Ripples of War Reach America's Most Popular Fruit

The New York Times reports that the consequences of the war against Iran have reached the market for one of America's most popular fruits.

According to Ambassador Arjan, the New York Times newspaper, in a report examining the route of bananas from Central American farms to American stores, shows how the economic consequences of the war against Iran have reached one of the most common items in the food basket of American households.

The increase in the price of fuel, chemical fertilizers and transportation has put pressure on the banana supply chain; An industry that, despite moving fruit over long distances, has limited ability to increase prices due to small profit margins.

Some of the important points of this report are as follows:

1. Increasing costs of war from fuel to banana packaging

The war against Iran has increased the cost of banana production and transportation in several stages. The price of diesel fuel used by Del Monte's refrigerated trucks in the United States has risen by about 70% since the start of the war and at one point exceeded $6 per gallon. Fuel for ships and farm irrigation systems in Central and South America have also become more expensive.

On the other hand, the increase in the price of chemical fertilizers, packaging materials and compounds used to combat plant diseases has raised the cost of production throughout the supply chain.

2. Continuation of disruption in the Strait of Hormuz and pressure on global markets

According to the New York Times, shipping traffic from the Persian Gulf and the Strait of Hormuz is still significantly lower than the pre-war level. Before the war, this strait was the route for transporting about a third of the world's chemical fertilizers and a quarter of the oil transported by sea.

Despite the increase in the flow of oil from the Middle East compared to the previous stages of the war, the world price of oil has exceeded 100 dollars per barrel several times in the last seven months. The increase in energy costs has also been transferred to industries that may not be directly related to the war at first glance; Including food production and distribution.

3. Long and sensitive banana supply chain

The transfer of bananas to America is an example of this industry's dependence on fuel and refrigerated transportation. Some of Del Monte's imported bananas are grown in farms in Guatemala, then transported by refrigerated trucks more than 250 miles to a port on the Caribbean coast and shipped to the port of Gloucester City, New Jersey.

This fruit should be kept in proper conditions all the way and after reaching the destination, it should be gradually ripened in special facilities. Any increase in the cost of fuel and transportation, therefore, puts pressure on different parts of the chain.

4. An industry with a small profit margin and limited power to increase prices

Despite its position as the most consumed fruit in America, bananas are not very profitable for growers and stores. Stores usually offer bananas at a low price to entice customers to buy other items. Competition among companies selling a nearly identical product has also limited the pricing power of manufacturers.

According to the report, the average price per pound of bananas in the United States was about 65 cents in August and has not changed much over the past decade. Del Monte's profit margin from the sale of bananas in the second quarter of this year was only 2.3%.

5. Cost pressure on farmers and the possibility of reduced production

The increase in production costs can force farmers to reduce the use of fertilizers and substances to deal with plant diseases; A decision that is likely to reduce next year's crop. Some Central American farmers have abandoned banana cultivation due to the increase in costs and have gone to products such as pineapple.

In northern Peru, Miguel Ángel Morales, a banana grower, says his costs are up 25 to 30 percent this year, but he can't easily raise prices because of annual contracts. According to him, from five years ago until now, the production volume of his region has decreased from 12 containers of bananas to only one container; However, plant disease also played a role in this drop in production.

6. The war has added to the crisis that existed before

Before the war, the banana industry also faced a series of problems; including climate change, trade tariffs, lack of truck drivers and the spread of plant diseases. Panama disease, which is caused by a type of fungus, almost eliminated the Gros Michel variety from the market in the past, and drove growers to the Cavendish variety; The species from which almost all the bananas consumed in the United States are obtained.

Now another strain of the disease is threatening Cavendish farms in parts of Asia and South America, and it can make infected land unusable for decades. The higher costs of war also limit the resources that companies and farmers can devote to countering these threats.

The New York Times report shows that the economic consequences of the war against Iran have reached areas beyond the oil and energy market and have even put pressure on the supply chain of a cheap and widely consumed fruit in the United States. Increasing the cost of fuel, fertilizer and transportation in an industry with a small profit margin can both reduce the income of farmers and make it more difficult to invest in dealing with plant diseases.