When it comes to perishables, it’s hard to match the banana…unless it’s an avocado.

The ubiquitous banana is among the most widely traded agrarian commodities in the world. Each year around $15 billion worth of bananas are shipped to global consumers – with a vast majority of this tally originating (over 58%) in the Caribbean, Central and South America.

While Ecuador doesn’t make it to the top of many economic lists, when it comes to banana exports, the small nation is a giant. Ecuador annually exports around $3 billion worth of bananas representing about 25% of the world’s total exports. The next nation on the list is generally Costa Rica or Columbia with around $1 billion in exports, with a widespread number of countries in Africa and Asia contributing in varying degrees to the total.

But exports are estimated to represent only 20% of production. A vast majority of the 114 million tons of bananas annually produced are consumed domestically. For example, two of the biggest producers, India at 29 million tons and China at 11 million tons are also importers.

Although the banana is now a staple in the diets for many Europeans and North Americans, as agricultural products go, it’s a relatively new business. In Europe, E.W. Fyffe Son & Co organized the first commercial banana shipments to London from the Canary Islands in 1888, setting the stage for the banana trades in the United Kingdom and Europe. In the United States the banana business took off after a banana tree was displayed at the 1876 World’s Fair in Philadelphia. By the mid-1890s the banana trade between the U.S. and Central America was well established with geo-political ramifications that are still making headlines.

The Banana Split: EU-US 

The 15-year “banana wars” pitted the U.S. and Latin American banana producers against the EU for its policy of favoring ACP (African-Caribbean-Pacific) nations – largely former colonies – by placing a tariff on Latam banana imports. In 2009, the EU conceded and cut the banana tariffs from €176 per/mt to €114 per/mt and also donated €200 million aimed to help ACP producers modernize. The EU subsequently cut deals with a number of Central American banana-producing nations to gradually decrease tariffs to €75 per/mt ton by 2020.

However, the agreements contain a special ‘stabilization mechanism’ which permits the EU to temporarily suspend the preferential tariffs when imports exceed pre-defined trigger levels. These are import levels that would cause a disruption to the EU banana market. Importantly, the stabilization mechanisms apply only until the end of 2019, when the import duty will be set permanently at €75/mt (see “trigger” chart on page 24).

As expected, the agreements between the EU and Latin American producers resulted in a shift in exports as European companies bought more bananas from Latin America at the expense of Africa and the Caribbean. Currently about 70% of the EU banana imports come from Latam nations.

Ecuador and Colombia have benefited the most from the new regime and a tariff deal between the EU and Brazil (as part of the Mercosur trading bloc deal) could eventually put more Latam bananas in European households. The big difference between the Latam producers and the ACP is a diversity of customers – particularly with the giant U.S. market on the doorstep. For the considerably smaller African producers, nearly all their exports go to the EU and even though they are “tariff free”, any loss of market-share is significant. Whether the “trade stabilization mechanism” will function to keep bunches of ACP bananas landing on European tables is an open question.

Brexit could also have a major impact on the banana trades. The U.K. consumes around 20% of all the EU bananas. If the U.K. pursues an independent course post-Brexit, it too might shift more purchases towards the Latam producers over the ACP nations. Another potential aspect of Brexit could be a re-routing of shipments. The Netherlands is a massive gateway for bananas coming from all sources as it acts as redistribution hub for all of Europe. With Brexit, will more shipments be direct to the U.K.? Another open question on the banana trade.

While the U.S. “won” the banana trade war, the business has changed greatly since the late1990s. For example, Ecuador shipped over 80% of its exports to either the U.S. or Europe – now that’s changed. New markets have emerged like Russia, Eastern Europe, the Middle East and China and have recut the market share pie. Now only about 40% of the Ecuadorian banana crop goes to Europe or the U.S. Equally new suppliers – some in the Latam – but others like the Philippines, Thailand, China and Mexico (see U.S. import chart) are providing a new dimension to the supply side. 

And then tastes change. In 2018 Descartes Datamyne’s U.S. trade data indicated the unthinkable had happened, stating the avocado had overtaken the banana (in dollar terms) as the top fruit (although the banana is technically an herb). The report noted avocados represented “20.3%, while bananas claimed a 16.3% share of $12.992 billion in U.S. fresh fruit imports in 2017.” The report pointed out, “Between 2013 and 2017, the U.S. share of Mexican avocados slipped very slightly from 77% to 76%, but exports grew 131%, gaining US$1.4 billion in total value and shipped to 17 additional markets, led by Argentina, the United Arab Emirates and Kuwait.”

There is still some consolation for the banana as avocado is way behind in volume terms.

The Box and the Bananas

On February 18th, the MV Chiquita Trader sailing from Costa Rica and Panama called at the Port of Vlissingen (also called Flushing in English) in the Netherlands. Vlissingen is dwarfed by nearby Rotterdam and Antwerp but the call was nonetheless significant on several levels. This made it the first fully containerized Chiquita (Great White) ship to dock at the port and illustrates the change underway for shipping bananas and really all perishables. In the not too distant past, this shipment would have come by a refrigerated “reefer”, a ship full of pallets. Most of these reefer ships were on dedicated service runs to ports with large capacity portside refrigerated warehousing. But with the reefer container, the ship and shoreside demands are different and flexibility in calls much greater.

In many ways, this begins with the container itself. The new generation of Controlled Atmosphere (CA) containers use less energy and have the space for 1,080 boxes of bananas. The port has a 1,000 reefer plugs available for storage. In the new gen banana trade, plugs equal capacity, so adding reefer plugs increases the volume a port can handle. The port wants to build out to be able to handle two more box ships. While a smaller reefer boxship like the Chiquita Trader makes sense for Vlissingen, there is also a trend on the linehaul vessels to add more reefer slots to the mix, making hub ports also a main destination for perishable product. Still reefer volumes are small compared to the number of standard slots on a line haul 14,000-18,000 teu vessel. This gives a smaller specialized niche port like Vlissingen a punchers’ chance at securing and retaining the “banana boat” business with some of the world’s largest ports only a stone’s throw away. 

With the call, Vlissingen is defacto a distribution hub, and shortsea services provided by Unifeeder and Samskip will move the bananas to Sheerness in the UK, Oslo, Norway, Helsingborg and Helsinki in Finland. Brexit could change that rotation and disrupt the Vlissingen aspirations of expanding but for now, the port is a distribution hub for all of Europe, and an apologist for the power of the reefer box.

Editor’s note: The author’s grandfather sailed on the Great White (now Chiquita) banana ships of the early 1900s largely in the Caribbean to Boston/New York trade lane.