Wednesday, March 19, 2008 Ledesma: ANZ and what ails the banana industry By Jun Ledesma Sunbursts
ABBAR and Zainy came to town amidst furor in the local banana industry following a deleterious price war that could lead to the extinction of burgeoning dollar industry.
ANZ is an unfamiliar name in the banana industry. The name also only surfaced recently when the members of the Philippine Banana Growers and Exporters Association tagged it as among the firms that had allegedly been buying bananas at a predatory price from growers with existing contracts with PBGEA members.
But even so, ANZ was actually just at the background in this controversy. The firm does not buy bananas from sources other than its own, so it claims. It also claimed that it has been in the business of bananas for over 40 years. Maybe in other countries, yes.
But I agree, ANZ has formidable and influential fronts. One of these is Vic Lao who sits as the chairman of the Regional Development Council and Chairman of the Mindanao Business Council.
Aside from being a 'consolidator' for ANZ, Lao is a big time government infrastructure contractor.
In a press statement two weeks ago, Lao acknowledged that he started buying bananas only three months ago. PBGEA members revealed that the price war started to heat up just about that time, too.
Lao also tried to convince me that he has more than 200 growers under contract with his firm Maharlika. How he achieved that feat defies me. Maharlika is actually engaged in poultry.
As Merly Cruz, Assistant Secretary and Regional Director of Trade of Trade and Industry would admit later, she personally introduced Lao to ANZ in one of the trade missions the government had in the Middle East. That gave him the edge.
In a press conference called by ANZ, it issued a rather terse but contradictory statements. The Arab traders confirmed that indeed they raised the buying price of local cavendish bananas from the range of US$3.60 to $3.90 to as high as $4.50 per 13-kilogram box.
Then they cajoled us to believe that what they did was more for the "consideration of the welfare of the growers."
At quick glance this indeed looks like messianic and noteworthy but as of now I am not prepared to buy this sales pitch. For one, its local arm, Aztropex Inc., was just registered and inaugurated.
That it has pledged to practice "corporate social responsibility" does not a CSR firm make of it as yet.
One more player in the banana industry is most welcome. Members of the Philippine Banana Growers and Export Association that nurtured the Davao-based industry to an enviable status welcome any investors. The recent demand in the world market for our sweet bananas has increased by leaps and bounds and supplying the export needs has become a problem. The market has expanded.
What compounded this problem is the fact that the other banana producing countries in Latin America was hit by a series of natural calamities. The entry of ANZ therefore is not a threat to the group but the agenda of how they will come into play is not clear to PBGEA.
Last Thursday, ANZ had an audience with President Gloria M. Arroyo. The press releases that came out from that meeting however centered mainly on the prospects of exporting Halal-certified meat products to the kingdom nations and no mention was made of investments in Cavendish bananas. In a press conference at the Waterfront Insular Hotel last Friday, ANZ came full force to debunk talks that they started the ruinous price war in the local banana industry.
Sheik Adnan Zainy and company also dispelled talks that ANZ had split from its partnership with Unifrutti Philippines. He also said that they have no investments with La Frutera, a banana firm based in Datu Paglas, Maguindanao.
This indeed was one of the surprises of the day. Among PBGEA members, they knew that Unifrutti and ANZ were out-buying each other in the banana black market.
The price war threatened the big players to the point that even the Japanese giant Sumitomo Fruits joined the fray for a short stint. Despite the fact that it stirred the hornets nest, ANZ wants the world to believe that what it had with Unifrutti was but a "lovers' quarrel" and that all is well with the partnership. Furthermore they said that Unifrutti is focusing on a different market while ANZ takes care of the Middle East.
The ANZ officials however refused to answer questions as to how much will they invest on bananas. They also docked questions on where and how big an area they will develop. This gives the impression that they will just go on prying into the existing farms. The talk is that they got wind of information that a number of existing growership contracts will expire this year.
This simply means that they will not open new areas or invest on new farms but just prey on expiring contracts. What will happen here is that they will attempt to out-quote and out-bid the original partners of growers. It's a case of economic terrorism, just like in a poker match where a player who is awash with money just call and tap others 'in the dark' or without looking at his cards and raise the bet prompting the small players to run.
As I said this looks like they will bring bonanza to local growers. But let's give this a second look and perhaps a chance to prove that they meant way they said. The Middle East market is peculiar. Since they do not grow fruits of their own (dates maybe) the price of fruits is comparatively stable. But it is not only to the Arabs that we sell our fruits to. Our prime market is Japan and we are developing at a dynamic pace the markets in China, Korea and Taiwan to name a few. These countries with winter season have a variety of fruits that glut their markets come harvest time. When this happens demands for our bananas decline and so does the price.
Under the existing agreement, the loss is absorbed by the trading partners. This is the reason for a much lower but guaranteed contract price compared to the on-the-spot price offered by ANZ to 'pole vaulters'.
ANZ, by its press releases, is looking only at the Middle East market. They said that they want to supply the demand of about 15-million boxes of bananas. (I had this on the average.) The ideal condition is for ANZ to plant an additional 4,000 hectares at least. This ought to be new area altogether so as not to mess up with the committed volume of supply of Philippine bananas in the existing export markets. ANZ cannot just source out and buy from the present farm capacity to fill up the demands of their buyers. This will not help the industry at all. Maybe they can make a few independent growers happy but in the end this practice will ruin the industry.
Meanwhile, the perceptible presence of ANZ is welcomed. This has perked up the players in the industry. The existing multi-national with whom many of our growers have existing contracts ought to reassess their contracts in the light of the appreciation of the peso.
One area they can look into is establishing a quota system to encourage growers to take care of their farms and encourage maximum productivity. An incentive of $0.40 per box, if a grower will achieve a quota of 4,000 boxes per hectare per year, could spell the difference.
I talked to one grower who said that the scheme is very reasonable. A farmer worth his salt will become a millionaire in no time at all if the quota system will be in place. More of this in future columns.
By the way, I have a heart to heart talk with Father EM-EM, or is it MM, last week. His explanation about the price war was a great eye opener. I will dedicate another column about my talk with him. (For comments, email me at scledesmajr@yahoo.com.)
