Profitability within the banana industry is likely to fall in the next ten years as rising production costs and flat prices continue to put grower margins under pressure. However, the long-term price and profit outlook for bananas and agricultural products in general remains strong according to the latest analysis by the USDA’s Foreign Agricultural Service.
In a presentation given to delegates on the third and final day of the V International Banana Congress in Costa Rica, the organisation’s director of Global Policy Analysis, Mike Dwyer, said the industry stood to benefit from the continued growth in global food demand fuelled by the rise in the middle classes in emerging markets such as China, Southeast Asia, the Middle East, North Africa and Latin America.
Over the next decade, roughly half of the world’s population will be middle class – equivalent to 1bn households. By 2018 there are projected to be more middle class households in developing countries than in developed nations, Dwyer said.
Trade liberalisation has provided a further boost to imports, with almost all major agricultural exporters making sharp gains in recent years. However, while US banana imports grew by 392,000 tonnes in the five years to 2012, imports to the EU fell by a similar amount during the same period, meaning there had been no overall increase in the world’s two biggest banana markets. Instead, Dwyer urged producers to focus their efforts on the countries that had seen the biggest import growth, namely China, Russia and other developing nations.
With the anticipated rise in the value of the dollar putting downward pressure on dollar-based commodities and energy and agricultural input prices likely to remain high, growers will see profits squeezed in the coming years, Dwyer predicted.
Nevertheless, he said as long as the global economy continues to show signs of improvement and no unforeseen crises befall the emerging markets, the industry can look forward to the coming decade with cautious optimism.