Introduction

Banana is one of the world's most important crops grown by small- and large-scale producers alike, with production occurring in more than 130 countries. The economic importance of the banana industry encompasses (1) the generation of export earnings and (2) the employment of hundreds of thousands of people in Latin America, the Caribbean, Southeast Asia, and West Africa. In addition, the industry employs thousands of people in distribution networks and supermarkets worldwide.

Currently, few bananas are produced in the United States. Banana production in Florida is estimated at about 500 acres, valued at approximately $2 million. Recently, there has been a renewed interest in expanding US banana production to satisfy various niche markets, including the market for organic and processed bananas. Consequently, the purpose of this article is to provide an overview of the world and US markets for fresh bananas, with special reference to the US market for organic bananas.

World Production of Fresh Bananas

4.9 million hectares of bananas were grown across the world in 2009, which resulted in an estimated 97.3 million metric tons (mmt).From 65.1 mmt in 2000, the 2009 crop represented a 49 percent increase in production.The top five banana-producing countries are India, China, Brazil, Ecuador, and the Philippines. They accounted for 61 percent of global banana production in 2009, up from 56 percent in 2000.India and the Philippines also saw noticeable increases in production (Figure 1).


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India continues to be by far the largest world producer of fresh bananas; by 2009, India had produced more than 26 mmt of bananas (almost 28% of the global production). Next in line is the Philippines, with a market share of 9.3 percent, followed closely by China (9.2%), Ecuador (7.8%), and Brazil (7%). Of the top five banana-producing countries, only Ecuador and the Philippines are major exporting countries. The bulk of the production is sold to the domestic market in these countries.

US Banana Production

In 2009, US total banana production reached almost 7,000 mmt, or 0.01% of the total world output, on an estimated 16,000 acres.In the United States, Hawaii is by far the largest banana producer, followed by Florida.Hawaiian banana production has fallen from 13,181 mt in 2000 to 8,090 mt in 2010.Due to high costs of labor and land, Hawaii produces mostly conventional Cavendish bananas and Hawaiian apple bananas, which are sold in the local markets. .Moreover, US banana producers are seeking opportunities in the organic and specialty segments of the banana markets in Florida and Georgia's coastal region (Schupska 2008).

Main Exporters of Fresh Bananas

(FAO) estimated that banana exports for 2009 were 14.8 mmt, which translates into 15.3% of the world's production and a value of approximately $8.08 billion.There were five major banana-exporting countries in 2009: Ecuador, Colombia, the Philippines, Costa Rica, and Guatemala.They accounted for approximately 84 percent of global banana exports in 2009.Ecuador exports 5.7 mmt of bananas annually, which is 38% of the total volume of bananas traded in 2009.With a share of 13.2 percent, Colombia is a close second, followed by the Philippines (11.7%), Costa Rica (11.5%), and Guatemala (9.9%). You will receive a discount on saycheesegcc.com's MSRP.On saycheesegcc.com, the MSRP price is shown either as a standalone price or as a strike-through price, along with a promotional or discounted price.A discount or promotional price will be indicated by a higher MSRP strikethrough price


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Main Markets for Fresh Bananas

In 2009, 16.3 million tons of fresh bananas were imported globally. This represents a long-term upward trend.Based on Figure 3, the 2009 figure represents an increase of 13 percent over the 14.4 mmt exported in 2000.Similarly to exports, banana imports are concentrated.About 56 percent of the total world's fresh banana imports came from the United States, the European Union, and Japan in 2009.The United States and Japan have seen a relative stagnation in banana imports over the last 15 years, but the European Union has seen a 15.6 percent jump in banana imports, from 3.9 million tons in 2000 to 4.5 million tons in 2009.


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The EU banana market is controlled by custom tariffs and market intervention. For example, the European Union imposes tariffs on bananas from Latin America while allowing bananas imported from the African, Caribbean, and Pacific (ACP) countries to enter duty-free. This caused the widely known banana trade war, which resulted in the European Union cutting duties on bananas from Latin America gradually to 144 Euros per mmt by 2016 from the current 176 Euros per mmt.

World Market Structure for Fresh Bananas

.In most cases, these companies are vertically integrated; they own or contract plantations, operate their own ripening facilities, and have their own distribution networks, giving them considerable economies of scale and market power in selling bananas. There are three largest manufacturers and marketers of fresh bananas in the world: Dole Food Company, Chiquita Brands International, and Del Monte Fresh Produce.These companies each own banana plantations throughout the world's banana-producing regions. .These estimates are based on public data (annual reports and websites).


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US Market for Fresh Bananas

Unlike the EU market, the US market is unrestricted by import tariffs or quantitative limits, making it a very competitive market.According to a value-based or volume-based measure, bananas continue to be the largest fresh fruit export to the United States.According to Figure 5, banana shipments to the US were worth $1.02 billion in 2000, representing 32 percent of total fresh fruit imports.As of 2010, the value of banana imports had increased by 61 percent since 2000, reaching $1.64 billion.The observed increase in banana imports was primarily due to a weak US dollar, not a result of an increase in volume.Based on Figure 6, the total supply of fresh bananas remained relatively flat over the period 2000 to 2009.Accordingly, the US banana market is perceived to be saturated.The slight decline in per capita consumption is further proof of this trend, which went from 12.9 kilograms in 2000 to 11.2 kilograms in 2009.Consumers may have switched their fruit purchases from bananas to other fresh fruits (Figure 6), which may be causing this decline.The fresh banana market, as discussed below, is a mature market in general, but the situation is completely different when it comes to organic bananas.


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Main Suppliers of Fresh Bananas

The main suppliers of bananas to the US market are Guatemala, Ecuador, Costa Rica, Colombia, and Honduras. In 2010, these five countries shipped an estimated 3.9 mmt of fresh bananas to the United States, accounting for 94 percent of total US banana imports (Table 1; Figure 7). Guatemala is the main supplier of fresh bananas to the United States, with a market share of 28 percent during 2010. Guatemala overtook Costa Rica as the main banana supplier to the US market in 2004. Guatemalan banana exports to the United States steadily rose over the period, increasing from 0.68 mmt in 2000 to 1.15 mmt in 2010. The United States has become an important market for Guatemalan bananas, accounting for 85–90 percent of that country's total banana exports. Ecuador has maintained its relative position as the second largest supplier of fresh bananas to the United States, with a market share of 24 percent. Bananas exported from Ecuador to the United States in 2010 totaled 0.98 mmt. In contrast, Costa Rica's banana exports to the United States declined considerably over the period, from 1.36 mmt in 2000 to 0.56 mmt in 2009, before recovering to 0.85 mmt in 2010. Costa Rica now accounts for 21 percent of the US banana import market, down from 34 percent in 2000. The decline in Costa Rican banana exports to the US market is due to a combination of factors, including bad weather that disrupted production and new opportunities to sell to the EU market. Currently, the United States accounts for only about 40 percent of Costa Rica's total banana exports. The other major suppliers of bananas to the United States are Colombia and Honduras, each with shares of approximately 11 percent. As shown in Table 1, banana exports from the Dominican Republic to the US market have been negligible and have shown a declining long-term trend. In 2010, the Dominican Republic exported only 139 tonnes of bananas to the US market, down from a peak of over 7,000 tonnes in 2001. Among other factors, the decline has been due to the decision to focus on the more profitable EU market.


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The main conventional banana brands marketed in the United States are Dole, Chiquita, Del Monte, Turbana (Uniban), and Bonita (Exportadora Noboa). Because of the lack of publicly available data, it is not possible to estimate the market share for conventional bananas. Many of the companies will not disclose this information or do so only on a limited regional basis. The only company that gives an estimated market share is Dole, which claims to be the number one brand of bananas in the United States, with an estimated market share of 35 percent.

Figure 8 shows the import pattern of bananas into the US market. In general, volumes tend to decline in the summer months due to increased competition from other fruits in the market. For example, the sharp decline in supply from July to September 2009 was due to exceptionally bad weather in South America as heavy flooding destroyed plantations in Costa Rica and Ecuador.


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US Market for Organic Food Products

It is the largest market for organic food products in the world.There has been a long-term upward trend in organic food sales in the United States since 2000 (Figure 9).The Organic Trade Association (OTA) reports that sales of organic foods at retail in the United States increased from $24.8 billion in 2000 to $24.8 billion in 2009.It is estimated that organic food sales in 2009 accounted for about 3.7 percent of total food sales in the United States, which represents a significant increase compared to the previous level of 1.1 percent in 2000.Food category-wise, Fruits and Vegetables accounted for 38%, Dairy 15%, and Bread and Grains 11% of organic food sales in the United States in 2009.


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US Market for Organic Bananas

. .According to industry sources, organic bananas accounted for 123,460 tonnes (6,789,750 boxes) of the total volume of fresh banana imports to the United States in 2010.According to 2010 statistics, the organic banana industry generated about $161.5 million at the wholesale level and $214 million at the retail level at an average price of $23.79 per box. While the demand for conventional bananas remained relatively flat over the first decade of the twenty-first century, the demand for organic bananas increased dramatically.Between 2000 and 2010, the import of organic bananas grew fourfold to over 123,000 tonnes (Figure 10).Sources report that organic bananas are one of the fastest growing commodities among organic produce, with demand outpacing supply.


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The main suppliers of organic bananas to the US market are depicted in Figure 11 for the corresponding years 2006 and 2010. Not surprisingly, Ecuador, the leading world exporter of bananas, is the main supplier of organic bananas to the United States. Between 2006 and 2010, Ecuador increased its market share of the US organic banana supply from 46 percent to 52 percent. Industry sources point out that bananas from Ecuador are of a very high standard and are relatively cheap.


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Colombia, which was the third leading supplier of organic bananas to the US market in 2006, has switched positions with Peru and now ranks as the second major supplier of organic bananas to the US market, with an estimated market share of 24 percent in 2010. The improved market penetration on the part of Colombia is due to major investments in organic banana plantations in that country.

The third leading supplier of organic bananas to the US market is Peru, with a market share of 18 percent in 2010, down from 26 percent in 2006. In contrast to production in Colombia, most of the organic banana production in Peru occurs on small holdings averaging less than one hectare. This has made the formation of cooperatives in Peru necessary for its farmers to compete in the larger marketplace. With help from its government, Peru has shifted from conventional to organic banana production, and as a consequence only exports organic bananas to the United States, about 45 percent of the total organic export share.

Even though the Dominican Republic is one of the world's leading exporters of organic bananas, it is not a significant player in the US organic market. Its market share of nearly 7 percent in 2006 dropped to less than 1 percent in 2010.

Using innovative strategies, Dole has become the leading marketer of organic bananas in the United States. The company has launched a website dedicated exclusively to its organic products (http://www.doleorganic.com/). Consumers can virtually see where a Dole product originated by visiting the company's website to view photos of the farms that sell to Dole, and by typing in the three-digit farm code listed on the fruit sticker, they can see the particular farm that grew the fruit they bought at the store. In addition, the website provides information for consumers to learn more about how Dole Organic is helping banana workers achieve a higher living standard and a more promising future and to view growers' organic certifications online (Dole Annual Report 2009). According to the company's website, Dole imports organic bananas from Colombia, Costa Rica, the Dominican Republic, Ecuador, and Peru. Unconfirmed reports indicate that Dole accounts for as much as 60 percent of the US organic market. Chiquita is the second largest organic banana exporter selling to the US market. Chiquita sources bananas from its own plantations and independent growers in Colombia, Ecuador, Honduras, and Peru. Other major organic banana exporters are Fresh Del Monte and Daabon Organics USA.

Price Analysis for Fresh Bananas in the United States

Prices of Conventional and Organic Bananas at the Wholesale Market

In some areas of the United States, wholesale banana prices are available from the Agricultural Marketing Service (AMS) of the US Department of Agriculture (USDA).Our choice for wholesale markets on both US coasts was made due to the scarcity of data. New York City (East Coast) and San Francisco (West Coast) represent the wholesale markets on both coasts. According to figure 12, the wholesale price of bananas in New York City compares organic and conventional bananas.Figure 12 indicates that there is a high correlation between organic and conventional banana prices, implying that both prices tend to move in the same direction.Banana prices rose significantly in 2008 due to smaller supplies in major producing countries and high transportation costs due to increases in fuel prices (Dole and Fresh del Monte Annual Reports 2008).In the period 2007 to 2010, the price of organic bananas fluctuated between $18.75 and $29 per box, a difference of $10.25, while the price of conventional bananas fluctuated between $12.55 and $24.5 per box, a difference of almost $12.In the time period reported, the average price for organic bananas was $23.9 per box. By contrast, the average price for conventional bananas was $17.72 per box, representing a price premium of about $6.18 (34.9%) per box.The prices tend to rise in the early months of the year and decline in the latter.Prices for 2010 were higher than for 2007, but lower than for 2008 and 2009.


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The monthly wholesale prices of organic and conventional bananas at the San Francisco market are shown in Figure 13. Again, it is clear that the prices for both types of bananas tend to move in the same direction. Between 2007 and 2010, the price of conventional bananas fluctuated between $13.30 and $25.20 per box, a difference of $11.90 per box, while the price of organic bananas fluctuated between $19.75 and $27.00 per box, a difference of $7.25, again implying more stable prices for organics over the period. During that period, the average price for a box of conventional bananas was $17.32 while the average price for a box of organic bananas was $22.63, resulting in an average price premium of $5.32 (30.6%) per box. The price premium organic bananas command over conventional bananas in the San Francisco market fluctuated from a low of $1.10 to a high of $9.1 per box.


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Figure 14 compares the price premiums in the New York City and San Francisco markets over the period of August 2007 to May 2010. Price premiums in the New York City market appear to be more stable than those in the San Francisco market, New York prices ranging from $3 to $8 per box (a difference of $5 per box). Organic bananas in the San Francisco market had a much wider margin, ranging from $1.1 to $9.1 per box (a difference of $8 per box). In percentage terms, price premiums in the New York City market ranged from 13 percent to 51 percent while those in the San Francisco market ranged from 5 percent to 67 percent over the same period. Although the highest premium was obtained in the San Francisco market, note that, on average, the New York City wholesale market paid a higher premium ($6.04 per box) for organic bananas compared to the San Francisco market ($5.35 per box) for the time period reported. Based on the data provided, there is a 65 percent likelihood that the price premium in the New York market would be greater than that in the San Francisco market. Moreover, suppliers from the Dominican Republic would have to factor in higher transportation costs than suppliers from Mexico or South America.


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Demand Estimates for Fresh Bananas in the US Market

Several studies have focused on consumer perceptions and preferences toward organic foods. Some studies have estimated the willingness to pay for organic products, but these studies used stated preference data rather than market data. Recently, however, Lin et al. (2009) used retail purchase data to investigate the US demand for organic and conventional fresh fruits. The study included five major conventional and five major organic fruit categories (apples, bananas, grapes, oranges, and strawberries) and two catch-all categories for other conventional and other organic fruits, for a total of 12 fruit categories. It was found that the demand for organic fruits is price elastic whereas the demand for conventional fruits is price inelastic.

The estimated own-price elasticities for organic bananas and conventional bananas are –3.19 and –0.70, respectively. As expected, these elasticities are negative and highly significant at the 1 percent level. Results suggest that with a 1 percent price reduction, the quantity demand for organic bananas is expected to increase by 3.19 percent while the quantity demand for conventional bananas is expected to increase by 0.7 percent. In other words, the own-price elasticity of demand for organic bananas is elastic, which means that the demand for organic bananas is very responsive to changes in price. A possible explanation for this lies in the fact that there are many "marginal" organic banana consumers. Such consumers will purchase organic bananas as long as they remain within a given price range. An increase in the price of organic bananas will result in a disproportionate fall in the quantity of organic bananas purchased by "marginal" consumers. On the flip side, a small lowering of the price of organic bananas will bring about a substantial increase in the quantity of organic bananas demanded. This bodes well for the future of organic bananas in the United States, where prices are likely to fall slightly over the coming years as availability increases.

The study also estimated the income elasticity of demand for organic bananas, which measures the responsiveness of the demand for a good to a change in the income of people demanding that good. The estimated income elasticity for organic bananas was 0.81, implying that an increase in disposable income will lead to a rise in demand. The fact that the income elasticity is greater than zero but less than 1 also implies that a 1 percent decline in disposable income will cause the demand for organic bananas to fall but by less than 1 percent, and vice versa (Figure 9).

In general, the above findings imply that an increase in disposable income will result in an increase in the quantity of organic bananas demanded. Also, the fact that the demand for organic bananas was found to be price elastic implies that any decline in prices will result in an expansion of the market as quantity demanded will increase.

Conclusions

The United States is the largest single-country importer of fresh bananas. With a per capita consumption of about 25 pounds, the banana market appears to be saturated. However, consumption of organic bananas in the United States is increasing. The US market is well supplied by a network of banana-producing countries and a set of Multinational Corporations. US producers in Hawaii and Florida will find it extremely difficult trying to compete with these low-cost producers of the Cavendish variety. Any expansion of the banana production in the United States should focus on the niche market for organic bananas and specialty varieties as Florida growers do.

References

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Dole Food Company. Annual Report 2009. http://investors.dole.com/phoenix.zhtml?c=231558&p=irol-reportsannual

Dole Food Company. Worldwide Operations Report 2009. http://investors.dole.com/phoenix.zhtml?c=231558&p=irol-reportsannual <4 April 2013>.

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Fresh Del Monte Produce, Inc. 2010. Bananas. http://www.freshdelmonte.com/products-whole-produce-bananas.aspx

Fresh Del Monte Produce. Annual Report 2009. http://phx.corporate-ir.net/preview/phoenix.zhtml?c=108461&p=proxy

Lin, B.H., S.T. Yen, C.L. Huang, and T.A. Smith. 2009. US demand for organic and conventional fresh fruits: The roles of income and price. Sustainability 1(3):464-478.

Liu, P., 2008. Certification in the value chain for fresh fruits: The example of the banana industry. Food and Agriculture Organization of the United Nations, Rome, Italy. ftp://ftp.fao.org/docrep/fao/011/i0529e/i0529e00.pdf

Organic Trade Association 2010. US Organic Industry Overview. http://www.ota.com/pics/documents/2010OrganicIndustrySurveySummary.pdf

Schupska, S. 2008. Can Georgia develop a viable banana industry? Southeast Farm Press, December 10. http://southeastfarmpress.com/orchard-crops/can-georgia-develop-viable-banana-industry

USDA/AMS. Fruit & Vegetable Market News. http://www.marketnews.usda.gov/portal/fv

USDA/ERS. Fruit and Tree Yearbook 2010. http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1377

USDA/FAS. Global Agricultural Trade System GATS. http://www.fas.usda.gov/gats/default.aspx