ORGANIC BANANA SALES GROWING AT 30 PER CENT A YEAR, SAYS FAO

6 May 1999

Press Release
SAG/33

ORGANIC BANANA SALES GROWING AT 30 PER CENT A YEAR, SAYS FAO

19990506 At Australia Banana Meeting, UN Agency also Raises Concern As Russia's Economic Difficulties Lead to Sharp Drop In Banana Consumption

ROME, 6 May (FAO) -- Global imports of fresh organic bananas grew to some 27,000 tonnes at the end of 1998, still a small niche trade when compared to total banana imports of more than 11 million tonnes, the Food and Agriculture Organization (FAO) said today. However, the United Nations agency added in a document presented at the Intergovernmental Group (IGG) on Bananas and Tropical Fruits meeting in Gold Coast, Australia 4-8 May, imports of organic bananas have been growing at approximately 30 per cent per year.

"The main markets are the European Community (EC) and the United States, while Japan and Canada also have substantial organic banana imports", said FAO.

"More than 100 countries produce certified organic commodities, including a significant number of developing countries. The main country producing organic bananas is the Dominican Republic, followed by Mexico, Colombia, Honduras, Costa Rica, Philippines and a few other countries.

FAO estimates the market for organic foods in the EC at less than 2 per cent of total food sales, but it says the EC is "the world's largest organics market". Imports of organic bananas were estimated at between 11,000 and 13,000 tonnes in 1998, with an additional 5,000 tonnes a year of processed organic bananas such as puré and several hundred tonnes of dried bananas.

The Dominican Republic supplied more than 80 per cent of European organic banana demand until Hurricane Georges severely damaged plantations there last summer, according to the FAO report. The second largest supplier, Colombia, provides the EC with about 2,000 tonnes of organic bananas per year.

FAO says the German market makes up 40 to 50 per cent of total organic banana consumption in the EC with sales at over 6,000 tonnes in 1998. "The second largest market is the United Kingdom estimated at 3,000 tonnes in 1998. The market has expanded rapidly due to the strong involvement of the leading

supermarket chains. Although organic bananas in the United Kingdom are considered as luxuries and sell at high prices, supermarkets and importers claim that demand greatly exceeds supply."

FAO estimates that organic food sales in the United States have grown by more than 25 per cent annually since 1990, with imports of fresh organic bananas estimated at 11,000 tonnes in 1998, or 0.3 per cent of total banana consumption. The bulk of Canadian organic banana imports is supplied by the United States with products from the Dominican Republic, Mexico and Honduras. FAO says Canada imported about 1,800 tonnes of organic bananas in 1998, while it estimates that Japan has imported more than 2,000 tonnes in 1997.

FAO says the prospects for further growth of organic banana sales appear to be good in all major markets, though further growth is limited by the lack of supply, due to constraints in organic banana production in many tropical countries. The greatest obstacle is Black Sigatoka, a fungus prevalent in many banana producing countries. So far, FAO says there is no effective organic treatment for fungus. Soil fertility is also a significant constraint and crown rot still causes problems, especially during long-distance transportation. Logistics is also an impediment to organic banana export. Because volumes are usually small, freight charges are higher. Shipments often await sailings carrying non-organic bananas.

According to FAO, the higher labour input requirements and the benefits of using inter-cropping, or mixed farming systems makes organic banana production well suited to small and medium farms.

"Theoretically", says FAO, "it could improve the economic viability of some of those small banana farms which cannot compete internationally with large-scale production units. Depending on the market, the price premium at retail level may vary from 50 per cent to 200 per cent. The price premium to producers is substantial, albeit more difficult to estimate."

Russian Banana Market in Free Fall

In other developments at the IGG meeting on Bananas, FAO said the sharp 15 per cent drop of per capita real incomes in the Russian Federation between August and December 1998 continues to curb demand for bananas. The declining Russian birth rate and fewer small children in the population also depress demand. Faster growth in prices for imported products and shrinking incomes will lead to more spending on cheaper domestic commodities, because banana prices are highly dependent on the exchange rate for the United States dollar. In Russia, banana prices in rubles have become higher in both absolute and relative terms.

According to FAO, "Retail prices per kilo are approaching a level that the survey found prohibitive for most consumers."

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On the other hand, FAO said the Russian population is now accustomed to bananas and they will probably be regarded as a necessary indulgence from time to time. Market participants are also reducing profit margins to try and retain the market niches they developed at considerable expense.

"Although the market in the Russian Federation is considered by most participants to offer good prospects over the longer term, the current crisis has brought uncertainty and a decline in banana consumption, and few are willing to predict when growth will return," FAO said.

International Tropical Fruits Network Launched

During the IGG session, the International Tropical Fruits Network (TFNET) was launched by representatives of 16 producer and consumer countries. Malaysia was elected to host the Network headquarters.

The Network will promote production, marketing, consumption and international trade in tropical fruits. Among other functions, it will assess the markets, support research and development of new technologies, help expand markets, reinforce human resource development, evaluate the impact of various international agreements on tropical fruits trade and facilitate economic and technical exchanges among countries.

For further information, see the IGG documents on the FAO web site at:

or, contact John Riddle, tel. 00 39 06 57 05 32 59; e-mail: john.riddle@fao.org

For interviews contact: The Conrad Jupiters Hotel at: tel. (00 61 7) 5592-8709; fax: (0061 7) 5592-8702. Ask, or leave a message for Paula Fortucci, Chief of FAO's Raw Materials, Tropical and Horticultural Products Service; or, Paul P. Pilkauskas and Kaison Chang, FAO Senior Commodity Specialists. E-mail them at: clrent52@onthenet.com.au

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