Banana Value Chains in the EU

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Banana value chains in Europe and the consequences of unfair trading practices

The Make Fruit Fair! campaign published a research report in late 2015, produced by BASIC, exploring Banana Value Chains in Europe and the consequences of Unfair Trading Practices(UTPs) between fruit buyers in Europe and banana producers in exporting countries, their consequences on farmers and workers, and the relationship with the pressure on prices in European markets.
 
Banana producing countries are predominantly concentrated in South-East Asia, Latin America and the Caribbean, with Ecuador, Colombia, the Philippines, Costa Rice and Guatemala accounting for more than 80% of global exports, with five companies - Chiquita, Del Monte, Dole, Noboa and Fyffes – traditionally dominant.  However, as a result of their divestment of directly owned companies and ships, their share of thetrade in Europe has dropped from 80% in the 1980s to 39% in 2013. 
 
At the other end of the chain, the EU is the biggest world importer of bananas, accounting for 28% of all imports, the majority being sold by the EU’s ten biggest retailers.

Retailer competition has led to the average consumer price of bananas being 25% lower than that of apples, despite the costs associated with being imported from Latin America. The value breakdown of bananas reveals that 41% currently goes to the retailer, whereas only 7% of the value goes to the worker.

Although, with the exception of the UK, consumer prices have remained relatively stable across the EU since 2001, the import price of bananas has dropped by 20% over the same period. This has negatively affected all major countries supplying bananas to the EU, where the cost of living has increased 107% on average since 2001.
 
As a result, farmers in exporting countries are being squeezed between price pressures from buyers and rising production/living costs. According to national consumer price indices, the cost of basic resources such as food, health, housing and education has increased since 2001 by 92% in Colombia, 129% in Ecuador, 218% in Costa Rica and 278% in Dominican Republic. In terms of production costs, inputs like fertilizer and pesticides now cost on average 195% more than they did in 2001, whilst shipping costs have increased by 233%.
 
The decreasing share of the value received by banana suppliers is having significant social and economic impacts on producing countries. Farmers are receiving lower wages and are often forced to work longer hours to make a living. This carries serious implications for health and human rights, as production intensification and resource cuts limit workers’ protection against toxic agrochemicals. On an environmental level, the intensification of large scale banana export production is causing the pollution of land and water courses, and harming biodiversity in local communities.
 
This downward pressure on prices, combined with increasing living and production costs, is further aggravated by UTPs, defined by the EC as practices which deviate from ‘good commercial conduct’ which are ‘unilaterally imposed by one trading partner on another’. UTPs in the banana sector result from the imbalance of negotiating power between retailers and their suppliers, mainly taking the form of one sided “leonine” clauses in contracts with producers and/or exporters. These can be aggravated during commercial low season (European summer) when the availability of local fruits reduces demand for bananas, leading to last minute cancelations of orders and greater quality claims.
 
The consequences of UTPs are particularly severe for small banana growers, who cannot afford to remain in business because of very low productivity. Unlike large scale banana growers, they lack the resources to invest in their farms, causing land decapitalisation and increased migration, due to lack of alternative job opportunities. Working conditions have also changed, with workers, for example, being hired on short term contracts or replaced by migrant workers, who tend to be  because cheaper and potentially more compliant.
 
If retailers continue to capture an increasingly excessive share of banana values, and buying prices are forces down to unsustainable levels, suppliers will struggle to survive. The result may well be highly concentrated banana chains, generating further negative social and environmental impacts on producing countries, while reducing the choice of consumers.

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·  Banana value chains in Europe and the consequences of Unfair Trading Practices - October 2015

·  Banana splits: Bananas, supermarkets, and a tale of Unfair Trading Practices - Media Briefing - October 2015

·  Banana value chains in the United Kingdom and the consequences of Unfair Trading Practices - October 2015