PHILIPPINE banana exporters are reeling from rising shipping costs and shipment delays, which they estimate may slash the country’s profit from the prized yellow-fruit by at least 15 percent.
Pilipino Banana Growers and Exporters Association (PBGEA) said the rising shipping costs, brought about by the global shipping problem due to Covid-19-induced problems, is further “eroding” the “already tight margins” of exporters in all markets. PBGEA Chairman Alberto F. Bacani told the BusinessMirror their shipping costs have increased by 15 percent to 20 percent compared to last year’s average quotations.
For example, Bacani said the cost of shipping a container of bananas to Saudi Arabia has increased to $3,000 from the usual $2,600 quotation.
Due to this, Bacani noted that profits by the industry this year would be slashed by double-digit rates. “You can assume by the same amount of the increase in shipping costs—about 15 percent reduction,” Bacani, who is also the President & CEO of Unifrutti Tropical Philippines Inc., told the BusinessMirror.
“With market prices generally staying the same year-on-year, the rise in shipping costs have eroded the already tight margins of banana exporters in all markets,” Bacani added.
Worse, the rise in costs is coupled by shipping delays from Davao to the Middle East, with shipments arriving within 30 to 33 days—from the usual average of 25 days, Bacani said.
Transit delays
Bacani explained that the transit delay was caused by the “continued spillover effect from the port congestions in China and Singapore that started at the end of 2020.”
The congestion, Bacani pointed out, caused feeder vessels to miss scheduled connecting dates with the intended mother vessels in Singapore and Shekou.
“This congestion has affected all shipping lines from Davao since all of them rely on the same feeder vessel service from Davao offered by CMA and RCL, meaning all banana exporters from Davao are equally affected by the delayed transit time,” he said.
Bacani pointed out that the increase in freight costs have affected “all banana exporters,” including Latin American producers, not just Philippine exporters.
Battle for China
However, the increase in freight costs has put the Philippines in a tighter corner against its rising Vietnamese and Cambodian competitors in securing market share in the growing Chinese market.
“Vietnam and Cambodia, given their proximity to China, are the last affected by these increased freight costs, making their bananas even cheaper now versus Philippine bananas compared to last year,” Bacani said.
Bacani explained that the entry of Vietnam and Cambodia into the Chinese banana market in the past two years took a substantial chunk of the Philippines’s market share in the East Asian market due to their cheaper value.
He noted, though, that Philippine bananas still boast superior quality and taste compared to those being shipped by Vietnam and Cambodia. Bananas exported by Cambodia and Vietnam to China are lower by $1.5 to $2 per box compared to Philippine exports.
“Previously, both of these countries composed only about 10 percent of banana imports into China with the Philippines comprising 90 percent. However, starting last year and up to now, they have increased to 40 percent of the imported banana volume into China, eroding Philippine market share,” he said.
Bacani has also sounded the alarm that the rate of decline of the country’s banana exports, both in terms of value and volume, is “definitely alarming.” He added, “As an industry we ended 2020 with less volume compared to 2016 which was an extreme El Niño Year, and there was no El Niño last year.”
The country’s banana exports in January plummeted by 51 percent to 186,419.019 metric tons (MT), from last year’s 384,151.173 MT, latest Philippine Statistics Authority (PSA) trade data showed.
PSA data analyzed by the BusinessMirror showed that the latest figure is the steepest decline in January banana shipments since 2006.
Data from the agency also showed the value of banana exports in January fell by 47 percent to $84.659 million, from $159.454 million recorded a year ago.
Japan remained the top destination of Philippine bananas in terms of value while China was the top export market in terms of volume.
The country’s banana exports to China reached 71,386.846 MT, 32 percent lower than the 105,514.553 MT shipped to the East Asian country last January 2020.
Value of banana exports to China dropped by nearly 30 percent to $30.406 million, from $43.307 million last year.
PSA data also showed that banana exports to Japan in January plunged by 41 percent to 63,476.882 MT, from 106,985.011 MT; while value of shipments declined by 39.7 percent year-on-year to $32.372 million.
The volume of bananas exported to Saudi Arabia, one of the country’s key markets in the Middle East, fell 61 percent to 10,564.715 MT, while value of shipments in January declined by 65.2 percent to $3.294 million.
Banana exports last year declined by almost a fifth to a 2-year low of 3.595 million MT as shipments across all key markets contracted due to weak domestic production.
PSA trade data analyzed by the BusinessMirror showed that total banana exports last year was 808,000 MT, or 18.35 percent, lower than the record-high 4.403 MMT posted in 2019.
Export receipts from banana shipments in 2020 declined by 20.6 percent to $1.552 billion from $1.953 billion. Due to the double-digit reduction in value, bananas dropped to sixth spot in the list of the top export products of the Philippines, according to PSA data.
“The biggest factor [in the decline of our exports] is the loss of hectarage due to the spread of Panama Disease, especially among small growers,” Bacani said.
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