Poor harvests, exporters' competition boost banana prices

This article was written by Susan Yu and published by the Taiwan Journal on March 17, 2006. It reports that the average wholesale price for bananas in the Taipei area stood at nearly US$1 per kilogram in March 2006, up from US$0.75 in March 2005 and US$0.70 in March 2004. This figure is in Taipei is generally taken as the prime indicator of Taiwan's overall price trends.

According to the Council of Agriculture, the rising price of bananas is the result of poor harvests. Unfavorable weather conditions are also a factor, including an exceptionally cold spring and various super typhoons in summer 2005. Official statistics further show that during the first 10 days of March 2006, less than 120 metric tons of bananas had been consumed in the Taipei area. This was a considerable drop from 500 metric tons for the whole of March 2005 and almost 460 metric tons in March 2004.

Poor banana harvests in Taiwan have made it difficult to fill contracts with Japan, the nation's largest export market. According to the Kaohsiung branch of the Taiwan Provincial Fruit Marketing Cooperative, it has been paying local farmers about US$1.30 per kilogram for bananas in order to honor contracts with Japanese buyers. This is nearly double the price paid by domestic distributors. Even so, the cooperative has not been able to purchase enough bananas to fill its orders.

Taiwan's banana exporters such as the cooperative mentioned above hope that they can recoup their losses of thousands of dollars in May and June 2006, when a great supply of bananas is expected to come onto the market. New contracts with their Japanese clients will be negotiated then.

This article argues that in addition to the supply shortfall, increased competition among Taiwan's banana exports has contributed to the fruit's rising price. The aforementioned Taiwan Provincial Fruit Marketing Cooperative was Taiwan's only authorized banana exporter for 20 years. However, since January 2005, as a result of market deregulation, the cooperative has become just one of about 10 competing organizations. Indeed, although export tonnage dropped by 16 percent in 2005, to 15,218 metric tons from 18,140 metric tons in 2004, competitive bidding has kept the value of exports to Japan in 2005. The value of banana exports to Japan was US$10.4 million in 2005, a healthy increase from US$10.3 million in 2004.

Finally, the article concludes that bananas have played an important role in Taiwan's economy. The fruit is mostly grown in southern Taiwan's Pingtung and Kaohsiung counties. During the Japanese colonial occupation of Taiwan (1895-1945), bananas were exported to Japan and its colonies in Korea and Manchuria in large quantities. Hence Taiwan's nickname, the "Banana Kingdom". During the 1960s, bananas accounted for one-third of Taiwan's exports. In the 1970s, Taiwan-grown bananas accounted for 97 percent of Japanese imports. This figure has decreased to 3 percent by 2004 as a result of strong competition by bananas from the Philippines and Latin America.