"One of the most coveted emerging markets for banana producers is that of the ten new countries that will join the Single European Market in May," said Paul Pilkauskas, FAO Senior Commodity Specialist.
Pilkauskas' comments came as the Third Session of the Intergovernmental Group on Bananas and Tropical Fruits opened in Puerto de la Cruz, Canary Islands, Spain.
In the coming weeks, the EU will decide how the transitional tariff-quota system will be applied to banana imports between 2004 and 2006. Beginning in January 2006 a tariff-only system will be established. According to FAO, these two decisions will have a significant impact on producer countries, because currently one third of the world banana trade is destined for the European Union.
"The meeting of the Intergovernmental Group will be a good opportunity to discuss these issues before the EU takes a final decision," said Pilkauskas. "This will affect all banana producers, whether in the Canaries, in Latin America or in the ACP [African, Caribbean and Pacific] countries. Currently only the ACP countries are allowed to enter the single European market free of any tariff or charge."
Currently, the sector faces a number of challenges, including overproduction and the shape of the new market that will be created by the new Europe of the 25 countries.
According to the FAO, bananas are the fifth most important commodity for world food security. Worldwide, more than 88 million metric tons of the fruit are produced every year. A substantial part of this production is consumed locally, especially in tropical countries, where bananas are a staple food.
The banana sector is strongly export oriented, with some 13 million tonnes crossing the seas and oceans each year. Oversupply relative to demand is a continuing issue, and the future of the sector is less than clear in the evolving world agriculture trade system.
"Last year saw a fall in prices," said Pilkauskas, "But, at the same time, demand is growing in the Commonwealth of Independent States and the ten new EU member countries. China is also a promising market."
Pilkauskas added: "Every region has export factors that work in their favour or against them. For example: The strength of producers in the Canary Islands lies in the fact that their market is almost exclusively European and that their crops are less prone to blights than those in Africa or Latin America. On the other hand, their workforce and irrigation costs are higher than other regions'."
"Banana plantations in Central America average 100 to 1000 hectares (247.1 to 2471 Acres) and are more economically viable than the smaller plots in the Canaries, which are typically just one to five hectares in size. But bananas destined for the EU from Latin America have to cross the ocean and pay tariff duties and all this drives up their price," said Pilkauskas.