Full Report Banana Nov112009 Notc
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WORKING PAPER
DEPARTMENT OF AGRICULTURE AND JAPAN INTERNATIONAL COOPERATION AGENCY
Formulation Team on the Drafting of the Strategic Agribusiness Development Plan
COMMODITY SITUATION REPORT: BANANA
Prepared by
JOSE ULYSSES J. LUSTRIA
November 2009 ____________________ Mr. Lustria is OIC-Chief, Public Investment Program Division (PIPD), Planning Service, Department of Agriculture. He would like to acknowledge the assistance of Ms. Acquilyn Morillo and Mr. Aldrin Nacional (Technical Assistants, PIPD) in preparing this report.
I. OVERVIEW A. Background Banana (Musa sapientum var.), a common tropical fruit in the Philippines and one of the major fruit crops in the country, generates revenues for the country being one of the regular export commodities. Banana is a good source of Vitamin C and Potassium and is used as snack and dessert. It may serve as a substitute for staple food aside from root crops (DA-BAS, 2004). The popular banana varieties are Cavendish (Musa acuminata), Bungulan (Musa sapientum var. suaveslens), , Lacatan (Musa sapientum L. var. lacatan), Latundan (Musa sapientum L. var. linérea), and Saba (Musa paradisiacal var. Saba). All these varieties except Cavendish, can be considered as small bananas. Based on the Japan-Philippine Economic Partnership Agreement (JPEPA), small bananas include Inabaniko, Lakatan, Latundan, Morado, Pitogo, Saba and Señorita bananas (Joint Committee on the JPEPA, 2008). Other small banana varieties are Cardaba and Bungulan/Balangon.
(Photo Source: Maghirang, R., Banana Strategic Plan 2005-2010. August 2007.)
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Cavendish is grown in plantation scale in Mindanao. Small bananas are mostly grown in smallhold farms. Lakatan and Latundan are grown commercially intended for the Luzon and Visayas markets. Cardaba is grown mainly for the banana chips industry. Balangon or bongolan is grown organically in Tupi, South Cotabato. Organic Cavendish is being grown by the multinational corporations (MNCs). There are 5.9 million farm households depending on banana as their source of income. Banana is still the leading fruit crop in the Philippines in terms of area, volume, and value of production with 2,273,834 farms (NSO, 2002). The national average yield is 9.4 MT per hectare while corporate plantations produce 40 MT per hectare. It is a widely grown fruit in the country, planted as a component of farming system or as a main crop in large plantations in Mindanao. It is an important source of income for small farmers that constitute 80 percent of the banana growers (DA GMA-HVCC, 2008; Rivera, 2004). B. Contribution to the Economy Banana's economic contribution is increasing. For the period 1998 to 2008, banana recorded an average contribution of 8.44 percent to total value of agricultural crop production (increasing from 5.65% to 9.87%), and 4.08 percent to total value of agricultural sector output (increasing from 2.79% to 4.71%) (see Annex 1). II. SITUATIONAL ANALYSIS A. Production 1. World Production a) Major Producing Countries. The Philippines is the third largest banana producer in the world in 2007 and has been among the top producers since 1998. Others 23.2%
India 26.9%
Colombia 2.2% Thailand 2.5% China 8.8%
Mexico 2.7% Costa Rica 2.8% Indonesia 6.2%
Ecuador 7.6%
Brazil 8.6%
Philippines 8.6%
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Figure 1. Top 10 banana producing countries, in percent, 2007. (Source: FAO, 2009) Table 1. Top 10 banana producing countries, in „000 MT, 1998-2007.
Country 1998 15,100 India 3,734 China 3,493 Philippines 5,322 Brazil 5,463 Ecuador 3,177 Indonesia 2,429 Costa Rica 1,526 Mexico 1,720 Thailand 1,517 Colombia 16,714 Others World 60,194
1999 16,810 4,407 4,571 5,478 6,392 3,376 2,351 1,738 1,720 1,735 16,807 65,385
2000 14,140 5,140 4,930 5,663 6,477 3,747 2,181 1,863 1,750 1,613 16,809 64,313
2001 14,210 5,477 5,061 6,177 6,077 4,300 2,065 2,028 1,750 1,470 17,313 65,928
2002 16,820 5,784 5,275 6,423 5,528 4,384 1,975 1,886 1,800 1,561 17,585 69,020
2003 11,954 6,126 5,369 6,801 6,454 4,177 2,144 2,027 1,900 1,536 18,034 66,522
2004 11,388 6,211 5,631 6,584 6,132 4,874 2,118 2,361 2,300 1,577 18,778 67,955
2005 11,710 6,667 6,298 6,703 6,118 5,178 1,875 2,250 2,000 1,765 19,083 69,647
2006 20,858 7,115 6,795 6,956 6,127 5,037 2,220 2,196 2,000 1,750 18,975 80,030
2007 21,766 7,100 7,000 6,972 6,130 5,000 2,240 2,200 2,000 1,800 18,830 81,038
(Source: FAO, 2009) b) Productivity and competitiveness. Philippine banana is also competitive in terms of yield. It can be noted, however, that the level could be improved further since even the world average is higher. According to the Philippine Agriculture 2020 report (NAST, 2008), banana is also price competitive under export trade scenario because export parity price ratio is greater than 1. It is also cost competitive because resource cost ratio for export is less than 1.
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Table 2. Leading high-yielding countries of banana in the world (kg./ha), 1998-2007.
Country Costa Rica India Mexico Ecuador Colombia China Philippines Indonesia Brazil Thailand World
1998 517,160 328,260 229,652 264,022 307,136 199,390 106,580 122,919 102,659 128,358 156,293
1999 480,904 343,061 230,550 330,164 309,762 208,199 122,815 125,134 105,639 128,358 164,098
2000 454,545 300,851 258,968 256,444 304,339 199,148 150,067 141,394 107,924 129,629 158,128
2001 463,878 302,340 285,424 265,390 287,854 215,677 130,937 155,249 121,048 129,629 160,619
2002 468,209 247,352 299,719 268,883 282,198 224,637 132,533 162,988 127,685 129,496 162,332
2003 513,446 261,182 278,974 276,024 270,736 231,095 131,014 150,262 133,460 130,136 160,441
2004 501,230 291,626 299,888 270,715 251,458 226,957 135,853 154,887 134,073 129,943 162,425
2005 455,683 289,715 292,315 276,745 272,324 233,842 150,763 164,368 136,475 130,718 166,395
2006 519,906 347,456 295,428 292,671 273,438 241,114 158,454 161,977 137,859 130,718 182,864
2007 520,930 349,830 293,333 291,905 276,923 240,677 162,791 161,290 137,024 130,719 184,189
(Source: FAO, 2009) 2. Domestic Production The major varieties are Cavendish, saba, and lacatan. Small bananas comprise 66 percent of the total production (in MT) in 2007. Others 12%
Lakatan 12%
Cavendish 44%
Saba 32%
Figure 2. Share of major varieties of banana to total production, 2007. (Source: DA-BAS, 2008) 4
Table 3. Major varieties of banana, in metric tons, 2002-2007.
Variety Cavendish Saba Lakatan Others Philippines
2002 2003 2004 2005 2006 2007 1,810,085 1,902,223 2,127,619 2,490,271 2,810,985 3,323,072 2,005,776 2,017,267 2,018,687 2,204,393 2,285,809 2,385,614 678,872 674,918 714,483 774,050 836,016 875,271 780,093 774,569 770,461 829,511 861,754 900,116 5,274,826 5,368,977 5,631,250 6,298,225 6,794,564 7,484,073
(Source: DA-BAS, 2008) Small bananas comprise 83 percent of the total banana area (in hectares) in 2007. The percentage shares remained basically the same since 2002.
Figure 3. Share of major banana varieties to total area, 2007. (Source: DA-BAS, 2008)
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Table 4. Major varieties of banana, in hectares, 2002-2007.
Variety 2002 2003 2004 2005 2006 2007 Cavendish 44,051 46,142 50,059 51,568 67,803 74,013 Saba 173,906 179,875 182,259 185,168 181,568 183,028 Lakatan 50,439 51,002 51,761 52,315 52,377 53,155 Others 129,609 130,981 130,431 128,704 127,056 126,566 Philippines 398,005 408,000 414,510 417,755 428,804 436,762 (Source: DA-BAS, 2008)
a) Major Producing Provinces. The top banana producing provinces in 19982007 are in Mindanao.
Davao Oriental 2%
Compostela Valley 15%
Others 56%
Davao Province 15%
North Cotabato Lanao del Norte 8% 4%
Figure 4. Top banana producing provinces, in percent, 2007. (Source: DA-BAS, 2008)
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Table 5. Top banana producing provinces, in metric tons, 1998-2007.
Province Davao Oriental Compostela Valley Davao Province North Cotabato Lanao del Norte Others Philippines
1998 1,056,588 295,838 114,702 252,338 2,387,232 4,106,698
1999 717,359 475,293 344,816 124,972 290,815 2,617,385 4,570,640
2000 769,986 535,250 398,453 156,185 304,195 2,765,503 4,929,570
2001 2002 2003 2004 2005 783,366 797,328 811,753 841,271 899,402 547,416 566,289 600,561 698,471 952,194 448,736 468,492 470,887 492,113 523,288 174,514 264,192 319,989 372,876 474,798 314,055 325,241 296,230 274,869 275,171 2,791,273 2,853,283 2,869,557 2,951,650 3,173,372 5,059,360 5,274,826 5,368,977 5,631,250 6,298,225
2006 1,009,849 1,087,356 538,571 527,601 279,304 3,351,883 6,794,564
2007 117,255 1,159,805 1,138,089 579,274 286,033 4,203,616 7,484,073
(Source: DA-BAS, 2008)
Below
are the top producers of lakatan and saba. North Cotabato 16%
Lanao del Norte 10% Others 50% Davao del Sur 10% South Cotabato 8% Davao Oriental 6%
Figure 5. Major producing provinces of lakatan, in percent, 2007. (Source: DA-BAS, 2008) 7
Table 6. Major producing provinces of lakatan, in metric tons, 2002-2007.
Province North Cotabato Lanao del Norte Davao del Sur South Cotabato Davao Oriental Lanao del Sur Maguindanao Mindoro Oriental Bukidnon Zamboanga del Norte Othes Philippines
2002 55,743 100,820 51,657 58,641 42,132 51,717 43,546 26,111 25,692 21,024 201,789 678,872
2003 57,802 91,851 52,687 57,688 43,917 48,603 43,237 27,729 26,410 23,532 201,462 674,918
2004 86,183 85,680 62,159 58,561 45,412 46,888 43,178 28,863 26,557 24,657 206,345 714,483
2005 109,449 85,590 65,814 57,501 52,648 46,072 42,793 35,749 26,799 27,720 223,915 774,050
2006 134,501 87,993 77,547 62,916 54,160 42,387 42,620 32,292 27,840 29,810 243,950 836,016
2007 139,855 90,295 84,784 66,245 52,813 41,085 42,690 32,826 30,200 30,895 263,583 875,271
(Source: DA-BAS, 2008)
Davao del Sur 14%
North Cotabato 11%
Others 53%
Isabela 9%
Lanao del Norte Mindoro 8% Oriental 5%
Figure 6. Major producing provinces of saba, in percent, 2007. (Source: DA-BAS, 2008) 8
Table 7. Major producing provinces of saba, in metric tons, 2002-2007.
Province 2002 2003 2004 2005 2006 Davao del Sur 238,197 239,520 248,879 264,803 267,305 North Cotabato 119,742 121,282 145,589 185,975 199,953 Lanao del Norte 166,814 152,258 144,121 144,502 145,819 Isabela 81,791 68,573 53,850 109,232 149,777 Samar 98,413 99,871 95,372 95,348 87,839 Mindoro Oriental 77,636 83,622 81,638 106,552 97,151 Others 1,223,183 1,252,141 1,249,238 1,297,981 1,337,965 Philippines 2,005,776 2,017,267 2,018,687 2,204,393 2,285,809
2007 267,742 216,346 150,303 171,242 89,993 99,621 1,390,367 2,385,614
(Source: DA-BAS, 2008)
metric tons
b) Volume, area planted, and productivity. Banana production is increasing due to gradual increase in area and significant increase in yield. However, as noted earlier, yield could still be improved significantly. 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 Production
7%
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
4,106,6
4,570,6
4,929,5
5,059,3
5,274,8
5,368,9
5,631,2
6,298,2
6,794,5
7,484,07
500,000
2%
hectares
400,000 300,000 200,000 100,000
-
1998
Area 353,707
1999
2000
2001
2002
2003
2004
2005
2006
2007
372,127
382,491
386,703
398,005
408,000
414,510
417,755
428,804
436,762
20.00
4%
MT/HA
15.00 10.00 5.00
0.00 Yield
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
11.61
12.28
12.89
13.08
13.25
13.16
13.59
15.08
15.85
17.14
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Figure 7. Banana production, area and yield, 1998-2007. (Source: DA-BAS, 2008) c) Value of Production. Value of production is increasing at an even higher average rate of 11 percent. 18,000 16,000
million pesos
14,000 12,000 10,000
8,000 6,000 4,000
2,000 Banana
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
6,252
8,181
8,824
9,056
9,442
9,610
10,080
11,274
12,162
13,397
15,551
Figure 8. Banana value of production (at constant prices), 1998-2007. (Source: DA-BAS, 2008)
B. Supply and Demand 1. Supply As presented in the Supply and Utilization Account - SUA (Table 2), production is increasing at an average growth rate of 8%. There were imports in 1998 but the amount is very small.
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Table 8. Supply and utilization of banana, in metric tons, 1998-2008. Supply
Utilization Net Food Disposable
Year
Production
Imports Gross Supply Exports
Seeds
Feeds & Waste
Processing
Total
Per Per Capita Capita in in gm/d Kg/yr
1998
4,106,698
37
4,106,735
1,149,552
-
177,431
739,296
2,040,456
28
76
1999
4,570,640
-
4,570,640
1,319,632
-
195,060
812,752
2,243,196
30
82
2000 2001
4,929,570 5,059,360
-
4,929,570 5,059,360
1,599,352 1,600,707
-
199,813 207,519
832,555 864,663
2,297,850 2,386,471
30 31
82 84
2002
5,274,826
-
5,274,826
1,684,986
-
215,390
897,460
2,476,990
31
85
2003 2004
5,368,977 5,631,250
-
5,368,977 5,631,250
1,829,384 1,785,458
-
212,376 230,748
884,898 961,448
2,442,319 2,653,596
30 32
83 88
2005 2006 2007 2008P Growth Rate Ave. Share to Gross Supply
6,298,225 6,794,564 7,484,073 8,687,624 8% 100%
-
6,298,225 6,794,564 7,484,073 8,687,624
2,024,321 2,311,540 2,217,741 2,192,553 7% 100% 31%
-
256,434 268,981 315,980 389,704
1,068,476 1,120,756 1,316,583 1,623,768 8% 17%
2,948,994 3,093,287 3,633,769 4,481,599 8% 48%
35 36 41 50
95 97 112 136
4%
(Source: DA-BAS, 2009) 2. Demand a) World demand (Exports). The SUA shows that fresh exports shared an average of 31 percent of gross supply. The SUA also show that fresh exports are increasing at an average rate of 7 percent. Using FAO data, Philippines contributes 11 percent of world export quantity and 6 percent in terms of value.
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Table 9. Philippine share of banana in world export quantity, in „000 metric tons, 1998-2005.
Philippines World Phil share Phil growth rate
1998 1999 2000 2001 2002 2003 2004 2005 AVE 1,150 1,320 1,600 2,129 1,685 1,829 1,797 1,794 1,663 13,915 14,307 14,336 14,588 14,489 15,238 15,762 15,946 14,823 8% 9% 11% 15% 12% 12% 11% 11% 11% 15% 21% 33% -21% 9% -2% -0.2% 8%
(Source: Generated using FAO data.) Table 10. Banana: Philippine Share of banana in world export value, in „000 $, 1998-2005.
Philippines World Phil share Phil growth rate
1998 1999 2000 2001 2002 2003 2004 2005 AVE 217,040 240,703 291,651 297,371 308,887 333,000 326,425 430,000 305,635 4,899,749 4,737,538 4,234,430 4,199,549 4,287,025 4,687,096 5,001,277 5,651,321 4,712,248 4% 5% 7% 7% 7% 7% 7% 8% 6% 11% 21% 2% 4% 8% -2% 31.7% 11%
(Source: Generated using FAO data.) Total export value is US$ $439M in 2007. The major products are fresh bananas and chips. Chips 9%
Others 1%
Product
F.O.B Value (in US$)
Fresh Chips
396,279,318 39,316,539
Others
3,529,508 439,125,365
Fresh 90%
Figure 9. Export value (in %) of banana by product, 2007. (Source: NSO, 2008)
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Others 12% Japan (Excludes Okinawa) 42%
Iran 19%
United Arab Emirates 8% South Korea 13%
China 6%
Figure 10. Philippines‟ top markets of fresh banana, in percent, 2007. (Source: NSO, 2008)
Table 11. Philippines‟ top markets of fresh banana, in million metric tons, 1998-2007.
(Source: NSO, 2008) Looking at Philippine export data from DA-BPI , there is world demand for fresh small bananas. Senorita is the most preferred variety from 2002 to 2007 and bungulan/balangon from 2008 to 2009. However, volume of small bananas exported is fluctuating. It is also minor compared to total fresh banana exports. For example, in 2006, the total fresh banana export was 2,311,540 MT or more than 2.3 billion kg. In the same year, small bananas exported was only 2,689,986 kg. or .1%. 13
Saba 0.22%
Lacatan 5%
Latundan 6%
Senorita 31%
Morado 0.02% Bungulan/balangon 58%
Figure 11. Export volume (in %) of fresh small bananas by variety, 2009. (Source: DA-BPI, 2009)
Table 12. Export volume (in kg.) of fresh small bananas by variety, 2005-2009.
Variety Cardaba Saba Lacatan Latundan Bungulan/balangon Morado Senorita Tindok Unclassified GRAND TOTAL
2005 149.00 875.00 376,062.00 179,244.00
2006 1,169.00 424.00 593,845.40 341,906.00
2007 0.35 8.86 32.65 339.07
29,884.00 1,278,953.04
33,161.00 1,717,105.00 2,376.00
4.17 515.89
2,689,986.40
900.99
158,120.00 2,023,287.04
2008
2009
0.27 36.27 533.49 435.98 2,003.28 2.99 1,417.77 0.23
3.25 69.29 91.62 852.88 0.31 459.69
4,430.27
1,477.04
(Source: DA-BPI, 2009) In 2009, Japan is the biggest market. From 2005-2007, the biggest market was Korea followed by Japan. 14
Others 0.4% Korea 28.6%
Japan 71.0%
Figure 12. Top export markets of small bananas in percent, 2009. (Source: DA-BPI, 2009)
Table 13. Top Export Markets of small bananas, in kg., 2005-2009.
Country Korea Japan China Others Total
2005 1,525,356.04 497,931.00 2,023,287.04
2006 2,261,430.00 403,442.00 25,104.00 10.40 2,689,986.40
2007 553.96 346.09 0.04 0.90 900.99
2008 1,769.27 2,639.21 21.79 4,430.27
2009 422.57 1,048.34 6.13 1,477.04
(Source: DA-BPI, 2009) The country is number 1 in banana chips export with .03 MMT valued at US$39 M in 2007 (NSO, 2008). Based on the quantity exported from 1998-2007, the top markets for banana chips are:
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USA 16%
Germany 14% Others 53%
Taiwan 2%
China 4%
U.K. (Great Britain and N. Ireland) 10%
Figure 13. Philippines‟ top markets of banana chips, in percent, 2007. (Source: NSO, 2008)
Table 14. Philippines‟ top markets of banana chips, in million metric tons, 1998-2007.
(Source: NSO, 2008) b) Domestic demand. Based on the SUA, net food disposable is 48 percent (Table 8). Per capita consumption is increasing at an average growth rate of 8 percent indicating growing domestic demand.
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C. Value-Chain System 1. Agribusiness System Figures 14 to16 show the stakeholders in the industry and the major activities specifically for Cavendish and saba/cardaba (Davao Region Industry Cluster Plan, 2008).
Figure 14. Banana industry stakeholder map.
Figure 15. Major activities and linkages in the cavendish banana production sector.
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Figure 16. Major activities and linkages in the saba/cardaba banana production sector. The banana industry is composed of growers, traders, middlemen, transporters, buyers/exporters, and processors. The key producers include: Tagum Agricultural Development Corporation (TADECO), Lapanday Holdings, Davao Fruits Corporation, Marsman Estate Plantation, and Stanfilco Division of Dole Phils., Inc. Some of these companies have contract-growing schemes with small- and medium-sized farms. The key buyers are Dole Asia and Del Monte Fresh Produce. For banana chips, the players are mostly located in Davao and Butuan. These are Pacific Fruits, Archmen, Natural Fruits Corporation, Basic Fruits, and Philexson International, Inc. (PCARRD, 2003). Some practices/description of market participants are (DA-GMA-HVCC, 2008):
Domestic markets for fresh banana is through the middle men getting the produce from the farm
Fresh fruits traders/agents – buy banana from farmers Shippers can be found at the port of origin – Cagayan de Oro, General Santos, Davao and the proposed Malalag, Davao del Sur
Consignees/receivers can be found at the port of Manila for sales distribution to wholesalers and jobbers
Wholesalers or jobbers come from all over Luzon Retailers have fruit stands in rich neighborhood, supermarkets, wet market and mobile retailers (cart)
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We could further understand the market by looking at commodity flows and market channels such as below.
Figure 17. Commodity Flow of Lakatan and Latundan Grown in Southern Philippines. (Source: Davao Region Industry Cluster Plan, 2008)
Figure 18. Banana, Saba/Cardaba: Marketing Channel. (Source: Davao Region Industry Cluster Plan, 2008)
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Figure 19. Marketing system participants and general marketing flow of smallhold bananas. (Source: PCARRD 2006) More detailed discussions are provided for banana cardaba under Processing Industry (item C.4) below. 2. On-Farm Costs Some production costs as well as prices are shown in Figure 20.
Figure 20. Selected production costs and prices of bananas (in PhP/kg.). (Source: Maghirang, 2007)
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For cardaba production, the major cost driver is fertilizer. (For details, see Annex 2.) Others 12%
Organic Fertilizer 29%
Seedlings 12%
Labor 23%
Inorganic Fertilizer 24%
Figure 21. Average on-farm major costs of cardaba, 2006-2010. (Source: Banana Cardava Production, 2005) Planting materials account to 12 percent of production cost for cardaba banana (Figure 21), which shows that it is one of the major cost drivers in production. Fertilizers and pesticides, which manifest an increasing trend in their prices, are also considered as one of the major cost drivers. For banana, about 55 percent of total production cost was spent on fertilizer and chemicals (Calderon & Rola, 2003). For Cardaba production, organic and inorganic fertilizers constitute 29 percent and 24 percent of its production cost, respectively (Banana Cardava Production, 2005). In nonplantation farms, agricultural machinery and equipment are not major cost items since only simple tools like plow and harrow and harvesting implements are utilized. On the other hand, multinational companies have fully integrated operations, implementing cost-reduction and productivity-enhancement programs. They invest in new technology and equipment for mechanization in order to maintain their leadership position in the industry (Digal, 2005). Labor is employed from planting to harvesting, as such; it is considered a major cost driver and accounts to 23% of production costs for cardaba banana.
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3. Logistics The logistics practices in the banana sector, particularly in Davao (Davao region is the largest banana producer in the Philippines) cover packaging, transport, storage and warehousing. Annex 3 presents the detailed description (Center for Research and Communication [CRC], 1999). The identified logistics-related problems in the banana sector for growers are (CRC, 1999): (1) workers' salary is quite expensive while other workers are slow; (2) quality deterioration of harvest, poor handling and expensive materials; (3) storage problems due to damage, lack of care, lack of facility, and lack of capital; (4) poor roads ( a dominant transport problem); (5) long hours of transport; (6) “lagay”; (7) lack of working capital and high interest rates; (8) lack of postharvest facilities and; (9) lack of awareness of new technologies. Moreover, better practices followed by exporters are not applied by the buyers, wholesalers and traders who sell to the domestic market, because the additional cost cannot be absorbed by the domestic prices. Unless they produce higher-quality products, they cannot demand for higher or premium prices. The identified logistics-related problems wholesalers/retailers/traders are (CRC, 1999):
in
the
banana
sector
for
grower
(1) Materials related – kaing and crates get destroyed, crates are expensive and cellophane not available; (2) quality deterioration due to use of closed vans, long or difficult trip, and rain; poor handling and packaging material; (3) storage losses can reach up to 20 percent due to lack of appropriate facilities, poor temperature control, and losses to vermin; (4) poor roads, long transport time, quality deterioration, traffic/truck ban; and tong ranging from Php 50-Php 100; (5) very high freight rates charged by the shipping lines and the limited availability of “fruit vans” or chiller vans. Thus, bananas in Davao are mostly sold in the city and nearby provinces. Only limited volumes are shipped to Manila since traders are unable to compete with suppliers closer to Manila; and 22
(6) lack of working capital and high interest rates on loans. 4. Processing Based on the SUA 1998-2007, 17% of gross supply is processed. Only three (3) percent of this is exported, indicating that there is a very big export market potential if we expand our processing industry. Banana processing is dominated by the saba banana chips industry. According to Argañosa, et. al. (2006), in Mindanao alone, there are 26 processing plants for banana chips with a capacity of 20-60 MT/day per plant. In a survey conducted in 2003, the total plant capacity was at 40 MT/day but the actual average daily volume of banana chip produced was only 242 MT/day or short of 198 MT/day. The total banana chip production on daily basis of 242 MT is far short from the estimated 600 MT daily requirements for banana chips. There are 12 big companies engaged in the production of banana chips (Annex 4). In a study conducted in Regions 11, 12, and 13 on banana chips production, only five companies are included in the DTI list while five others are not. There are other three big banana chips producers in the three regions that did not provide any information during the conduct of the study. The results of the study showed that each company is producing at least 10 MT per day of banana chips. Moreover, her report also revealed that the total production of banana chips in the country is estimated at 400 MT/ day. It is 200 tons short of the 600 MT requirements for banana chips on a daily basis. The banana chips export in 2004 was estimated at 36,538 MT valued at US$ 36.86 M. In her survey covering the Southern Tagalog Region (Region 4) where six small banana chip processors are involved, it was found that their banana chips are marketed locally. It could be presumed that their production is not part of the annual estimate of total banana chips production in the country. Hence, it is actually difficult to estimate the total production of banana chips in the Philippines. A USAID report (USAID and Strategic Development Asia, 2007) gives us a detailed description of the industry (refer to Figure 22).
23
Figure 22. Banana cardava subsector map, 2007. The main findings are as follows: a) Some degree of preferred buyer-supplier relationship exists. But, in general, spot market transactions are practiced with price as the main factor. b) Most farmers prefer to sell their produce to those who provide loans and advances. They also give priority to buyers who offer a higher price. Main sources of disagreements between farmers and traders are the reliability of weighing scales and quality judgment. For procurement per hand basis, the issue is on the manner of the counting of the hands (e.g., three medium-sized hands counted as two and two-small sized hands as one). c) On average, about 25 percent of bananas delivered to processors are rejected. If the bananas were delivered by farmers, in many cases they prefer to leave the rejected bananas rather than spend for transportation to bring these back to the farm or to a distributor. d) Distributors/agents/assemblers usually get from the farm the cardava bananas that cannot be processed anymore (ripe or undersized). Banana stocks which do not meet the specifications of processors are bought at a lower price except during peak season (December to February). Table 15 shows the specifications followed by processors. 24
Table 15. Specifications of Cardava Banana Processors. GRADE
SPECIFICATIONS
Banana for Chips
Semi –mature (90-105 days), unripe, green color of skin, light yellowish color of flesh, not less than 3 inches in length
Banana for the Local Market
Mature/Over mature, semiripe/unripe, yellowish color of flesh, unblemished or with blemishes, less than 3 inches in length.
e) Local market cannot absorb the large volume supply of cardava banana when there is a slowdown in banana chips production, thus creating a market glut. On the other hand, during peak banana chips production season, there is a shortage of supply of banana of processing grade. During the stakeholders‟ workshops, farmers do not fully understand demand requirements of exporters because it is very rare for these two players to interact. Traders have some degree of understanding of the demand and supply requirements but they generally depend on signals received from their buyers. f) Most distributors practice “alsada” by letting the retailer sell fresh bananas at the prevailing price on delayed payment basis, with the retailer getting a percentage of the sales. Another practice is trading by “rachada” or using retailers to facilitate the sale of day-old cardava at discounted prices but on consignment basis. The seller is paid a commission. g) The wholesale buying price of cardava for local consumption is based on the prevailing price in the market. This is usually determined by the traders who are the main suppliers of banana traded in public market. As bananas ripen, the price becomes lower. h) Processors dictate the wholesale buying price of cardava for chips. The price is based on their export contract price and the prevailing price of coconut oil (which is a main cost center). i) Assemblers/agents offer a higher price if the assembled quantity of cardava exceeds 1 MT.
25
j) Banana chips are currently being exported to 32 countries with the biggest shipments going to the Europe, China, and the United States. Growth during the last 5 years has been mainly due to the expansion of the China market. k) After a decline of about 3 percent in 2005 over 2004 figures, export volume from Mindanao during the first quarter of 2006 has increased by 245 MT compared with the same period in 2005. It is forecasted that the banana chips international market can absorb around 10 percent to 15 percent more per year growth. Annex 5 gives more detailed description on the cardaba industry players. To better understand the processing industry, a case report of Snapsnax, Inc., a processor and banana chips exporter, is shown in Annex 6 (Source: Davao Region Industry Cluster Plan, 2005-2010. March 2008.) In processing, the price of cooking oil is a major cost driver especially in the first frying. Table 16 shows the cost contribution of various marketing players in the banana industry (Source: USAID and Strategic Development Asia, 2007).
Table 16. Cost contribution of various marketing players in the banana industry. Player
Selling Price per kilogram (in Php)
Cost Contribution/ Kilogram Chips Amount (in Php)
Percent Share (in %)
Farmers
3.50/kg fresh (farm gate)
14.00
28 %
Traders
3.90/kg fresh
1.60
3%
First Fryers
32.00 – 37.90/kg chips
16.40 – 22.30
44 %
Processors
50.54/kg chips
12.64
25 %
Notes: Php 16.40 – Cardavas purchased directly from the farmers Php 22.30 – Cardavas sourced from traders
26
Figure 23. Cost contribution for 1 kilogram banana chips.
From the Php 50.54/kg export price of banana chips, 44 percent (Php 22.30) goes to first fryers, 28 percent (Php 14.00) goes to the farmers, 25 percent ((Php 12.64) goes to the processor/exporter, and 3 percent (Php 1.60) pays for the services of the trader. First fryers contribute the biggest share of the production cost as labor is more intensive, and more oil is consumed in first frying than in 2nd frying of processors. Though traders take the smallest percentage of the proceeds, his business cycle is very short. All his transactions from buying of fresh cardava from farmers up to delivery to processors can be completed in less than one day. Farmers on the other hand, need to wait 14 months to harvest from each banana seedling/flower. The study of Argañosa, et. al. (2006) also looked into the gaps between services needed and services offered (Table 16). They noted that support services are available to assist small banana processing businesses in the different areas of their projects. However, these services are not usually availed because of the following reasons: (a) lack of awareness on the availability of such services, (b) leniency in the compliance of existing policies on food sanitation and handling as well as waste management, (c) difficulty in complying to the documentation and collateral requirements in availing financial capital, and (d) high cost involved in the adoption of good manufacturing practices.
27
Table 17. Gaps between services needed and services offered.
The problem tree analysis of the banana chips industry is presented in Figure 24.
28
29
Figure 24. Banana, Processed: Problem Tree.
D. Prices 1. World Prices Philippine banana is competitive based on comparison of producer prices. Table 18. Producer Prices (US$/tonne) of Top Banana Exporters, 1998-2007.
(Source: FAO, 2008) 2. Domestic Prices The trend of banana prices and price ratios were presented in Figures 19 to 26. The price of banana is increasing (note positive average growth rates). Using price ratios, the gainers and losers can be determined.
Bungulan 8
2%
7
peso/kg.
6 5
7%
4 3 2 1 0
1998
1999
Farmgate-green
3.08
3.85
Wholesale-ripe
5.67
5.88
2000
2001
2002
2003
2004
2005
2006
2007
2008
3.5
3.5
4.16
4.21
5.57
6.27
4.58
4.71
5.17
4.83
5.18
5.46
5.39
6.16
6.3
6.23
6.16
6.79
Figure 25. Prices (current) of bungulan, 1998-2008. (Source: DA-BAS, 2009)
30
120% 100%
percent
80% 60% 40% 20% 0% Ratio (farmgate/wholesale)
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
54%
65%
72%
68%
76%
78%
90%
99.5%
74%
76%
76%
Figure 26. Price ratios of bungulan, 1998-2008. (Source: Generated using DA-BAS data, 2009) Bungulan farmers are the gainers since farmgate prices are closer to wholesale prices (from just 54 percent in 1998 to 76 percent in 2008).
Lakatan
peso/kg.
30 25
5%
20
6%
15
8%
10 5 0
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Farmgate-green
5.31
7.38
5.49
5.73
6.35
6.7
7.84
8.61
8.83
9.41
10.47
Wholesale-ripe
11.16
12.6
11.43 11.79 11.88 12.42 14.31 15.66 15.39 16.92 19.44
Retail-ripe
15.57 17.46 16.65
17.1
17.64 17.91 19.35
20.7
21.6
24.21 25.83
Figure 27. Prices (current) of lakatan, 1998-2008. (Source: DA-BAS, 2009) 31
80% 70%
percent
60% 50% 40% 30% 20% 10% 0%
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Ratio (farmgate/wholesale)
48%
59%
48%
49%
53%
54%
55%
55%
57%
56%
54%
Ratio (wholesale/retail)
72%
72%
69%
69%
67%
69%
74%
76%
71%
70%
75%
Ratio (farmgate/retail)
34%
42%
33%
34%
36%
37%
41%
42%
41%
39%
41%
Figure 28. Price ratios of lakatan, 1998-2008. (Source: Generated using DA-BAS data, 2009) Lakatan farmers are also gainers since the farmgate/wholesale and farmgate/retail ratios increased. Wholesalers are also gainers. Latundan 20
4%
18
16 14
peso/kg.
3% 12 10 8
6%
6 4
2 0
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Farmgate-green
4.5
5.6
4.2
4.34
4.52
5.17
6.11
6.73
6.93
7.26
7.69
Wholesale-ripe
10.1
10.5
8.9
9.5
9.8
9.9
10.7
11.6
12.1
12.4
13.4
Retail-ripe
12.4
13.7
12.2
13.2
13.5
13.5
14.6
15.4
15.9
17.4
18.1
Figure 29. Prices (current) of latundan, 1998-2008. (Source: DA-BAS, 2009) 32
90% 80% 70%
percent
60% 50% 40% 30% 20% 10% 0%
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Ratio (farmgate/wholesale)
45%
53%
47%
46%
46%
52%
57%
58%
57%
59%
57%
Ratio (wholesale/retail)
81%
77%
73%
72%
73%
73%
73%
75%
76%
71%
74%
Ratio (farmgate/retail)
36%
41%
34%
33%
33%
38%
42%
44%
44%
42%
42%
Figure 30. Price Ratios of latundan, 1998-2008. (Source: Generated using DA-BAS data, 2009) Latundan farmers are gainers but wholesalers are losers.
Saba 16
6%
14
peso/kg.
12
5%
10 8 6
5%
4 2 0
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Farmgate-green
3.51
3.42
2.86
3.24
3.4
4.2
4.3
4.6
4.52
5.31
5.48
Wholesale-ripe
6.66
7.02
6.21
6.66
7.02
7.11
8.19
9.18
8.82
10.17 10.98
Retail-ripe
8.73
9.27
8.28
8.91
9.27
9.36
10.8
11.88 12.15 14.94 15.03
Figure 31. Prices (current) of saba, 1998-2008. (Source: DA-BAS, 2009) 33
90% 80% 70%
percent
60% 50% 40% 30% 20% 10% 0%
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Ratio (farmgate/wholesale)
53%
49%
46%
49%
48%
59%
53%
50%
51%
52%
50%
Ratio (wholesale/retail)
76%
76%
75%
75%
76%
76%
76%
77%
73%
68%
73%
Ratio (farmgate/retail)
40%
37%
35%
36%
37%
45%
40%
39%
37%
36%
36%
Figure 32. Price ratios of saba, 1998-2008. (Source: Generated from DA-BAS data, 2009) Saba farmers and wholesalers are losers. This can indicate that retailers are the gainers. 3. Price Formation/Differentiation The domestic markets of fresh banana are dominated by middlemen and traders while the export market is handled mostly by multinational corporations. In small farms, bananas are sold on a finger count basis while in commercial plantations, they are sold by weight (Rivera, 2004). Furthermore, Lantican (2008) confirmed that the pricing system for banana is inefficient considering that price transmission is so weak between the local market and reference market For example, Saba farmgate prices in Oriental Mindoro was nonstationary, hence it could not be co-integrated with wholesale prices in Metro Manila and retail prices in Tarlac and Batangas. She further cited limited access to reliable and updated market information and poor farm-to-market roads that entail high transportation cost in hauling banana as the contributory factors to weak market integration between farm and wholesale or retail markets. These findings are supported by a past study on “Banana Marketing in Nine Selected Areas in the Philippines” (ASSIST, 1994), which documented price formation in some major producing provinces as well as in Metro Manila. This study shows that price formation is area- and banana type-specific and affected by many other factors. (See Annex 7 for details.) Evidently, the buying price of banana has been dominated by traders. However, a report (
34
Figure 33) found that farmers (specifically in Mindanao) are having a bigger say in price setting (USAID and Strategic Development Asia, July 2007).
Figure 33. Price setting shift in banana, 2007. E. SWOT Analysis The strengths, weaknesses, opportunities, and threats (SWOT) were consolidated from various sources (DA-GMA-HVCC, 2008; Davao Region Industry Cluster Plan, 2005-2010, March 2008; DA, Banana Strategic Action Plan, 2002). The strengths are: large number of experienced and technically capacitated banana growers; strong, dedicated and credible leadership in the industry; extensive membership; strong multisectoral linkages; strong industry associations such as Minfruit: Mindanao Fruit Shippers Association, Inc., and Banana Industry Council of Southern Mindanao, Inc.; large potential areas for expansion; existing R & D facilities with mature technologies; presence of multinational companies; and program/project support – such as Growth with Equity in Mindanao (GEM) and GMA-HVCC program. The strengths specific to Lakatan/Latundan are: easy to grow cultivar, non-seasonal fruit, high nutritive value, can be grown organically, availability of propagation protocol for tissue 35
culture materials, availability of selected production/post-production technologies, large domestic market, and established market niche to Japan (lakatan). The strengths specific to Saba/Cardaba are: easy to grow relative to lakatan/latundan; nonseasonal fruit; potential for steady year-round production especially in Mindanao; thrives under wide range of soil and climatic conditions, tolerant to sigatoka, planting materials relatively available, suitable for intercropping, can be grown organically, health food – due to excellent starch quality, high potential yield, country is sole producer in large quantities, harvesting of fruits for chips can be done in 90 days after debudding compared to 120 days for other products, has many other alternative uses (chips, flour, catsup vegetable, feeds), price competitive if produced in farms w/in 50 km radius of chip manufacturing plant, versatile processing methods make the business affordable to small businesses, high demand in the export market, and continued dominance of banana chips in the export market. Despite the many strengths, there are many weaknesses: pest and diseases such as bugtok, bunchy top and sigatoka; lack of disease surveillance and early warning system for bananas; fragmented production areas for bananas other than cavendish; high cost of investments; inadequate access to financing institutions; weak farmer-grower organizations; lack of an efficient marketing system for cardaba, lakatan, and other cultivars; inadequate support facilities such as ports and farm-to-market roads; high postharvest losses; lack of data banking facilities/system; pesticide residue analysis function is very weak; lack of traceability system; and lack of awareness on food safety. The weaknesses specific to lakatan/latundan are: prone to typhoons and strong winds, limited availability of planting materials, sporadic planting, lack of irrigation system in typical farms, lack of standard nutrient levels for banana plants, high incidence of pests and diseases, poor quality fruits and high postharvest losses, unreliable supply of quality fruits, lack of market infrastructures, and disorganized groups of stakeholders (e.g., growers, shippers and consignees). The weaknesses specific to saba/cardaba are: reliance on old stocks to replenish planting materials, low intensity use and sporadic application of fertilizer, susceptibility to bugtok and other diseases, poor quality fruits and high postharvest losses, unreliable/unpredictable supply of quality fruits, unreliable supply chains, lack of harmonized quality standards, lack of market infrastructures, disorganized groups of stakeholders (e.g., growers, shippers and consignees), limited support to RDE, small to medium scale manufacturers pay little attention to food quality and safety, chips manufacturers serving only the local market priced their product at a premium, normally twice over those that are export-oriented, lack of system in product handling and transporting, and cold storage is not used. 36
The opportunities are: greater access to markets, presence of ICT facilities, heightened global consciousness for health foods, high employment and investment generator, typhoonfree area (Mindanao). The opportunities specific to lakatan/latundan are: growing domestic demand for latundan (for babies and the elderly), expanded markets for lakatan to Asian countries, high demand for lakatan in the domestic market, could be exported as an organic fruit (lakatan), and biotechnology tools available for varietal improvement. The opportunities specific to saba/cardaba are high demand in the export market, overseas buyer demand a steady and predictable source of banana chips, and new export markets. The threats are: high cost of farm inputs especially fertilizers, high cost of transport, unpredictable china market in the case of banana chips, banning of aerial spraying in Davao City, unfair trade practices disease outbreak, rapid changes in customer preferences, peace and order, climatic disturbances (e.g. El Nino/La Nina), political disturbance/instability, possible global market oversupply/market saturation, agrarian reform law - caused division of farms into smaller units thereby affecting economies of scale. The threats specific to lakatan/latundan are: entry of Ecuador in the Japanese market which is the traditional market for Philippine lakatan, and competition with other fruits produced locally and outside the country. The threats specific to saba/cardaba are: distribution systems in markets abroad particularly in China and the European Union are controlled by a few large distributors; changing consumer preferences especially for healthy, low sugar products; availability of lower-priced substitutes; absence of mandatory international or local standards; high cost of inputs – cooking oil accounts for 40% of sales and saba accounts for 35% of sales; and possible relocation of production and processing operations of Filipino manufacturers to neighboring countries (e.g., Indonesia). F. Problem Tree Analysis Figure 34 shows the problem tree analysis for fresh banana. The SWOT analysis above was used as a main input in its formulation. Among the commodities in the country‟s fruit industry, banana has already established a very competitive edge in the world market. Alongside with the investment opportunities seen by the multinational companies in banana sector, changes in the production and marketing system has also been triggered by the increasing demand for this fruit, both in the domestic and international markets. Despite of the competitive edge of the industry in the world market, there are still opportunities to improve and develop banana industry to tap the higher value chains and considerably improve quality, production capacity and enhance competitiveness. Although banana has different varieties, it can be noted, however, that issues prevailing in the industry are common among the all types of banana. Hence, each issue significantly 37
hinders the development of the industry. In the case of Cavendish, production is highly dominated by multinational companies. Farmers/growers are often engaged in contract growing with these large firms. This set-up enhances the technological transfer and technical skill development of the farmers betrothed on the contract. However, there are still existing issues that are encountered by these firms. Among these issues are high cost of inputs especially fertilizers and labor, declining soil fertility due to farming and fertilizer application, and high incidence of pests and diseases. Apparently, these problems also come across in the production of other varieties of banana. Sustaining the supply of quality fruits starts at the farm level production. The implementation of Comprehensive Agrarian Reform Law has prohibited the ownership of large land. Hence, investors will be more reluctant to invest in the industry inasmuch as incentive to expand the production will be more costly and problematic. Lands that are under the reform law cannot be used as collateral to the bank which leaves the farmers with limited access to credit. Thus, farmers rely on old stocks to replenish their planting materials and cannot buy certified or quality materials to enhance the production capacity and quality. Moreover, farmers limit the application of fertilizer since it will be more costly for them to follow the required amount of the chemicals to have a good grown banana plant. Another repercussion of the agrarian reform law is the fragmented production area of different varieties of banana. 80% of the banana growers are small farmers. The crop is grown along the road side, on mountainside, on home lots and in small farms. As a result, standards set by the market are hardly met by small growers. This is further aggravated by the absence of mandatory international or local standards which eventually causes the lack of harmonized quality standards of the produce of small growers. Weak pesticide residue analysis further reinforces the fact that there is a need to improve the quality of the produce. However, weak pesticide residue analysis should not be overstressed since research and development to improve the production capacity and quality of the banana also needs more support from the government and the concerned agencies.
38
39
Figure 34. Banana, fresh: problem tree.
The industry is also lacking on data banking system/facilities for the other varieties of banana. Some growers and traders, therefore, have insufficient knowledge whether they are meeting the demand for banana in the domestic market. The inability to trace the origin of the rejected and low quality produce is also contributing to the slow development of the industry. Aside from quality of the produce, typical farms have relatively low yield. Climate change (e.g., uncontrollable climatic disturbances such as occurrence of typhoon) highly influences the production of banana. For some growers, the low productivity of their farm is due to inadequate support facilities such as irrigation system. This is also compounded by the declining soil fertility due to continuous farming and fertilizer application. Lack of disease surveillance and early warning system for banana and its susceptibility to diseases significantly influence the yield of its production as well. Handling the produce at the postharvest stage is as important as maintaining the quality of the fruit at the farm production level. Apparently, there is a lack of good system for handling and transporting the produce. Most of the produce was transported without using cold storage which is necessary to maintain the freshness of fruits before reaching its destination market. The archipelagic nature of the country and sporadic production of banana area also drive up the transportation cost. Lack of market infrastructure, including farm-to- market roads, further intensified this problem. Likewise, most of the farmers have difficulties in marketing their produce because of the fragmented production and inefficiencies of its marketing system. III.
SUMMARY, ISSUES AND RECOMMENDATIONS
The banana industry is already globally competitive already but big improvements could still be done in terms of production and yield, and in the supply chain. The processed export industry also still has a big potential. The Philippines market share could be increased. During an agribusiness stakeholder consultation (DA, 2008), Mr. Ruben See, President of See‟s International, a banana chips exporter, encouraged the growing of saba because it is easy to cultivate and there is market for saba. There is also no problem on Maximum Residue Limit (MRL), since it is “organic by neglect”. The problem is always a shortage in supply due to typhoon. Table 19 illustrates the issues and gaps in the banana industry, accordingly, recommendations were also provided.
40
Table 19. Issues and recommendations in the banana industry. Supply chain I.
Issue/Gap
Recommendation
Input Supply Subsystem Seeds and Seedlings, etc.
Insufficient planting materials with high quality
Provision of quality planting materials – especially for small bananas
Fertilizer and Pesticide
Increasing costs
Improvement of logistics; utilization of organic fertilizers
Agricultural Machinery/equipment
Need for standards in farm equipment
Establishment of standards
Labor
Increasing cost of
Maximum utilization of family
labor
labor
II.
Production Subsystem
Inconsistent supply; fragmented production
Expansion of production areas; integration of supply
III.
Marketing Subsystem
Inefficient marketing system
Improvement of logistics (to address high postharvest losses); establishment of an efficient marketing system for small bananas through better market information and trade systems
IV. Processing Subsystem
Inadequate postharvest and processing facilities; need for standards in equipment
Increase and improvement in processing and postharvest facilities (e.g., processing and packaging plants, peeling and cutting machines); utilization of biotechnology
V.
Inadequate support systems
Provision of more support facilities such as ports, farm-to-market roads, cold chain systems, irrigation facilities; also regulatory and food safety system (e.g., traceability,
Support Subsystem
database/s); promotion of GAP; credit and crop insurance facilities; strengthen RDE system
41
DA-GMA-HVCC identified some investment opportunities - growership for cavendish export, Individual production of fresh banana for local and export markets, banana chips production, organic - fresh and processed, and production inputs: organic fertilizers, tissue cultured plantlets. But more investments would come in if the gaps are addressed. It is recommended that there should be reviews on the existing programs formulated by the government to solve the concerns of the industry - from access to agricultural resources and services to market information- to strengthen its competence in dealing with the prevailing issues of the fruit industry. One good example is the Food Terminal Concept which is developed by DA. This concept is especially designed to develop market infrastructure of the industry by establishing chain of marketing facilities from farm to consumers and developing distribution centers (food terminal hubs) which are designated regional or provincial agro-industrial centers for proximity to value-adding and processing activities. Active involvement of LGUs, NGOs, private sector, GOCCs, and joint-venture between any of the parties above is highly encouraged to operate the hubs so that trading system will be more efficient and transparent and market information will be more accessible to the agents of the market.
IV.
REFERENCES
Agribusiness System for Statistical Information Services and Technology (ASSIST). (1994). Banana marketing in nine selected areas in the Philippines. Argañosa S. A., et. al. (2006). Analysis of banana processing businesses and their support environment in the Philippines. Banana Cardava Production. (2005). First Bukidnon Banana Congress: Banana cardava productionan alternative crop. Powerpoint Presentation. November 3-4, 2005. Retrieved on October 2008 from Calderon, R. P. and Rola, A. C. (2003). Assessing benefits and costs of commercial banana production in the Philippines. Working paper no. 04-03. ISPPS, CPAF, UPLB. Center for Research and Communication. CRC. (1999). Enhancing the Global Competitiveness of Agribusiness through a Strategic and Integrated Transportation Action Program. 42
Davao Region Industry Cluster Plan, 2005-2010. March (2008). Department of Agriculture. (2002). Banana strategic action plan. April 2002. Department of Agriculture. (2008). Proceedings of the agribusiness situation analysis, stakeholders consultation meeting. Quezon City. December 9-10, 2008. Department of Agriculture-Bureau of Agricultural Statistics. (2008). Countrystat. Retrieved on December 2008 from Department of Agriculture-Bureau of Agricultural Statistics. (2004). Situationer on banana, 1999-2003. Department of Agriculture-Bureau of Plant Industry. (2009). Export report on fresh small bananas, 2005-2009. Department of Agriculture-Ginintuang Masaganang Ani High Value Commercial Crops (DA - GMAHVCC) Banner Program. Commodity profiles. Retrieved on October 2008 from Digal, L.N. (2005). Benefit diffusion and linkage development in the Philippine tropical fruits sector. Retrieved on October 2008 from http://siteresources.worldbank.org/INTPHILIPPINES/ Resources/Digal-word.pdf Food and Agriculture Organization (FAO) of the United Nations, 2008. Retrieved on October 2008 from < http://faostat.fao.org/default.aspx/ >> Joint Committee on the Japan-Philippine Economic Partnership Agreement. December 11, 2008. Operational Procedures referred to in Chapter 2 (Trade in Goods), Chapter 3 (Rules of Origin) and Chapter 6 (Mutual Recognition). Agreement between Japan and the Republic of the Philippines for an Economic Partnership. Retrieved on September 2009 from http://www.mofa.go.jp/region/asia-paci/philippine/agree0812.pdf Lantican, F. A. (2008). The Philippine banana industry: Market performance, constraints and policy directions. Maghirang, R. (2007). Banana strategic plan 2005-2010. National Academy of Science and Technology, Department of Science and Technology. (2008). Philippine Agriculture 2020: A Strategy for Poverty Reduction, Food Security, Competitiveness, Sustainability, Justice and Peace. Main report. January 2008. 43
National Statistics Office. (2002). Census of agriculture and fisheries. National Statistics Office. (1994-2007). Quantity and value of exports and imports. 2008. PCARRD. (2003). Banana and mango. R & D status (2000 and beyond). PCARRD (2006). Marketing system participants and general marketing flow of smallhold bananas, Philippines. Cited in A.P. Aquino, et. Al. Exploring the Link Between Supply Chain Management and Transaction Cost Economics: A Cursory Evaluation of Export Mango and Small-hold Banana Marketing in the Philippines. International Seminar on “Economics and Marketing of Tropical and Sub-tropical Fruits.” Kuala Lumpur, Malaysia, 16-18 July 2007. Rivera, R.A. (2004). Philippine banana production and marketing. Retrieved on August 2008 from USAID and Strategic Development Asia-SDA. (2007). Banana agrichain competitiveness enhancement. Implementation Plan – Year 1.
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V.
ANNEXES
Annex 1. Gross value output of selected fruits, in million pesos, 1998-2008. (At constant prices)
(Source: BAS, 2009)
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Annex 2. 5-Year (2006-2010) cardaba production cost and return analysis for one hectare.
2006
2007
2008
2009
2010
I. COST (pesos) A. Land Preparation
1,500
3%
-
0%
-
0%
-
0%
-
200 1,000 2,000 900 800 1,500 -
0.5% 2% 5% 2% 2% 3%
2,000 900 800 1,500 1,000
0% 0% 8% 4% 3% 6% 4%
2,400 1,080 960 1,800 1,200
0% 0% 9% 4% 3% 7% 4%
2,400 1,080 960 1,800 1,200
0% 0% 9% 4% 4% 7% 4%
2,400 1,080 960 1,800 1,200
17,600 540 8,800 6,520 720 1,500 43,580
40% 1% 20% 15% 2%
8,800 6,840 720 1,200 1,500 25,260
0% 0% 35% 27% 3% 5% 6% 100%
600 8,800 7,180 720 1,200 1,500 27,440
0% 2% 32% 26% 3% 4% 5% 100%
8,800 7,520 720 1,200 1,500 27,180
0% 0% 32% 28% 3% 4% 6% 100%
8,800 7,900 720 1,200 1,500 27,560
B. Labor
C.
D. II.
III.
Stacking Hauling/Planting Weeding Fertilization Deleafing/Debelling Desuckering Harvesting Materials Seedlings Lime Organic Fertilizer Inorganic Fertilizer Medicine Harvest Basket Technical Services Sub Total PRODUCTION Fruit (kg.) B-suckers (pc.) Soybeans (kg.) Income (pesos) Fruit B-suckers Soybeans Gross Income Net Income ROI
3% 100%
13,200 2,000
38,500 13,200 -
38,500 13,200 -
38,500 13,200 -
38,500 13,200 -
66,000 30,000 96,000 42,420 0.97
134,750 66,000 200,750 175,490 6.95
134,750 66,000 200,750 173,310 6.32
134,750 66,000 200,750 173,570 6.39
134,750 66,000 200,750 173,190 6.28
Note: P10,000 production cost for soybeans was deducted to arrive at a net income of P42,420 (year 2006) (Source: 1st Bukidnon Banana Congress, November 3-4, 2005)
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Annex 3. Logistics practices in the banana industry. Extracted from: Center for Research and Communication. Enhancing the Global Competitiveness of Agribusiness through a Strategic and Integrated Transportation Action Program. 1999. Packaging. The post harvest practices of growers are: cleaning, sorting, grading, packing. Growers use various packaging/containers such as: kaing (3 sizes), sack, crate (2 sizes) before and after processing. Wholesalers/Retailers/Traders perform a wider variety of steps than growers: repacking, sorting, cleaning, kalburo, packing, grading, cutting, weighing. There is no standard sequence. A variety of containers are used, with crated of 30-32 kilos most popular. Kaings of 4 sizes and baskets are also mentioned. These practices show lack of standardization. Transport. For growers, the produce is more often picked up by customer in own vehicle. For some cases, the produce is delivered using either jeep, motorcycle or utility vans. Weekly volume ranges from 30 to 80 kilos, except 1 big player cited 4 tons. Delivery is mostly to Toril. Fee ranges from P20 to P250. Frequency ranges from daily to every 15 days. Bananas are mostly packed in crated of 30-32 kilos. Assemblers deliver green, unripe saba to banana chips processors (Celebes and Basic Fruits). Processors shoulder the transport cost from the assembly point (trader‟s house) to the processing plant. Company vehicles pick up the produce according to a daily schedule. For Wholesalers/Retailers/Traders, pick up by customer in customer‟s vehicle is more common than delivery, in customer‟s vehicles. Travel distance ranges from 3 to 12 km and time from 15 minutes to 2 hours. Fee ranges from P20 to P1500. Per Dizon Fruitworld, containers used are either „cattle vans‟ which can hold 245 crates, or regular 20 foot dry vans which can hold 207 crates with air passage allowed between crates, and one container door left open and subject to pilferage. Each crate can hold 35 kilos latundan/30 kilos saba. Solid Shipping Lines is typically used by Dizon, sailing from Tefasco wharf. There are also instances of crude practice, where banana hands are piled on top of each other, without container crates or cartons, inside a smaller dry van. Bananas at the bottom are damaged by the weight above them. Storage & Warehousing. The type of storage used by growers is either sheds or house. Bananas are stored in kaings or cartons, waiting for buyers or ripening and are held on the average for less than 2 days.
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Wholesalers/Retailers/Traders mostly store the bananas prior to sale. Storage areas vary from sheds, to stores or small warehouses. Sheds range from 30 to 60 sq.m. and can contain 6 kaing up to 500 crates. A small warehouse may hold 50 to 300 kilos, while a store is smaller, holding 15 to 100 kilos only. Shed rental can be P10000 to P20000 per month. Bananas are packed in crates or kaings. Reasons for storing are: ripening or waiting for buyers. Most store for 1 day, others longer, up to 15 days. Losses experiences range from 5% to 20%. The existing logistics practices for export are already satisfactory as these have been set by the importers themselves. Exports to Japan, Middle East and Korea are in cartons containing 13 kilos, while exports to Hong Kong & Singapore are in cartons containing 18 kilos. Logistics Cost of Banana Transport Costs. The two transporters (interviewed in the study) ship once a week an average of 1.5 tons and 4 tons. Trip is from Calinan to Divisoria and they charge P3000 and P8000. Shipments are in crates of 30 kilos and the crates are in containers. Freight per kilo is P1.83 to P2. Typical Price Structure TYPICAL SABA BANANA PRICE STRUCTURE (CFA-UA&P WORKSHOP, 1999) PER KILO
LOW
HIGH
1.45
2.45
+ Hauling Cost
0.05
0.05
= Farmgate Price
1.50
2.50
+Transport Cost and Margin
0.20
0.20
=Assembler‟s Price
1.70
2.70
+Supplier‟s Margin
0.20
0.20
+Transport, Hauling Cost
0.10
0.10
=Processor‟s Price (Butuan City)
2.00
3.00
0.55
0.55
% OF PROCESSOR‟S PRICE
28%
18%
% OF FARM PRICE
38%
22%
Farm Price
LOGISTICS COST + MARGINS
Storage & Warehousing Costs. Both transporters reported being aware of new storage technology, but are not using any because it is expensive.
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Annex 4. DTI list of companies which are into production and export of banana chips.
(Source: Argañosa S. A., et. al. (2006). Analysis of banana processing businesses and their support environment in the Philippines)
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Annex 5. Actors in the cardaba industry. (Source: USAID and Strategic Development Asia-SDA. (2007). Banana agrichain competitiveness enhancement. Implementation Plan – Year 1)
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Annex 5. Actors in the cardaba industry. (continued)
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Annex 6. Case report of Snapsnax, Inc., a processor and banana chips exporter. (Source: Davao Region Industry Cluster Plan, 2005-2010. March 2008)
Firm Name: Snapsnax Inc. Sector: Processor and Banana Chips Exporter Principal Products and Services: Banana Chips Address: Northern Binugao, Toril, Davao City Telephone Numbers: 082-2912542 (Fax), 082-2912458 Date: February 22, 2008 (1)Linkages/ networking a) Existing linkages/ networking in conducting your business
Sales : 100 percent of production is sold directly to China, U.S., and Germany. 80 percent to China, 10% to U.S., and 10 percent to Germany (broken chips)
Distribution – none locally
Procurement : 70-80 percent of total raw material (Cardaba Banana) is delivered to the plant by farmers, while 20-30 percent is bought through their agent in the areas. About 70 percent of raw material is sourced from Davao del Sur and the 30% is sourced from Davao del Norte. : Cardaba is „all-in‟ acceptance from supplier. No classification in purchasing, but classify it according to sizes in processing due to market requirement where one market require big sizes and others small (3-4 inches)
Source of business information : Export buyers
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Others : Information from media regarding incidents in Luzon (like typhoons) that affect the supply of Cardaba since Manila processors will source their raw materials from Mindanao and compete with local suppliers for the sourcing of raw materials.
b) Linkages/networks you are expecting in conducting your business: (and what do you think is the benefit from forming the linkage/ network?) Has linkage with the DTI, particularly the information on the availability of GMP training and other training opportunities. c) Trade/industrial associations
Trade/industrial associations involved in - President Ruben See is a member of the Banana Chips Processor Organization, a loose organization that gets together only when confronted with a problem like scarcity of raw material.
Trade/industrial associations you are not involved in: Davao City Chamber
(2) Markets a) Current markets (customers/ users)
Major market : China
Other markets : US and Germany market
Satisfied with current buyer to China as turn-around payment is just two weeks compared to U.S. where the turn-around is 1.5 months. No plan for further development as limited by the supply of raw materials. b) Potential/ expecting markets (customers/ users) c) Requirements for penetrating into the potential/ expecting markets No plan for penetration to other markets. (3) Competitors a) Competitors: Compete with Luzon processors on the raw material supply and not the market. Luzon buyers of Cardaba offer 1 Peso more per kilo to farmers. 53
b) Competing factors (price, quality, sales channels/ techniques, others): price (4)Technologies a)Issues relating to technology: None b)Technological information you like to obtain: Processing is very simple and technology is matured, and no need of new information on current technology. c) Research themes to solve the current technological problems: None (5)Technologies/technical skills
Processing activities are very simple and technology and trends are not very critical to its competitiveness. It is the price and availability of raw material, particularly cardaba and vegetable coconut oil used for frying, that are critical to its operation and competitiveness. Processing activities – Peeling – Frying – Sweetening - Packaging
(6) Current Development issues and potentials of the clusters a) Issues industry players are being confronted with.
Scarcity of raw material particularly cardaba as Manila processors also source their raw material from the Davao Region particularly if typhoons hit Luzon and areas of sources of Luzon processors. Manila buyers of Raw Cardaba also offer higher prices.
The big increase in the price of the cooking oil.
b) Development potentials of the cluster (market potential of the major activities) 1. Development Intervention of relevant government agencies (past performance, and current key direction of interventions) - Received training on GMP/HACCP through DTI‟s facilitation -Would like to be GMP/HACCP certified.
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Annex 7. Price formation for banana. (Based from ASSIST. Banana Marketing in Nine Selected Areas in the Philippines. November 1994) Cavendish Cavendish is mostly exported and thus farmgate and wholesale prices are affected by the world price. Lakatan South Cotabato and Sarangani - Wholesale buying prices of traders are based on prices outside the market center and the buying prices of fellow traders. During lean months, most distributors demand higher prices from buyers. Semi-ripe bananas command higher price than ripe ones at the retail level. Retailers based their selling prices based on demand and supply situation and prevailing market price. Latundan Misamis Oriental- The buying price is based on the count of the buyer. Different traders use varying methods of counting bananas; this count serves as the basis of price-setting by traders. Farmers normally do not bargain over prices. Thus, the Manila or Cebu trader sets the price for the provincial assembler based on the former‟s count. The provincial assembler sets the price for the agent/assembler, who in turn sets the price for the farmer. Saba Davao del Norte - Processors dictate the wholesale buying price of cardaba for chips to their contractors and direct suppliers. They normally base their price on their export contract price. Contractors set their buying price from which their suppliers will receive a commission per kilogram. The wholesale buying price of cardaba intended for local consumption (ripe and undersized) is based on the prevailing price in the market. This is usually determined by traders who are the main suppliers of banana traded in the public market. Retail price is based on the current price in the market or the retailer-set price which includes additional marketing costs.
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Metro Manila – Saba prices are stable. Latundan and lakatan vary at times due to changes in quality and size.
Provincial assemblers who deliver to medium distributors usually dictate the price in the markets and even in supply areas. For permanent supplier/distributor relationships, an advance notice of change in price is given by the supplier usually one week before the next delivery. Freelance viajero and their spot buyers negotiate on the price. Divisoria distributors have a better edge in price negotiation due to their permanent location and regular supply.
Suppliers who sell at the pier dictate the price and give a one-week notice before implementing price change.
Retailers base their selling price on their buying price from distributors, including overhead expenses and their margins. Overhead expenses include handling, transportation, fees, stall rentals and others. Retail markets with high stall rental fees have higher retail selling prices compared to ambulant vendors or to talipapa retailers.
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