The price of bananas is set to increase this year because of rising fuel costs and poor weather in South America, fresh fruit giant Chiquita Brands International has warned.

The cost of bananas was up 36% in North America and 26% in Europe last month on a year ago, the company said.

"We are pleased that banana pricing remains favourable as we continue working to offset higher industry costs," said Fernando Aguirre, chairman and CEO of Chiquita Brands.

Chiquita's volume sales of bananas were down 11% year on year in core European markets, and blamed the reduction on tight supplies, a decision to cancel lower-priced contracts, and a strategy of concentrating on premium quality product rather than market share.

Market conditions would continue to make trading "challenging" throughout 2008, it said.

Last month the big four supermarkets began a price war on bananas, slashing prices to as low as 67p a kilo.