The Biggest Threat to the Banana Industry Doesn't End With Bananas

Monsanto Company (NYSE: MON  ) could learn a lot from bananas, and Americans may want to pay attention as well. A fungus that is spreading and destroying Asian banana plantations will inevitably hit the American supply of bananas. When it does, our most beloved version of the fruit may go extinct. Though no such fungus or disease is currently known to be a threat to the world's corn crops, the dominance of a single corn crop in America makes it susceptible to destruction for the same reasons that bananas are currently vulnerable. If a single fungus can wipe out the banana industry due to its dependence on a single cultivar, a similar lack of biodiversity in the corn industry should raise concern among investors and citizens alike. While one might be able to imagine a country without bananas, it may be more difficult to envision a world without corn.

The fall of the banana
Americans love bananas, but the only places where bananas can be grown domestically are Florida and Hawaii, where the crops are small compared with those grown in more tropical climates. This makes the U.S. extremely dependent on imported bananas, mostly sourced from Latin America. The required traits to enable packaging and relatively long shipping times along with the desire for a wider-appealing, blander-tasting, fungus-resistant product has narrowed the American market down to a single banana: the Cavendish.

The Cavendish came to prominence over half a century ago when a strain of Fusarium oxysporum f. sp.cubense (Foc), a fungus responsible for Panama disease, decimated the most dominant banana cultivar of the time (the Gros Michel). Though the Cavendish variety was chosen largely for its resistance to Panama disease, the varietal is susceptible to a new strain of Foc (Foc-TR4) that could wipe out the Cavendish in the same way the fungus took out the Gros Michel decades ago.

Some varietals eaten in other countries are not susceptible to Foc-TR4. The heavy reliance of the industry on the single Cavendish varietal, however, makes the threat of a single fungus strain that much more imposing. Herein lies the biggest liability for leaders in the banana industry like Chiquita (NYSE: CQB  ) and Fresh Del Monte Produce Inc (NYSE: FDP  ) as well as Monsanto's corn industry: a lack of biodiversity.

The differences between bananas and corn
Though Cavendish bananas are pretty much the only bananas that Americans consume, local populations are heavily dependent on the crop as well. Of the whopping 40 million tonnes of Cavendish bananas grown annually, only 40% of them are exported, making less nourished countries even more affected by Foc-TR4.

Cavendish bananas make up around 40% of overall banana production worldwide. By comparison, even though Roundup Ready crops have been around for less than 20 years, Monsanto's GMO (genetically modified organism) corn commands about 80% of the U.S. market, and corn is the only genetically modified (GM) crop grown commercially in Europe. The domestic soybean seed market is comparable to that of corn, and Monsanto has specifically developed the INTACTA RR2 PRO soybeans for commercial use in Brazil.

The heavy reliance on a single banana that is not resistant to a new fungus has the $7 billion banana industry in a panic. Realizing that the corn industry generates a whopping $69 billion in annual revenue and that the domestic market is more dominated by a single plant than the banana industry is should generate concern. Unfortunately, the attention toward GMO crops tends to be more centered upon non-verified health implications than on the broader biodiversity issue that could radically change the way corn is consumed for food, fuel, and feed.

The takeaway
The banana industry may be able to survive Foc-TR4, and the corn industry may be able to survive a comparable threat (studies have already shown that weeds have developed resistance to glyphosphate-based herbicides on fields planted with Roundup-Ready seed and treated exclusively with Roundup). But they may not. Regardless, investors should be aware of real and perceived threats to the companies in which they invest, and a lack of biodiversity is a liability that Monsanto and Chiquita investors should watch.

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  • Report this Comment On March 16, 2014, at 9:35 PM, Jeff14 wrote:

    Unfortunately for your analogy, Roundup Ready corn is not a single cultivar. There are hundreds of varieties of corn that harbor that trait and it could be bred into any variety of corn by conventional means just like any other gene. Technically, adding that trait has increased diversity by one gene rather than decreased diversity. Anyone that uses this column to make investment decisions would be well served to look in the scientific literature for correct information.

  • Report this Comment On March 16, 2014, at 10:08 PM, getthefacts4 wrote:

    The author is like many who blog about agriculture very ignorant of agriculture. They believe the organic activists. Here are the facts:

    1. There is a lot of diversity in corn. Some conr hybrids are more different from each other than humans and apes.

    2. Seed companie like Monsanto and Dupont test out about 200 new corn genetics every year.

    3. Each sell about 200 different hybrids - there is much mor ediversity in commercial corn GM lines than organic corn or many other crops because of the money spent to breed new lines.

    I wish the Fool wouldn't hire Fool's to right their blogs

  • Report this Comment On March 16, 2014, at 10:08 PM, getthefacts4 wrote:

    ...mind you at least they use a spell checker unlike me.

  • Report this Comment On March 17, 2014, at 10:57 AM, getthefacts4 wrote:

    I will say this for you Shamus - you are not alone. Several academic scientists from Europe I recently met were also misinformed. These were plant geneticists who dependended on the internet for their knowledge of commercial crops. They did not have a clue about how the major crops were bred and what the issues were. They just assummed that if a company developed a GM trait that it was in one type of germplsm or genetics and if it was licenced out for others to use it would stay in that genetics. In fact an advantage with a GM trait is it is often a single gene that can easily moved into other genetics and then released in a very different germplasm of that plant type. The problem with some crops is that no money has been spent on genetics e.g. bananas. This is becuase there is no incentive to do so from the researching entity. If you can not recoup your research costs people would do it. Acdemics funded by governments do research but they ate often not focused on making a product that will be used by farmers. You dopn't need to use GM technology to fix the banana problem but in case you can't do it through breeding it would be better to use both breeding and GM technology. The papaya crop in Hawaii was saved by GM technology mianly developed by academics. This flew under the radar. So much so that a recent activist attempt to ban GM in Hawaii didn't realize what they were doing. They then picked the remarkably arbitary track of trying to ban everything except the papaya trait. You can then see their cause is build on sand.

  • Report this Comment On March 17, 2014, at 11:28 AM, Ashmead wrote:

    Also, once you plant a banana tree the genetics is fixed for the life of the plantation. Corn genetics can be changed every year

  • Report this Comment On March 17, 2014, at 11:59 AM, ProfessorFunk wrote:

    Whether a single cultivar or hundreds of different cultivars, the argument that adding a single gene adds diversity is flawed. Bananas lack biodiversity due to the dominance of a single cultivar that is susceptible to disease, whereas the lack of biodiversity in corn is due to the addition of a single gene. If that single gene is added to every seed of corn planted, regardless of how many different hybrids, the fact that the vast majority contain the same specific gene creates a lack of biodiversity.

    If every sandwich was required to have dill pickles on it, the variety in sandwiches would decrease, even though every sandwich would have an additional ingredient. If international sandwiches adhered to the dill pickle trend, it would eventually become impossible to find pickle-less sandwiches. Enter a concern about salt content, where the medical community makes the claim that the high salt content of pickles is bad for human consumption. Unfortunately, all sandwiches have pickles, so no more sandwiches could be sold.

    Perhaps the analogy is a bit far-fetched, but the argument that adding the same single gene to a variety of corn hybrids adds to corn biodiversity is similarly unreasonable.

  • Report this Comment On March 18, 2014, at 2:48 PM, Jeff14 wrote:

    Professor Funk is arguing gibberish. You are confusing a clonally propagated plant, the banana, with an outcrossing species in which there is plenty of diversity. Your education obviously did not include genetics, botany, or agriculture. There are ~35,000 genes in maize, that is why I added the word technically when is stated that addition of a new gene would increase diversity. In practice it has no effect on diversity. There are likely hundreds or thousands of alleles that are shared, in common, by all modern cultivars. Please do a little studying before writing more on this subject. Originally I felt sorry for people seeking investment advice, now I worry about your students.

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