International Forum on Bananas and Fresh Fruit

1. International Forum on Bananas and Fresh Fruit The Impact of the Financial Crisis on Agriculture and in particular the demand and consumption of Bananas and Fresh Fruit in Europe Professor John Moverley OBE Senior Consultant, Bidwells Agribusiness, UK

2. TIMELINE Oil price rises – cost increases/ inflation Re-emergence of the food security issue A changing world – dietary, population A Financial Crisis IntroductionWe live in interesting times

3. CUSTOMER RESPONSE Trading down Price cutting Unemployment & Insecurity Cut back on recognised luxuries New luxuries – certain food items IntroductionWe live in interesting times

4. The Credit Crisis in Europe Demand & Supply for food Impact on Agriculture Consumption and Demand for Bananas and Fresh Fruit Impact of the Credit Crunch on Consumption and Demand Policy and Market Responses The Future My Presentation

5. Origins The Spread from the USA to Europe The ‘Decoupled Theory’ is proved wrong 15 September 2008 – ‘D Day’ The UK vs the Eurozone The lending crisis General Impact on European Consumers The Credit Crisis

6. Real GDP Growth and Trend Source: IMF

7. The UK Position: GDP Source: UK Office of National Statistics

8. "Owners of capital will stimulate working class to buy more and more of expensive goods, houses and technology, pushing them to take more and more expensive credits, until their debt becomes unbearable. The unpaid debt will lead to bankruptcy of banks, which will have to be nationalized, and the State will have to take a more interventionist stance."   1867 What can history tell us?

9. People still need to eat Production agriculture – commodities versus fresh produce – retail dominance more critical Fruit – policy drivers Fruit & Vegetables – health & local Fruit – necessity or ‘luxury’ Impact on European Agriculture

13. Demand pull (i) Population (ii) Dietary shift (iii) Policy changes (iv) Bioenergy Supply Constraints (v) Land (vi) Climate Change & Water (viii) Technology So how recession proof are the drivers?

14. Dietary Shift

15. billion metric tons Impact of Biofuels on Demand Demand for Food, Feed & Biofuel Source: Goldman Sachs Commodities Research

16. Demand pull (i) Population (ii) Dietary shift (iii) Policy changes (iv) Bioenergy Supply Constraints (v) Land (vi) Climate Change & Water (viii) Technology So how recession proof are the drivers?

17. Production Yield Relative to Demand Source: FAO Food Price Index, USDA, Goldman Sachs Commodities Research

18. Commodities & Agriculture: Just how ‘recession proof’ – what can history tell us?

19. Background and Trends Some basic information – with health warning Major Consumers Global Consumption and Demand of Bananas and Fresh Fruit

20. Global Production of Fresh Fruit

21. Market and Consumption Trends – pre and post credit crisis Policy Effects EU Banana Regime EU Fruit and Vegetables Regimes Grow Local Banana and Fresh Fruit Consumption in Europe

22. Global Banana Production and Consumption 2003-2007 Exports Production

23. Global Banana Production Import Averages 2002- 2006

24. Geographical distribution of bananas imported in the European Union, 1990-2007 Source: UNCTAD Secretariat from COMTRADE statistics

25. Market and Consumption Trends – pre and post credit crisis Policy Effects EU Banana Regime EU Fruit and Vegetables Regimes Grow Local Banana and Fresh Fruit Consumption in Europe

26. EU Banana Regime Agricultural Policy Impacts • EU Fruit and Vegetables Regime

27. UK ‘5 a day initiative’ Food Policy Drivers EU School Fruit and Vegetable Scheme

28. Detail needed Fresh Fruit Consumption in EU

29. From 2002 to 2006, EU fruit consumption grew by 2.7% according to CBI Yet in 2007, total gross supply of fruit per capita stood at 91 kg (compared to an average of 97 kg over the previous five years) according to the “2008 Production, Trade, Supply and Consumption Monitor in the EU-27” Still well below WTO recommended levels The distinction between traditional & tropical fruits Market

30. The EU is a major producer of fresh fruit and vegetables. Most fruit and vegetable production is concentrated in the southern countries such as Spain and Italy. From 2002 to 2006, fruit production increased, although by less than 1%, The main fruits produced are apples, oranges and grapes. Consumption trends increasing in tropical fruits which cannot be grown in the EU. Production and Consumption Trends

31. Examples of EU Fresh Fruit Imports

32. Income Elasticity of Bananas in Europe =0.6 A measure of responsiveness of demand for a good to change in income of people Price Elasticity of Demand = 0.4 A measure of how responsive the demand is to price change Recession and Bananas: What does Economic theory tell us?

33. Recession and Bananas: What does History tell us?

34. Conventional Organic Fairtrade Live Research Data – Major European Supermarket

35. Selected Subgroup(s): Conventional Apples, Bananas, Carrots and other fruits and vegetables Previous Period: 52 weeks from 26-Mar-07 to 23-Mar-08Most Recent Period: 52 weeks from 24-Mar-08 to 22-Mar-09

36. A leading supermarket – huge price cuts The loss leader principle Impact on supplier now Impact on supplier future Links to other fruits UK Banana Wars

37. Selected Subgroup(s): Conventional Apples, Bananas, Carrots and other fruits and vegetables Previous Period: 52 weeks from 26-Mar-07 to 23-Mar-08Most Recent Period: 52 weeks from 24-Mar-08 to 22-Mar-09

38. Selected Subgroup(s): Organic Apples, Bananas, Carrots and other fruits and vegetables Previous Period: 52 weeks from 26-Mar-07 to 23-Mar-08Most Recent Period: 52 weeks from 24-Mar-08 to 22-Mar-09

39. Selected Subgroup(s): Organic Apples, Bananas, Carrots and other fruits and vegetables Previous Period: 52 weeks from 26-Mar-07 to 23-Mar-08Most Recent Period: 52 weeks from 24-Mar-08 to 22-Mar-09

40. What’s the position with organic?

41. Introduction

42. Volatility will persist – consumer confidence will recover but slowly Prospects depend upon individual government plans & global recovery Coming out of the recession? Upturn? 2008 2009 Greece +3.0 +1.5 France -2.0 +1.0 Netherlands -2.0 +2.0 Ireland -5.0 -2.0 UK -3.0 +1.0 Source European Commission Jan 2009 Conclusion (1)

43. After a period of steady and slow growth, traditional fresh fruit consumption in Europe is slowing, even with policy incentives like the School Fruit scheme being developed Increased range of fresh fruit available & improved storage mean greater consumer choice Quality continuing to be priority Conclusion (2)

44. There is a shift in EU fruit eating habits towards more non-indigenous tropical fruits. However bananas have always been, and remain a key staple or ‘luxury Growing need for information & importance of consumer rights Impact for fresh fruit and bananas is not income or price dependent (except for the very poorest) and history shows us demand is resilient during recessions. Conclusion (3)

45. Impact of EU Banana Policy Reform is likely to favour EBA and Dollar Bananas at the expense of ACP Bananas. Looking at very recent UK Retail Data: Ethical issues such as Fairtrade appear to be more resilient to the economic downturn Organic seems to be being hit by the economic downturn We believe there is generally a positive outlook for fresh fruit and bananas in the EU over the next few years and see no reason why the current trends will not continue. Conclusion (4)

46. World food demand could double by 2050 50% increase from world population growth all in developing countries 50% increase from successful poverty reduction – development = food demand Food Security? 850 million people were chronically hungry before the food crisis of 2007 (UN) 1 billion people are the current number of chronically hungry(FAO) Credit Crisis or Food Crisis? The Fundamentals

47. The United Kingdom Fresh Produce Consortium (FPC) found last year that the average UK consumer eats just 2.5 servings of fruit and vegetable a day. Without a dramatic change in eating habits it could take another 25 years for consumers to meet the recommended 5-a-day, it said. March 2009 A final thought…..

49. Professor John Moverley OBE Bidwells Agribusiness Trumpington Road Cambridge CB2 9LD United Kingdom t: (+44) 1223 559 XXX e: john.moverley@bidwells.co.uk Thank You