Ecuador announces new banana pricing system for 2021

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Ecuador announces new banana pricing system for 2021

The Ecuadorian Minister of Agriculture has announced a new system for the controversial minimum per-box banana price for 2021, which will vary throughout the year.

The official price payable by exporters to growers will be split into four periods during the course of the year to reflect the changing market demand.

Between weeks 1 and 16 the price will be $6.90, while from weeks 17 to 32 it will be $6.60.

Then in the second half of the year, from week 33 until 42 it will drop to $4.50, then rising between weeks 43 and 52 to $6.40.

However, contracts can still be signed using the weighted annual price of $6.25. The current annual price per 18.14kg box is currently US$6.40.

The pricing system was decided by the Ministry of Agricultural after negotiations between grower and exporter groups earlier this month failed to lead to an agreement.

Exporters had wanted to decrease the price to improve their competitiveness while growers had wanted to increase it amid rising producing costs.

The Ministry said this differentiated pricing model will allow the industry to generate more income when its production is higher and to better cope with the normal fall in demand that occurs from June to October of each year.

It will also help prepare them for the increased sales and production that takes place from November to October. may.

Ecuador, due to its geographical location, concentrates the highest fruit production in the first half of the year.

Despite the Ministry's announcement of a new pricing system, Richard Salazar, executive director of the banana exporters' association Acorbanec, told that the industry already had a similar system in place for the previous few years, with the differentiated prices and a fixed price.

"We were looking for it to be lower given market conditions, which will not vary in 2021, we were looking for USD 6, but it did not come," he said.

"We are going to have to negotiate with our customers abroad, but nevertheless we believe that that price is still high. There is already pressure from supermarkets in Europe to lower the price a box of bananas and the same thing is happening in other markets, such as Russia, the Middle East and Eastern Europe and Africa as well."

He added that the challenges related to the Covid-19 pandemic next year will continue, while the falling price of oil will impact the purchasing power of markets like Russia - Ecuador's biggest banana market by far - and the Middle East.

Meanwhile, local website Expreso this week reported that banana prices have experienced a considerable decline in international markets due to the excess of fruit shipped from Central America and Ecuador.

"There are still ships waiting to enter Russia and Turkey especially, where production peaks have been directed, causing them to be oversupplied," Salazar was quoted as saying.

This year, the price of a box in Russia is well below the weekly average achieved last year. Russia is the most important consumer of Ecuadorian bananas, as it accounts for almost 20% of all exports, and the devaluation of the ruble continues affecting imports.

The price in Turkey in August, the third most important market for this fruit, reportedly fell from $7.31 CIF in 2019 to $6.97.

Prices in the European Union, where some countries have returned to confinement, have also decreased significantly. In week 42, prices reportedly fell by 10.4%.

Correction: Following the publication of this article, Ecuador's Ministry of Agriculture announced that the new prices for the first half of 2021 had changed. This is now reflected in the article.

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