Interview with Mr. Denis Loeillet (CIRAD): “Supporting bananas production of ACP countries is in the interest of European Union”


Denis Loeillet is director of the Cirad-Persyst UR 26 Market Observatory and editor of CIRAD's FruitTrop magazine. He is a recognized expert on the banana market and takes part in the work of the Cyclope, annual report on world commodity markets.

- What are the trends in the banana market in 2017?

The trends are very mediocre, even very bad. As the Anglo-Saxon say, "it is a perfect storm". The price decline was initially violent, with a wait of almost 14 weeks in 2017 before returning to correct prices. The market then performed well for two months before falling back to relatively low levels in June and historically low in the summer and September. Since the beginning of October, we are beginning to see an improvement in the market, which is expected to continue until the end of the year.

- What are the origins of these trends?

All these trends were foreseeable because the fundamentals of the market indicate for some time already that a crisis due to an abundant supply was outlined. Prices have been good over the last decade, which has led logically to increased investment and productivity. This commodity cucle has for at least ten years been regulated by climatic hazards (cyclones, droughts, tornadoes, etc.). But in 2016, the supply has not been cut, or not enough, and we are therefore in a situation of over-supply in the market. Without climate damage in the banana plantation areas, all production potential was expressed and bottled up in European ports

Despite the major damage in Guadeloupe and Martinique in September 2017 (-70% of production compared to the last year at the beginning of October 2017), there was no inflationary effect on import-prices. It was not until the monstrous floods in the Dominican Republic and the end of the cycles of the big peaks of production (in Costa Rica and Colombia in particular) to see the price of cardboard take between 1 and 1,50 €. Still, will this be enough to trigger a bullish move? In the short term no doubt, but there is a real downward resilience.

This is not at all a crisis of under-consumption, Europeans and Americans have consumed more bananas than previous years. Consumer dynamics in Europe are very favorable, with an annual increase of 4 to 7% for several years. In the first 40 weeks of the year, compared with the previous year, imports were up to 7%. Nice score for a widely-consumed product.

- What prospects do you see for African production?

Within five years, we can expect an African supply of one million tons. In terms of volumes, the prospects are good because there are many projects to extend existing plantations but also projects of new productions, notably in Côte d'Ivoire and Ghana, a little less in Cameroon.

On export, it is illustrated very concretely on the European market by an increase in imports from the African continent. Looking at the Eurostat data, which was closed at 8 months at the end of August 2017, Côte d'Ivoire is already approaching the 200 000 tonnes for export to Europe (a record!), while Ghana has exported about 44 000 tonnes, compared with 34 000 tonnes a year earlier. Last year, Côte d'Ivoire had already exported 308 000 tonnes of bananas to the European Union.

If the supply potential has increased, there is also a demand for it. Since 2012, nearly 660 000 tonnes of bananas have been in addition imported into the European market. It is as if a market and a half of the size of the French market had been added to the European Union. The dynamic on the consumer side has absorbed this excess of supply but this is reflected in 2017 by a very significant drop in prices.

- What role can the European Union play in supporting the development of bananas in Africa?

Since the establishment of the single market in bananas, the European Union has always accompanied and supported the productions of ACP countries.

This was reflected mainly through two policies. First, differentiated access to the European market, with privileged access in terms of quota and customs duties. Second, a development support system (ATF or BAM program) of the banana sector aimed at strengthening the competitiveness of the sector and its diversification.

These two pillars have gradually been eroded. With regard to the first pillar, we enter into the period of negotiation of the customs duty of 75 € per tonne which Latin American competitors would like to reduce or even eliminate but which remains the last instrument to regulate European banana market. On the development pillar, the BAM (Banana Accompanying Measures) program ends, but the European Commission has not yet drawn up the lines for a new support plan.

For various reasons, it is in the EU's interest to continue to support ACP banana production. First of all, it helps to maintain a real diversity of origins in the European market, at the risk of being quickly found with only four origins of bananas. Secondly, European decision-makers should not forget the importance of the development of African rural areas, where bananas occupy little land for a sufficiently high labour intensity. It is a sector that requires a well-trained and quality workforce, an additional asset for rural areas in search of development. Agriculture in Africa is a sector that is all the more interesting as the continent is resolutely investing in agroecology.

But I would say that there is also an ethic that Europe must respect. African countries have signed cooperation agreements with Europe for a long time. There is a moral obligation to continue to support the banana sector in Africa, especially as the futur of the two continents are linked. This unraveling of the agreements between the African countries and the EU that has been going on for the last fifteen years has no meaning, either historical or economic.

- Do not the ultra-peripheral regions of the EU and African producers have an interest in joining forces against the South American giants?

They are objective allies. In terms of political defense, they are in "coopetition" - Competitors on the same markets but objective allies to defend their position as preferred suppliers of the European market. Although producers in the ultra-peripheral regions and the ACP countries are competing in the markets, they have every interest in cooperating on tariffs and the safeguard clause. Especially since these regions share the same vision of a certain agriculture, of certain origins.