Banana Price Crunch is Making Sustainable Options Unaffordable for Producers

Bananas are one of the cheapest fruits on the supermarket shelf, but behind their deceptive price tag is a multi-billion-dollar industry that employs more than a million workers across the globe.

New research from the International Institute for Sustainable Development (IISD) shows that downward price pressure from buyers and retailers—coupled with global economic disruptions, climate change, and rising production and living costs—is threatening the profitability and livelihoods of smallholder banana farmers across the globe.

“Banana supply chains are vulnerable to disruptions, such as those caused by the COVID-19 pandemic, the Russia-Ukraine conflict, and fluctuating fossil fuel prices,” said Vivek Voora, Senior Associate, IISD. “Higher input costs across the supply chain are putting banana producers under increasing financial pressure.”

But producers are often unable to pass on the rising costs to buyers and retailers, undermining the income they earn from their crops.

“Multinational companies and retailers in major importing countries hold much of the market power in the banana supply chain, leaving producers with little room to negotiate higher prices as their costs rise,” added Steffany Bermúdez, Policy Analyst, IISD.

Voora and Bermúdez are two of the authors in IISD’s new Global Market Report: Banana Prices and Sustainability. The report examines global market trends for sustainable banana production. It tracks the rise in bananas being produced under voluntary sustainability standards (VSSs) such as GlobalG.A.P., the Rainforest Alliance, Fairtrade International, and Organic and examines their role in building producers’ resilience to sustainability challenges.

VSSs in the banana sector are adopting measures to ensure banana farmers and workers are better compensated, such as setting minimum prices, paying premiums to cover the costs of sustainable production, and offering base wages.

IISD’s analysis finds that VSS-compliant producers in major exporting countries can receive between 60% and 100% higher prices than those selling conventional bananas. They can also be more protected from abrupt price changes and market disruptions.

However, these prices and premiums are limited since the reference price used to calculate them is the market price for bananas, which remains extremely low due to the market dynamics in importing countries, particularly the pressure to offer low retail prices in Europe. “VSS-compliant banana farmers struggle to compete with conventional bananas sold at unsustainably low prices,” said Bermúdez.

The report outlines recommendations for governments, private sector actors, and sustainability standards to support banana producers to adopt more sustainable practices and ensure they are rewarded fairly for their efforts. Recommendations include:

• VSSs should define minimum prices and premiums to improve conditions for farmers. To set new reference prices for VSS-compliant bananas, VSSs should consider factors such as inflation and the social and environmental cost savings of adopting more sustainable practices.

• Industry actors across banana supply chains should share responsibility for the costs of sustainable growing practices. For example, buyers, retailers, and governments can adopt policies and programs to reward banana farmers who use more sustainable practices based on the outcomes obtained. VSSs and other non-governmental organizations can help coordinate and monitor the results of such practices, while governments and private sector actors can provide monetary or in-kind incentives.

• Major banana-producing countries, in cooperation with other supply chain actors such as importing countries and retailers, should provide up-to-date information to farmers about market prices in different countries. Greater transparency would allow producers to make more informed decisions about how to access markets and better negotiate prices, including for VSS-compliant bananas, as well as compare and improve their sustainable production practices.

• Regional networks and associations, such as worker unions and local authorities, should advocate for higher prices for producers. The power dynamics of the banana industry must be rebalanced to give producers a stronger voice. Latin American and African countries could unite to push for higher minimum prices for farmers and advocate for greater price transparency.

Contact

For more information or to set up an interview, contact media@iisd.org.

About the Sustainable Commodities Marketplace Series

This report is part of the Sustainable Commodities Marketplace Series of global market reports that analyze agricultural commodities to foster transparency, knowledge, and strategic decision making for sustainable development. The series covers bananas, cotton, cocoa, coffee, palm oil, soybeans, sugar, and tea. The series is published by IISD’s State of Sustainability Initiatives (SSI), advancing inclusive value chains by providing credible and solutions-oriented research, dialogue, and strategic advice for decision-makers about voluntary sustainability standards and other supportive initiatives.

About the International Institute for Sustainable Development

The International Institute for Sustainable Development (IISD) is an award-winning independent think tank working to accelerate solutions for a stable climate, sustainable resource management, and fair economies. Our work inspires better decisions and sparks meaningful action to help people and the planet thrive. We shine a light on what can be achieved when governments, businesses, non-profits, and communities come together. IISD’s staff of more than 120 people, plus over 150 associates and consultants, come from across the globe and from many disciplines. With offices in Winnipeg, Geneva, Ottawa, and Toronto, our work affects lives in nearly 100 countries.