BANANA pure prices are starting to surge and traders fear that they could spiral out of control

next year. There are conflicting reports on the exact price of single-strength pure, but this may be down to the fact that some traders have not needed to come to the market recently and may therefore be unaware of the spot market rise. According to FOODNEWS sources, the present turmoil in the market is due to one thing only: McDonalds recently launched a banana and strawberry smoothie in the US, and its success has taken the fast food chain by surprise. The fast food giant has been re-branding and re-inventing itself over the past few years, starting with its trialling of pre-packed beverages in its stores (FOODNEWS 13 June 2008) and, in its recent results statement, actually cited higher beverage sales as one reason for its 15% jump in second-quarter profits. It singled out smoothies, lattes and strawberry lemonade for special mention. The result is that McDonalds commitment to its new smoothie line means it needs an extraordinary quantity of pure to meet demand for the products. Just how much is uncertain (McDonalds is believed to buy its banana pure from three main suppliers ), but FOODNEWS has been given estimates of 40 000-50 000 tonnes per year, which is the annual output of a single major manufacturer. McDonalds is placing huge orders, said one source. Banana pure is one of those products that seems to remain stable in price. Demand obviously increased when the smoothie boom hit the UK, and spread to other countries, but the recession affected smoothie sales and the largest European manufacturer, Innocent, has diversified into other fruit juices, so the market calmed slightly, and in 2008 prices fell to around USD510-530 per tonne (FOODNEWS 14 November 2008). Before that, the price had been pushed up by the Russian appetite for fresh bananas, which saw the country buying large quantities of second grade fruit that would otherwise have gone for processing. This was in the height of the smoothie boom, and levels rose to around USD750/tonne, with some suppliers claiming as much as USD750/tonne. Chiquita investing Demand for banana pure took a slam -dunk in the recession, said another contact. But it seems to be firm -ish at the moment. He quoted levels of around USD580-600/tonne c&f, and added that one reason for rising prices was that some companies had stopped investing in their plants or got out of the banana pure business altogether. Burt Chiquita is investing continually in its production line, he said. Chiquita has installed its own drum making plant: there was only one drum maker in Costa Rica. A trader who specialises in the product put prices at a much higher level. There is a deficit of 30 000 tonnes of pure in t he market, after the McDonalds launch, he told FOODNEWS. I have just sold five tonnes that is all at USD680/tonne c&f. A buyer in Germany acknowledged that banana pure had seen fluctuations in the past but said firmly: This time, it is different. Supply shortage A UK-based buyer said: The last price we had was GBP420/tonne (USD685/tonne) delivered. It is now up to GBP430/tonne. Yet another said that he had heard McDonalds was looking for at least 10 000 tonnes of pure, but admitted that this was four mo nths ago. The worry is if they decide to roll it [the new smoothie] internationally, or even just in Europe. It would be a major challenge for the industry. In Guatemala, processors are fighting over raw material. In Honduras, banana is a staple so there is limited availability of pure. India is the biggest grower in the world, but processes little: they consume it all fresh. India did, in fact, sell some product to the EU during the smoothie boom. Indian pure is subject to EU duty, which reduces its competitiveness, and for many buyers is something of an unknown quantity, but the country can produce perhaps 36 000 tonnes of pure in a season, if its plants all run at maximum capacity. Its mango processing plants can also handle banana, but they tend to produce only acidified product. Still, buyers may turn to India if, as looks likely, product from Central America becomes scarce. Innocent is believed to be the UKs biggest customer for banana pure, and is also believed to be covered for the rest of thi s year. After the UK, Germany is Europes second-largest customer, and again, processors there are thought to be covered. But nobody is

betting where the price of banana pure will be at the end of the year when the UK and Germany have to come to market to contract for 2012. Nor is banana likely to remain the only product influenced by the McDonalds effect: the fast food chain has just announced a mango/pineapple smoothie to partner the banana product, and it is not coincidence that one trader told FOODNEWS: I have just sold a huge tranche of pineapple concentrate to McDonalds