The True Cost of Bananas

Usually, I buy Equal Exchange organic, Fair Trade bananas. I work there. I looked for a bunch the other day at my neighborhood coop, but they were out of stock. A month earlier, I might have reached for Dole’s organic bananas. But I’d just returned from northern Peru, where I visited banana co-operatives trying to wrestle out of Dole’s grip. I left the store banana-less but at peace.

Small Banana Farmer Co-ops and Dole: A Tale of Two Banana Enterprises
Thanks to a government agrarian reform program, the Peruvian farmers that I’d visited owned small parcels of land. They had organized themselves into the APOQ and CEPIBO producer cooperatives. With their own land and fruit, their relationship with Dole was different than that of banana plantation workers I’d visited in Costa Rica (more on that in a moment). Dole provided training and technical assistance to the farmers to improve quality for export. The company installed washing stations and packing facilities. The relationship was pretty straightforward and not too bad: the farmers produced and Dole packaged and exported.

Things went well for a while – until the farmers had a new idea. They heard about fair trade’s higher prices, social premiums, and direct relationships with buyers. There was big demand in Europe. The farmers knew how to produce high quality, organic bananas. Why couldn’t they also handle relationships with international buyers, the washing, packing and exporting Why not own and manage the entire business themselves

“It wasn’t that we necessarily wanted to compete with Dole; we just wanted to export some of our bananas on our own,” Jorge Domador said. Dole wasn’t so enthusiastic. The company had invested money in infrastructure and didn’t want direct competition from the small farmer organizations. Maintaining the farmers as suppliers was working just fine.

Nevertheless, by the late 2000s, both APOQ and CEPIBO had succeeded; they were exporting directly to the European market. Dole responded by cementing the wells they had dug and ripping out their packing stations. How did things go so wrong

Behind a Banana’s Price
Bananas are the most frequently bought grocery item in the United States. They have a huge impact on a grocery store’s volume sales and profits. Retail lore has it that shoppers have the banana’s price etched in their minds and that this one item can influence where someone shops. Many stores are loath to raise the price of bananas.

This price ceiling poses a challenge to alternative importers like Equal Exchange, who then need to ask for higher prices from resistant retailers in order to pass along higher payments to growers.  On the other hand, Dole, Chiquita and the three other companies that have dominated the global banana export market for over a half century, have the ability to pay high – at least for short periods of time – to squeeze out their smaller competitors. They then turn around and offer low to retailers in the north – thereby eliminating competition on both sides.News about the practices of Dole and Chiquita in Latin America, and elsewhere, isn’t exactly… well, news. In 1954, Chiquita Brands, previously called United Fruit, helped overthrow Jacobo Arbenz, the first democratically elected president in Guatemala because his modest land reform ideas threatened to undermine the U.S-based company’s profits. With CIA backing, the coup d’etat led to a 30-year civil war with over 100,000 dead.

Despite lawsuits and scandals about their treatment of workers and support of paramilitaries who have killed unionists organizing workers on their plantations, these companies continue to sell us their bananas. And we continue to buy them.

Years ago, I lived on the Atlantic coast of Costa Rica, downstream from a Dole banana plantation. The plantations were endless rows of banana plants, and off in a corner, matchbox housing for the workers. Volumes have been written about the alienation of banana plantation workers, and the drinking, prostitution, and related violence that fills the void.

I can’t forget the pervasive smell of the pesticides aerially sprayed over the groves and the fish that washed up dead on the shore of the river where I lived (the same river the community bathed in and drank from). Banana prices can remain unnaturally low when you treat workers and the environment with unnatural callousness.

So, in 2006, when Equal Exchange and a few partners decided to build an alternative banana supply chain to buy direct from small farmers, I was elated. Five years later, I was thrilled to visit the APOQ and CEPIBO cooperatives – some of Equal Exchange’s banana farmer partners – and hear how the extra dollar per case of bananas they receive as a fair trade premium had funded youth scholarships, health insurance, and social “safety nets”.   

They’d also made production and commercial investments like CEPIBO’s cable system. For years, farmers carried 100-pound bunch of bananas long distances to washing stations. Now they simply hook bunches to the cable and the pulley carries it to its destination. This single infrastructure improvement has saved the farmers considerable time and physical injury. Plans are underway to install this system in more communities.

In the coops’ office, leaders pointed to a poster comparing the conventional supply chain chart (when they sold all their bananas to Dole) to their current model. CEPIBO’s General Manager, José Maria Lecarnaqué Castro told us, “We’ve reduced that chain by one link because now we’re also the exporter.”

These small farmers’ farms average 2.5 acres. But these farms are theirs. Many farmers also grow food to consume – corn and beans and other fruit. Life may not be easy, but it’s integrated and healthy.

Sounds like a story with a happy ending

Read on…

Scarcity and Predatory Pricing:
Buy High, Sell Low
Supply is down this year. Equal Exchange can’t get enough bananas for our customers.

“Whether you choose to believe in climate change or not, it is real and it is affecting us,” said Donald Lecarnaque Castro, President of CEPIBO’s board of directors. In the fall of 2010, when average temperatures should have been in the mid 80s, they dropped to all-time lows. Northern Peru now suffers from an unusual and severe drought.

Rains in Colombia, excessive flooding in Guatemala and Honduras, and organic certification issues in Ecuador have also conspired to create fierce competition for a limited supply of organic, fair trade bananas.  With banana supply low, and demand high, the competition has been brutal.

Dole sees it as an opportunity to regain its lost ground in Piura. While the company no longer owns the entire supply chain, it is now attempting to regain control of supply by driving up prices. By offering the farmers a price just higher than what the co-ops they belong to can pay, Dole can break the co-ops.

While logic might have it that rising banana prices should benefit small farmers, the price war is pushing co-ops to the brink. The co-operatives are losing some of their members who can’t resist the temptation to sell to the highest bidder. Already, one of CEPIBO’s twelve member associations has left the co-op to sell exclusively to Dole. In general though, José Maria Lecarnaqué Castro, CEPIBO’s General Manager, told us, co-ops are holding on, surviving these predatory strategies.

“Dole offers higher prices and hand outs which they’ll drop once they regain market control. But the co-op belongs to the farmers. We’ve made infrastructure improvements, built packing stations. The co-op provides technical assistance to the members. That translates to knowledge and knowledge is power. That’s more important to our members than today’s higher prices.”

His words were reassuring, but it was obvious that the co-ops are still worried. With good reason. According to Valentín Ruiz Delgado, representative of the Fair Trade Network of Organic Banana Producers of Peru, “These companies take advantage of the fact that we are relatively young organizations and new to the market, confronting very big companies who make use of their economic power.” said Ruiz Delgado.

Equal Exchange recently negotiated new contracts with CEPIBO and APOQ, including higher prices to help them compete. But Dole raised its prices twice more. We are now paying $2 more (over conventional prices) per case of organic, Fair Trade bananas. In the meantime on the grocery shelf, the price remains steadfast at $.99 a pound.

Higher Prices That Equal Good Values
But it’s not just the banana producers getting yanked around. Here in the U.S., the big 5 offer lower prices to retailers. Whatever the going price is for a pound of bananas, these companies offer their’s for a little bit less. Small farmer co-ops like CEPIBO and fair trade wholesalers like Equal Exchange find themselves in similar positions: how do businesses motivated by a social mission survive against a handful of multinationals that control the entire industry

In the end, retailers and consumers will have to decide how much they value small farmers, co-operative organizations, independent suppliers, and their social mission.  Are we willing to pay a higher price – one that reflects the true cost of a bunch of bananas – for those values

I hope that one day, fair trade bananas grown by small farmers become a mainstream idea, and a household staple.  Like CEPIBO and APOQ, we can tell Dole “no business-as-usual”.  Their unfair practices serve up bruised bananas – too sad and tasteless to be acceptable.