Ecuadorian banana export trends in 2021 and 2022 expectations

Banana market in Ecuador

Bananas are predominantly produced in Asia, Latin America, and Africa, with approximately 5.6 million hectares of land dedicated to its production globally. Ecuador has become one of the largest global producers and it has earned the number one place in banana exports positioning its high-quality cavendish banana in the global market. Cavendish bananas achieve high yields per hectare, are less prone to be damaged, and are more suited for trade in comparison to than other varieties like burro bananas and manzano bananas. Additionally, Ecuadorian cavendish banana exports are mainly composed of 85% of conventional bananas and 15% of organic bananas.

The global export value reached USD 16.8B in 2020, and Ecuador held 22% of the market reaching exports of USD 3.7B. Ecuadorian banana trade has been accelerated, showing a 4% growth during 2016-2020. However, Ecuador has been facing some challenges through 2021 which has caused a decrease in exports and sales.

2021 First Half: Unstable market and a decrease in exports

The Ecuadorian banana industry started 2021 with a new price scheme approved by the Ministry of Agriculture. The price scheme contained two options:

1. A minimum sustainability price equivalent to UDS 6.25 per standard box (18.14kg)
2. Seasonal pricing with a per standard box value that varies from USD 4.50 to USD 6.40. 

Source: www.eluniverso.com, Ministry of Agriculture and Livestock (1)

The new price scheme was meant to target the challenges the industry had faced with both COVID-19 and Fusarium TR4 (2). The producers insisted that the minimum price should increase to USD 6.90, but the government insisted that the new price scheme would help regain competitiveness in the global industry.

Although the new price scheme was supposed to regain competitiveness and increase exports, this did not occur. During the first semester of 2021, there was a 4.57% decrease in banana export. Until June 2021 Ecuador exported 194.64 million boxes of bananas; 9.32 million less than in the first semester of 2021.

Source: www.primicias.ec, ARCOBANEC

Export decreased due to decrease in purchases in Algeria and Iran due to import policy changes. Also, there has been a slow economic recovery in some countries, for example, the European Union which held a 5% decrease in their fruit exports from Ecuador. Additionally, there was a change of purchase preference in the Chinese Market, replacing Ecuadorian banana suppliers with suppliers from Cambodia, Myanmar, and Vietnam.

On top of external sources of contraction, global container shortage and increasing shipping cost also complicated the market situation. Also, there was a decrease in demand globally which was attributed to homeschooling and a decrease in the demand for bananas for school lunch breaks. Finally, the Ecuadorian banana sector, as well as many other countries, has been facing exposure to Fusarium TR4 fungus which has affected their crops.

2021 Second Half: Continuous Market Complications

During the second semester of 2021, Ecuador also faced some complications that contributed to the overall export market decrease. The second half of the year continued having important congestion in the maritime logistics which led to Ecuadorian suppliers having limited spaces, preventing them from opening new markets or exporting to existing ones. The shortage of shipping spaces obligated banana suppliers to close annual programs due to the lack of space.

During the second semester of 2021, Ecuadorian banana prices experienced an increase, reaching a box farm gate price of USD 6.70. The increase in prices contributed to the decrease in banana exports from Ecuador. Some of the price increases are due to:

• 35% to 45% price increase in fertilizers.
• 35% price increase in cardboard prices.
• 45% increase in plastic prices.
• Increase in ocean freight by up to 62% due to global shortage of containers.
• Biosecurity investment to prevent Fusarium Raza 4.
• Biosecurity investment to prevent contamination of containers with illegal products such as drugs and contraband.

Source: www.elcomercio.com

Additionally to the price increase, other factors also contributed to the decrease in exports. One of them is the supply chain interruption due to the container and shipping space shortage. This interruption makes buyers look for markets in which they won’t have any complications when importing.

During the first 8 months of the year, Ecuador sold fewer bananas at a lower price than in previous years. From January to August, banana exports reached USD 2,345 million representing a 10% decrease from 2020 when Ecuador exported USD 2,611 million. In terms of volume, there was only a 6% decrease, from 5 million metric tons to 4,7 million metric tons.

Source: www.elcomercio.com, Central Bank of Ecuador.

The last four months don’t indicate trends much different from the rest of the year. Everything indicates that Ecuador will close the year with a drop in banana exports of 3.41% compared to 2020 which means an approximate decrease of 240,247 MT. 

Source: www.bananaexport.com and Trade Map

What to expect in 2022

Currently, there seems to be no change in 2022 for the banana sector in Ecuador. COVID-19 and the appearance of the OMICRON variant put Ecuador and the world back in crisis.

In terms of the factors that affected price in Ecuador, there seems to be no change. The logistics and shipping companies are not changing their working mechanism which means that the 2022 outlook does not look good due to the limited availability of containers. There are speculations that freight rates might increase from USD 1,000 – 1,500 per 40 ft containers for 2022. Furthermore, carton box suppliers are planning to increase their prices by 15%-25% for 2022.

On the other hand, Banana exporters speculate that the 2022 official banana price, will remain the same as 2021 at USD 6.25 per standard box (18.14kg). In addition, in December 2021, the Ecuadorian government allocated USD 400 million to fight Fusarium TR4 for the next 5 years. Both of these efforts will help the market recover during 2022.

Banana producers will face multiple challenges to stay competitive including the increase in production costs and changes in external factors. The Ecuadorian banana industry will need to establish competitiveness not because of the price, but because of a stable supply chain with less requirements. In 2021 some regions increased imports including, Africa (47.38%), Eastern Europe (26.86%), United States (7.64%), and Southern Cone (4.77%). The Ecuadorian banana industry needs to target those regions that have the potential to grow and pose no logistic barriers.

Disclaimers:

(1) Seasonal pricing is calculated in a weekly basis. The first week starts on the first Monday of every years.

(2) Fusarium Tropical Race 4 (TR4) is the latest race of the fungus Fusarium oxysporum f. sp cubense. It attacks the roots of the banana causing the Banana Fusarium Wilt disease by clogging its vascular system. Storms such as typhoons can also carry Fusarium TR4 to new plantations.

Sources

Banana Export. Challenges of the banana sector for 2022.

Banana Export. Outlook for Ecuadorian bananas in 2022.

BananoTecnia. Ecuadorian banana exports break their positive trend in 2021.

Banana Traders. SPOT Price for TYPE OF BOX 22XU, 208 in ECUADOR, USD.

CAMAE. Government allocated $ 400 million for a plan against Fusarium race 4, for the next 5 years.

El Comercio. Banana exports fell 9% in september 2021

El Comercio. Ecuador sells less bananas and at a lower price in the first 8 months of 2021.

El Universo. Banana starts 2021 with a new pricing scheme that raises two options.

FAO. What is Fusarium Tropical Race 4?.

International Trade Center. Trade Map.

Primicias. Banana exports fall 4,57% due to slow economic recovery.

Tridge. Intelligence & Data.