NCoV fallout: Chinese buyers halt orders for PHL bananas

By Jasper Y. Arcalas, BusinessMirror, 7 Feb 2020

BANANA exporters may soon feel the pinch of the slowdown in China’s economic activity due to the outbreak of the 2019 novel coronavirus (nCoV), as Chinese buyers have stopped ordering Philippine bananas.

Pilipino Banana Growers and Exporters Association (PBGEA) Executive Director Stephen A. Antig told the BusinessMirror that Chinese buyers have started canceling orders last week. This could cause the industry to lose an estimated $5.5 million a week.

Worse, some banana exporters have received notice from some Chinese importers that they will stop buying Philippine bananas and did not indicate when they will resume ordering from local traders, Antig said.

He also said exporters who wish to ship bananas to China are having a difficult time finding a vessel that can transport the orders.

The cancellation of orders stemmed from the lockdown of cities in China to control the spread of the virus, which has killed 563 and infected 28,000 people, according to international reports.

Antig said supermarkets have started reducing their orders as the supply will not reach them due to the lockdown.

“The big buyers from China have already sent notice to suppliers that they will either reduce or totally stop the purchase of bananas for a certain period of time. And they did not say how long this will be,” he said in a phone interview.

“China has been [the Philippines’s] No. 1 market since 2018. This [outbreak] has a huge impact on us,” he added.

Excess Cavendish

Antig said the reduction in the purchases of Chinese buyers may force local growers to cut output. However, he said production in the first quarter may rise due to favorable weather conditions and this could lead to a banana glut.

This, he said, would add to the woes of banana growers and exporters as they would have to look for other buyers of excess bananas.

“The problem is Filipinos do not buy Cavendish,” said Antig.

Antig said diverting Cavendish exports to other Asian countries like Japan and South Korea is no longer an option since these countries, which are the Philippines’s second- and third-top buyers, are already mature and saturated.

The PBGEA official estimated that banana exporters are losing a minimum of $5.5 million weekly based on a low price of $5 per box and annual shipments of 60 million to 65 million boxes.

“I don’t want to think about the repercussions or the implications of a prolonged lockdown or shutdown in the Chinese market. Imagine, we are exporting something like 60 million to 65 million boxes to China. [Losing millions of dollars] is not far-fetched if this will continue,” Antig said.

Philippine Statistics Authority (PSA) data showed that from January to November 2019, the Philippines exported 1.428 million metric tons of bananas worth $599.216 million to China.

On average, the Philippines earns at least $11 million weekly from Cavendish exports to China, based on PSA data analyzed by the BusinessMirror.

Impact on small growers

Smallholders and medium-size growers are the ones who will immediately feel the impact of China’s economic slowdown as they supply most of the bananas shipped to the East Asian nation.

Antig said the use of better farming technology has allowed small- and medium-sized growers to export at least a container of Cavendish banana to countries like China.

China has been the country’s top Cavendish market in the past two years after it ended Japan’s 30-year reign as top buyer in 2018.

Cavendish bananas were the country’s fourth-top export product to China in January to November 2019, PSA data showed.

Aside from bananas, economist Pablito M. Villegas said shipments of Philippine pineapples and coconut oil to China may also go down in the coming months.

Villegas said exporters may consider redirecting these products to Taiwan, Hong Kong, or even the Middle East, which is a growing market for Philippine Cavendish.