Bananas price liable to go sky high

BANANAS could cost $15 a kilogram - a fivefold price increase - after cyclone Yasi decimated most of Australia's crop.

By InvestSMART · 4 Feb 2011

By InvestSMART ·
4 Feb 2011

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BANANAS could cost $15 a kilogram a fivefold price increase after cyclone Yasi decimated most of Australia's crop.

Prices not seen since cyclone Larry five years ago are expected as farmers begin a year-long struggle back to full production.

Banana and sugar cane farmers were hit worst in the storm. Cane growers expect more than $500 million to be wiped from their $2.5 billion industry.

The National Farmers Federation said the checkout price for sugar should stay the same since it was a global market.

More than 75 per cent of Australia's banana crop was destroyed, with Tully and Innisfail taking the brunt of the damage.

Australian Banana Growers Council chairman Cameron MacKay, who has a farm at Tully, expected supplies to be disrupted for four months. Return to full production could take up to a year.

"This is a fairly significant disaster for our industry," he said.

"Many growers are facing massive repair costs as crop insurance is not available for banana farms. Therefore the industry is facing a huge financial and personal struggle to return production to its previous levels of more than 450,000 cartons per week."

Mr MacKay said shoppers would see a lot of storm damaged fruit. But he said that while it might look rough it would taste the same.

Woolworths spokesman Benedict Brook said the company had about one week's supply of bananas.

Bananas were yesterday selling for about $2.75 a kilogram.

Mr Brook said Woolworths was not considering importing bananas at this stage.

While not closed to importing the fruit, National Farmers Federation spokesman Brett Heffernan said the federal government must not relax its tight quarantine laws.

Steve Greenwood, chief executive of the Canegrowers organisation, said some sugar cane farmers would never recover from Yasi.

But some farmers remained hopeful, he said.

"Cane is resilient and . . . there is still a chance that it may still yield something."

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Frequently Asked Questions about this Article…

Why are banana prices expected to surge after Cyclone Yasi?

Cyclone Yasi destroyed more than 75% of Australia’s banana crop, especially around Tully and Innisfail. The article notes prices could jump to about $15 a kilogram — roughly five times the recent $2.75/kg — as growers struggle to restore output.

How long will banana supply disruptions last and when could production return to normal?

The Australian Banana Growers Council chairman said supplies are likely to be disrupted for about four months, while a return to full production could take up to a year as farms recover from the storm damage.

What does this banana shortage mean for supermarkets and retailers like Woolworths?

Woolworths told the article it had about one week’s supply of bananas and was not considering importing at this stage. With local supplies disrupted for months, retailers could face tighter stock levels and higher wholesale prices in the near term.

Will Australia import bananas to cover the shortfall from the cyclone damage?

The article says Woolworths was not considering importing bananas at the time, and the National Farmers Federation warned the government should not relax quarantine laws. So while imports aren’t ruled out, they were not being actively pursued and quarantine concerns remain a barrier.

How has Cyclone Yasi affected the sugar cane industry and its financial outlook?

Canegrowers warned the storm hit sugar cane hard: cane growers expect more than $500 million to be wiped from a $2.5 billion industry. The National Farmers Federation also indicated Australian checkout prices for sugar should stay stable because sugar is traded on a global market.

Are banana farms insured against storm damage and what are the financial implications for growers?

The article states crop insurance is not available for banana farms, leaving many growers facing massive repair costs. Industry representatives described a huge financial and personal struggle for growers trying to return production to previous levels (more than 450,000 cartons per week).

Will storm-damaged bananas still be good to eat?

Industry leaders noted shoppers would see a lot of storm-damaged fruit that may look rough, but they said the bananas would still taste the same.

What key signs should everyday investors watch when assessing impacts from this agricultural disaster?

Investors should monitor banana price movements (retail and wholesale), retailer stock statements (for example, supply levels at companies like Woolworths), reports on crop recovery timelines, any government quarantine or import policy updates, and financial updates from farming groups about repair costs or industry losses.