(March 21) Tight supplies have banana prices continuing their upward climb, and suppliers say it could be summer before prices come down, if at all.

Wholesale prices have nearly doubled since January, according to the U.S. Department of Agriculture, and most contract prices are under force mejeure clauses — “Act of God” provisions that allow suppliers to raise prices — due to heavy rains and flooding in Ecuador and Costa Rica.

Retailers, meanwhile, are slow to increase prices for one of the most competitive items in the department.

One East Coast retailer, who declined to be named, said his store increased prices 10 cents a pound and already was feeling the pinch.

“It’s something that even when you move it a dime, people complain,” he said. “People will drive across town to save a dollar.”

Another, who also declined to be named, said his stores are holding off as long as they can.

“They are one of the biggest items in our department,” he said. “We’re holding out as long as we can without raising prices, but we’ve got to start covering our expenses.”

PRICES

The USDA reported wholesale prices increased from $13.50-14 for a 40-pound carton in early January to $24-26 in Chicago in mid-March.

These are the highest prices Mark Levin, co-owner of Philadelphia-based M. Levin & Co. Inc., has ever seen.

Levin said March 19 he’s seeing bananas sell for $21-24 in Philadelphia. That’s causing some customers to look for other alternatives for their banana purchases.
Levin said club stores in his area, for example, still have been selling bananas for 3 pounds for $1.25, which equates to about $16 for 40 pounds or 42 cents per pound.

“People are going in there and cleaning them out, buying 20 boxes at a time,” Levin said.

Ed Odron of Produce Marketing Specialists, Stockton, Calif., said retailers are sensitive to changing banana prices because bananas are the No. 1 volume item in the department.

“Bananas have a huge impact on the volume sales and profit of a produce department,” he said.

Because consumers buy them so frequently, they know the price of banans better than anything else in the department.

“They are as familiar with the retail price of bananas as they are with milk and bread and eggs,” Odron said. “A retailer wants to be competitive because it’s an item that’s on everybody’s grocery list.”

Lakeland, Fla.-based Publix Super Markets Inc. stores, however, haven’t seen a slump in banana sales, despite price fluctuations.

“I can tell you, banana sales are on the rise, so our customers are not seeking alternatives to bananas,” said Maria Brous, director of media and community relations for Publix.

NO IMMEDIATE RELIEF

Marion Tabard, marketing director for Coral Gables, Fla.-based Turbana Corp., said heavy rains in Central American growing regions still are putting pressures on supplies.

“It’s impossible to forecast future supplies,” Tabard said.

Some Caribbean production regions still are recovering from hurricanes last season and are not expected to be in full volumes until at least May.

Bil Goldfield, communications manager for Dole Food Co., Westlake Village, Calif., was less optimistic.

“We hope these effects are temporary, but parts of Latin America are still experiencing non-normal weather conditions, so we can’t be certain,” he said. “If normal weather resumes, we would estimate volumes might return in or around July.”

Don’t expect that to mean $10 cases of bananas, however.

LIKELY TO CONTINUE

Company executives from Coral Gables, Fla.-based Fresh Del Monte Produce NA and Cincinnati-based Chiquita Brands Intl. told investors in their year-end conference calls that higher prices likely would continue.

Del Monte’s chairman and chief executive officer Mohammad Abu-Ghazaleh said in the company’s Feb. 26 call that the current shortage in supplies has been coming for some time and higher prices were overdue.

“The shortage that we see today, actually it didn’t happen overnight,” Abu-Ghazaleh said. “It’s been developing over the last maybe two years.”

Demand and consumption have increased, but production hasn’t kept up, Abu-Ghazaleh said.

“The reason for that is because suppliers were losing money and marketers as well were losing money,” he said during the call. “So, in either case, nobody was interested to go further and I believe that if pricing does not improve significantly in the future, we will not see much bigger supplies as well in the future.”

Chiquita’s chief financial officer and senior vice president Jeffrey Zalla told analysts during the company’s Feb. 19 call he thinks demand won’t suffer too much with higher banana prices.

“… We believe that consumers can and would be willing to pay more for bananas and certainly we continue to strive to earn a fair share of the total profit returns that are earned at retail in bananas.”