Bananas As A Macroeconomic Indicator

Mike Leslie
March 30, 2024

For the U.S., U.K., and E.U., the price of bananas is a significant macroeconomic indicator currently facing global shortages.

Inputs that matter: "I think climate change is really an enormous threat to the banana sector," said Mr Liu of the World Banana Forum, an U.N. umbrella group.

  • Fusarium Wilt TR4, a fungal infection that has moved from Australia and Asia to Africa and now to South America, kills all the banana trees and has mutated into the West's favorite banana, the Cavendish.
  • According to the BBC, "Producers are also facing pressures from rising costs of fertilizers, energy and transport as well as problems in finding enough workers."

The opportunity: When the average price of bananas in the U.S. goes above $0.60 per pound, it is likely the signal of a major macroeconomic event.

  • ABC News reports, "In the U.S., the cost of a pound of bananas averaged at about 63 cents last month."
  • "That's only 3 cents more than it was a decade ago."
  • "Banana prices saw their most notable pandemic-era spikes in 2022."

Zoom in: Bananas in the West have been immune to inflation due to their extremely low tariffs and history of being used by supermarkets as a low-cost leader.

  • Like Trader Joe's, one store's changing prices are not cause for alarm.
  • In the U.K., banana prices have reached 1990 levels.

Between the lines: The Guardian reports, "The ubiquitous yellow fruit is the proverbial canary in the mine of our modern food system, showing just how fragile it is."

  • That is because each Cavendish banana is a clone.
  • Before the Cavendish, there was the Gros Michel.

Follow the money: Epicurious explains, "Panama disease, a wilt-causing fungus, evolved to attack one Gros Michel banana tree. It was then able to infect all the Gros Michel banana trees planted in close quarters on these massive banana plantations."

  • "Only by switching the crop to a new banana that American consumers would like—one that was similar to the Gros Michel in color and shape, but was genetically distinct from it—could the banana industry save itself from collapsing."
  • Thus, the bananas in the west became the Cavendish.

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