The True Cost Of Bananas A David & Goliath Tale

 

The true cost of bananas, a David & Goliath tale.  Bananas are a staple of most American families; we buy them cheaply & don’t think much more about it.  But like many high volume imported commodities there is a dark & unfortunate path in the story.  This is a small snapshot of what goes on before those golden yellow beauties sit a top your counter & some of the players involved.

Bananas are the most frequently bought gro­cery item in the United States. There impact on a grocery store’s volume sales and profits are vast. Retail rumor has it that shoppers have the banana’s price etched in their minds and that this one item can influence where someone shops. Many stores cringe at the thought of raising banana prices.

This price ceiling poses a challenge to alterna­tive importers like Equal Exchange, who then need to ask for higher prices from resistant re­tailers in order to pass along higher payments to growers. On the other hand, Dole, Chiquita and the three other major companies that have domi­nated the global banana export market for over a half century, have the ability to pay high.  They can do this for short periods of time to squeeze out their smaller competitors. They then turn around and offer low to retailers in the north – thereby eliminating competition on both sides.  News about the practices of Dole and Chiquita in Latin America, and elsewhere, isn’t exactly news.  In 1954, Chiquita Brands, previous­ly called United Fruit, helped overthrow Jacobo Arbenz, the first democratically elected presi­dent in Guatemala because his modest land reform ideas threatened to undermine the U.S-based company’s profits. With CIA backing, the coup d’etat led to a 30-year civil war with over 100,000 dead.

Despite lawsuits and scandals about their treat­ment of workers and support of paramilitaries who have killed unionists organizing workers on their plantations, these companies continue to sell us their bananas. And we continue to buy them. When profits come well ahead of things like fair trade, fair treatment of workers & regard for environmental safety, you end up with the following. “Banana prices can remain unnaturally low when you treat workers and the environment with unnatural callousness.”

Supply is down this year. Equal Exchange can’t get enough bananas for our customers.

“Whether you choose to believe in climate change or not, it is real and it is affecting us,” said Donald Lecarnaque Castro, President of CEPIBO’s board of directors. In the fall of 2010, when average temperatures should have been in the mid 80s, they dropped to all-time lows. Northern Peru now suffers from an unusual and severe drought.

Rains in Colombia, excessive flooding in Gua­temala and Honduras, and organic certifica­tion issues in Ecuador have also conspired to create fierce competition for a limited supply of organic, fair trade bananas. With banana supply low, and demand high, the competition has been brutal.

Dole sees it as an opportunity to regain its lost ground in Piura. While the company no longer owns the entire supply chain, it is now attempting to regain control of supply by driv­ing up prices. By offering the farmers a price just higher than what the co-ops they belong to can pay, Dole can break the co-ops.

While logic might have it that rising banana prices should benefit small farmers, the price war is pushing co-ops to the brink. The co-operatives are losing some of their members who can’t resist the temptation to sell to the highest bidder. Already, one of CEPIBO’s twelve member asso­ciations has left the co-op to sell exclusively to Dole. In general though, José Maria Lecarnaqué Castro, CEPIBO’s General Man­ager, told us, co-ops are holding on, surviving these predatory strategies.

“Dole offers higher prices and hand outs which they’ll drop once they regain market control. But the co-op belongs to the farmers. We’ve made infrastructure improvements, built packing stations. The co-op provides techni­cal assistance to the members. That trans­lates to knowledge and knowledge is power. That’s more important to our members than today’s higher prices.”

His words were reassuring, but it was obvious that the co-ops are still worried…with good reason. According to Valentín Ruiz Delgado, representative of the Fair Trade Network of Organic Banana Producers of Peru, “These companies take advantage of the fact that we are relatively young organizations and new to the market, confronting very big companies who make use of their economic power.” said Ruiz Delgado.

Equal Exchange recently negotiated new con­tracts with CEPIBO and APOQ, including higher prices to help them compete. But Dole raised its prices twice more. We are now paying $2 more (over conventional prices) per case of organic, Fair Trade bananas. In the meantime on the grocery shelf, the price remains stead­fast at $.99 a pound.

 

Price vs Values

 

But it’s not just the banana producers get­ting yanked around. Here in the U.S., the big 5 offer lower prices to retailers. Whatever the going price is for a pound of bananas, these companies offer theirs for a little bit less. Small farmer co-ops like CEPIBO and fair trade wholesalers like Equal Exchange find themselves in similar positions: how do busi­nesses motivated by a social mission survive against a handful of multinationals that con­trol the entire industry?

In the end, retailers and consumers will have to decide how much they value small farmers, co-operative organizations, independent sup­pliers, and their social mission. Are we willing to pay a higher price – one that reflects the true cost of a bunch of bananas – for those values?  So here we are having read this and thinking well it’s just a small sector of the big picture so it doesn’t really matter. But this is going on in so many other industries and commodities that it’s a question we really need to consider.  In our next featured article on this “fair trade” topic we’ll take a look at the supply chain & sustainability as well as some new ideas the industry is having.

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