High Value Fruits And Vegetables:

A perspective from Asia

By

Leslie Cheong

Director, Food Supply & Technology Department

Agri-Food & Veterinary Authority of Singapore

Challenge Program: High Value Crops – Fruits and Vegetables Workshop, Nairobi, Kenya, 7 – 8 June 2007

Coverage

• Background• High Value Crops• Strategic Focus: Asian Perspectives• Information and Knowledge• Access to Capital• Conclusion

Global Fruit and Vegetable Trade: Patterns1 (1/3)

• Share of world agricultural trade:– 1961: 10.6% or US$3.4 bil – 2001: 16.9% or US$70 bil

• Variety– 1961: bananas, apples, oranges, tomatoes (30% of

total fruit and vegetable trade)– End 1990s: above less than 20%, with increasing

share by fresh grapes, fresh vegetables, frozen potatoes, tree nuts, and other fruit and vegetable products

Background

1 Sophia Wu Huang, 2004. Global Trade Patterns in Fruits and Vegetables. (In) Global Trade Patterns in Fruits and Vegetables, Economic Research Service/USDA. Chapter 1. http://www.ers.usda.gov/publications/wrs0406/wrs0406b.pdf

Global Fruit and Vegetable Trade: Patterns1 (2/3)

• Most trade in following regions:– European Union (EU) – North American Free Trade Agreement (NAFTA)– Asia

• Typical of these trade regions:– Has high-income consumer countries– With nearby supplier countries

• Within EU, Britain, France and Germany are main importers, Spain largest exporter and Netherlands through whose seaports many exports are shipped

• Within NAFTA, USA main importer, Mexico is main exporter• Within Asia, Japan is largest importer, China largest exporter

Background

Global Fruit and Vegetable Trade: Patterns1 (3/3)

• Globalisation of markets• Developed countries will continue to dominate global

trade • New varieties will find their way into the diets of the

relatively affluent everywhere with increasing per capita income growth and freer trade

• Asia – China is fast becoming a larger importer and exporter as it

improves on the quality of its produce– Japan’s overall consumption unlikely to increase and may

decrease with population decline beginning before 2010; trade in fresh fruits, especially temperate fruits, most likely to grow

Background

Further reference: M V Stichele, S van der Wal & J Oldenziel, 2006. Who reaps the fruit? Critical Issues in the Fresh Fruit and Vegetable Chain (update). SOMO, Amsterdam. 192 pp. http://www.somo.nl/html/paginas/pdf/Who_reaps_the_fruit_june_2006_NL.pdf

High Value Crop: Characteristics2 (1/3)

• High value products usually meet the needs of motivated buyers who are willing to pay a premium if their expectations about specifications and quality are met.

• The number of such buyers is limited, and the danger of over-supplying such a market is always a threat.

2 International Institute of Tropical Agriculture, 2005. Our story: from field to fork. IITA Annual Report 2005; http://www.iita.org/cms/articlefiles/279-our_story.pdf]

High Value Crops

High Value Crop: Attributes (2/3)

ICTA3 Japan4 RemarksTaste (4) Taste

Appearance (3) Visual perfection

Safety (1) Freshness

(2) Quality

Stringent safety standards

Nutrition

Ease of preparation

Packaging & Shelf-life

Consistency in supply (7) Stability of supply

(5) Lower prices

(6) Tariffs

Tariffs: vary by country of origin

3 International Center for Tropical Agriculture, 2005. Getting a Handle on High-value Agriculture. CIAT In Focus, 2004 – 2005 Annual Report of International Center for Tropical Agriculture (CIAT); http://www.ciat.cgiar.org/newsroom/pdf/ciat_in_focus_2004_2005_text_only.pdf4 John H Dyck and Kenzo Ito, 2005. Japan’s Fruit and Vegetable Market. (In) Global Trade Patterns in Fruits and Vegetables, Economic Research Service/USDA. Chapter 7. http://www.ers.usda.gov/publications/wrs0406/wrs0406h.pdf

High Value Crops

High Value Crop: Strategic Focus5

• Commercial production and sales by small farmers and retailers will depend on their ability to:– focus on high value, specialty crops targeted

at specific niche markets– differentiate their products– optimise product mix– establish early brand loyalty

5 Ramu Govindasamy and Suzanne Thornsbury, 2006. Theme Overview: Fresh Produce Marketing: Critical Trends and Issues. Choices, 4th Qtr 2006 21(4), http://www.choicesmagazine.org/2006-4/produce/2006-4-05.htm

High Value Crops

An Asian Perspective (1/5)

• Specialty Crops & Specific Niche Markets– Proposed 3-year project on Indigenous Vegetables (IV)

• Title: Enhancing utilization and conservation of indigenous vegetables by rural farmers in ASEAN countries

– Training of farmer facilitators and farmers in growing IV efficiently– Conservation programme by farmers on IV– Illustrated guide to IV in ASEAN– Facilitating farmers in marketing the vegetables – Promoting private sector involvement to develop new varieties of

indigenous vegetables

• Lead country: Brunei Darussalam under AARNET [ASEAN-Asian Vegetable Research & Development Center (AVRDC) Regional Network on Vegetable Research]

• Status: seeking funding support (US$454,000)

– Other IV news: http://203.64.245.173/world_iv/News/news.asp

Asian Perspective

Amaranth

“People have become more concerned about what they eat – perhaps because of the recent food scares.” – Chris Conway, Executive Assistant Manager, Grnd Hyatt Hotel’s mezza9 restaurant.

An Asian Perspective (2/5)• Differentiate their products

– Product: • Good Agricultural Practice

• Join the organic movement

Asian Perspective

Branded Packed

An Asian Perspective (3/5)

• Differentiate their products– Service: matching quality requirements of

major retailers, e.g., cold-chain integrity• Title: Study Meeting on Cold-Chain Management of

Vegetables for members of Asian Productivity Organisation (APO)

– Country papers from participants– Key-note addresses by experts

• Organisers: Singapore (AVA and SPRING) and Asian Productivity Organisation

• Status: scheduled on 21 – 24 August 2007

Asian Perspective

Reefer truck

An Asian Perspective (4/5)

• Optimise product mix– Transportation

• High cost of logistics: defraying return journey

• Lack of logistics network: dedicated freighting

– Information and Knowledge • Empowerment

– Of the Individual– Of the Village or Community– Of the Economy

Asian Perspective

Chiller hold in vessel

Empowering the Poor• Village Phone (VP) concept6 & 7(Grameen Telecom,

GTC, of Bangladesh):– Concept: A person may not own a telephone but he/she should

have access to a telephone within a ten minute walk– Operation: GTC provides Global System Mobile (GSM) 900

cellular mobile phones to villagers – Grameen Bank member (woman) obtains ownership of phone

under lease-financing programme of Bank; serves as a VP operator responsible for extending services to the villagers for both incoming and outgoing calls; may also have phone numbers of local MPs, police stations, even the PMO, to communicate with

– Average use of village phones: 1,600 minutes/month, with 600 minutes outgoing calls

– Outcome: One VP covers 2,500 people of that village; by 2004, 40,000 VP operators provide telephone access to 100 mil rural people; target: 100,000 VP operators (covering 85% of Bangladesh’s villagers)

6 Durga P. Paudyal, 2006. From the Peasant Charter to the ICARRD: An Overview of the Current Trends and Emerging Issues in Rural Development in the Asia-Pacific Region. Asia-Pacific Journal of Rural Development, Vol XVI No.1, 42pp

Info & Knowledge

VP in action

7 http://www.telecommons.com/villagephone/section1.html

Empowering the Village

• Village meeting place8&9 [Indian Tobacco Company (ITC)] or e-choupal

– Concept: confers power of expert knowledge on even the smallest individual farmer, thereby enhancing competitiveness in the global market

– Operation: ITC establishes Internet Kiosk in cluster of villages– Selling centre for seeds, fertiliser, crop insurance, etc.,– Managed by a trained farmer– E-choupal is a web-supported initiative offering farmers’ information,

customised knowledge, products and services to enhance farm productivity

– Outcome: Already benefiting over 3.5 million farmers; target: 10 million farmers in 100,000 villages to be empowered over next decade

8 B Sudhakar Rao, 2006. Rural Infrastructure: A Critical Issue for Farm Productivity in Asia. Asia-Pacific Journal of Rural Development, Vol XVI No.1, 61-77 9http://www.itcportal.com/ruraldevp_philosophy/

echoupal.htm

Info & Knowledge

E-choupal in action

Empowering the Economy

• Township and Village Enterprises (TVE)10&11 in China: – Concept: Integrated rural development by combining agricultural production

with development of rural and small industries in public-private partnership

– Operation: Both husband and wife who worked on their farm also worked in the factory in the township or village enterprise in their area; people who worked in the factory came home in the evening to till their plots

– During harvest time, the factories would be closed down and the workers would be permitted to spend all their time in harvesting their land; Earlier they would be given time for preparation of land for sowing

– Outcome: TVEs contributed to the success of transitioning China from a controlled economy to a market-based economy. It encouraged modern day entrepreneurs in China. Line of public and private business blurred. However TVEs are breaking down because of high rate of out-migration from rural areas into urban sector.

10 Rehman Sobhan, 2006. Comments on “From the Peasant Charter to the ICARRD: An Overview of the Current Trends and Emerging Issues in Rural Development in the Asia-Pacific Region”. Asia-Pacific Journal of Rural Development, Vol XVI No.1:43-54] 11http://www.umich.edu/~ipolicy

/china/5)%20Chinese%20Township%20and%20Village%20Enterprises,%20A%20Model%20for%20Oth.pdf

Info & Knowledge

Awarding elite businessmen

Problem: Shrinking population, getting older, town left behind by country’s post-war economic boomAdversity: Town’s orange trees, once main source of income, were damaged by storms and unusually cold weather in 1981. Farmers forced to look for other work.

Human spirit: “No matter how old you are, you need a job to feel a reason for living.”New Opportunity: Gathering leaves to high-end restaurants to garnish traditional Japanese dishes began with shipments of simple wild leaves.

Business: Some 200 residents (mostly women in their 80s or older) have contracts with Irodori Co. Inc., a joint public-private venture that brokers sale of the leaves.

Information Empowerment: They (the residents) receive faxed orders and get daily information on the business through the Internet. Improvements: Nowadays the line-up has expanded to value-added oriducts such as small origami-style figures, including cranes, fans, boats and arrows made of iris leaves.

Earnings: The residents have managed to turn the business into an enterprise earning more than S$3.13 million a year.Viability: “If you watch TV all day long, you get old. I can get over the slightest cold easily as I work hard. In fact, I’m too busy to see a doctor.” – Hariki, great-grandmother

An Asian Perspective (5/5)•Establish early brand loyalty: Maple Leaf case study

Asian Perspective

Lesson learnt: Public-Private partnerships work, and succeeds well when entrepreneurial spirit is strong.

Another Strategic Focus: Access to Capital

12 Eric Onstad, 2007. Big corporations try to tap a market they have ignored (By) C.K.Prahalad. (In) Khaleej Times, 6 June 2007.

• Raising private capital for starting and expanding a business is an essential aspect for any business environment

• Government loan– often given to individual– sometimes perceived by the individual as an entitlement

• Comercial loan– TVEs: Ability to procure production inputs, such as capital, is

another advantage instrumental for TVE’s success in China11

• local Government involvement in TVEs created favourable environment for banks to lend to the TVEs since TVEs have community Government back-up

– Kenya’s Equity Bank and Mexico’s Banco Azteca12

• Equity Bank: low-cost bank accounts • Banco Azteca: Mexicans without formal jobs

One more Focus

Conclusion• Tremendous potential in business of high-value fruits

and vegetables• Characteristics of high-value produce• Asian perspective on Strategic Focus• Information and Knowledge Empowerment• Maple Leaf case study• Re-engineering of Township & Village Enterprises?• Getting big corporations to tap market of the 4 billion

poor (USD 5 trillion annual purchasing power), e.g., bank loans

• Challenge to developing and implementing a programme on high value fruits and vegetables is in keeping a multi-disciplinary approach from farm to plate

Thank You