It’s All Bananas

A few decades ago, I was one of the few passengers on one of the strangest trains in the world.  The train, run by an infamous fruit company and guarded by the Honduran Army, made no stops between the banana plantation and the port where ships were waiting to take the green fruit to Houston.  The railroad, now almost a century old, had been built solely for that purpose.

It would probably surprise you to learn that bananas are so profitable that they have been the cause of several wars and have caused some countries to suffer numerous revolutions.

About 120 years ago, a young immigrant figured out a way to buy “overripes” (the bananas that, while still good, would go bad before reaching retailers) directly off the banana boats in New Orleans and hustle them to the rail depot, delivering the bananas on the cheaper overnight trains to grocers along the Gulf Coast.  Since he paid almost nothing for the fruit and could deliver the bananas below the regular wholesale price, Sam Zemurray made a sizable profit by employing accurate timing and precise logistics.

Zemurray made his profit by improving logistics and more than a century later, as we shall see, that is still the crucial factor in the banana business.

Eventually, the larger fruit companies saw the profit in Zemurray’s enterprise and they bought him out, offering a small fortune for his business.  Zemurray promptly relocated to Honduras and bought a banana plantation, intending to modernize it and increase the yield enough to become a major player in the fruit business.  Unfortunately, Zemurray’s timing was bad, because Honduras had just raised import taxes on the type of machinery necessary to improve his plantation.  Worse, the United States was using its military to “stabilize” the economy (and the current president) of Honduras, so that the Central American nation could make regular payments on its national debt—most of which was held by American and British banks.

Undeterred, Zemurray hired a half-dozen mercenaries, then bought a crate of rifles and a very small boat that had been used in the Spanish American War.  Despite the best efforts of both the American and British navies, the small vessel successfully made its way from New Orleans to Honduras and in an incredibly unlikely war, overthrew the government and installed a new Honduran President, who had been handpicked by Zemurray, and who “coincidentally” allowed Zemurray to import, tax-free, the  equipment necessary to modernize that plantation.  One of the improvements was the train I was riding while researching that revolution.  Eventually Sam "the Banana Man" made enough money to buy the largest of the fruit importers, United Fruit.  Today, we call that company Chiquita Brands International.

Note.  The research eventually became the thesis for my graduate degree.  I think it is exciting reading and you can still request it through inter-library loan from Enema U.  Personally, I think it would make a great movie starring Brad Pitt.

Editor’s note.  I personally edited the thesis and I guarantee that it is a fascinating story.

There is a new revolution brewing in the banana shipping business, but this time it is the shipping companies that are acting like the armed mercenaries.  It is far too early in the war to predict who the winner is going to be, but among the guaranteed losers are the consumers and the Central American countries that produce the fruit. 

Green banana bunches used to be hung upside down in the cargo holds of freighters who raced to get them to American ports.  Bananas were considered a dangerous cargo and not just for the alarming numbers of poisonous insects that live among the bunches.  (A single banana is called a finger, several fingers together make a hand, and anywhere from 5 to 20 hands clustered together make up a bunch or a stalk.)  As green bananas ripen, they give off a lot of heat.  In the not too distant past, a number of cargo ships that had suffered ventilation system malfunctions actually caught fire from the heat of ripening bananas!

Today, green bananas are loaded into steel refrigerated cargo containers which are stacked on monster ships as long as the Empire State Building is tall (roughly 1250 feet).  These ships make their way to American ports—chiefly New Orleans, Houston, and Los Angeles—where giant cranes transfer the cargo containers to trucks equipped with wheeled rigs that swap  empty containers for the containers of still-green bananas, that are then transported to the wholesalers, who quickly ripen the fruit with ethylene gas.  It everything goes right, the simultaneous arrival of loaded and empty containers is a well-orchestrated ballet performed by cranes, trucks, and massive ships.

Unfortunately, for the last year and a half, the ballet has been performed by blind elephants on rusty pogo sticks.

It started with COVID’s shutting down the docks.  Ships arriving at ports waited for weeks to be unloaded, using massive amounts of fuel to maintain position offshore while the bananas in those containers turned to mush.  Once they were finally unloaded, the dockyards quickly filled with containers waiting to be delivered and empty containers waiting to be loaded onto ships and sent back to China.  Before long, companies wanting to return empty containers couldn’t do so because the dockyards didn’t have the space to store them.  The yards of trucking companies and warehouses quickly filled up with empty containers that the dockyards refused to accept.

For all of this, the costs kept rising, with the biggest cost being detention and demurrage fees.  Demurrage fees are charged to the recipient of a container who does not pick up the container from the dockyard on time.  Detention is the daily fee shipping companies charge for each day’s delay in returning the empty container to the docks.  The trucking companies, however, are only allowed to pick up or return the containers when the shipping companies allow access to the docks, and right now, there are long delays to do either.

Imagine you are on vacation and when you fly to your destination, the rental car company tells you there will be a five day delay to pick up your car, but that you will have to pay the daily rental fee for the car while you wait.  Then, when you try to return the car, you are told the car lot is full and you can’t return the car until next week, all the while still paying that daily rental fee.

Faced with such a dilemma, if you were the trucking company, you might be tempted to dump the empty container in the street outside the dockyard and tell the shipping company to handle it themselves (I originally expressed this more colorfully if not accurately, but my editor changed it, citing good taste.)  Several trucking companies have done just that so that it is not hard to find abandoned containers in the roads around the Port of Los Angeles.  A trucking company that does not pay the late fees can be slapped with a shut-out notice, meaning that the company’s trucks will no longer be allowed to enter the dockyards, effectively putting that company out of business.

To make dire matters even worse, some shipping companies only allow a trucking company to deliver an empty container if the trucker is picking up a filled container at the same time—a combination that is not always possible, especially now.  All of this means endless delays, mounting fees and charges, and… well, what do you think happens to those bananas after delivery has been delayed by two weeks?  Picture black banana pudding topped with dead spiders.

Currently, the only way a fruit importer can be sure that it’s cargo clears the docks in time to still be salable is by paying exorbitant fees to expedite the delivery.  These fees can easily mean that the retail price of the bananas rises by more than 50%.  (This increase in shipping costs raises the cost of more than just bananas—it affects everything we buy.  The cost of shipping a container of goods from China to Los Angeles rose from an average of $2,000 to over $20,000, from January, 2019 to now.)

The problem will be solved eventually by a combination of factors.  As the price of bananas from Central America rises, consumers will buy fewer of them, possibly substituting domestic fruit.  Fewer bananas will be purchased, leading to increased competition among plantations throughout Central America, to see who can produce the cheapest fruit.  Some plantations will fail, causing the revenue of some small countries to be lower, and forcing many, many former plantation employees to have to find work elsewhere…perhaps in the United States.

Meanwhile, more efficient dockyards with larger storage space will be serviced by new shipping companies.  Some of the freight that normally goes through California will be rerouted to ports on the East Coast.  Eventually, new companies in new locations will profit from innovation in states less regulated than California and, essentially, a modern version of Sam Zemurray will arrive.

Until then, bananas won’t be selling for peanuts.