Between the uncertainty caused by the effects of El Niño and expectations surrounding Ecuador’s trade agreement with the European Union (EU), the banana sector in the South American country is cautiously optimistic about an increase in exports to the UK during the course of this year
According to figures from the Central Bank of Ecuador (Banco Central del Ecuador) quoted by Eduardo Ledesma, the president of the country’s banana exporters’ association (AEBE), by October 2015 sendings to the UK market reached 3% of total exports – an uplift of 0.44% compared with the same period in 2014. This represents a 40% increase overall in both volume and value terms for the UK.
“In absolute terms, up to October last year, 148,492.14 tonnes were sent to the UK, an increase of 32,068t, which demonstrates the interest there is in Ecuadorian bananas,” Ledesma tells Produce Business UK.
El Niño and the political climate
Ledesma further indicates that the forecast for total Ecuadorian banana exports in 2015 are in the order of 5.37 million tonnes – a figure similar to that of 2014. And for 2016, the prognosis is for another comparable volume since the effects of El Niño so far are not as serious as initially anticipated.
“Banana shipments depend on the climatic situation during the first quarter of 2016,” Ledesma stresses. “The El Niño effect is not as strong as scientists were predicting. The national and provincial governments are working so its impact on our road infrastructure is as minimal as possible.”
Meanwhile, the reduction in import tariffs in Europe is one of the changes most eagerly awaited by Ecuadorian exporters such as TropicalFruit Export, which is trying to break into the UK and wider European marketplace.
“Exports to Europe are going to be complicated given that Ecuador has a large tariff disadvantage compared to Colombia and Costa Rica, which makes Ecuadorian fruit more expensive,” points out Oswaldo Menéndez, TropicalFruit Export’s general manager.
Nevertheless, there has been progress in this direction. In November last year the European Parliament approved Ecuador’s inclusion in the European Union’s trade agreement with Colombia and Peru.
“Important steps have been made over the last few weeks towards the agreement coming into force,” Ledesma emphasises. “The governments of Colombia and Peru have given their approval for Ecuador to join the multi-party agreement.”
Despite Costa Rica and Colombia’s increasing presence on the EU marketplace, Ecuador continues to be “the chief supplier” to this market and it “will continue to be” once it has the same tariff as its competitors, according Ledesma.
Lower support price
In the expectation that the agreement will at last come into force and in order to maintain the competitiveness of Ecuadorian product, Ecuador’s Ministry of Agriculture has announced that the official price for a box of bananas this year will be set at US$6.16 (£4.28).
“With this price – which is lower than the price paid in 2015 (US$6.55 or £4.55) – our bananas face better prospects on the EU market in 2016,” Ledesma points out.
He adds that the reduction was agreed among producers and exporters by taking into consideration the increase in supply of the fruit and the economic recession affecting markets such as Russia, the Middle East, and the Mediterranean region, which are suffering depreciation of their currencies in relation to the US dollar.
“Furthermore, 95% of our fruit has to travel via the Panama Canal, whereas that of our Latin American competitors does not, and this incurs an extra cost which means our bananas face a significant disadvantage,” Ledesma adds.
Measures for trading fairly
As far as fair trade measures are concerned, AEBE highlights that Ecuadorian legislation has established norms and regulations to promote fair pay for producers and their workers and also to ensure that the latter benefit from mandatory insurance.
Ledesma stresses these measures even include a provision for the suspension of exporters who fail in their duty to producers. And in announcing the reduction in the minimum price to exporters, agriculture minister Javier Ponce Cevallos indicated that the export sector will be required to ensure that at least 15% of export volumes are supplied by small producers.
In regard to the UK market, Francisco Mena, ProEcuador’s UK trade commissioner, tells Produce Business UK the aim is to distinguish Ecuador as a supplier of the best quality products.
He stresses that the geographical position of his country on the Equator means its bananas have special characteristics due to the intensity of the sun’s rays, combined with the mineral richness of its volcanic soils.
Meanwhile, Ledesma highlights other advantages of Ecuadorian bananas. “It is a fruit which does not face the stress of harmful diseases such as [Black] Sigatoka, it has a longer shelf life compared to similar products, responsible sales contracts and legislation that protects the environment,” he explains.
TropicalFruit Export’s Menéndez agrees; emphasising that: “Ecuador has less incidence of Black Sigatoka compared to other countries such as Costa Rica and Colombia, which means the fruit goes through fewer fumigation and fungicide cycles every year.” That, of course, translates into a saving in production cost terms.
Menéndez is hopeful TropicalFruit Export will ship 100-120 containers of bananas a week to Germany, the Netherlands and France this year.
“We are starting with a very small service to the UK of just one container a week,” he reveals. “The idea is to start small and to get to know the market and the customer, and then to be able to grow in the longer term.”
Menéndez highlights the professionalism of the UK market as just one attraction for distributing fruit there. “It allows us to get organised on an annual basis and negotiate prices just once for the year, which permits long-term organised growth,” he points out.
Ledesma echoes this sentiment: “Plans for the immediate future are to increase our presence on the UK market which will become even more meaningful once the trade agreement with the EU comes into force”.
Read other articles in PBUK’s Sourcing Spotlight on Ecuador: