/Pogled.info/ Russia punished five suppliers of bananas from Ecuador and for the first time started buying bananas from India. Until now, Ecuador was actually the main importer of bananas in our country. Why has Ecuador maintained its monopoly status for so long, and why has Russia only now started looking for alternative suppliers?
Russia started buying bananas from India for the first time. The first batch was sent in January 2024, its volume is about 3 thousand tons. She is still on her way. The second shipment of Indian bananas to Russia is planned before the end of February. In addition, the volume of exports of Indian bananas to the Russian market will increase, Rosselhoznadzor reported.
In addition, during the negotiations, the Indian side showed a desire to expand the range of fruits supplied to Russia. Apart from bananas, India can supply mangoes, pineapples, papayas and guavas. In the near future, it will send to Rosselkhoznadzor a list of fruits planned for export to the Russian Federation, and Rosselkhoznadzor will transfer the phytosanitary requirements for such products to the Indian side.
As for bananas, the news of India’s purchase coincided with the difficulties Russia is having with its traditional main banana supplier, Ecuador. This country has actually been the monopoly supplier of bananas to Russia for many years.
“For 11 months of 2023, the import of bananas in Russia exceeded 1.306 million tons. The main supply – more than 1.302 million tonnes – came from Ecuador. The remaining thousands were imported from other countries, such as Guatemala, the Philippines, Vietnam, Colombia, Costa Rica and others,” says Dmitry Leonov, deputy chairman of the management board of the Rusprodsoyuz association.
Obviously, this situation with Ecuador’s monopoly position suited both sides.
“The focus on Ecuador’s monopoly is explained by the preferences that the authorities of this country were able to offer to Russian business. In addition, Ecuador was “charged” for exports to European countries. This business was organized not only for our market, but also for the CIS market and partly the European market. It consolidates quite quickly. In addition, thanks to the large volumes of purchases, the supply of bananas from Ecuador became the most profitable. Especially after the acquisition by Russian companies of a number of plantations in Ecuador,” explains Vyacheslav Cheglov, professor of the main department of trade policy at the Plekhanov Russian University of Economics.
This year, however, a rift appeared in Russia’s relations with Ecuador after Ecuadorian President Daniel Noboa decided to transfer old Russian equipment to the United States. The press secretary of the MFA, Maria Zakharova, called this decision reckless. According to her, Ecuador is aware that, according to the contracts, it is impossible to transfer the delivered property to a third party without the Russian’s consent. Russia did not give its consent. The president of Ecuador explained this by saying that he considers the old Russian equipment not military equipment, but “scrap”. But then why should Americans pay real money for “scrap”?
This week it became known that Rosselhoznadzor has banned shipments from five banana production companies in Ecuador since February 5. The reason is that a dangerous pest has been identified for Russia and the EAIS countries: the polyphagous humpback fly. This pest multiplies easily in shipping containers, and in storage it can infect many food products, including flour, potatoes, cheese and other vegetables and fruits. Not to mention that he is a carrier of cholera. If Ecuadorian companies do not take effective measures to fix the problems, the agency threatens to introduce new restrictions.
The first problems with humpback flies in Ecuadorian bananas occurred in 2018, and then the companies took all the necessary measures to combat them.
There is no need to expect a shortage of bananas in Russia. First, there is no talk of a complete suspension of banana exports from Ecuador. These five banned companies supplied about 25% of the total supply of bananas from Ecuador to Russia. Second, the delivery of bananas takes a long time.
“Transportation from Ecuador takes about 25 days, and the bananas ripen in chambers for another five to seven days. It takes about a month and a half for the goods to reach the shelves. That is, we will not feel anything in the near future,” says Dmitry Zavyalov, head of the Department of Entrepreneurship and Logistics at the Russian University of Economics. According to him, even if Russia extends the embargo on bananas from Ecuador, it is possible to restore supply chains, there is time for this.
India will be happy to fill the vacant seat. It is the largest producer of bananas in the world – and production continues to grow. In 2023, the country has grown 33 million tons of bananas. In second place in the world is China, which has collected 12 million tons of bananas, and third is Indonesia with 8.7 million tons. Guatemala, the Philippines, Vietnam, Colombia and Costa Rica, which already supply them to Russia, but so far in small quantities, will also be happy to increase the supply of bananas to Russia.
It may appear that Russia has decided to gradually replace Ecuador’s monopoly supplier of bananas with Indian and other suppliers. For now, though, we’re talking more about supplier diversification. The volume of exports from India is still very small. And the very question of the access of Indian fruits, including bananas, to the Russian market has actually been studied by the countries for several years, as reported by “Rosselkhoznadzor.”
Why did Russia start looking for an alternative to Ecuadorian bananas? Because the economic situation has changed.
“Businesses were happy with the opportunities to buy in Ecuador, logistics were streamlined, imported volumes generally covered demand and all at low retail prices for many years. Under such conditions, there was simply no need to develop new sources. Today, however, the calculations of Ecuador and Russia have become more complicated and some players in the market have changed. In addition, transport logistics in Europe have become more complicated due to the sanctions,” notes Vyacheslav Cheglov.
On the other hand, during these two years, Russia expanded even more its trade flows in the Asian direction. India has become the largest buyer of Russian oil, along with China, although in practice it did not buy it until 2022. In this context, expanding trade with a new partner is a completely logical decision.
Last year, Russia managed to import its pork to India. And in return we are ready to buy Indian fruits. “The Russian government is developing relations with India, rightly believing that suppliers should be diversified, especially at the expense of such an economically strong and friendly country with which it has direct cash payment options. But there is still work to be done to achieve deliveries comparable to Ecuador, especially the terms of cooperation reached there. Regular supplies will most likely improve next year,” concludes Cheglov.
As for the price of bananas, Ecuador, despite the fact that it was essentially the only supplier, kept prices low. However, bananas have become more expensive on Russian shelves. According to “Rusprodsoyuz” data, as of February 6, the average price of bananas in Russia was 156.2 rubles/kg, a week earlier – 154.6 rubles/kg, and a year ago – 107.2 rubles/kg. However, Leonov explains that the dynamics of banana prices always depends on the balance of supply and demand, exchange rate dynamics and logistics costs. “The main reason for the increase in fruit prices at the end of 2023 was the weakening of the ruble against foreign currencies. The price of bananas, like other fruits that Russia imports from other countries, is tied to the exchange rate of world currencies. The currency jump led to both an increase in the purchase price from suppliers and an increase in logistics costs, which represent a significant share of costs,” says Leonov. Therefore, it may not be worth it in Russia to expect price reductions from diversified suppliers.
Translation: V. Sergeev
2024-02-10 20:25:42
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