Ukraine/Russia conflict and what it means for bananas in North America

The banana market is about to come into some twists and turns.

Currently, supplies of bananas are lower and have been since the beginning of the year. Supplies are also lower compared to other years.

“This is due to a combination of many things,” says Andy Thomas-Stivalet of Kadivac Produce. Most notably is fertilization costs. “A lot of producers last year stopped fertilizing because of the increases in the costs of fertilization. That’s the largest contributor to the low supply.”
At the same time, increasing freight costs continue to be a factor influencing just how much fruit is coming into the U.S.

Supplies building again

However supplies are about to pick up by approximately 10 percent. “We estimated this would happen around week 10 and it’s panning out. And once spring kicks in, maybe by week 18, we should see a lot more supply hitting the market,” says Thomas-Stivalet.

Currently, Guatemala is the key supplier of bananas into the U.S. followed by Costa Rica and then Mexico and Honduras. Mexico, particularly the West Coast of Mexico, also supplies bananas to Russia. “So with the sanctions, that will dump a lot of supply to our side of the world,” says Thomas-Stivalet. “Though Mexican fruit may stay in Mexico because Western producers don’t have the infrastructure to make it up to the U.S. So that may depress prices in Mexico.”

And then there’s Ecuador, a significant banana growing country that supplies Asia and Europe, including the Ukraine and Russia. However, Thomas-Stivalet notes that Chiquita is working on bringing that fruit not making it to those two warring countries to the U.S. This season, much of the Ecuadorian fruit had been priced out of the U.S. market due to significant freight costs. “But the spot market is apparently $3/box right now and if that’s the case, it’s economically feasible and lucrative for them to bring that fruit to the U.S. They’ll drop fruit from other countries to substitute Ecuadorian fruit,” he says.

Meanwhile demand for bananas looks good but heading into March, the month of spring break vacations in the U.S., demand is slowing down.

Shifting growing countries

However there is a shift on what fruit U.S. consumers prefer. “The highest quality of fruit you see in the U.S. now is from Mexico or Guatemala. It’s the largest fruit and the sweetest. Other countries such as Honduras and Costa Rica are packing fruit that barely meets market specifications,” says Thomas-Stivalet. “The market seems to be shifting its preferences to fruit closer to the U.S., which makes sense too because it’s cheaper to get it based on logistics costs.”

Regardless of where fruit is sourced from, undoubtedly the industry will continue to keep an eye on the conflict between Ukraine and Russia and the potential financial fall outs. “Russia is one of the largest suppliers of nitrogen and with the sanctions, that will cut off the nitrogen supply to most of the world. That means the price of fertilizers is going to go up exponentially if this continues,” says Thomas-Stivalet, noting nitrogen is also the fertilizer that, by volume, is used the most. “Ukraine is also an important supplier of nitrogen and other important fertilizers and Belarus is also a really large supplier of other materials used in fertilizer, such as potash. So we’re looking at a worst-case scenario in terms of the world’s supply of fertilizers after coming off a really bad year for fertilizer costs.”

On banana pricing though, currently it’s good and stable in the U.S. “The spot market was a little bit higher than we saw last year. But that’s because everyone priced in the inflation increases at the end of last year with contracts for this year so the base level price for bananas is much higher,” he says, noting the short supplies are key in also making that pricing strong. “When we head into summer, prices will start coming down because there’s going to be more production in the tropics,” he says. “I don’t know how much more they’ll come down. It may not be much because freight prices are increasing. We’ll just have to see what happens with fuel and fertilizer.”