Friday, 11 April 2008

RP bananas in great demand in Middle East

The Manila Bulletin

GENERAL SANTOS CITY — Philippine bananas are now in great demand in the Middle East due to tight supply triggered by floods that devastated huge banana plantations in Ecuador, the world’s biggest banana producer.

And this short supply of bananas from Ecuador and Costa Rica sparked a price war in Mindanao, particularly Davao Region, the banana capital of the Philippines, as Middle East trading firms compete in buying for their markets in the Gulf countries.

An estimated 80,000 hectares of Ecuador’s banana plantations were damaged by floods last month. Hardest hit were farms in Guayas region where vast plantations were covered by water for more than a week.

"Bananas could survive flood for a maximum of 48 hours, after which the fruits could not pass export quality. If flood water remains for more than 72 hours, banana fruits are totally spoiled and are then dumped," an industry source said.

Experts say the devastation in Ecuador quickly caused a shortage of not less than 200-million boxes in the export market.

"Consequently, banana prices shot up supply lines, tightened and created a huge demand forcing independent traders in the Middle East, like Abbar and Zainy (ANZ) to come to Davao City and engage in spotbuying for bananas," the source said.

The banana business in the Middle East is controlled by small players and ANZ is one of them.

Multinational companies that supply Cavendish fruits in North America, Europe and Middle East are also buying bananas from Davao’s 50,000 hectares of Cavendish farms.

"Owing to shortfall of banana production in Ecuador, ANZ was forced to look elsewhere for bananas to meet the demands of their seven major retail cold stores since their competitors resorted to spot buying in bananas countries in Latin America pushing prices to all- time high," he said.

He said this claim on "corporate social responsibility" by the new players in the banana industry like ANZ is nothing but empty rhetoric, since they knew that 99.9 percent of banana growers in the Philippines have existing marketing contracts.

ANZ officials led by its chairman Sheik Adnan A. Zainy claimed in Davao City last week that they are not into price war with other traders operating in Davao but this only cast doubts on their sudden emergence in the area.

With banana growers bound by marketing contract, ANZ and Unifrutti firm have to lure growers to sell or pole vault their bananas by engaging in spot price nearly twice the prevailing contract price ranging from .30 to .40 to as high as .95 to .50 per 13-kilogram box.

But ANZ Chairman Sheik Adnan A Zainy declared during the opening of ANZ buying station here, Aztropex, Inc., that the "price war is a myth," which ironically, got the support of Vicente Lao of the Region 11 Development Council. Lao owns Maharlika Agri-Ventures, Inc., one of the buying fronts of ANZ.

Lao’s company, which is engaged in poultry, is new in banana trading. Apart from RDC, Lao also chairs the Mindanao Business Council.

He announced that he has 200 banana contract growers, which the Philippine Banana Growers and Exporters Association doubts, although, the group said Lao might have contracted a few small independent growers.

The Philippine Banana Growers and Exporters Association is alarmed that the black market created by the price war might backlash in the long run.

Gov. Rodolfo del Rosario of Davao del Norte, who once ran the biggest banana plantation in the province, warned the "price war is alarming."

"I have nothing against new investors but ideally they should develop new plantations so that this will translate to new production output, more job openings and revenue for the government," Del Rosario stressed.

"Governor Del Rosario is right. For the new players just conveniently wait in the bend for grower’s marketing contracts to expire and scuttle the renewals by outbidding the present trading partners partakes of piracy and unethical business practice," another industry source said.

Apart from the Middle East market, new export markets for bananas have opened up in China and Russia.

New areas have to be developed to guarantee supplies.

He said the Middle East markets looks good at present but Ecuador will rehabilitate its damaged banana farms and in two years their production would stabilize.

ANZ and other banana traders in the Middle East are expected to again source out Cavendish from Ecuador.

"I doubt whether ANZ, despite its claim, would develop new banana farms. I suspect that the -million they are bragging they would invest in bananas would just be earmarked for buying and trading. In the black market, -million is merely 12 million boxes," the source added.

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