Banana prices set to smash £1/kg barrier

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The retail banana price is set to the break through the symbolic £1/kg barrier on the back of huge hikes in the price of oil and the weakness of sterling, importers are predicting.

Bananas are currently selling for 97p/kg in the big four, 35% up on the same period last year when the fruit was regularly discounted, according to Grocer 33 data.

Bananas are imported using forward shipping contracts, which will come up for renewal over the coming months, and shipping companies are expected to demand higher prices.

The price of Brent Crude has risen by a hefty 63% to $80 a barrel in the past year [Mintec], which has had a knock-on effect on the price of bunker fuel for ships.

Importers have been severely hit by the weakness of both sterling and the euro, which is putting further pressure on prices. At European level, bananas are currently £825/tonne, up 3% week-on-week and up 27% against the same period last year.

All this could send the retail price as high as £1.08/kg in the coming months, industry sources claim.

"There's not a supplier out there making a healthy profit at the moment," said one leading importer. "And supermarkets are losing money hand over fist as they try to maintain these low prices.

"We are engaged in fixed tenders with supermarkets but will be looking to recoup some money. The sad thing is the market is totally inelastic, so you could see a 30% increase in the price without it affecting sales."

Should the general election result in a hung parliament which could lead to a further collapse in sterling the price could rise even higher, he added.

Another supplier said the fact that two major Chilean oil refineries were out of action following the recent earthquake had put pressure on oil supplies in recent weeks. But sterling was the issue.

"The price of oil is not that bad compared with two years ago, but the situation is particularly tough because of exchange rates. It's extremely likely that the price will pass £1/kg in the near future."

Irish importer Fyffes also warned in a trading update last month that it would be seeking an increase in selling prices to offset the impact of poor exchange rates and higher costs.

However, another importer cast doubt on whether supermarkets would be prepared to move the price any higher.

"We have seen an 8%-9% increase on sea freight and fruit cost, which would equate to a 3.7p/kg increase, which is within the margins supermarkets will absorb," he said. "Logic says the price should be well past £1, but logic says it should have been for the past two years."

Supermarkets' banana pricing decisions were made according to "politics", not cost considerations, he added.

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