Russia's attack on Ukraine had a negative impact on Ecuador's banana sector

Russia's war against Ukraine puts additional pressure on the already tense global logistics, as container shortages and rising production costs are among the factors affecting the fruit industry.

Richard Salazar, executive director of the Ecuadorian Banana Association ACORBANEC, assessed the impact of the war on Ecuador's banana exports and outlined the challenges facing the industry.

"The Russian war against Ukraine (Russia and Ukraine account for 25% of all banana exports), which began on February 24, exacerbated the crisis that the industry has already experienced," he said, referring to the already existing global logistics crisis.

Economic sanctions against Russia have damaged the country's economy and made it difficult to make payments.

In addition, economic sanctions affected logistics. In January, February and March, a shortage of spaces on export ships and containers was exposed, with increases in freight prices affecting spot fruit purchases above all.

As a result, "due to the economic crisis in which Russia found itself, Russian importers appealed to exporters in Ecuador to reduce the price of bananas, and some even terminated contracts concluded with a number of exporters or switched from contracts to spot purchases," Salazar said.

Ecuador recorded an 8% reduction in banana exports as of the end of June 2022 compared to the same period in 2021. For comparison, at the end of 2021, the registered decrease in banana exports was 3% per year. These figures are clear evidence of the damaging impact the war has had on Ecuadorian banana exports.

According to Salazar, the fall in exports occurred as a result of different factors, including, but not limited to, the cold weather, a decrease in production and an increase in the price of banana production inputs.

In addition, due to high inflation and the energy crisis caused by the war, demand in the EU decreased by 6.53% from January to May 2022.

The increase in export costs seen during 2021 has continued into 2022, especially with regard to cardboard, plastic and security costs. Additionally, the contamination of cargo with narcotics has affected Ecuador’s reputation and caused a decrease in purchases of Ecuadorian bananas.

"The trend is obvious both at the level of production and in the foreign market, and we predict an 8% decrease in exports at the end of 2022, in comparison to 2021 exports," concludes Salazar.

IC UAC according to the FreshFruitPortal