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Fresh Del Monte Produce Inc. Message Board

  • invshort invshort Nov 23, 2009 8:53 AM Flag

    EU within days of deal to cut banana tariffs

    "I think it will be later this week or early next week.
    The decades-old dispute with exporters in Latin America is over their complaint they pay higher tariffs than African, Caribbean and Pacific rivals to sell bananas in Europe.
    A deal, which should be sealed before the WTO's ministerial conference starting on Nov 30, would see the EU steadily cutting tariffs on bananas for suppliers in Latin America and elsewhere.
    It is likely to reduce prices for consumers, bolstering competition and strengthening the hand of low-cost Latin American exporters.
    It will help companies like Chiquita and Dole, US distributors of the region's bananas."

    I think FDP may be effected too. They sales a lot to Europe and got some advantages. In addition Banana price in other places may be infiluanced.

    in the 10-K document they decscribed a risk factor regarding some import preferences they get.

    Risk Factors
    We are exposed to political, economic and other risks from operating a multinational business.
    Our business is multinational and subject to the political, economic and other risks that are inherent in operating in numerous countries. These risks include those of adverse government regulation, including the imposition of import and export duties and quotas, currency restrictions, expropriation and potentially burdensome taxation. For example, banana import regulations have in prior years restricted our access to the EU banana market and increased the cost of doing business in the EU. This banana import license system expired on December 31, 2005. From January 1, 2006, the quotas controlling import volumes of Latin American bananas imported into the EU have been eliminated and replaced with a tariff of 176 euros per ton. The effect of this new tariff-only system on the European banana market has resulted in increased supply to this market, which in turn had the effect of reducing our per unit net sales prices. The potential risks of operating a multinational business may be greater in countries where our activities are a significant factor in the country’s economy, which is particularly true of our banana, pineapple and melon operations in Costa Rica and our banana and melon operations in Guatemala and our prepared pineapple operation in Kenya..

    We have a contract to purchase all of the banana production from an entity controlled by the Government of Cameroon. In 2007, we signed a new banana purchasing agreement with our Cameroon partner, effective May 1, 2008 and terminating on December 31, 2008 with automatic one-year renewal and a cancellation notice period of 12 months. This contract was automatically renewed for 2009. The Government of Cameroon has declared again its intention to privatize these banana plantations in the future. Since bananas produced in Cameroon benefit from certain banana import preferences and tax exemptions in the EU, privatization may have a negative effect on our results of operations.

    Since Banana sales is a major part of FDP's sales and Europe is big part of that, I am "short".

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    • The main banana importer to EU is CQB who expended US millions fighting against to the tariff system, if the EU market is more open, you will see more banana and lower market prices and this will affect the big ones according to their size ( CQB-DOLE-FDP-Fyffes- Noboa- Others).The main FDP source for EU is their own farms in LA thus this reduction will help their production cost no matter the ACP production is not going to receive a big hit because aids from EU and reduction is not big enough to balance the landing cost between LA and ACP Countries.

    • I think you got it backward. FDP produces bananas in Latin America so it will benefit from EU tariff reduction.

      • 1 Reply to warmcamp
      • The last 10-Q mention that "We produce bananas on company-controlled farms in Costa Rica, Guatemala, Brazil, Cameroon, and the Philippines and we purchase bananas from independent growers in Costa Rica, Ecuador, Colombia, Guatemala and the Philippines...."
        My claims:
        1. I don't know exactly what is the sources FDP use for the EU market, but common sense said it is the countries that have a tax advantages. - This advantage may be disappear.
        2. Banana prices in the whole markets will be decreased. - This will effect FDP. (Theoretical the whole market can grow, expanding FDP sales, but my own opinion is that this is not the case in the Banana market.)

        You can read in the following article some estimates about the effect of this change:

47.64+1.80(+3.93%)May 4 4:02 PMEDT