Banana Producers in Mexico Face Marketing Crisis due to Low Prices

For banana producers in the Mexican state of Veracruz, it has been more expensive to produce this year’s harvest than the price they offer for it. The global downward trend in banana prices has also affected the average price in Mexico. In Veracruz, however, the third-largest producing state in the country, prices have gone down to the extent that this year’s production is worthless. Producers are opting to lose harvest on their own land than invest in transporting the products.

Continuous Production Increase Lead to Lower Prices

Similarly to the global situation, banana production in Mexico has grown considerably over the past years. In 2020, Mexico reached the highest banana production recorded ever at 2.46M mt, a 3% YoY increase. Chiapas, Tabasco, and Veracruz are the primary producing states since they generate more than 60% of national production. Moreover, according to figures from the Agrifood and Fisheries Information Service (SIAP), Mexican banana plantations generate notable yields, exceeding the world average, with a harvest area representing 1.4% of the world's total production area.

By 2021, it is estimated that Mexico’s banana production had maintained its previous upward trend by reaching an approximate 2.5M mt. However, that year, Hurricane Grace struck Veracruz, destroying crops, which represented a significant loss for banana production in that state. Contrary to Veracruz, the states of Tabasco and Chiapas, the first and second-largest producing states, respectively, had an overproduction over the same period. The overproduction of plantains in Tabasco and Chiapas caused prices to continue falling for the producer, but not necessarily for the consumer, as there is still plenty of supply in the market.

According to Tridge’s Price Chart, the wholesale price for bananas in the state of Veracruz plummeted by 43.7% YoY and by 27.6% MoM. In W3 of May-22, the wholesale price for bananas in the Xalapa market stood at USD 0.47/kg, while the price for the same week last year was at USD 0.84/kg. The price also had a significant monthly decrease, when in W3 of Apr-22, the price stood at USD 0.65/kg.

Rising Production Costs Lead to a Marketing Crisis

Besides facing a damaged harvest in the state and an oversupply from others, Veracruz banana growers have also faced the skyrocketing cost of agricultural inputs. General rising costs through different types of crops in Mexico have severely affected producers' profits and led to national concerns. High production costs are mainly driven by the price of fertilizers, which have increased by 200 to 300% in Mexico due to the conflict between Ukraine and Russia, as Russia is Mexico's leading fertilizer supplier.

With the current scenario that producers face, it has become more expensive to produce bananas than to sell them, let alone invest in transportation and labor. As a result, producers have left the fruits in the trees, and in some cases, they have been able to allocate them for livestock feed. Furthermore, Mexican authorities recognize that they do not have the capacity to deal with the crisis due to the economic magnitude of providing support for more than 300 producers. Therefore, no current support will be provided.

The situation has put banana producers in Veracruz in a critical situation where they need to decide the actions to take for the rest of the year with the risk of losing a considerable amount of the harvested area to plant other crops in the near future.