By Marifi S. Jara Mindanao Bureau Chief with reports from Carmelito Q. Franc

Growers confident recession-hit Japanese won’t give up bananas

Posted on November 27, 2014

DAVAO CITY -- Philippine growers of banana, the country’s second biggest agricultural export, are not worried about the economic slump in their number one market, Japan.

The recession in Japan actually bodes well for the industry, according to the major exporters, because the fruit is considered an affordable luxury by Japanese consumers when finances are tight.

“We’ve seen in time of (previous) recessions, there has been an increase of the purchase of the banana in the (Japanese) market. They were moving from the more expensive food to bananas,” Alexander N. Valoria, president of the Pilipino Banana Growers and Exporters Association (PBGEA), said in an interview.

For the five years to 2013, production of Cavendish bananas averaged 2.8 million metric tons (MT) in the Davao Region, the main growing area for the export variety.

Stephen A. Antig, PBGEA executive director, told BusinessWorld in a text message that the export price for Japan has actually stabilized because of the continued increase in demand.

“Prices (of bananas) in Japan are actually higher than last year,” Mr. Antig said.

A standard banana export box, with a net weight of 13.5 kilograms, currently fetches an average of $6 freight on board (fob) in the Japanese market, according to Mr. Antig.

“When there is a recession, actually the housewife, budget wise, will resort to bananas... because undoubtedly banana is one of the most nutritious year-round foods,” added Mr. Valoria, also the president and chief executive officer of the Anflo Management and Investment Corp. Group of Companies, whose flagship firm is the Tagum Agricultural Development Company, Inc. (TADECO).

TADECO exports about 200 million boxes of premium Cavendish bananas per year, of which 70 million are sent to Japan, considered the high-end market for Philippine bananas because it procures the best quality of the harvest at premium prices.

The company also delivers to Hong Kong, China, South Korea, Singapore, and the Middle East.

Philippine banana exports, of which 36% go to Japan, accounted for 14% of the Philippines’ $6.3 billion agricultural exports by value in 2013, a close second to coconuts at 15%, according to data from the Philippine Statistics Authority.

“Japan is the most stable and very important market for our industry,” Mr. Valoria said.

Mr. Antig added that local growers have been able to maintain their hold on the Japanese market despite seasonal competition from distant suppliers as Ecuador, the biggest exporter in the world, by maintaining quality levels.

The Philippines was the second largest exporter, based on the Banana Market Review and Banana Statistic report issued this year by the United Nations’ Food and Agriculture Organization (FAO).

Japanese buyers are also paying an even higher premium of about $7.33 per box for organically-grown bananas, such as those supplied by two farmers’ cooperatives in Davao City, the Sibulan Organization of Banana Growers Multi-Purpose Cooperative and the Pamara Producers Cooperative of Organic Banana Growers .

These two cooperatives, composed of small-scale farmers, are able to supply 1,300 boxes of chemical-free bananas per week, but demand from the Japanese buyers is actually at 3,600 weekly.

The Federation of Cooperatives in Mindanao (Fedco) is also exporting around 5,000 boxes of bananas to Japan every week.

FEDCO, a secondary cooperative composed of primary cooperatives in Mindanao involved in agricultural production, facilitates export by small growers through marketing and linkage assistance to foreign buyers not just in Japan but also China, South Korea and the Middle East.

Prices in export markets outside Japan, however, have seen a significant drop due to competition from the Latin American banana producers as well as increasing production within China.

“The price of banana in the export market has dropped from around $6 per box in the past two months to less than P100 (about $2.23) per box,” said Mr. Antig, noting that this hurts the small growers more with 95% of them exporting to China.

A small grower is loosely defined as cultivating five hectares or less.

Mr. Antig said the industry, despite very little support from the government, continues to seek other markets, including expansion to the United States despite stiff competition from the nearer South American producers.

Industry players have also been exploring possible export destinations within the European continent, including Russia and Ukraine, but these would require different logistical strategies compared to the more proximate existing markets.

Another challenge faced by the industry, according to PBGEA and local government officials, is the continued threat from clusters of New People’s Army groups who resort to harassment and hostile acts to collect so-called “revolutionary taxes”.

Overall, Mr. Valoria said prospects for the banana industry remain positive with steady global demand for fresh produce as well the potential for processed goods, which the Department of Trade and Industry aims to push for the Association of Southeast Asian Nations integration.

“Banana is recession-proof... it is the most important fruit in the world, it is the most consumed in the world and the cheapest in the world,” he said.

The FAO report shows the volume of global gross banana exports reached “a record high” of 16.5 million MT in 2012, higher by 7.3% than the 2011 level.

Agriculture and fishing, mainly through tuna exports, account for about 10% of the Philippine’s gross domestic product.