The port strike could leave America's bananas in short supply

10/03/2024 20:59
The port strike could leave America's bananas in short supply

If dockworkers and port companies don’t reach a labor deal quickly, supply chain experts said consumers will feel the absence of one grocery item in particular: bananas.

America’s most popular fruit might be taking a temporary leave of absence from some grocery store shelves.

The first East Coast port strike since 1977 shut down 36 ports from Maine to Texas on Tuesday. If dockworkers and port companies don’t strike a labor deal quickly, supply chain experts say consumers will feel the absence of one grocery item, in particular: bananas.

The US has been the world's top importer of bananas since at least 1961, and some 75% of those bananas make their way to grocery stores through East Coast ports from Guatemala, Costa Rica, Ecuador, and other Latin American countries. The Port of Wilmington in Delaware, now shut down, is the No. 1 banana port in North America, with leading fruit companies Dole (DOLE) and Chiquita using it as their mid-Atlantic distribution hub.

Michigan State University professor of supply chain management Jason Miller told Yahoo Finance that if the strike goes on longer than two weeks, “we may not have bananas in certain parts of the country, or banana supplies are going to be very low.”

Bananas are omnipresent in the daily lives of Americans. The once-exotic fruit — with a dark labor history of its own — made its way to US ports in the late 1800s, and it's now a staple in American diets. On average, people in the US eat 27 pounds of bananas every year, and they’re more popular than any other fruit, according to the US Department of Agriculture. Their influence spans across pop culture, from high fashion to art and rock n’ roll.

US consumption of bananas grown outside its borders has only increased. Banana imports to the US grew around 11% from 2010 to 2022, according to the US Department of Agriculture. The trend has continued in the last couple of years too. According to the most recently available USDA data, banana imports from January through July totaled 6.15 billion pounds, worth $1.4 billion — about 100 million pounds more than the same period in the last three years, on average.

Unlike other goods that retailers have back-ordered in anticipation of the strike, perishable foods can’t be stocked up for too long. Bananas have an especially short shelf life — the fruit has about two weeks from the time it’s picked to “peak ripeness” and only stays fresh for about two to five days.

“As soon as you pick the banana, the clock is ticking,” Frank Montabon, a professor of supply chain management at Iowa State University, told Yahoo Finance.

Stew Leonard Jr., the CEO of Stew Leonard’s, a grocery chain in Connecticut and New York, said stores had stocked up on imported items such as champagne, pasta, marinara sauce, and cheeses in anticipation of the strike, but not perishables.

“Things like bananas, pineapples, mangoes, a lot of perishable products: Those are the real challenges, I think, for the retailers today,” he said.

Leonard said he's told customers who buy bananas at its stores that they may find the ones on shelves are riper than usual due to supply constraints.

"Get your banana bread recipe dusted off from your kitchen,” he said.

He added that customers should expect higher food costs linked to supply chain delays.

Bananas in the fruit and vegetable section at a Food Rite in Snow Hill, Maryland in March, 2024. (Photo by Deb Lindsey for The Washington Post via Getty Images)

Bananas in the fruit and vegetable section at a Food Rite in Snow Hill, Maryland in March, 2024. (Photo by Deb Lindsey for The Washington Post via Getty Images) (The Washington Post via Getty Images)

While Michigan State’s Miller argued that bananas are too cheap for consumers to feel meaningful impact on their wallets, Iowa State’s Montabon believes inflation-weary consumers will notice the difference — if there are bananas to buy at all.

Unfortunately, there's not much room for flexibility in the banana supply chain, according to Miller. Widespread attempts to divert bananas to other trade routes would be unlikely and even futile, he said. He noted that West Coast ports are operating between 70% and 80% capacity, and truck crossings from Mexico are at record levels. Miller said the cost to divert bananas would be too high to justify for a cheap grocery item that’s typically shipped inexpensively in non-refrigerated containers.

To be sure, other food items such as rice, alcohol, and fresh coffee could also be in short supply if the East Coast port shutdown continues — but to a lesser extent, Miller said, because those items have longer shelf lives and often have domestic substitutes.

According to Goldman Sachs, the 14 largest ports affected by the strike handle about 25% of US goods imports, and a 10-day strike would result in a 0.2 percentage point reduction in fourth quarter GDP growth. Some 45,000 members of the International Longshoremen's Association are asking for higher pay and protections against automation efforts that could render their jobs obsolete. Goldman noted that most transportation industry strikes since 2000 have ended within two weeks.

“While the net effect on GDP growth is likely to be small, we expect the strike to have a more pronounced negative impact on monthly trade volumes in October if it lasts for more than a week,” the investment firm said in an analysis late Tuesday.

And while shoppers looking to nab their weekly banana stash may be sorely disappointed, big food companies will likely see little impact. Consumer Edge analyst Alex Jarombek told Yahoo Finance that the three largest banana companies — Dole (DOLE), Chiquita, and Fresh Del Monte (FDP) — are “relatively well-equipped” to handle the impacts of the strike by rerouting operations. Shares of Dole and Fresh Del Monte, which are publicly traded, unlike Chiquita, fell around 1.5% and 1.8%, respectively, on Wednesday. Dole is still up about 37% from last year, while Del Monte has risen around 13% over that time frame.

Leonard said that if the strike continues, Stew Leonard’s will begin doing “supply chain gymnastics” — something the chain is well accustomed to since the pandemic. A trade group for independent grocery stores, the National Grocers Association, told Yahoo Finance, “As port strikes are underway, independent grocers are actively collaborating with their wholesalers to secure alternative supply options and are efficiently managing their inventory to ensure minimal disruption to their customers.”

According to the association, fresh produce accounted for about 9% of independent grocery store sales in 2023. As much as 30% to 40% of those goods are imported.

Laura Bratton is a reporter for Yahoo Finance.

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