European banana prices to drop

European banana prices to drop

Chiquita Brands International has warned that European banana prices are close to 11% lower than in the first quarter of 2009.

The US-based group said prices had "not followed the normal pace of seasonal price improvements", although it expects prices to improve in comparison to 2009 as the year goes on.

Pricing did not improve sequentially during the quarter at the same rate as in recent years due to soft demand throughout the company's core European markets, it noted.

Banana prices in the company's core European markets in January were 2% lower compared to the same period in 2009 on a local currency basis.

However, local currency prices in February were 8% lower than 2009 and an estimated 18% lower in March. Volume was lower by approximately 13% during the quarter.

"As widely reported in recent weeks, European banana pricing was negatively impacted by the harshest winter weather in 30 years and depressed economic conditions which have affected commerce all over Europe, particularly in the south," said Chiquita chairman and CEO Fernando Aguirre.

The Chiquita boss warned that the company's first-quarter results would be "substantially lower" than in 2009. However, he insisted that Chiquita was "confident" of achieving our full-year target of US$110 to $120m of comparable income.

"We expect that second half results will improve versus 2009 as we have already begun to take aggressive pricing actions, are executing significant cost improvements throughout our supply chain and will realise profit improvements from our Just Fruit in a Bottle joint venture. Taken together, this should allow us to overcome these early headwinds in our European business," Aguirre said.

Aguirre said Chiquita expects banana prices to strengthen as the year progresses, as tightening industry supplies in Latin America and Asia restore the balance between supply and demand.

As reported today, Danone is to join forces with Chiquita to market fruit-based drinks for the European market.

In February, Chiquita announced that it had doubled its annual profits thanks to greater efficiency from the US-based firm's salads business.