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

Corn and bananas share vulnerabilities that should have Monsanto and Chiquita worried.

Mar 16, 2014 at 1:21PM

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.

A strong stock for a precarious market
There's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

 

Shamus Funk has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers