THE EDITOR, Sir:
THE recent closure of Victoria Banana Company with 350 job losses was the first step in an escalating process which will result in the obliteration of the Jamaican banana industry in the near future unless some action is taken.
The seriousness of the situation was outlined to the government of Jamaica at a meeting in February of this year. Irish banana distributor, Fyffes Plc, met with the Government in February to outline its concern for the banana industry, and to set out its rationale for the immediate closure of both Victoria Banana Farms and Eastern Banana Estates, in which Fyffes owns 40 per cent of the equity.
The Government owns five per cent in each of these farms and the remaining 55 per cent is owned by Jamaica Producers Group. In addition to this, JP Group owns 100 per cent of a third banana farm, St. Mary's. These three banana farms account for over 90 per cent of the bananas exported from Jamaica.
Fyffes' concern arose from the fact that for all of 2000 and 2001 both Victoria Banana Farms and Eastern Banana Estates had been losing a significant amount of money. As a publicly traded company, Fyffes has a duty to its shareholders to maximise its return on investments.
In addition, they were concerned that for the past two years, both Victoria and Eastern could only survive with significant financial support from the shareholders. Fyffes has stated that it is not prepared to support the farms in future and, in its recent financial statements, Jamaica Producers has also indicated that they are not prepared to continue to provide support.
Fyffes has traditionally been a very strong supporter of the Jamaican banana industry. It originally bought 40 per cent of these companies in 1994 and received 40 per cent of the fruit exported to the UK. In addition, Fyffes provided a US$2 million loan in 1998 to fund a rationalisation programme designed to make the farms more efficient. This program was obviously not successful. With the changes to the European Banana Regime in 2000, the full effect of which will only be felt in 2006, it is almost impossible for the banana industry in Jamaica to survive beyond that date. If the Regime is extended or modified in some other way, the industry might be able to survive but in the meantime; it will require government support to avoid an imminent collapse and give it time to become more efficient.
The current estimated cost of producing bananas in Jamaica is over US$8 per box. From 2006 on, this fruit will have to compete on the open market with fruit from Central and South America costing between US$4.50 and US$5 per box.
The closure of Victoria Banana Farms was inevitable, and in fact, should have come much sooner. The trading position of Eastern Banana Estates is almost identical.
With 800 job at stake, the closure of Eastern could also make the entire banana export industry untenable as even in the event of it being able to produce fruit on a cost competitive basis, it would be uneconomic to ship this to Europe.
One of the largest components of the cost of this fruit in the UK is the shipping cost. To economically ship fruit to the UK, it is imperative that the ship is fully loaded and therefore the cost is averaged out over the largest possible quantity of boxes. With Eastern accounting for approximately 40 per cent of the Jamaican harvest, the remaining fruit simply could not be shipped economically.
The effect of this is even more alarming when you consider the advantages to Jamaica of the back haul shipping from the UK to Jamaica. This will obviously lead to further job losses in the shipping industry and a knock-on effect on the whole economy as a result of the unavailability, or increased cost of those products currently imported from the UK.
If the industry is to survive in the short term, it must receive government support.
At a time of world recession, when it is very difficult to create new jobs, you would expect the government to pay more attention to preserving the existing jobs in agriculture and shipping - jobs that generate vital foreign currency for the economy.
It is equally amazing that neither the candidates in the parishes facing the worst job losses, or the relevant trade unions have not reacted to this issue This is obviously a vital concern in an election where the people have already identified employment as the number one issue.
A BANANA INDUSTRY INFORMANT
