67 destinations, five more than now in 2023. This is why formalization of the price is requested. place.