EU plans to extend banana import duty

Banana-producing countries in Latin America have reacted angrily to EU proposals to extend the imposition of full import duties on the fruit. The duties will be levied until 2019, three years longer than initially proposed. After that date, the duty will fall from 176 euros to 114 euros per tonne. The European proposal was tabled at World Trade Organisation talks in Geneva.

bananasFormer European colonies, mainly in Africa and the Caribbean, are exempt from paying any duty on exports to the EU. These countries, usually referred to as the ACP countries, fear that stronger competition from American banana multinationals will force them out of the European market. This exemption is denounced as 'preferential treatment' by the Latin American countries and the United States.

Retaliatory measures
Ten banana exporting countries have said they are rejecting the EU proposal. They are threatening to impose retaliatory measures and are demanding that the reduction in duty be introduced in 2016 as originally agreed.

The EU does not feel bound by the original 2008 agreement because, Brussels says, it is conditional on the Doha Round negotiations being concluded. Currently, Doha is stalled, therefore in the EU's view the old agreement does not apply.



Source: radionetherlands.nl

Publication date: 2/25/2009

Solon scores Australia over banana export

A senior administration lawmaker yesterday protested Australia’s alleged imposition of unjustified barriers to prevent Philippine bananas from entering that country. Cotabato Rep. Emmylou Talino-Santos, a member of the powerful Commission on Appointments, urged the Australian government "to stop unreasonably stalling the entry of Philippine banana exports."

Talino-Santo’s province is one of the country’s top producers of the tropical fruit for export. Earlier, the Philippines’ Bureau of Plant Industry (BPI) reported that Australian government has been obstructing banana exports from Manila through the imposition of unusually difficult quarantine controls.

Cotabato and other Mindanao provinces produce bananas that are exported to Japan, the US, South Korea, and the Middle East, primarily the United Arab Emirates. Talino-Santo’s dismissed as "exaggerated and distorted" the risk of possible pest flare-ups originating from Philippine bananas.


Source: tempo.com.ph

Publication date: 2/25/2009

US: Chiquita sell-off is bananas

Chiquita (CQB) reported Q4 2008 results last week which missed analyst expectations due primarily to lower salad sales (more on that), foreign exchange headwinds, and an $8m expense from flooding in Panama and Costa Rica. CQB also took a $375m goodwill impairment charge which made the GAAP number look much worse, however the write-off has no effect on covenant compliance or borrowing capacity.

In response to this weaker than anticipated quarter, the stock had the steepest sell-off in its history, falling -56% in the past two days! This is not a highly levered homebuilder or RV manufacturer, these guys grow bananas, leading me to believe this sell-off is way overdone. Keep in mind that CQB has a solid balance and even paid down $2.7m in debt during Q4 2008. Furthermore, they have no significant debt maturities until 2014 so there should be no concern over liquidity.

What the heck happened?
Sales for bananas were strong at +9%, but the salad part of the “Salad and Healthy Snacks” segment was weak as CQB canceled certain foodservice contracts with customers that were unwilling to accept price increases. Foodservice salad volume was down -25% in the Q, according to last year’s 10-k the foodservice business makes up 30% of Salad & Healthy Snack sales. Retail value-added salads volume declined -4% in the Q. All in all, sales were roughly flat on a yr/yr basis as banana strength and growth from healthy snacks offset the weakness in salads.

Guidance was actually fairly positive in my opinion as management said they expect improved FY 2009 results vs. 2008. If CQB is able to execute I think they will be one of the few companies to show earnings growth in 2009. Given the results and guidance for FY 2009, the market’s reaction seems wildly inappropriate.

CQB is now trading at a compelling valuation relative to peer Fresh Del Monte (FDP) and is generating a FCF yield of +20%. If banana prices and volumes stay relatively constant with where they are now, I think CQB could make $1.17 (vs. $1.12 in FY 2008) in EPS in 2009. Assume a 10X P/E and CQB is an $11 stock. At $11 the stock is trading at 9.4x P/E and 6.3x EV/EBITDA. This estimate does not include any favorable impact from the removal of EU tariffs so that potentially offers even further upside, more detail below. With the stock currently trading at tangible book value (real assets, by the way, such as farms, land, etc.) the downside risk is muted.

* Attractive business, significant growth potential

CQB uses their strong brand recognition to dominate the markets in which they compete with a #1 banana market share in Europe, #2 banana market share domestically, and a #1 packaged salad market share domestically. In addition, CQB is well positioned to benefit from the growth in health consciousness and the new FDA pyramid which recommends 13 daily servings of fruits and vegetables. CQB is leveraging their strong brand by introducing new products that should accelerate the company’s growth rate and achieve higher margins. CQB enjoys competitive advantages such as scale, brand recognition, and supply chain efficiencies.

* Stable demand and “fruit arbitrage”

CQB sells staple products that have steady demand which is attractive during rough economic times such as these. The products are low in absolute cost so any pressure on consumer spending should not have a huge impact. CQB has recently been able to offset cost increases by meaningfully raising banana prices in the US for the first time in 15 years. In addition, CQB has shown the ability to add surcharges (related to Katrina expenses last year) when necessary without damaging demand.

Anecdotal evidence, bananas increased from $.49 per lb to $.59 per lb at my local grocery store (shout out to Harris Teeter) over the past year. This still represents a huge discount to other fruits (apples $1.89lb) and I expect that demand is relatively inelastic at these price levels due to this “fruit arbitrage”. On the call management noted that banana supply/demand remains favorable for banana prices with stable demand and tight supply.

* EU tariff appears to be on the cusp of being overturned

Over the past few years CQB had been pressured by the EU tariff regime change that took effect at the beginning of 2006 which called for the removal of the existing quotas for Latin American producers while simultaneously increasing tariffs for these producers. The law was intended to provide benefits for EU interests in Africa, Caribbean, and Pacific (ACP) regions but appeared to many as a violation of free trade. The tariff per 40lb box increased 135% which effectively added $2.20 in incremental tariff cost to each box imported from Latin America. An analyst that I spoke with estimates the tariff cost CQB $1.00 EPS in 2007.

The legal landscape appears to be shifting in favor of CQB and other Latin American producers. In December 2007 the WTO ruled in favor of Ecuador that the EU was breaking international trade rules by giving preferential treatment to bananas imported from Europe’s former colonies. In May 2008 the WTO ruled in favor of the US complaint against the EU tariffs. These rulings are a big step towards reversing the tariffs. Given that a removal of the tariffs would add roughly $1.00 to EPS and my FY 2009 estimate is at $1.17, a favorable ruling should revalue CQB significantly higher. I think it is likely that the US and Ecuador prevail in overturning the tariff based on the prior WTO rulings and a pretty open/shut case.

At the current stock price of $5.60, CQB is trading at tangible book value and offers an attractive risk-reward profile. The weakness seen in Q4 was self-induced due to exiting their contracts. End demand remains stable and finding companies with earnings growth in this economy is rare.

* Risks
o Natural disaster disrupts operations.
o EU tariffs are not overturned. At this price I don’t think there is any expectation of the removal of tariffs baked into the valuation.
o Banana prices fall back to 2006 levels. This seems unlikely as the reason for depressed bananas prices in 2006 was the removal of the EU quotas which resulted in the market being flooded. Since then these unsophisticated importers have gone out of business leading to a more rational marketplace.


Source: seekingalpha.com

Publication date: 2/25/2009

EU proposal to end banana trade dispute

The European Union has made a fresh proposal to Latin American banana producers in a bid to end a decade-old dispute over the bloc's banana import policies, sources close to the WTO said Monday. In the fresh proposal, the EU has proposed lowering its taxes on banana imports from Latin American countries to 114 euros per tonne by 2019, instead of 2016, prompting swift criticism from the producer nations.

Banana imports to the EU from Latin America are currently subject to taxes of 176 euros per tonne, while imports from mostly poor former European colonies in Africa, the Caribbean and the Pacific region enter the bloc tariff-free. As a result, Latin American exporters have been pushing for this barrier to be lowered.

The latest proposal would envisage lowered taxes but levied three years later than the 2016 deadline Brussels offered last July in a proposal made on the sidelines of negotiations between ministers for a world trade liberalization deal.

The EU has said the July agreement on bananas was tied to overall trade liberalisation negotiations at the World Trade Organisation. Since those talks collapsed, that agreement was therefore no longer valid, according to the EU.

However, Latin-American producers want the EU to honour the July agreement. "We will not accept the introduction of new elements and renegotiations to arrive at something that is completely different and disadvantageous compared to the balanced agreement concluded on July 27, 2008," Guatemala's ambassador Eduardo Sperisen-Yurt told AFP.

The world's largest banana exporters, Ecuador, Brazil, Colombia, Costa Rica, Guatemala, Honduras, Mexico, Nicaragua, Peru and Venezuela, have all rejected the EU's argument and have threatened sanctions against the the bloc. Three of the largest producers with plantations in Latin America are US-based multinationals -- Chiquita, Del Monte and Dole.


Source: google.com


Publication date: 2/24/200

Australia: Banana supplies back to normal

Supplies of North Queensland bananas have returned to normal after weeks of havoc caused by widespread rain and flooding in the tropics. "The industry is very appreciative of the support it has received from consumers during the interruption in banana supplies," said Australian Banana Growers Council president Nicky Singh.

"We expect that banana prices at retail outlets will quickly reflect the increase in available supply as packing sheds and transport operations return to normal,” he told farmonline. "There may be some dullness of the skin due to the weather conditions, but eating quality of the fruit remains excellent."

Singh said that from a logistical perspective, it was a credit to the banana industry's supply-chain partners that they were able to get fruit to market so quickly in what were still very difficult circumstances after the Bruce Highway re-opened.

"Supply from north Queensland was cut to 23,000 cartons during the first week in February but jumped up to 550,000 cartons last week," he said. "The rain caused an average of about 20pc losses in northern plantations due to flooding, water-logging and weather damage, but this will not cause any interruption to future supplies unless there are further weather complications."


Source: foodweek.com.au

Publication date: 2/23/2009

Huge strikes hit banana supplies

Fruitnet.com 18 February 2009

Long-running strikes in Guadeloupe and Martinique have finally started to affect UGPBAN’s activities

The banana-growing islands of Martinique and Guadeloupe in the French West Indies have been virtually paralysed for the past month due to massive strikes against the spiralling costs of living.

Although there have been no strikes in the banana plantations, according to UGPBAN, the islands’ union of banana grower associations, business has recently been affected.

“Activities are starting to be impeded by blockages to the roads leading to the ports, especially in Martinique,” the union said. “Last Saturday, the boat left the Antilles with 44 containers from Guadeloupe and 0 containers from Martinique – less than 20 per cent of usual volumes, which stand at around 250 containers. This was the first boat to havebeen affected by the crisis. Until then, volumes had been quite normal.”

UGPBAN said that it was working with its clients to maintain commercial flows using bananas from other origins, with the priority being the French market rather than exports.

According to reports in the associated press, the strikes in Guadeloupe escalated into rioting on Tuesday, with shops ransacked, vehicles torched and no obvious end in sight.

Banana prices jump amid flooding

Fruitnet.com 18 February 2009

Western Australian banana prices have soared by up to A$3 per kg on January prices as suppliers struggle to move fruit

Flooding in northern Queensland has hit Western Australian (WA) banana supplies, leading to a rapid increase in prices at retailers.

Torrential rains and floodwater has cut off many transport routes, meaning that Queensland growers have struggled to supply the usual 40,000 bananas per week to the region, The West Australian reported.

Bananas were retailing at A$6.99 per kg at Herdsman Fresh this week, with prices at Coles (A$6.95 per kg) and Woolworths (A$5.98 per kg) in Innaloo also up significantly on January's prices of around A$4 per kg.

Herdsman Fresh produce manager Ron Swain told the publication that he expected the situation to ease over the next few weeks as supplies return to normal. "We're paying about A$55 per carton, when we'd normally pay between A$28 and A$20 a carton," he said.

Australian officials have marked the cost of the flooding in Queensland at A$210m, with many areas declared natural disaster zones.

Australia: Banana prices set to fall

You might have noticed banana prices have been a little high in recent weeks, but that's not going to be for much longer.

Far North Queensland banana growers have rejoined the market, after severe flooding stopped the road transport of bananas out of regions north of Ingham.

In Western Australia, Carnarvon grower Chris Collins has enjoyed better prices for his fruit, but reckons it'll drop with a thump as 550,000 cartons hit the market.

"We've probably got $10 to $15 more than what we were getting in the weeks previous," he says.

"I think sort of the top price was about $48 to $50 a carton and it'll probably drop back down quite quickly.

"I mean, 550,000 cartons probably equates to about 45,000 to 55,000 cartons coming into Perth."


Source: abc.net.au

Publication date: 2/18/2009

Dole gives consumers direct line to Costa Rica

An interactive sticker system is being introduced by fresh produce supplier Dole to help reassure consumers over its banana sourcing policies.

Each sticker will feature a unique code that identifies where the bananas were packed. Shoppers can enter the code into the Planet Dole website, which will give them access to information about the grower.

Consumers will be able to zoom into the farm via Google Earth, learn about the farmers who grew the fruit and the social benefits sales of the bananas have paid for.

Dole, the world's largest fresh produce company, would roll out the stickers in Continental European retailers later this month, and was in discussions with UK supermarkets about introducing the stickers here, said Dole vice-president Sylvain Cuperlier.

In a crowded fresh produce aisle, stickers directly on the produce were the best way of communicating information, he said.

The stickers will initially be limited to banana lines from Costa Rica, although Dole plans to extend this to Ecuador and other locations. Other fruit may also be included in the scheme in future.

"We are being more proactive in promoting corporate social responsibility," added Cuperlier. "We want consumers to know more about what's behind the brand. Bananas are a sensitive product in terms of image and consumers are concerned about how they are sourced."

The stickers were part of a strategy to get retailers to work with Dole on joint CSR projects, Cuperlier said. A Norwegian supermarket, for example, had recently contributed $300,000 to a Dole community project in Ecuador. Retailers could contribute towards any of 20 medical, environmental or social projects, he said, adding that the publicity would help boost consumer confidence in their sourcing practices.

Dole was also providing material for children to use in the classroom to explain how produce was sourced and when fruit was ripe, Cuperlier said.


Source: thegrocer.co.uk

Publication date: 2/17/2009

Costa Rica ‘rejects’ EU offer

fruitnet.com 16 February 2009

Export official calls EU banana tariff proposal “insufficient”, although Costa Rica has yet to deliver a formal response

Costa Rica appears poised to reject the latest offer from the European Union (EU) to reduce its controversial banana tariff for Latin American bananas, claiming that the proposal is “insufficient” for the country’s exporters.

The Central American nation’s Ministry of External Trade (Comex) has also claimed that the new offer is “inferior” to a provisional agreement made between the EU and Latin
American countries last year during the failed Doha round of trade talks.

Speaking to Costa Rican daily La Nación, Comex spokesman Marco Vinicio Ruiz described the new proposal as “insufficient and even poorer than the July (2008) agreement”.

News agency EFE earlier claimed that the revised proposal, if implemented, would see a three-phase reduction in the tariff – from €176 per tonne to €148 per tonne this year, followed by a lowering to €143 per tonne in 2010 and a final reduction to €136 per tonne in 2011.

This compares with the original agreement, which would have seen the tariff lowered to €148 per tonne this year, falling to €114 per tonne by 2016.

Ministers from Comex reportedly met late last week with officials in Panama to discuss their response to the EU’s proposal.