The Economics of Bananas

The papers yesterday were full of news about bananas.

The Wall Street Journal reported that Chiquita Brands International, “the Cincinnati-based banana distributor” (I love that phrase; it evokes Lardner, or at least Runyon), was expected to report a third-quarter loss due to higher fuel costs and bad weather in banana-growing countries. Chiquita stock fell sharply on the news.

The second article was far more interesting, and answered a question I’ve long wondered about: why are bananas so cheap relative to other fruit, especially since a lot of the fruit we consume in the U.S. is grown here while bananas are not?

Dan Koppel, author of Banana: The Fate of the Fruit That Changed the World, wrote an Op-Ed in The Times that is packed with interesting stuff about the Freudian fruit. The economics are particularly interesting:

That bananas have long been the cheapest fruit at the grocery store is astonishing. They’re grown thousands of miles away, they must be transported in cooled containers, and even then they survive no more than two weeks after they’re cut off the tree. Apples, in contrast, are typically grown within a few hundred miles of the store and keep for months in a basket out in the garage. Yet apples traditionally have cost at least twice as much per pound as bananas.

Americans eat as many bananas as apples and oranges combined, which is especially amazing when you consider that not so long ago, bananas were virtually unknown here. They became a staple only after the men who in the late 19th century founded the United Fruit Company (today’s Chiquita) figured out how to get bananas to American tables quickly — by clearing rainforest in Latin America, building railroads and communication networks, and inventing refrigeration techniques to control ripening. …

Once bananas had become widely popular, the companies kept costs low by exercising iron-fisted control over the Latin American countries where the fruit was grown. Workers could not be allowed such basic rights as health care, decent wages, or the right to congregate. … Over and over, banana companies, aided by the American military, intervened whenever there was a chance that any “banana republic” might end its cooperation. … Labor is still cheap in these countries, and growers still resort to heavy-handed tactics.

The final piece of the banana pricing equation is genetics. Unlike apple and orange growers, banana importers sell only a single variety of their fruit, the Cavendish. There are more than 1,000 varieties of bananas — most of them in Africa and Asia — but except for an occasional exotic, the Cavendish is the only banana we see in our markets. … By sticking to this single variety, the banana industry ensures that all the bananas in a shipment ripen at the same rate, creating huge economies of scale. The Cavendish is the fruit equivalent of a fast-food hamburger: efficient to produce, uniform in quality, and universally affordable.

Some readers may recoil at this description and vow to never eat another banana. Others may thank their lucky stars that free markets are able to deliver a tasty, healthy, peel-intact fruit to their corner stores at very affordable prices.

Koppel’s larger message is that the Cavendish banana is under fungal threat and may disappear. And, because Koppel seems to endorse the locavore movement (unlike some of us), he doesn’t sound all that sad:

In recent years, American consumers have begun seeing the benefits — to health, to the economy, and to the environment — of buying foods that are grown close to our homes. … [B]ananas have always been an emblem of a long-distance food chain. Perhaps it’s time we recognize bananas for what they are: an exotic fruit that, some day soon, may slip beyond our reach.

I am guessing this prognosis is alarmist but I have no way of knowing. Can anyone out there add some insight?


Fernando Valdez

2 things to consider on the economics of bananas:

- yield per hectare, much higher than for other fruits.

- cost of picking, much much lower that for other fruits. This not only from lower wages in banana producing countries but also because a worker will pick much more kilograms per hour or per day.

RZ

Bananas are one fruit that are only minimally affected by pesticides. I've read in several places that there's no need to spend more on organic bananas becauase pesticides don't get to the fruit.

Thomas B.

"The alarmism is warranted, because it's already happened before."

Isn't that a good reason to suspect the alarmism is not warranted?

If we lose a banana variety, we apparently just replace it with another. Maybe those other varieties are "nothing like" the Cavendish to a connoisseur, but I'm sure the Cavendish was a poor imitation of the Gros Michel to banana connoisseurs.

Banana connoisseurs aren't the ones putting these cheap fruits in kitchens throughout America, though, price is.

Mike Knowles - Editor, Eurofruit Magazine

Bananas are far from extinction and the Cavendish variety is most probably going to be around for a long while to come.

A previous comment mentioned Wikipedia, but for this kind of thing I think Snopes is far better:

http://www.snopes.com/food/warnings/bananas.asp

I interviewed the man from Del Monte this morning (no, really) and he confirmed one other interesting thing about bananas, in the UK market at least: they're extremely price inelastic. Apparently, retailers here could probably charge double and (in isolation from other factors) you still wouldn't see any downturn in the volume sold. Equally, price promotions don't seem to have any positive impact on sales.

Will

I'd be happy to see the Cavendish disappear. I lived overseas and was able to choose between several varieties of bananas, each with their own flavors and textures ... not just one sickly and tasteless breed like in the U.S.

There are nearly a dozen varieties of apples in the local market, why not a dozen varieties of slightly more expensive banana?

Terox

I don't know other countries, but here, in Costa Rica, banana industry offers good jobs and social security for it's workers, most farms even meet environmental standards.

More information at

http://www.corbana.co.cr/english/default.htm

Rick

I wonder what the yield/acre/year is for Bananas compared to other fruit crops, as well as their hardiness?

Robin

jeffreytg, have you ever lived in a dictatorship? If it didn't suit the powers that be, it seems very reasonable that workers could be denied healthcare or at least forced to seek it from an underground market.

thissh!tisbananas!

to brad (#5) and kathryn (#21):

"I think I've made a huge mistake."

Brad

"How much could a banana cost? Ten dollars?"

NM

Is it alarmist? Well, read the book, or head other to the old trusty Wikipedia to get a primer on the banana.
The alarmism is warranted, because it's already happened before. The gros michel, predecessor to the cavendish, was wiped out by fungus and had to be replaced by the latter in the 1950's.
And the cavendish has the exact same fundamental weakness as the gros michel: all plants are rigorously identical clones, with the exact same genetic make up. Notice how they don't have seeds, which is a major part of their appeal. They're sterile. Wild bananas have seeds, /lots/ of them. Even if one species is the victim of a new fungal strain, you can always select individuals for resistance and breed a new variety. Not so much with the cavendish. If one plant is vulnerable, they all are, and it's only a matter of time.

AaronS

As my Uncle Howard, now 81 and a lover of banana pudding, has humorously put it many times: "Don't let anyone ever tell you that bananas are poison! If they were, this family would have been wiped out years ago!"

I found that bananas are really plantains, but are the the type you can eat, rather than have to cook.

Real banana pudding is COOKED. Don't ever forget that, you impurists!

A banana and peanut butter sandwich is the finest sandwich known to mankind, outside of the Cuban Sandwich.

A banana an MAYONNAISE sandwich is the finest sandwich after the previous...and sometimes is better. Sounds weird, but TRUST ME.

No, bananas won't leave our tables. Even if the "banana republics" quit putting up with the heavy-handed tactics of fruit companies, they will still need a market to sell in (and the fruit companies will still need bananas).

Further, as we continue to "go green," they will come up with ways to get bananas to us more efficiently and with less carbon emission (vacuum tubes from Central America to Houston?).

Oh, and this is a PET PEEVE of mine with my wife.... She thinks a banana has to be virtually green tipped to be ripe. Friends, the PERFECT BANANA is freckled/speckled with little brown spots. Such bananas have white fruit, well-sweetened by ripeness, and no tartness or over-firmness found in pre-ripe bananas. REMEMBER THIS!

Now, a splendid little poem I have composed about bananas:

A banana is a lovely thing,
Wonderful in winter, delightul in spring.
I could eat a banana every day for my health,
or invest in a fruit company to increase my wealth.
For no matter what they think, no matter what they say,
the banana is forever--I've had two today.

Ha!

Read more...

jeffreytg

I am intrigued by this statement "Workers could not be allowed such basic rights as health care..."

Really, workers are not allowed health care?- there is someone who by the threat of force prevents a worker from receiving health care? I doubt it- it may be more accurate to say that workers are not provided with health care as part of their compensation- something that very few workers even in the United States were provided with post World War II. But, I find it hard to believe that a worker is not allowed to obtain health care- anyone who equates NOT ALLOWING something with NOT OBTAINING something shows an obvious left leaning bias.

Brad

Kathryn...glad someone got it...

"Marry me!"

jz

I have no expertise beyond strolling the produce isle, but I'll pretend I know more:
-no need for refrigeration in transport
-little product waste, given long post-harvest survival
-low wage-rate in harvest countries
-massive scope of geography to grow them
-Ecuador is an oil producer, so cheap oil cost to the same country that produces bananas
-no special handling labor nor technology

Ian

Hey RZ. Is the health of the consumer the only reason to buy organic produce? I agree with you that non-organic bananas probably don't contain much in the way of pesticides. Think about the exposure of the workers to pesticides and what it does to their environment. 30c a pound extra is well worth it.

Cary Fowler

While news of the demise of the banana may have been exaggerated, it is certainly the case that basing the export industry on a single variety, whatever the short-term economic advantages, is asking for long-term trouble. We should also remember that banana is far from being only an export crop and is much more important locally as a staple. It nourishes millions of subsistence farmers all around the tropics. Fortunately, people are breeding new varieties -- though, it must be said -- not that many people. But they need raw materials. We at the Global Crop Diversity Trust have supported the development of a global strategy for the conservation of those raw materials -- genetic diversity within the fruit (http://www.croptrust.org/main/strategies.php?itemid=50). We're also supporting the cryopreservation of the global banana variety collection (http://bananas.bioversityinternational.org/content/view/137/75/lang,en/).

Read more...

Diversity

A bumch (or hand) of random thoughts:

The comments above on the price elasticty of bananas convince me that I am right in thinking that they are mildly addictive.

For many years, European Governments each had a set of files headed "Bananas!". They were the only official files that I have seen headed with an exclamation mark. (They dealt with a set of lunatic arrangements for subsidising bananas from old colonies, and from a couple of miserable looking stands of the plant in Crete.)

"Yes, we have no bananas". Nobody ever sang about lack of apples, pears or apricots.

From time to time I find myself longing for the remembered taste of a past variety of banana.

alan

The turnaround at Asda (Walmart UK) was famously driven by yhe banana, see this from former CEO Allan Leighton:

"Once a year at Asda we used to do a big set piece for the managers. My job was to gee everyone up and get them going. For the first event my theme was that the whole business turnround had to be based on increasing like-for-like sales. We had to have a totem of product sales.

Now, the biggest-selling item in a supermarket is the banana, so I arranged through Fyffes for 600 blow-up bananas to be delivered to the conference. These 3 ft inflatable bananas were then suspended in a big net in the auditorium above the store managers.

After I had made my upbeat speech, I pulled the cord attached to the net and all the bananas fell on top of everyone. Everybody then had to hold one of the inflatables and swear an oath of allegiance to the banana."

AaronS

There was actually a futuristic story in Hitchcock magazine sometime ago where the story hinged on a banana--a supposedly extinct (or at least hard-to-get) luxury.

Due to the refrigeration of bananas in transport from where they are grown to our markets, and to the marketing of bananas, which makes everyone think a "good" banana is perfectly yellow, many people seldom experience the true full flavor of a banana.

I wrote this before, but let bananas ripen until they are speckled with brown spots, then eat. Wait too long and their are big brown spots (on the skin or on the fruit itself), but if you hit it just right you experience what God intended you to experience with bananas.