DAVAO-BASED Reefer Express Line of the Filipinas Inc. (Reefer Filipinas) said it will launch a direct shipping route between Mindanao and the Middle East to allow local banana growers to directly tap the growing Middle Eastern market for their produce.
Reefer Filipinas President and CEO Felix S. Ishizuka told the BusinessMirror they are keen on launching their first Davao-Saudi Arabia-Iran route by April as they are able to consolidate 200,000 boxes of bananas for export to the Middle Eastern market.
Ishizuka claimed this will be the first commercial direct shipping route between Mindanao and Iran. He noted that only one company has a vessel shipping directly to Middle East. This, Ishizuka pointed out, leaves banana growers with no choice but to sell their produce to this company and even competing with the firm’s own banana production.
“There is no player going directly to Iran. So, how can our small growers be able to penetrate the Middle East market?” he told the BusinessMirror in an interview at Reefer Filipinas’s office in Makati.
Ishizuka said his firm has signed an agreement with the prospective first exporters to use the new route with a current consolidated volume of 150,000 boxes today. He explained that the volume should be at least 200,000 boxes for the route to launch.
“The 50,000 boxes would be easy to fill up. We are very positive that this Philippine-Middle East direct liner service will fly very, very soon. We’re looking at April,” he said.
“Now, we are giving our small banana growers an option to penetrate the Middle East market,” he added.
Ishizuka said the Mindanao-Middle East route would ply every once a month after launching, eventually increasing to twice a month once volume increases and stabilizes.
Through the new shipping rouute, Ishizuka said local growers will have more elbow room to negotiate prices directly with the importers or traders of the importing country.
“At present, banana growers are forced to engage in fixed long-term contracts at low price regardless of market conditions,” he said.
Last year, Saudi Arabia overtook Iran as the top buyer of Philippine bananas in the Middle East, with a total volume of 189,268.144 metric tons (MT) worth $66.452 million, according to Philippine Statistics Authority (PSA) data.
The volume was more than double the 83,432.030 MT of bananas, worth $28.896 million, exported by the Philippines to Iran in 2019, PSA data showed.
Nonetheless, Philippine cavendish exports to Iran grew 16 percent to 188,822.546 MT, while its value rose 22.29 percent to $58.415 million, PSA data also showed.
Mindanao Development Authority (MinDA) Chairman Emmanuel F. Piñol, a former Agriculture secretary, said the new route to be opened by Reefer Filipinas is a welcome development that allows banana growers, mostly in Mindanao, to find other options amid trade disruptions in China caused by coronavirus disease 2019 (COVID-19).
Piñol added that they are “working closely” with Reefer Filipinas for the Mindanao-Middle East shipping route.
“We have to find new markets for our Cavendish bananas in view of the current health crisis in China which has affected the shipment of bananas and other products,” Piñol told the BusinessMirror.
Economist Pablito M. Villegas, a former Land Bank of the Philippines vice president, said the direct shipping route “would entail lesser costs” for both importer and export—something “good for the economy” and the local growers.
However, Villegas had words of caution: the government should ensure that the banana shipments utilizing the forthcoming route are compliant with the rules and regulations, particularly sanitary and phytosanitary measures, set by the importing country to avoid rejections.
“That will save a lot of costs unless there will be restrictions sucuh as trade restriction or protection that would be imposed by the importing country,” he told the BusinessMirror.
Ishizuka said they also plan to launch a direct Mindanao to Japan route that drastically cuts the landed cost of Philippine bananas in the Eastern market by at least half to $12 from current $25 per box.
The reduction on the costs of the importer, Ishizuka pointed out, would allow local growers directly supplying to Japan to ask for higher prices