The Ecuadorean Ministry of Agriculture and Livestock has introduced a new, more flexible mechanism for setting the minimum banana price.
From 2021, the price will set at different levels throughout the year to reflect variations in productivity and demand.
Thus, from weeks 1 to 16, the price will be US$6.90 per box, falling to US$6.60 between weeks 17 and 32; US$4.50 from weeks 33 to 42; and US$6.40 from weeks 43 to 52.
This scheme also allows contracts to be signed with the annual weighted average price of US$6.25. The current annual price for an 18.14kg box is US$6.40.
According to the Ministry, “this model will allow producers to obtain a greater income when their production is higher and better cope with the normal drop in demand that occurs from June to October of each year, and prepare for the increased sales and production that takes place between November and May”.
It points out that the sector has faced unprecedented challenges in the past two years, including the arrival of fusarium wilt TR4 in Latin America and Covid-19, which has caused logistical problems, disrupted markets and held up payments.
The new plan also includes a range of financial incentives to encourage small and medium-sized growers to invest in improvements at farm level. They apply to producer organisations with farms of up to 50ha.
The government said the goal is to help keep farms in good condition and raise productivity levels.
The move has been met with resitance from some producer groups, who claim it invalidates the aim of the Banana Law. The National Federation of Banana Producersm which represents around 600 growers, is seeking legal advice as to its validity.
However, Richard Salazar of exporter association Acorbanec said the new price structure was a fair reflection of the impact of the pandemic on the global banana market. He noted that the average spot price this year has not managed to exceed US5, well below the current minimum price of US$.6.40, which reflect's last year's average price.
Ecuador exported 286.98m boxes of bananas in the first nine months of 2020, an increase of 6.95 per cent on the year-earlier period.