Chiquita Brands International Inc. and Dole Food Co. face a profit squeeze because of excess banana supplies and weak demand that will likely to burden global prices into 2011, BB&T Capital Markets analyst Heather Jones said.

High banana production in Africa, Latin America and other major growing regions has led to weaker prices recently, Jones said in reports released Oct. 28. Europe prices appear to have bottomed but remain weak, Jones wrote, and there is potential for U.S. prices to erode next year.

“The environment is still one of too much supply and too little demand,” said Jones, who reduced her ratings on Chiquita and Dole shares to “hold” from “buy” and lowered her earnings estimates for 2011 for both companies.

The banana market has been a concern for the produce industry for more than a year after global recession and a cold winter hurt demand. Recent price weakness raises questions whether Chiquita and Dole will see the improved conditions their executives predicted earlier this year.

Additionally, strength in Latin American currencies, such as the Costa Rican colon, has raised costs for U.S. and European importers, Jones said. Rising costs may force large, multinational fruit companies to buy less or shut some growing operations next year, she said.

Chiquita, Dole and Fresh Del Monte Produce Inc. account for about 85% of U.S. banana imports, Jones estimates.

Overall, the global fruit industry is “in flux” and faces “a lot of uncertainty,” Jones said.

“Barring some kind of weather disruption that meaningfully interrupts supply and/or great improvement in demand, there will be too much fruit next year,” Jones said.

“That fruit will very likely end up in the more trading-oriented markets,” Jones said. “Given the demand trends in those markets, we would expect pricing to be pressured and traders to generate significant losses in those markets.” Without “significant rationalization” over the near term, “we believe production will be cut significantly by the end of 2011,” Jones said.

Shares of Cincinnati-based Chiquita fell 92 cents, or 6.6%, to $13.11 in midday trading Oct. 28. The stock is down 27% this year. Chiquita is scheduled to report third-quarter results Nov. 2. Shares of Westlake Village, Cal.-based Dole dropped 26 cents, or 2.8%, to $9.18, down 26% this year.

Chiquita, Dole face profit squeeze from weak bananas