Is a Banana Shortage Coming? China's Market May Face a Banana Shortage in the Future
Bananas are undisputedly the staple commodity of the fruit industry. Due to declining supply from major domestic production areas and climate change, the persistently high "bull market" of 2014 brought far-reaching structural changes to the entire industry. Although supply and demand in the domestic market have returned to stability this year, industry insiders also believe that as China's demand for bananas continues to grow and global climate change intensifies, China may face an increasingly severe "banana shortage" in the future.
"Changes in domestic banana production affected the volume of imported bananas. 2014 was a year of relatively large profits for China's banana industry," said Liu Zijie, chairman of Goodfarmer Group, at the Asia Fruit Congress held recently in Hong Kong, China. Because major domestic banana-producing areas were hit last year by an off year and adverse weather factors such as typhoons, domestic supply fell sharply short, and China's banana imports surged to 1.13 million tonnes, doubling compared with 2012 and 2013 and reaching the highest point in recent years, with prices also soaring accordingly.
It is reported that China's main banana-producing regions are the five provinces of Guangdong, Guangxi, Yunnan, Hainan and Fujian, with a total planting area of 402,300 hectares in 2014, an increase of 41% over 2004. Overall, China's market supply is still dominated by domestic bananas, with imported bananas accounting for only 5%-6% of demand. Statistics from Goodfarmer show that over the past 10 years, China's demand for bananas has grown steadily year by year, with total banana demand reaching 13 million tonnes in 2014, double that of 10 years earlier. By this figure, because domestic output in 2014 was only 9.08 million tonnes, although imports surged, overall supply still showed a gap of 2.87 million tonnes.
"Last year China's production fell by 20%, which had a far-reaching impact on the global supply-demand relationship. It not only caused global prices to rise sharply, but also meant that the volume imported from the Philippines was far from enough to meet supply." Liu Zijie explained that over the past 10 years, banana imports in the Chinese market have not been stable, but basically 80% of imported bananas came from the Philippines. Therefore, amid the supply shortage, in 2014 Ecuadorian bananas, which previously accounted for less than 10% of imports, emerged prominently and for the first time accounted for a quarter of China's imported banana share, injecting a fresh vitality into the entire industry.
He also pointed out that the quality of imported bananas is clearly higher than that of local bananas, especially with consumers in Beijing, Shanghai and Guangzhou showing strong demand for imported bananas. In addition, the high logistics costs of "transporting southern bananas to the north" also mean that domestic bananas are not necessarily more competitive in price.
"When bananas from the south are transported to the northeast, the unit cost of land transport is even higher than sea freight, so the northeast region imports the largest volume of bananas. Bananas imported through the Port of Dalian account for 50%, and Shanghai accounts for 30%. The three northeastern provinces are the main regions consuming imported bananas such as those from the Philippines." He expects that Ecuadorian bananas, favored by supermarkets and other mid-to-high-end channels, will gradually gain greater recognition in China in the future, with imports achieving steady growth.
Huge Growth Potential in China's Market Demand
Although there was a relatively large supply gap in 2014, Liu Zijie said that domestic banana production in 2015 is expected to return to normal levels, reaching 12.899 million tonnes, with supply and demand more balanced than last year. From January to May 2015, the volume of imported bananas in the Chinese market was 480,000 tonnes. But it is worth noting that China's current per capita annual banana consumption is only 7.6 kg, while the international consumption level is about 14 kg. Meeting China's growing domestic banana consumption demand still remains a long and arduous task. "If [per capita annual consumption] reaches the international level, that means an additional 13 million tonnes of production will be needed," Liu Zijie pointed out.
This year's severe El Nino phenomenon has also affected banana-supplying countries such as the Philippines and South America, and problems such as prolonged drought have also led to instability in supply from these countries, widening the supply gap. At the same time, because there are not many regions in China suitable for growing bananas, and because domestic transport, labor, land lease costs and environmental costs are all rising, the growth potential of domestic production is not significant either.
"For bananas in some places, such as Yunnan, the entire production cost plus transport works out to be more expensive than imports from the Philippines. Therefore I am very worried about China's demand for bananas, and Goodfarmer also hopes to make its own contribution in this process. The Chinese market needs to transform the entire chain, but this will also increase costs in the cold-chain management process."
He believes that in the future, potential banana-supplying countries such as Laos, Myanmar and Cambodia may all increase banana cultivation to meet the needs of the Chinese market.