Banana Cavendish - PHP Version 5.6.21

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VALUE CHAIN ANALYSIS AND
COMPETITIVENESS STRATEGY:
FRESH CAVENDISH BANANA IN MAGUINDANAO
IN MAGUINDANAO
PHILIPPINE RURAL DEVELOPMENT PROGRAM (PRDP)
I-PLAN Component, Mindanao Cluster
FINAL REPORT
Meriam L. Buguis
1
Table of Contents
Executive Summary................................................................................................................................. 6
Section 1: Introduction ......................................................................................................................... 11
A.
Background Information and Objectives .................................................................................. 12
B.
Objectives of the Value Chain Analysis ..................................................................................... 18
C.
Methodology and Approach ..................................................................................................... 19
Section 2: Overview of the Industry ..................................................................................................... 21
A.
Product Description .................................................................................................................. 21
B.
Production Trends..................................................................................................................... 23
Section 3: Nature and Structure of the Industry .................................................................................. 32
A.
Value Chain Mapping ................................................................................................................ 32
B.
Key Players and Functions ........................................................................................................ 33
C.
Nature of Interfirm Relationships ............................................................................................. 38
D.
Price and Cost Structure ........................................................................................................... 39
Section 4: Markets and Market Opportunities ..................................................................................... 42
A.
Markets and Market Trends ..................................................................................................... 42
B.
Price Trends .............................................................................................................................. 44
Section 5: Support Services................................................................................................................... 46
A.
Financial Services ...................................................................................................................... 46
B.
Non-financial services ............................................................................................................... 47
Section 6: Enabling Environment .......................................................................................................... 48
A.
Formal Rules, Regulations, and Policies.................................................................................... 48
B.
Informal Rules and Socio-Cultural Norms ................................................................................. 48
Section 7: Constraints and Opportunities ............................................................................................. 49
Section 8: Competitiveness Directions ................................................................................................. 51
A.
Competitiveness Vision ............................................................................................................. 51
B.
Priority Constraints/Opportunities and Interventions.............................................................. 51
Section 9: Conclusions and Recommendations .................................................................................... 57
2
List of tables
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
Summary of constraints, Opportunities and Interventions
Agriculture and Fisheries Sector’s Gross Value Added, 2011-2012
Export and import performance, A & F Sector
Productivity of Traditional Crops, 2010-2012
Other Uses of Banana
Breakdown of Banana Production (In Mt) by Genotypes: 2010
Cavendish Production by Top 5 Producing Countries (in metric ton)
Cavendish Production By Region (MT), 2009-2013
Mindanao Production by Provinces (MT), 2011-2013
Number of Bearing Hills Per Hectare and Yield per Bearing Hills ff Cavendish
By Region, By Province, Philippines 2011-2013
Cavendish Banana Yield Per Hectare (MT), 2011-2013
Bearing Hills Per Hectare, 2011-2013
Yield per Bearing Hills (kg), 2011-2013
Cavendish banana number of bearing hills, bearing hills per hectare and yield
per bearing hills, by region, Philippines, 2011-2013
Estimated Production Cost and Returns, Banana Cavendish, per hectare
Estimated Production Cost and Returns, Banana Cavendish, for Export per
hectare
Top 10 Agriultural Exports, Philipppines, 2011-2013
Cavendish Banana Annual Report per Destination , 2008-2012
In boxes
Price of Fresh Cavendish Banana per Major Destination, 2011-2013
Domestic Price Trend of Fresh Cavendish Banana, per kg., 2014
Demand for Finance Among Value Chain Players
Constraints and Opportunities
Priority Constraints/Opportunities and Interventions
Page
7
13
14
15
22
23
24
25
25
27
28
29
30
32
39
40
42
43
45
45
46
49
53
3
List of Figures
1.1
1.2
1.3
1.4
2.1
2.2
2.3
2.4
2.5
3.1
Agri-Pinoy Key Strategies
Regional Agricultural Productivity
Results Framework on Competitive and Sustainable Agriculture and Fisheries
(A & F) Sector
General Value-Chain Map
Distribution of the World Banana Production by Continent
Banana Genotypes and Consumption Groups
Top Cavendish Banana Producing Regions in Mindanao 2013
Cavendish Banana Volume of Production Area Planted, and no. of Bearing,
Philippines
Map of Mindanao Banana Industry
Value-Chain Map – Fresh Cavendish Banana
Page
12
14
16
18
24
24
26
27
31
32
4
Acronyms
AFMP
ARMM
ATI
BAS
BBL
BOC
CDA
DA
DAR
DENR
DOST
DTI
EO
FAO
FGD
GAP
HVCDP
I-PLAN
I-BUILD
I-REAP
I-SUPPORT
KII
LBP
LGU
MBGEA
MINDA
MLGU
MRDP
NAFC
NCCAP
NGO
NIA
OAP
PBGEA
PDP
PPA
PQS
PRDP
RDE
SEC
Agriculture and Fisheries Modernization Plan
Autonomous Region Of Muslim Mindanao
Agricultural Training Institute
Bureau Of Agriculture Statistics
Bangsamoro Basic Law
Bureau Of Customs
Cooperative Development Authority
Department Of Agriculture
Department Of Agrarian Reform
Department of Environment And Natural Resources
Department Of Science And Technology
Department Of Trade And Industry
Executive Order
Food And Agriculture Organization
Focus Group Discussion
Good Agriculture Practices
High Value Commercial Development Program
Investment for AFMP Planning At The Local And National Levels
Intensified Building-Up Of Infrastructure And Logistics For Development
Investments For Rural Enterprises And Agricultural And Fisheries Productivity
Implementation Support To PRDP
Key Informant Interview
Land Bank Of The Philippines
Local Government Unit
Mindanao Banana Growers And Exporters Association
Mindanao Development Authority
Municipal Local Government Units
Mindanao Rural Development Program
National Agricultural And Fishery Council
National Climate Change Action Plan
Non-Government Organizations
National Irrigation Administration
Organic Agriculture Program
Philippine Banana Growers and Exporters Association
Philippine Development Plan
Philippine Ports Authority
Plant Quarantine Service
Philippine Rural Development Program
Research And Development And Extension
Security and Exchange Commission
5
Executive Summary
The Philippine Rural Development Program (PRDP), a flagship program of the Department of
Agriculture (DA), is designed to establish the government platform for a modern, climate-smart and
market-oriented agri-fishery sector. The design of PRDP and its implementation aspects draw heavily
on the experiences of the Mindanao Rural Development Projects (MRDP 1 and 2), a program that has
been successfully implemented over the past decade. The program adopts a value chain development
approach as a tool for promoting inclusive, climate resilient, and sustainable growth in key agricultural
subsectors and value chains.
0.
This report provides an overview and analysis of the Cavendish banana value chain, linking the national
context to the regional and provincial contexts, with the aim of identifying main leverage points and
key strategies to improve Maguindanao’s competitiveness and promote development in a pro-poor
and sustainable manner. It will provide the basis for the formulation of the provincial commodity
investment plan and will lay the foundation for PRDP’s cooperation with the private sector and other
government agencies active in the Cavendish banana industry.
1.
Banana is a popular fruit crop in the Philippines where some 80% of the harvested land is devoted to
rice, corn, or coconut. Banana accounts for only 3.5% of area harvested to crops but 15.8% of value of
crop production. However, the Philippines is currently the third both among the top banana producing
countries and among the top exporters in the world.
The banana varieties commonly grown in the country are Cavendish, bungulan, lacatan, latundan, and
saba or cardaba. Cavendish is grown for export in plantation scale in southern Mindanao. The other
varieties are small bananas mostly grown in smallholder farms and planted as an intercrop. Lakatan
and latundan are also grown commercially for consumers in Luzon and Visayas urban centers. Cardaba
is grown mainly for processing into banana chips.1
There is a huge potential for expanding the existing markets of Cavendish banana producers of
Maguindanao in countries of Asia and Middle-East. At present, the limited production of Cavendish
banana in Maguindanao has been traced to several root causes. Table 1 illustrates the root causes or
key constraints as identified by stakeholders and the proposed interventions. The interventions are
aimed at ensuring the participation of all players in the chain and the need to strengthen vertical and
horizontal relationships of players of the chain. The proposed interventions are mainly a combination
of technical assistance/capacity building support, financial assistance and sound investments, to:
a) Develop the capacity of providers to offer improved products, facilities, and services to the banana
industry in a sustainable manner;
b) Promote awareness and uptake of these products, facilities, and services among the value chain
players;
c) Contribute to an improved enabling environment; and
d) Build the capacity of market players to form win-win relationships to foster improved
competitiveness.
1
Philippine Agribusiness Competitiveness and Benchmarking Study
6
Table 1. Summary of Constraints, Opportunities, and Interventions
Constraints/Opportunities
Input provision
Constraints:
High input price
Inputs average production
cost increased by about
37.5% during the last 3
years.
Opportunity:
Inputs are widely available
from the multi-national
companies
Who can do it?
Public
Private
Intervention Strategies and
Approaches
DA-PRDP i-plan program:
DA-PRDP shall provide the
necessary support for LGUs in
the crafting of its provincial
commodity investment plan
that will include the required
input provision available not
only to multination national
companies but to small
growers and cooperatives of
growers.
DA-BPI in partnership with
DA-HVCDP shall facilitate
development/ establish
nurseries of affordable
quality planting materials for
small growers or
cooperatives.
DA-PRDP
Technical and
financial
assistance
DA-BPI and DABAR
Technical
assistance on
quality of
planting
materials
Multinational
Companies/coo
peratives
Supply of
quality planting
materials
Banks/Private
Lending
Institutions
Financing
LGUs
Technical
assistance
DA-HVCDP to capacitate the
LGUs to provide technical
support to smallholder
nursery operators.
Farming/Production
Constraints:
Average yields and
productivity of small
producers are low
Land use and credit access
difficulties brought about
by carp
Limited capacity for preand post-harvest
investments.
Underinvestment in farm
production and postharvest.
Ban on aerial spraying
DA-PRDP to provide the
necessary support for
PLGU/MLGUs in the crafting
of its provincial commodity
investment plan that will
include the required input
provision requirement s
available not only to
multination national
growers and
cooperatives/association of
growers and exporters.
PRDP I-REAP and I-SUPPORT
programs:
DA-PRDP, DA-HVCDP and
concerned MLGUs must
established a task force,
composed of representatives
DA-PRDP
Technical and
financial
assistance
DA-BPI, DAHVCDP and DABAR
Technical
assistance on
good
agricultural
practices
Multinational
Companies/
cooperatives
Technical
assistance
Production
Banks/Private
Lending
Institutions
Financing
NIA
Provision of
irrigation
system
LGUs
7
Approaches
Widespread of banana
of national and local
disease (fusarium wilt of
agencies, PBGEA, and
banana)
MBGEA, to conduct a
massive information drive
Poor farm-to-market roads particularly involving small
growers so that any
Hiring
of
plantation occurrence can be
supervisors who are not immediately contained of
known to the workers often diseases in bananas.
resulted to insubordination.
Opportunities:
necessary technical support
Vast land in the ARMM is
for Social and Environment
ideal for Cavendish
Safeguards to laborers in the
cultivation
Cavendish banana industry in
Maguindanao.
Technology to preventing
and managing diseases are DA-HCDP to create the
available
banana research and
development institute, an
LGU is willing to co-share in agriculture-research body
the construction and/or
that will be able to address
improvement of farm-tothe technology-related
market roads.
problems the industry is
facing.
Who can do it?
Public
Private
Technical
assistance
Institutional
development
Land use
LGUs in coordination with
DA-HVCDP to identify specific
areas for expansion.
DA-HVCDP to coordinate
with NIA for the provision of
irrigation to expansion areas
for plantation of Cavendish
DA-PRDP through i-BUILD
program and LGUs to
improve/upgrade and
maintain farm-to-market
roads specifically in the
existing production areas and
in the proposed identified
expansion areas.
Consolidation/Packing
Constraints:
Limited capacity of
postharvest facilities
caused by
underinvestment.
DA-PRDP I-BUILD Program:
Establish the needed
postharvest infrastructure to
facilitate
consolidation/packing of
DA-PRDP
Technical and
financial
assistance
Multinational
Companies/
cooperatives
Technical
assistance for
8
Opportunity:
Improved postharvest
facilities reduces costs
related to consolidation/
packing and marketing and
distribution
Approaches
Cavendish banana specifically
by small growers or
cooperatives of growers. The
concerned MLGUs must at
least provide the necessary
20% counterpart for the
construction of post-harvest
facilities.
DA-PRDP i-reap:
DA-PRDP, DA-HVCDP,
PHILMECH and MLGUs to
establish a capacity building
program designed to provide
the needed knowledge and
skills in proper
handling/packing of
Cavendish banana following
the international standards,
and to provide business
development technical
assistance and support to
small growers/consolidators
in order to access the export
market.
Marketing/distribution
Constraints:
Poor farm-to-market road
Inefficient port (PPA
controlled) services
Opportunities:
PPA’s ports in Sasa, Davao
City and in Makar, General
Santos City are being
proposed for privatization
to enhance its operation.
There is a huge potential
for expanding the existing
markets of Cavendish
banana producers of
Maguindanao in countries
of Asia and Middle-East.
House Bill No. 4994:
DA-PRDP I-BUILD program:
postharvest infrastructures
that will facilitate
consolidation/ packing of
by small growers or
cooperatives of growers.
The concerned MLGUs must
at least provide the
necessary 10% counterpart
for the construction of postharvest facilities.
DA to request for the
amendment of EO 554 to
allow the DA-BPI to charge
full cost for the phytosanitary
certification services, while
ensuring that inspectors
remain fully compensated for
Who can do it?
Public
Private
DA-HVCDP, DA- capacity
BPI-PQS and
enhancement
DOST
Technical
Marketing and
assistance on
promotion
food handling
and safety
Banks/lending
Regulation of
institutions
exportations
Access to
financing
LGUs
Technical
assistance
Institutional
development
Land use
DA-PRDP, DAHVCDP
Technical and
financial
assistance
Multinational
Companies/coo
peratives
Market
information
DA-BPI-PQS,
BoC
Technical
assistance, and
regulations
Banks/lending
institutions
Access to
financing
DTI
Marketing
matching
Market
information
LGUs
Technical
assistance
9
provides mechanism on
trade and commerce with
autonomy from Central
Government of the
Philippines
Approaches
overtime and reimbursed of
expenses.
Who can do it?
Public
Private
Institutional
development
DA-PRDP, DA-HVCDP, and
concerned MLGUs to support
the efforts of PPA in the
immediate privatization of
Sasa Wharf in Davao City and
Makar Wharf in General
Santos City to enable
modernization of physical
and soft infrastructure. And
review BOC’s E2M system to
allow for corrections in
papers should these be
required.
Interfirm relations/supply chain governance
Constraint:
Develop peace building
DA-PRDP
Presence of
program to conflicted areas
- Technical and
insurgency/rebellion and
designed addressing poverty
financial
incidence of extortions.
through productive
support
agriculture.
Opportunity:
LGUs
- Relationship
building
provides mechanism to
support
resolve the peace and
order problem in
PNP/ AFP
Mindanao
- Peace and
security
Cooperatives/g
rowers/
multinational
companies
- Relationshi
p building
support
10
1.
Section 1: Introduction
It has been roughly three years into the implementation of the Philippine Development Plan (PDP)
2011-2016. Undoubtedly, there have been dramatic achievements relative to the targets set by this
comprehensive national plan, primary of which is the robust economy as touted in the Midterm
Update. With at least 7 percent gross domestic product (GDP) growth for five consecutive quarters2,
said update as of 2014 mentions among other progress the following: low and stable inflation, a sound
financial system, and a sustainable fiscal and external position.
However, same study shows that inclusive growth through poverty reduction has been elusive. Far
from the PDP’s plan of broad distribution of the benefits of economic growth, only three of the
country’s 17 regions account for two-thirds of the GDP. The country remains lagging in its attempt to
alleviate poverty with about a quarter of the population considered income poor. And agrarian
reform, still the country’s “boldest attempt at asset reform” is at best, on its way to completion.
Evidently, achievements against the main goal of the Plan which is inclusive growth have not yet been
materialized much less felt by the masses. The empowerment and integration of smallholders in
relevant economic activities have not been well-demonstrated.
But just to be clear, poverty reduction is a long-term program that necessitates the comprehensive,
dedicated and concerted effort of both the public and the private sector. Experiences of other
countries tell that it would take up to 20 years of rapid and sustained growth in order to make a
positive impact on poverty reduction. So while the country has been experiencing dramatic economic
growth lately, this has not been sustained long enough to accelerate inclusive growth. Hence, targets
and strategies under the Plan are continually redefined as periodic monitoring and evaluation would
require.
“An important lesson derived from the first three years of Plan implementation is that good
governance is an effective platform for implementing development strategies.” And inclusive market
development promotes economic growth with poverty reduction by facilitating the integration of
large numbers of micro- and small enterprises into competitive value chains.3
The strategy of inclusive growth has strong appeal in agriculture, where a successful smallholder-led
strategy for inclusive growth can precipitate a structural transformation that increases productivity,
incomes, and food security in rural areas. Defined in terms of increased productivity and efficiency,
upgrading, plays an essential role in bringing smallholders into higher value markets because it
increases smallholder contributions to value added.3 It is in the accomplishment of sustained and
inclusive growth that, among others, value chain development is being used.
1.
This particular study focuses on the value chain of the (respective crop), one of the priority crops which
the PRDP will concentrate during Year 1 of PRDP implementation.
2
Philippine Development Plan 2011-2016, Midterm Update With Revalidated Result Matrices, (2014)
3
Dunn, E., 2014.
11
A. Background Information and Objectives
Increase in the growth of agriculture and fishery sector (Sector Outcome 4d) is identified as among
the key strategies geared towards achieving inclusive growth and poverty reduction. This agricultural
sector strategy or the “Agri-Pinoy” goes with two of the Government’s Five Major Guide Posts based
on the President’s 16-point Agenda: (1) poverty reduction and empowerment of the poor and
vulnerable; and (2)integrity of the environment and climate change mitigation and adaptation.4
It includes the following new strategies: (1) institutionalizing regional-based and spatial planning; (ii)
developing a systems approach for both planning and resource allocation; (iii) providing the critical
infrastructure needed by priority value chains; and (iv) building a more resilient production base to
accommodate fluctuations in global markets and effects of climate change. Complementing the AgriPinoy strategy is the National Climate Change Action Plan (NCCAP) which highlights the priority to be
given to the rural sector in pursuing climate adaptation measures.4
Figure 1.1 - Agri-Pinoy Key Strategies
Governments five major guide posts*
Sector Outcome 10c
Sector Outcome h
protected and rehabilitated
Sector Outcome
Sector OutcomeHuman development status
improved
.
Sector Outcome 7a.
Effective and transparent governance
practiced
Sector Outcome 6.
Financial system made resilient and
inclusive
Inclusive growth and poverty reduction
Anti-corruption/
Transparent, accountable
And participatory governance
Poverty reduction
And empowerment of the
Poor and vulnerable
Rapid, inclusive and
Sustainable
Economic growth
Just and lasting peace
And the rule of law
Integrity of the environment and climate
change mitigation and
Adaptation
PDP MIDTERM UPDATE: CHALLENGES AND EMERGING OPPORTUNITIES
This year and half-way through the PDP Completion, Midterm Update4 reports the following according
to the results of its assessment:
CONTRIBUTION TO RAPID AND SUSTAINED GROWTH
4
12
Growth in the sector’s gross value added (GVA). From 2011 to 2012, the A&F sector accounted for
about 11.2 percent of the total gross domestic product (GDP) on average. While posting positive
annual growth of 2.6 percent and 2.8 percent in 2011 and 2012, respectively. The sector’s
performance remained below the PDP target of 4.3 to 5.3 percent annual growth (Table 2).5
Table 2: Agriculture and Fisheries Sector’s Gross Value Added, 2011-2012
Gva in a&f* (in
million php and
Growth (in %)
Crops
4.3-5.9
676,075
(2.4%)
Accomplishments
2011-2012
2012
Average
695,100
685,587
(2.8%)
(2.6%)
4.9-2.9
Livestock
1.6-2.6
Poultry
4.2-5.2
Fisheries
4.5-5.5
333,255
(5%)
92,225
(2%)
71,262
(4.4%)
130,529
(-4.3%)
11.4
347,546
(4.3%)
93,260
(1.1%)
74,536
(4.6%)
130,032
(-0.4%)
11
Particulars
Annual growth
Target
2011-2012 in %
% share to gdp
-
2011
340,355
(4.6%)
92,758
(1.5%)
72,890
(4.5%)
130,280
(-2.3%)
11.2
H1 2013
336,591
(1.3%
170,810
(-0.5%)
45,722
(2.1%)
36,835
(4.2%)
60,148
(4.6%)
10.2
Subsector contribution to GVA. Crops (palay, corn, coconut including copra, sugarcane, banana,
mango, pineapple, coffee, cassava, rubber, coconut, and other crops), livestock and poultry remain
the growth drivers, accounting for about 74 percent of the sector GVA. Among the high-value crops,
coconut and banana posted the highest contribution of around 19 percent to crop subsector GVA. In
2012, coconut production increased by 4.2 percent not only because of the favorable weather
conditions but also because of the thorough implementation of the salt fertilization program of the
Philippine Coconut Authority (PCA) in most of the major coconut-producing provinces of the country.
Regional Contribution to GVA
Regional contribution to GVA (Figure 1.B). Among the regions, the top contributors to the sector GVA
in 2012 are Central Luzon (14%), CALABARZON (10%), Western Visayas (9.4%), Northern Mindanao
(8.5%) and SOCCSKSARGEN (7.4%).5
Figure 1.2 shows that Central Luzon (Region III) far exceeds the other regions in terms of land
productivity. Bicol (Region V) and Zamboanga (Region IX) have relatively large agricultural areas but
are shown to be among those with the lowest land productivity. Enhancing productivity levels in these
areas to reach the levels achieved by regions xi and xii could have huge impact on agricultural incomes
and GVA.
5
13
Share in Agricultural GVA
Figure 1.2 - Regional Agricultural Productivity
16.00
14.00
12.00
10.00
8.00
6.00
4.00
2.00
0.00
0.00
III
IV
A
2.00
I
4.00
VI
XII
8.00 XI
IX
VIII
6.00
II
VI
IVB
I ARMM
NCR
X
10.00
ot
XIII
CAR
Share in Agricultural Land
Exports performance. For 2011 to 2012, the A&F sector generated US$5.195 billion in exports revenue,
representing an average annual growth rate of 12 percent.
Table 3 - Export and Import Performance, A & F Sector
Export
Import
Indonesia
43,041
0.25
Average
Value
(in million
us$)
19,654
Malaysia
33,906
0.19
Philippines
4,874
Thailand
Vietnam
Country
Average
Value
(in million us$)
Average
Share*
(%)
Average
Share*
(%)
Average trade
balance
(in million us$)
0.11
23,387
19,544
0.11
14,362
0.03
7,030
0.04
(2,156)
41,589
0.24
14,675
0.08
26,914
21,370
0.12
12,385
0.07
8,984
Contribution to employment generation
The sector employs about 32.0 percent of the country’s total labor force but accounts for 43 percent
of the total underemployed.
Productivity
Productivity of traditional crops such as rice (3.7 mt/ha), corn (2.7 mt/ha), coffee (1.5 mt/ha) and
coconut (4.35 mt/ha) is low compared to other countries in the region (table 4)
14
Table 4 - Productivity of Traditional Crops, 2010-2012
Country
Indonesia
Malaysia
Philippines
Thailand
Vietnam
Philippine rank
Average (2010-2012)
Rice
5.04
3.84
3.71
2.97
5.50
4
Corn**
4.63
5.42
2.72
4.31
4.23
5
Sugarcane
Coconut
57.93
61.27
71.86
73.60
62.07
2
5.97
5.20
4.35
5.19
8.79
4
Banana*
57.85
21.36
40.61
23.90
30.27
2
Coffee*
0.51
1.59
1.52
1.67
4.51
4
*2010-2011 only
**average yield for both yellow and white corn
Source: food and agricultural organization corporate statistical database (faostat)
Contribution to food security and poverty reduction
The relatively high production growth rates in the crop subsector during the period should have led
to improvements in terms of the country’s food security agenda.
Agriculture and fishery performance not sufficient to make a positive impact on poverty reduction
The midterm update presents that growth performance was not high enough to make a dent in the
goal of reducing poverty in the sector. Official data on poverty for 2009 indicated that poverty
incidence in the a&f sector stands at 36.7 percent (1.7 million) among farmers and 41.4 percent
(346,345) among fisherfolk. For 2012, the nscb reported that subsistence incidence among families
remained at 7.5 percent.
Challenges
The A&F sector will need to overcome numerous challenges to be able to realize its potentials. Among
these are (a) low productivity and production; (b) slow market growth and poor linkage to valueadding activities; (c) weak institutions and policies; (d) weak governance and resource degradation;
and (e) vulnerability to climate risks and disasters.
Redefined objectives and strategies
With the mentioned challenges, PDP Midterm Update has redefined its aims for agriculture and
fisheries sector into (a) increase productivity in the sector; (b) increase forward linkage with the
industry and services sectors; and (c) improve sector resilience to risks, including climate change.
Further, interventions will be directed towards increasing the productivity of key commodities, such
as palay, corn, sugarcane, pineapple, coconut, coffee, banana, mango, livestock and poultry and
fisheries, among others. Productivity in these commodities is targeted to increase by 19 percent from
2012 to 2016.
In order to facilitate the linkage of agriculture to the industry and services sectors, farmers and
fisherfolk will be trained in value-adding, agri-business development and value chain management
activities. Farmers and fisherfolk groups and cooperatives will be strengthened and, where possible,
transformed into MSMEs that can transact with other MSMEs in industry and services.
The updated PDP pays closer attention to agriculture and fishery (A&F) sector and its links with
industry and services (I&S) so as to fulfill its potential to reduce poverty and generate quality
employment for more Filipinos.
By the end of 2016, the sector will have achieved higher incomes and improvement of food security,
especially for the farm households, through (a) further increases in agricultural and fisheries
15
production with more prudent use of resources; (b) greater linkage with the manufacturing and
industrial sector with increased production of raw material inputs; and (c) enhanced sector resilience
to climate change risks.
Figure 1.3 - Results Framework on Competitive and Sustainable Agriculture and Fisheries
(A & F) Sector
Poverty in multiple
dimensions
Reduced and massive
quality
Goals
Intermediate
goals
Rapid and
sustained
Economic growth
achieved
Competitive and
sustainable
Agriculture and fisheries
sector achieved
Sector
outcome
Subsector
outcomes
Intermediate
outcome
Equal
development
Opportunities
achieved
Productivity in
agriculture
and
fisheries
sector
Forward
linkage
to the industry
and services
sector
Sector
Resilience to
climate
change risk
increased
Land tenure
Security
improved
PRDP: PROPELLING BROAD-BASED ECONOMIC GROWTH
Aligned with the Agri-Pinoy is the Philippine rural development program (PRDP) which is a flagship
program of the department of Agriculture (DA). It is a six-year program (2013-2019) that serves as a
platform for an inclusive, value-chain oriented and climate-resilient agriculture and fisheries sector.
The design of PRDP and its implementation aspects draw heavily on the experiences of the Mindanao
rural development projects (MRDP 1 and 2), a program that has been implemented over the past
decade.
Externally, it will focus on expanding market access and improving competitiveness. Internally, it will
introduce reforms in operating the da bureaucracy. Specifically, it aims to achieve the following
development objectives: increase farmers’ income in agriculture- fishery sector in program areas and
develop a more market-oriented and climate-resilient agriculture and fishery sector developed in
program areas. These objectives are further quantified as follows:
 At least, 5% increase in annual real household incomes of farmer beneficiaries;
 30% increase in income for targeted beneficiaries of enterprise development
 7% increase in value of annual marketed output
 20% increase in number of farmers & fishers with improved access to da services
To facilitate the achievement of above objectives, the program has four main components, namely:
16




I-PLAN: Investment for AFMP Planning at Local and National Levels
I-BUILD: Intensified Building-up of Infrastructure and Logistics for Development
I-REAP: Investments for Rural Enterprises and Agricultural and Fisheries Productivity
I-Support: Implementation Support to PRDP
It is under the I-PLAN component that the AFMP is aimed to be enhanced through science-based tools
including Value Chain Analysis (VCA), Vulnerability and Suitability Assessment (VSA), Participatory
Resource Appraisal (PRA), and Climate Change Adaptation (CCA). It also aims to harmonize the
Provincial Investment Commodity Plans (PCIP) with the regional AFMPS including the annual planning
and budget system. Hence, this study.
Results of this study will serve as a basis for the other components I- BUILD and I-REAP where through
the establishment of strategic and climate-resilient infrastructure facilities, creation of marketable
surplus commodities, installation of market and production support facilities, among others, will bring
about increased smallholder groups operating in viable enterprises, enhanced producer productivity
and increased resilience smallholder and fisher resilience to climate change and adverse weather
conditions.
Value chain analysis: tool to realize a sustained and inclusive agri-fishery modernization
In a study conducted to investigate the participation of smallholders in the agricultural value chain,
inclusive growth is defined as economic growth that reduces poverty, inclusive growth incorporates
low-income households and individuals into growing economies and market systems4. In agriculture,
inclusive growth means developing the agricultural sector in a way that generates broad-based
benefits for rural populations while improving economic productivity and food security at the local
and national levels.
Further, it says that by integrating large numbers of small-scale agricultural producers into competitive
value chains, a successful smallholder-led strategy for inclusive growth can support a structural
transformation of the agricultural sector. The benefits of such a structural transformation include
increasing incomes for smallholders. It has multiplier effects on employment and income throughout
the rural economy, reducing poverty, improving food security and fuels a process of local and national
economic growth. When smallholders invest to increase their own productivity, this can have a
positive effect on competitiveness for the entire value chain.
The term “inclusive,” as applied to value chains, highlights the emphasis placed on benefits for
microenterprises, smallholders, and the low-income individuals and households who operate them.
More generally, an inclusive market system is one that benefits large numbers of low-income
households.
A value chain includes the full range of activities and services required to bring a product or service
from its conception to sale in its final market. The conceptual framework for analyzing value chains
includes both structural and dynamic features of the system. The structural elements, depicted in the
general value chain map (Figure 1.4), include all the firms and other actors involved in the value chain,
the vertical and horizontal linkages between these actors, supporting markets, and the business
enabling environments within which actors make their decisions. The dynamic elements in the value
chain framework include the characteristics of the relationships between firms and the ability of the
value chain to remain competitive by upgrading in response to changing end market demands and
requirements.
17
Figure 1.4 - General Value-Chain Map
Input Provision
Production
Processing
Trading/
Distribution
Final Sale
Global
Retailers
National Enabling Environment
Sector-specific
providers
National
Retailers
Exporters
Wholesalers
Cross-cutting
providers
Buyers
Financial (Crosscutting)
Input Suppliers
Entry point for the implementation of value chain interventions under the DA-PRDP is at the provincial
level with an aim to gradually scale these up to other viable areas of regions in Mindanao.
Coverage of Study
This study covers the Province of Maguindanao in the ARMM for fresh cavendish banana production.
B. Objectives of the Value Chain Analysis
This study provides an overview and analysis of the fresh Cavendish banana value chain at
Maguindanao area.
a) Bring in better appreciation of the Cavendish banana industry which may affect positively to the
Mindanao regions’ economy by providing issues and linkages in relation to the industry including
(a) information of markets, ultimate customers or domestic market potentials; and (b)
understanding, following, and acting on new market opportunities and technologies
18
b) Identify in a participatory process the systemic chain level issues that hinder or promote the
gainful participation of rural households, sustainability of the chain, and its competitiveness in
general.
c) Under a participatory process, identify and prioritize interventions needed to overcome
bottlenecks throughout the chain that would foster value chain competitiveness and climate
change resiliency.
d) Identify and explore how to encourage private and public sector stakeholders in the coconut fiber
industry to collaborate for improved industry performance.
It will provide the basis for the formulation of the provincial commodity investment plan (pcipp) and
will lay the foundation for PRDP’s cooperation with the private sector and other government agencies
active in the fresh Cavendish industry.
C. Methodology and Approach
As take off point, desk study of secondary data collected, including reports and studies from the
bureau of agricultural statistics and other potential sources were conducted . This serves as reference
points in generating information and concerns that need to be focused during the key informants’
interviews (KII) and during the focus group discussions (FGD) in the regional stakeholders’ conference.
Key informant interviews will be focused on generating information as to individuals’ perspectives,
challenges, experiences, and quantitative data. FGDs will be employed to extract issues, concerns,
challenges and opportunities as a process of verifying the information obtained from the desk study
and the KII.
A questionnaire containing the guide questions for the RCPOS, farmer-producers, providers of inputs,
assemblers, processors and traders were prepared to be used in generating primary data from the
PAOs through the RPCOs and during the KII. Key informants will come from the various channels of
the chain to ensure that information relevant to the VCA will be generated.
The PAOs through the RPCOs will be requested to provide the statistics such as:
a. List of players for the specific product that will include farmers, processors, traders and
financiers by province/municipality;
b. Production statistics (2011 to 2013);
c. Major production areas including data on land area currently utilized for the product (crop
maps);
d. Trading centers;
e. Trade practices; and
f. Farm gate and prevailing market price data (municipal/provincial)
During the KII and regional stakeholder’s conference initial findings in the preliminary VCA studies will
be validated and to achieve the following goals:
19
a. Facilitate establishment of product development directions and strategic objectives
b. Prioritize constraints, challenges and opportunities affecting the development directions
c. Identify actions (may include programs, projects, activities, policies and/or procedures)
needed to address priority constraints and opportunities
The outputs from the KIIs and the FGDs will be integrated in the final VCA study. Analysis of issues and
concerns will be based on the point of views of the KII and the FGD participants. Recommended
interventions from the inputs coming from the stakeholders including the best practices in other
leading regions within the Philippines and other leading producing countries will be considered.
20
2.
Section 2: Overview of the Industry
A. Product Description
Banana is a general term describing a number of species or hybrids in the genus Musa of the family of
Musaceae. It often referred to as a tree but it is actually an herb with succulent, very juicy stem.
Historic origin of banana varies as each species seemed to be originating from the tropical Southeast
Asia or Latin America. The Arabs brought them to Africa. Africans are credited to have given the
present name. The Portuguese brought them to the Canary Islands.
Cavendish bananas was first introduced in the world market by the people of Canary Islands in 15th
century. A certain Thomas Fyte imported it in England. But later determined that it was originated
from China and Vietnam by William Spencer, a Cavendish gardener and Sir Joseph Paxton.
Out of 273 species of banana, a triploid AAA group or Musa Accuminata commonly known as
Cavendish group bananas embraced the majority of banana exports.
Cavendish banana variety is fully grown in the plantation scale in Mindanao and is classified in two
kinds:
a) Giant Cavendish- has a greenish-yellow fruit, white to cream pulp, soft, fine-textured and
sweet under normal temperature. It produces 7-14 hands per bunch weighing as much as 60
kg. The fruit matures 105-120 days from shooting. The plant can reach as high as 3-5 meters
and can produce 36 leaves from the emergence of the first leaf to maturity. Each leaf can grow
as much as 4 meters long and more than a meter-wide. Its first leaf emerges from 11-15 days
in upland and 7-9 days in lowland.
b) Dwarf Cavendish- is short in feature ranging from 1.8-2.4 meters only compared to other
varieties. It takes 10-15 mos. of fost- free conditions to produce a flower stalk. The shortness
of this variety makes it manageable, stable, wind-resistant and ideal for plantation cultivation.
The leaves are broad with short petioles. It’s male bracts and the flowers are not shed. The
pseudo stems are stout attaining a diameter of 75-80 cm with brown-black blotches spreading
all over. Leaves clustered at the crown with short internodes and winged petiole having wideopen canals not clasping the pseudo stem. A bunch has 8-12 hands and the fruits are yellowish
green in color with brownish spots. Cavendish bananas variety fruits ranges from 15-20
cm.long and thin skinned. Each plant can bear up to 90 fingers.
Banana grows best at tropical places with temperatures ranging from 22° C 31°C and can be grown
from sea level up to 100 meters above sea level . Ideal temperature for the banana is 22°C to 31°C.
Soil should be deep, friable, well-drained with 40% clay, 75% silt and 85 % loam, soil pH is 6.5. Average
annual rainfall is 2000-2500 mm or 25 mm per week and is necessary on all growth stages. Drain excess
water by construction of drainage canal. Planting distance is spaced at 2.0 x 2.5 meters with 2,000
plants per hectare. It is the standard distance required to minimize Sigatoka infection. For volume
planting, the plants are spaced at 2 x 3 meters with 2 plants per hill making 3,200 plants per hectare.
21
Cavendish banana is full of protein and sugar. It is a high source of selenium, magnesium, iron and lots
of vitamins, recommended for salt-free diet because of its low sodium chloridium contents. Fruits of
Cavendish are ideal for baking, fruit compotes, and fruit salads to complement other foods.
Banana is an important food for Filipino. It is an income earner for the Filipino farmers and a top
dollar earner of the country’s foreign trade.
Table 5 - Other Uses of Banana
Particulars
Banana fiber
Animal feeds
Organic food wraps
Intercropping
Medicinal uses
Description
Dried banana fiber from the trunk is used for handicrafts,
woven into basketry and handmade papers.
Banana fruit rejects are used as component for animal feeds
Banana leaves serves as all-purpose food wraps commonly
used in Asian countries
Banana cultivation is used to give shade to other crops during
the gestation years such as the coffee and cacao.
Vitamin a in the bananas are considered food for the
treatment for gastric ulcer and diarrhea.
The high content of carbohydrates makes them a good source
for energy.
Cavendish Banana
Cavendish Banana Plantation
22
B. Production Trends
Global Production
Around 98% of world banana production is grown in developing countries while the developed
countries are the usual destination for export bananas.
In 2010, around 130 countries produced bananas. However, exports and imports of bananas, are
highly concentrated in a few countries. The 10 major banana producing countries are accounting for
more than 75% of total banana production. Furthermore, India, China, the Philippines, Brazil and
Ecuador alone produced more than 60% of total world banana production. This concentration of
banana production has increased over time although showing a different regional distribution. While
America accounted for more than 50% of the world production in the 1970s, against 34% for Asia, the
share of Asia began to increase in the course of the 1990s and the 2000s to finally reach 58.6% in 2010,
against 26.9% the same year for America. The share of the African continent in the world production
is remained relatively unchanged from the 1970s (13%) to the 2010 (12.5%). (FAOstat)
Table 6 - Breakdown of Banana Production (In Mt) by Genotypes: 2010
Cooking banana
Region
(world)
Dessert Banana
Plantain
(aab)
Highland
Bananas +
Abb + others
Cavendish
Gros michel
+others
Total
N. America
0
4,000
7,890
100
11,990
S. America
5,314,743
513,913
12,235,024
3,710,437
21,774,117
C. America
972,800
106,876
6,523,545
100,000
7,703,221
Caribbean
956,216
508,246
931,491
239,242
2,635,195
W.c. Africa
8,198,008
912,396
2,337,310
491,242
11,938,956
E. Africa
1,137,036
14,670,783
2,467,884
680,703
18,956,406
31
9,667
1,913,543
9,316
1,932,557
1,299,184
12,058,539
29,486,825
7,260,348
50,104,896
Oceania
1,431
543,210
304,423
69,924
918,988
Europe
101
1,010
435,236
1,020
437,367
17,879,550
29,328,640
56,643,171
12,562,332
116,413,693
N. Africa me
Asia
Total
Percentage
41%
59%
100%
Source: LESCOT 2010
23
Figure 2.1 - Distribution of the World Banana Production by Continent
Source: UNCTAD Secretariat from FAO Statistics
The Philippines is now the third largest producer of Cavendish banana next to India and China. It
displaced Columbia in the third spot in 2003. Class A Cavendish banana accounts for the bulk of export.
These bananas are packed in boxes weighing an average of 13 kg per box at an export price of
US$2.80/box FOB. In Philippines, from 2010-2012, production of cavendish banana has grown to 5%.
Table 7 - Cavendish Production by Top 5 Producing Countries (in metric ton)
India
China
Philippines
Ecuador
Brazil
2008
26.22
8.04
8.69
6.70
7.00
2009
26.47
9.01
9.01
7.64
6.78
2010
29.78
9.85
9.10
7.93
6.97
2011
29.67
10.71
9.71
7.43
7.33
2012
24.9
10.8
9.2
7.01
Source: FAOStat
Figure 2.2 - Banana Genotypes and Consumption Groups
24
1.
Domestic Production
From 2009 to 2013, there was an upward trend in the production of Cavendish banana (table 8) with
the Davao region as the top producing area followed by northern Mindanao .
The ARMM region produces 146,876 metric tons (MT) of Cavendish banana. It ranks 4 th in the top
producing regions of the Philippines. However, it only produces 6% as compared to the 2,392,320 MT
of Davao region, the lead producing region in the country. Maguindanao province, specifically, ranks
8th in the whole Mindanao, in terms of production.
Table 8 - Cavendish Production By Region (MT), 2009-2013
2009
2010
2011
2012
Region
Car
Ilocos
Cagayan Valley
Central Luzon
CALABARZON
MIMAROPA
Bicol Region
Western Visayas
Central Visayas
Eastern Visayas
Zamboanga Peninsula
Northern Mindanao
Davao Region
SOCCSKSARGEN
Caraga
ARMM
Total
Source : BAS 2013
2013
305
281
311
284
222
149
107
805
909
92
1558
824
190
187
1,095,816
2,877,651
405,861
14,674
100,508
4,497,722
1552
823
192
192
1,117,212
2,927,247
432,474
14,739
105,912
4,600,617
1589
887
189
157
1,115,622
2,961,989
464,688
20,486
119,274
4,685,997
1648
897
193
146
1,102,389
2,902,974
505,827
40,886
138,487
4,694,640
1488
1,293
151
600
1,120,311
2,392,320
520,618
45,253
146,876
4,230,073
Table 9 - Mindanao Production by Provinces (MT), 2011-2013
Regions
Philippines
2011
2012
2013
4,685,997
4,694,640
4,230,073
157
146
600
Northern Mindanao
1,115,622
1,102,389
1,120,311
Bukidnon
1,111,621
1,097,485
1,112,616
730
782
806
3,271
4,122
6,889
Davao Region
2,961,989
2,902,974
2,392,320
Davao del Norte
1,511,034
1,472,762
1,484,529
Zamboanga Peninsula
Misamis Occidental
Misamis Oriental
25
Regions
2011
Davao del Sur
2012
2013
175,293
176,817
177,889
2,077
3,045
2,927
1,096,798
1,068,406
541,808
Davao City
176,786
181,944
185,166
SOCCSKSARGEN
464,688
505,827
520,618
North Cotabato
212,204
214,930
221,081
Sarangani
120,460
151,792
146,653
South Cotabato
131,997
139,105
151,652
28
-
1,232
Caraga
20,486
40,886
45,253
Agusan del Norte
10,435
10,014
6,436
18
13
7
346
234
145
9,687
30,625
38,665
119,274
138,487
146,876
Lanao del Sur
88
103
113
Maguindanao
119,186
138,384
146,763
Davao Oriental
Compostela Valley
Sultan Kudarat
Agusan del Sur
Surigao del Norte
Surigao del Sur
ARMM
Source: BAS 2013
Figure 2.3 - Top Cavendish Banana Producing Regions in Mindanao 2013
ARMM
4%
Soccsksargen
13%
North Mindanao
26%
Davao Region
57%
26
Figure 2.4 - Cavendish Banana Volume of Production Area Planted, and No. of Bearing,
Philippines
production '000MT/ha
4,686
2011
bhills (no.) '000
116,000
115,000
114,000
80,230
area
82,413
4,695
82,902
4,230
2012
2013
However, there is a positive growth of 1.4 percent an estimated 2.30 mmt(million metric tons)
in banana production this second quarter compared to 2.272mmt from the same period last
year. This is due to lower infestation of banana leaf roller and weevil in Zamboanga Peninsula.
According to Bureau of Agricultural Statistics (BAS) the expanded areas and bearing hills
harvested in Northern Mindanao, MAMIROPA, WesternVisayas, CentralVisayas, ARMM and
Davao Region, the good weather condition with even rainfull resulted in bigger bunches
harvested in Ilocos Region, ARMM and Bicol Region, the La Frutera in Paglas, The Alip River
Development in Buluan,and the Unifrutti projects in Wao and Bumbaran contributed to the
increase in production. Cavendish banana variety production noted an increased by 3 percent
from the 2013 output of 1.065mmt.
27
Table 10 - Number of Bearing Hills Per Hectare and Yield per Bearing Hills ff Cavendish By
Region, By Province, Philippines 2011-2013
Regions
Philippines
Mindanao
Zamboanga Peninsula
Northern Mindanao
Bukidnon
Misamis Occ.
Misamis Or.
Davao Region
Davao del Norte
Davao del Sur
Davao Or.
Compostela Valley
Davao City
SOCCSKSARGEN
North Cotabato
Sarangani
South Cot.
Sultan Kudarat
Caraga
Agusan del Norte
Agusan del Sur
Surigao del Norte
Surigao del Sur
ARMM
Lanao del Sur
Maguindanao
Source BAS-PSA
2011
80,230
2012
82,413
2013
82,902
29
16,635
16,490
32
113
48,741
29,136
3,565
59
13,333
2,648
9,283
3,800
1,782
3,699
2
804
390
2
50
362
4,395
5
4,390
98
16,628
16,481
34
113
48,535
28,772
3,625
110
13,333
2,695
10,140
3,840
1,795
4,483
22
2,105
300
1
40
1,764
4,545
155
4,390
72
17,074
16,900
34
140
46,681
28,564
3,625
58
11,759
2,675
11,668
4,550
1,798
5,110
210
2,146
230
1
15
1,009
4,908
408
4,500
Table 11- Cavendish Banana Yield Per Hectare (MT), 2011-2013
Regions
2011
2012
2013
58.41
56.96
51.02
CAR
-
-
-
Ilocos Region
-
-
-
Cagayan Valley
31.14
28.43
22.17
Central Luzon
-
-
-
CALABARZON
18.40
20.66
21.40
MIMAROPA
-
-
-
Bicol Region
-
-
-
10.01
10.29
9.82
Philippines
Western Visayas
28
Central Visayas
9.14
8.01
11.54
Eastern Visayas
5.52
5.32
4.18
Zamboanga Pen.
5.52
1.49
8.33
Northern Mindanao
67.06
66.30
65.62
Davao Region
60.77
59.81
51.25
SOCCSKSARGEN
50.06
49.88
44.62
Caraga
25.48
19.43
21.09
ARMM
27.14
30.47
29.93
Source: BAS-PSA
Table 12 - Bearing Hills Per Hectare, 2011-2013
Regions
Philippines
CAR
Ilocos Region
Cagayan Valley
Central Luzon
CALABARZON
MIMAROPA
Bicol Region
Western Visayas
Central Visayas
Eastern Visayas
Zamboanga Pen.
Northern Mindanao
Davao Region
SOCCSKSARGEN
Caraga
ARMM
2011
1,423
480
793
409
370
531
232
1,481
1,511
1,361
1,043
514
2012
1,393
480
852
408
322
518
62
1,481
1,490
1,330
739
569
2013
1,397
480
855
424
359
518
379
1,508
1,514
1,233
910
585
Source: BAS-PSA
29
Table 13 - Yield per Bearing Hills (kg), 2011-2013
Regions
Philippines
CAR
Ilocos Region
Cagayan Valley
Central Luzon
CALABARZON
MIMAROPA
Bicol Region
Western Visayas
Central Visayas
Eastern Visayas
Zamboanga Pen.
Northern Mindanao
Davao Region
SOCCSKSARGEN
Caraga
ARMM
Source: BAS-PSA
2011
41.04
64.88
23.20
24.47
24.71
10.38
23.80
45.28
40.21
36.79
24.42
52.83
2012
40.91
59.23
24.25
25.18
24.86
10.28
24.19
44.76
40.13
37.50
26.29
53.54
2013
36.52
46.18
25.04
23.18
32.17
8.07
21.99
43.51
33.85
36.19
23.18
51.15
Table 14: Cavendish Banana Number of Bearing Hills, Bearing Hills per Hectare and Yield
per Bearing Hills, by Region, Philippines, 2011-2013
Region
Philippines
Zamboanga Pen.
Northern Mindanao
Davao Region
SOCCSKSARGEN
Caraga
ARMM
Source: BAS-PSA
2011
2012
Bearing Hills (no.)
114,192,836
114,763,659
6,609
6,030
24,638,602
24,626,650
73,662,978
72,337,465
12,629,600
13,488,865
838,900
1,555,370
2,257,650
2,586,736
2013
115,825,419
27,280
25,745,650
70,678,653
14,384,560
1,952,500
2,871,250
30
Figure 2.5: Map of Mindanao Banana Industry
31
2.
Section 3: Nature and Structure of the Industry
A. Value Chain Mapping
Figure 2.1 - Value Chain Map: Fresh Cavendish Banana
Production
(4)
FUNCTIONS
Input Provision
(4)
Nursery; Planting
Materials;
Chemicals &
Fertilizers;
Provision of Tools
and Other Supplies;
Financing
Plant Care and
Fruit Care;
Farm
Maintenance;
Bunch Harvesting
Consolidation/ Packing
(4)
Post-Harvest;
Cleaning;
Preservation;
Selection &
Grading;
Packing and
Labelling
Trading/
Distribution
(4)
Storage;
Transport;
Distribution;
Selling
OPERATORS
FARMERS/ COOPERATIVES/ ASSOCIATIONS
FARMERS/ COOPERATIVES/ ASSOCIATIONS
INPUT SUPPLIERS/
SERVICE PROVIDERS
TRADERS/ MNCs
TRADERS MNCs
ENABLERS
MULTI-NATIONAL COMPANIES (MNCs)
Final Sale
Grade A (Export);
Off-Grade for
secondary
processing (puree,
ketchup, etc.);
Waste Plastics
(recycling)
DOLE Phils; Unifrutti
Growers; La Frutera
Inc.; MD Midland
Farms; Other MNCs;
Flour Milling
Companies; Puree
and Condiments
Companies;
Recycling Plants
DTI/ DA/ DAR/ LGU / DOLE/ DPWH/ FPA/ PPA/ DOTC/ RDC
LEs/ NGOs/ Associations/ Cooperatives/ Manufacturers/ PBGEA/ MBGEA
Illustration above shows the various key players in the industry and its functions. Large players are
multi-national companies (MNCs) wherein in this chain they dominate the banana industry being the
big exporters of fresh Cavendish banana. With the Comprehensive Agrarian Reform Program (CARP),
land ownership is limited to only five (5) hectares and distributing the land beyond that limit to the
farm workers and tenants, thus, these MNCs either lease farms or enter into contract growing
arrangements with small farm owners.
Some small farm owners organized themselves into a cooperative or associations and engage also in
exporting either independently or supply fresh Cavendish bananas to big exporters, in this case, the
MNCs. In 2008, with the lifting of regulations that imposed limits on area (in hectares) that may be
devoted to bananas for export the continuing emergence of small banana farmers and exporters who
also get their supply from consolidators, then being processed in packing plants (independent service
providers) and deal with shipping arrangement through independent cargo forwarders. Generally,
these farmer-members though their cooperatives have several arrangements with packing plants and
cargo forwarders as their independent service providers.
32
Other stakeholders which play several vital roles in the chain are the following:
- Input and facility suppliers that supplies the pesticides and fertilizers, and other planting
materials, different service providers from tissue laboratories, power and water sectors, and
port and logistics services.
-
National Government Agencies (NGAs) that crafts and implements regulations and provide
both financial and non-financial support. DA provides research and development. DA and DTI
are providing marketing support. DAR is monitoring the implementation of the carp. The
Local Government Units (LGUs), the Department of Transport and Communications (DOTC)
and Department of Public Works and Highways (DPWH) together with the Regional
Development Council (RDC) are responsible for farm-to-market roads, highways and ports.
And the regulators that significantly affect the industry are the Bureau Of Customs, Philippine
Ports Authority (PPA), the Bureau of Plant Industry (BPI) and the Fertilizer And Pesticide
Authority (FPA).
-
Industry organizations which include the Philippine Banana Growers and Exporters
Association (PBGEA) whose membership includes the big exporters and growers, and the
Mindanao Banana Growers and Exporters Associations (MBGEA) comprised of small grower
and cooperatives.
-
Lending institutions that provides financial assistance to the farmers.
B. Key Players and Functions
1. Input provision
Research and development are made by the Department of Agriculture and several state universities
and colleges in Mindanao. Their primary concerns are to increase yield of fresh Cavendish banana,
improvement of preservation of fruits and packing, and development of organic farming without
affecting its yield.
Input and facility suppliers which include tissue laboratories and chemical industry provides the
planting materials, pesticides and fertilizers and other chemicals. Port and logistic service providers
offer transport and shipment requirements of the industry. Power and water sectors provide
electricity and water requirements for the whole duration of the operation.
In Mindanao, planting materials are mainly provided by multi-national companies wherein they are
also the buyers of the fruits produced. In Maguindanao, it is sourced out from La Frutera that have its
own nursery, and provides the other planting requirements and services to land preparation, planting,
farm maintenance and harvesting. Small farmers who are members of cooperatives get their supplies
and input requirements from their respective cooperatives and associations.
2. Farming and production
Farming and production in MNCs are being done by company farm workers who are being paid
according to their actual labor or piece work and some are hired on a permanent status with which
33
salaries and wages are being paid accordingly. In cooperatives and associations, farmer-members are
the one doing the preparation, maintenance, and harvesting.
Here are primary functions of the company farm workers and/or farmer-members of the cooperative:
Land preparation. The field is being plowed and harrowed three times. All stumps, bushes, and
weeds are being removed. They will dig at least 45cm deep with 45cm diameter holes and each
hole is being fertilized by 10 grams of complete fertilizer and granular nematode.
Planting. It is best to start planting during the beginning of the rainy season. Suckers are set on
the field in vertical position, and being covered with soil then compost materials are being added
to enhance the recovery and growth of the newly planted trees. These plants are watered regularly
and during dry season water from irrigation will ease the watering of plants.
Cultivation and maintenance. Cultivation are being done at least 6 inches from the base of the
plant to avoid injury within its roots, then being sprayed with glamozine or karmex that acts as
weed control. Workers also propped the plants with bamboo poles during fruiting to support the
plant against strong winds.
Desuckering or pruning. Excess suckers which are considered needless are being cut off from their
mother plant to concentrate the soil nutrient into it. Per hill, it will only need at least one or two
suckers.
Fertilization. For soils which are considered poor or inadequate natural nutrient, fertilization is
being applied that contains n-p-k at a ratio of 3-1-6 and these are being doubled for young plants.
The amount of fertilizer increases as the plant matures. During flowering and fruiting period, each
plant is being applied with five to six pounds of complete fertilizer.
Pest and diseases control. 3 of 27 insect pests that attack the banana plantation in the Philippines
causes a significant damages in all varieties of bananas including Cavendish. The banana corm
weevil feeds on sucker and destroys the corm tissues and eventually will cause the suckers to die.
These are being controlled by spraying the soil with furadan 5g and 10g. Aside from spraying,
sanitation and cutting of affected corms are effective alternative and also an environment-friendly
practice.
Fruit-peel sarring beetle that damages the fruit surface are being sprayed with decis to control and
prevent infestation.
The banana floral thrips are being controlled through applying of diazinon 40/60 ec of decis 2.5.100
ec spray.
The three major diseases of banana plants are the sigatoka, pitting or wilting, and the moko.
Sigatoka is a leaf spot disease that causes the premature death of the banana leaves, in severe
cases, bunches and fingers are reduced. The fruit will ripen prematurely and develops abnormal
flavor. These can be controlled by spraying with bordeaux mixture and badly spotted leaves are
34
being removed to avoid contamination. Pitting or wilting is characterized by dry, reddish-brown or
black, circular or oval, depressed spots and to prevent these diseases which are often comes during
rainy season proper sanitation is being done and all collapsed leaves are removed. Moko disease’s
impact to plants is similar to that of sigatoka except that it does not have an effect of unfavorable
smell into its fruits and black colored fruits are being spotted. This infection is prevented by
disinfecting it with formaldehyde. However, in line with environmental considerations, alternative
pest and disease controls are being introduced by integrated pest management and infected plants
and weeds are uprooted to keep the area free of host plats for the period of six to twelve months.
Harvesting. Once the last leaf turned yellow, angle formation of the fingers through its roundness
are the determinants that the fruit is ripe and ready for harvesting. However, for exportation of
green fresh Cavendish, harvest time is being determined through the right size of its fingers.
Workers are measuring the fingers in each plant and if it is ready for harvesting, a group of three
workers are doing the work. First they will put protective paddings and plastics around the fruit to
avoid skin damage, then the entire stem is being cut off and being transported by one worker
through each shoulder wearing a pad. The leaves of the mother plant are being cut off and being
left on the ground and the remaining stalk will serve as nutrient provider to its daughter plant. The
one carrying the fruit is placed in the nearest cable way system or cable lines on to the center of
the plantation which is the packing plants. These tasks will take six days a week by the time it is
being harvested and packed, it is just in the right time the fruit will ripen as soon as it reached the
consumers.
3. Processing
Processing is done by plant workers hired by MNCs or contracted through manpower agencies and
emergency piece work contracts. In cooperatives and associations, they contracted with independent
packing plants. Once the harvested fruit arrives at the packing plant, the protective plastics and pads
are removed from the hands of the fruits. These plastic and padding wastes are being delivered to
the recycling plants to be processed and to be reused. To monitor quality control, the harvesting
team, where it is being harvested, and other necessary information is being labelled into the fruit.
These fruits are being washed with chlorinated water, inspected and primarily graded if it meets the
quality standard of the company. Banana hands are being cut according to the specifications and
grading and then being placed in the tank full of water to preserve the freshness of the fruits and at
the same time removed the excess latex found naturally on the fruit. The excess stems and other
plastics are delivered in the recycling plant to be recycled and the stems are being processed as boards
and compost materials. The gentle conveyance of the water tanks to the next station while some
35
workers are thoroughly inspecting each fruit if it meets the company standards. Once passed, the
fruit is being clustered into five to seven fingers each.
The clustered fruits float into the next station where it is being removed from the water tanks and
placed on trays into the programmed scale to control the right weight of the fruit per carton. Before
it is being packed in cartons, it is being labelled with the company logo. The cut stems are being
processed into its post-harvest system to maintain freshness. These fruits are now packed in boxes
each specifically designed depending on the distance of its destinations and for quality control,
packers marked each boxes they packed. Packing is carefully done to minimize damage on the fruits
and these boxes contain materials that allow the fruit to ripen during shipment by the time it arrives
the destination. Packing is done in three different ways, the loose banana hands, the single banana,
and the sealed consumer bags. It is being scaled again to check the exact weight of the banana. In
large MNCs, harvest to packing will take a bunch of fruit at least two to three hours to be processed.
And lastly, boxes are being stacked into pallets ready for transport and for quality control and
traceability throughout the shipment process, each pallet is being marked with unique identification
code. Processing of bananas is considered delicate thus minimal automation is being done in the
processing plants.
4. Distribution and trading
The principal or the buyer pays the agent (seller/grower) per box weighing 13 kilos of bananas meeting
specific quality requirements. Bananas for the japan market, for example, is priced at around U.S. $
2.10 per box of export quality bananas loaded on board the buyer’s designated cargo truck. The
conversion rate is based on the Bankers Association of the Philippines (BAP) conversion rate at the
time the vessel containing the seller’s bananas departs from any Davao Port. Remittances of export
proceeds from the seller’s preceding month’s production are made within 15 days after the end of the
month.
The price of the output depends on the arrangements with regards to it inputs. There is a price
review/negotiation at least every 2 years or sooner should there be an increase of 5% in the price of
imported materials, such as fertilizers, herbicides, fungicides, insecticides and others, either or both
parties may call for a price review/negotiation. All outstanding accounts and compensation due to the
buyer and loans guaranteed by the buyer are deducted first from the gross sales proceeds before
payment. The buyer has the first lien over the seller’s sales proceeds including the subsequent ones
until the latter’s account is fully paid. Should there be changes in the industry specifications on
weights, the price may be adjusted either upward or downward.
36
Total production area is specified and the principal has the right of first refusal to all bananas produced
from the additional area not specified in the contract.
The buyer has complete ownership of the bananas and is treated as the exclusive exporter of the
bananas of the seller. The buyer, or its representative, has the right to reject all bananas that do not
qualify for shipment as specified by the cutting order and/or do not meet the quality and grade
standards specified. Rejection can be made at anytime prior to buyer’s acceptance of the bananas
loaded on board the buyer’s designated cargo truck. The buyer also has the first option to purchase
the banana rejects or those that do not conform with any export specifications; with price, terms, and
conditions agreed upon by the buyer and the seller. Banana reject refers only to those that do not
meet the specifications.
37
C. Nature of Interfirm Relationships
1. Horizontal Relationships
La Frutera was the first large-scale banana plantation in the ARMM. Ultrex and Chiquita Unifrutti
formally agreed to a 20-year contract wherein Chiquita Unifrutti would buy La Frutera’s bananas,
market them under the Chiquita and Unifrutti brands, and then export them abroad.
There are 45,000 hectares of banana plantations in the country. Among them is La Frutera. It is one of
the top 10 percent banana farms in terms of production per hectare, cost per box, and quality of
products in the market. It exports bananas to Japan, Korea, China and the Middle East. La Frutera is
the only banana plantation in the country certified by both the Rainforest Alliance (since 2003) and
ISO 14001 (since 2005).
Over the past 10 years, La Frutera has shown how a business model can succeed in a conflict-ridden
area previously bedeviled by lawlessness, underemployment and interethnic violence. He believes
that providing jobs, especially in rural areas, is the direct and sustainable way of alleviating poverty.
2. Vertical Relationship and Supply Chain Governance
Exporting banana in the country started in the 1960’s with rapid growth in the first 10 to 15 years.
Historically, the commercial growing of banana in Davao started after World War II when the abaca
industry, the major export of the area before the war, experienced a slowdown. It then expanded as
more multinationals infused investments in the area.
Cavendish banana is considered a staple fruit in most major export markets such as Japan and New
Zealand. Mindanao, in particular, has large banana plantations because the island is an ideal area for
banana production with large contiguous tract of land available, typhoon free, even rainfall yearround, rich soil, and abundant human resources. Besides, Mindanao has a competitive advantage
In terms of yield, the Philippine banana industry has the highest yield in the world at 4,692 boxes per
hectare per year attained by Lapanday Foods Inc. On the average, production yield is approximately
3,500 boxes per year. With low prospect in export, exporters implement strategies to lower costs and
improve productivity. Research on pest management to reduce dependency on imported chemicals is
being done. Efforts to improve labor productivity are geared towards upgrading incentives. These are
some strategies currently being implemented by PBGEA members to enhance competitiveness.
Major exporters are Lapanday Foods (25% share producing 28 million boxes of Cavendish bananas),
TADECO – Del Monte Fresh Produce (20%), while Dole-Stanfilco, Marsman- Drysdale and other
exporters shared the remaining 55%. Moreover, each exporter has its own cooperatives or farmers’
associations that supply fresh bananas. These firms have their own brand and support facilities such
as box plant, trucking, cooling warehouse, shipping, packing sheds, etc. These firms formed PBGEA or
Philippine Banana Growers and Exporters Association. This association acts as an advocacy group for
issues such as agrarian reform, lease rentals, wage rates, etc.
While banana exporters gain from peso depreciation, these are being offset by higher cost of imported
38
materials. Growers use imported pesticides and fertilizers as well as imported spare parts and
machineries. The sustained growth of the banana industry in Mindanao led to the emergence of
support enterprises. These include the use of biotechnology on seedlings production, pest control, soil
and plant nutrient analysis. Thus, there are firms in Mindanao that provide technical services to
banana plantations and other agricultural industries such as Biotrends Inc, ITRI (Intelligent AgroTechnical Resources Inc), and Dole Research. Their services also include production of tissue cultured
mini-plants, conduct soil and plant tissue analysis and other technical services.
In the value chain of the banana, the major players are the multi-national banana traders who own
and operate plantations at the same time. Historically, banana production in Davao Region was
benefited by the efforts of these big players, who have developed Davao as an export banana
production area with Japan as the main target market. They have developed the infrastructure not
only for cultivation and post-harvesting, but also for road to port, shipping facilities of the port, and
ocean going vessels specialized for banana transportation, among others.
D. Price and Cost Structure
1. Domestic
Table 15 : Estimated Production Cost and Returns, Banana Cavendish, per hectare
Particulars
Amount
Production
Labor costs
(includes land preparation, weeding, pruning, harvesting,
packing)
211,133
Planting materials
15,000
Fertilizers
78,117
Pesticides and other disease control chemicals
107,883
Propping materials
23,751
Bagging materials
34,179
Fuel, oil, lubricants
27,176
Depreciation costs
33,264
Overhead expenses
18,492
Total production cost
548,995
Gross returns
(estimates for about 58 tons yield per hectare)
90% of total yield - grade a @php220 per box (1 box = 13.5kg or 3866
boxes)
850,520
10% of total yield- off-grade @ php 10.50 per kg
60,900
Total gross returns
911,420
Net returns
362,425
Net profit-cost ratio
0.66
39
Key informant interviews confirm that the total production cost of banana Cavendish production is
estimated at about 500 to 600 thousand per hectare. However, this cost will lessen if the labor
works will be done by the family members and relatives or the farm owner themselves. On land
preparation, planting, maintenance, and harvesting, the cost will be cut-off at about 12 to 25
thousand depending on the scope of work the farm owners and its family is willing to take.
Independent packing plants offers one-stop packing requirements at a discounted prices of the
whole duration of the processing of fresh green Cavendish and labor expenses for packing is being
shouldered by the packing plants based on the contract between the farmer and that of the
independent packing plants.
2. Export
Table 16: Estimated Production Cost and Returns, Banana Cavendish, for Export per Hectare
Particulars
Amount
Production costs
Labor costs
(includes land preparation, weeding, pruning, harvesting,
packing)
211,133
Planting materials
15,000
Fertilizers
78,117
Pesticides and other disease control chemicals
107,883
Propping materials
23,751
Bagging materials
34,179
Fuel, oil, lubricants
27,176
Depreciation costs
33,264
Overhead expenses
18,492
Total production cost
Exporting costs for 3,866 boxes
Cost to port, loading, documentation, and administration
(@p18 / box)
Carton, packing materials, and pallets
(@p60 / box)
Freight (@p132 / box)
Container yard (@p7 / box)
Total exporting costs
Total costs
548,995
69,588
231,960
510,312
27,062
838,922
1,387,917
Gross returns
Lowest price @ p528 per box
Net return at lowest price
Highest price @ p704 per box
Net return at highest price
2,041,248
653,331
0.47
2,721,664
1,333,747
0.96
40
Minus the production cost of the fruit, the cost for exporting fresh green Cavendish is at an average
of p217 per box. Export prices in the global market vary on its destination. In japan, the average price
per box is at $14 to $16. In Middle East it is priced between $11 to $13 per box. China being the
lowest is priced only between $10 to $12 per box. Breakeven of a one hectare Cavendish banana is at
2,650 boxes of grade a fresh green Cavendish banana.
41
1.
Section 4: Markets and Market Opportunities
A. Markets and Market Trends
1. Export markets
Compared to its competitors, Mindanao has a competitive advantage to supply fresh and
processed food as well to various countries because of its strategic location. Mindanao’s rich
soil, huge land available for banana plantation, a typhoon free weather and abundant labor
force makes it ideal place for banana production which make Philippines as the third largest
Cavendish producer in 2003.Cavendish banana is packed in boxes an average of 13.5kg/box
with an export price of US$2.80/box fob.
A gross export value of over US$200m/year earned from 26,000 hectares plantation which is
highly centered in Davao Regions including Davao Oriental, Davao del Norte, Compostela
Valley, and Davao City with each exporter per area.
Table 17 : Top 10 Agriultural Exports, Philipppines, 2011-2013
Quantity in ‘000 MT, FOB value in M USD
2011
Item
Coconut oil
Bananas, fresh
Tuna
Pineapple &
pineapple products
Dessicated
coconut
Tobacco
manufactured
Seaweed &
carrageenan
Centifugal sugar
Milk & cream
products
Fertilizer
manufactures
Source: BAS
2012
826.72
2,055.51
80.13
582.68
Fob
value
1,425.45
472.38
314.58
345.64
%
share
26.24
8.70
5.79
6.36
108.88
286.81
28.16
Growth
rate
Quantity
Fob value
857.50
2,646.12
61.71
742.61
1,016.09
646.66
455.10
414.91
%
share
20.31
12.92
9.10
8.29
5.28
68.58
197.00
3.94
(31.31)
199.97
3.68
15.80
157.46
3.15
(21.26)
46.13
210.78
3.88
33.91
184.15
3.68
(12.61)
578.74
38.13
351.45
173.44
6.47
3.19
201.93
18.01
108.80
85.80
2.17
1.71
(69.04)
(50.53)
455.12
213
3.92
239.16
118.79
2.37
(44.23)
Quantity
(28.72)
36.89
44.67
20.04
42
Table 18: Cavendish Banana Annual Report per Destination , 2008-2012 In boxes
Destination
Year
2008
2009
2010
2011
2012
Japan
50,633,406 58,073,518 51,038,528 54,455,593 53,053,283
China
26,029,941 26,863,549 31,030,072 48,179,858 33,160,358
Iran
39,240,959 35,501,963 37,142,583 31,932,439 19,626,001
South Korea
15,903,404 15,400,037 19,096,083 17,953,259 18,106,609
Saudi Arabia
12,118,233 11,525,681 14,376,261 16,864,973 17,609,720
Kuwait
6,513,174
7,770,196
7,489,350 10,091,055 10,198,207
UAE
8,630,520
9,925,205
7,147,089
7,095,786
7,736,292
New Zealand
3,683,692
3,695,957
3,888,282
4,246,779
4,290,935
Russia
1,696,513
1,662,140
2,113,134
2,272,650
2,292,768
Singapore
892,587
1,128,307
1,103,902
1,161,810
1,221,438
Qatar
1,280,132
1,602,361
891,468
1,094,773
1,096,446
Hongkong
424,031
710,607
623,708
631,468
662,508
Bahrain
518,925
564,585
538,218
472,135
773,266
Egypt
376,687
51,996
456,320
457,610
471,199
Oman
366,150
394,347
313,120
318,821
295,146
Jordan
470,156
562,982
629,971
262,457
163,345
Iraq
6,160
237,692
31,120
Malaysia
12,038
23,242
91,424
143,268
400,873
Indonesia
11860
122,115
35,370
121,557
Vietnam
56,343
25,229
Brunei
6,670
11,1990
10,550
10,540
9,046
Turkmenistan
6,160
Thailand
15,870
17,599
3,864
1,968
Turkey
5,440
57,603
2,500
UK
1,200
New markets
2,658
423,146
(Bulgaria,
Pakistan, Belarus,
Mongolia,
Germany)
Source: PBGEA
Major Cavendish banana Exporter in Mindanao:
1. Lapanday Foods
2. Dole-Stanfilco
3. TADECO-Tagum Agricultural Development Company
4. Marsman/Drysdale
5. TADECO-Del Monte Fresh
6. Unifrutti
7. La Frutera
The major destination of Cavendish banana in foreign trade are Japan, USA, New Zealand ,Iran, UAE,
South Korea, and Singapore and other 32 countries worldwide.
43
Organic fertilizers and tissue plantlets are basically needed input for Cavendish banana variety
production. It’s finish products are feeds, vinegar, banana catsup, banana puree and inulin.
(source:davao agribiz)
As common practice of the banana exporters or consolidators for Region 11, fresh fruit rejects are sold
to private entities or cooperatives. The private entities or cooperatives in turn process these rejects
into dried banana pellets for feeds. Banana pellets are sold to SMC and nearby feed mill plants. On
the other hand, banana flour are also processed for food.
In the case of the Maguindanao Province, the La Frutera is the major producer and buyer of Cavendish
Banana. Other players in Cavendish banana production are: Alip River Development Export
Corporation, Paglas Corporation and Delinanas Development Corporation.
2. Domestic market
The domestic market for the fresh cavendish banana comes in the form of fresh fruit rejects
that didn’t passed the quallity standards of the export market. These may either be with the
following defects:
1)
2)
3)
4)
bruising
discoloration
perforations or abnormality in form of banana fingers
inadequate size of fingers as specifiied by the export buyers
As common pratice of the banana exporters or consolidators specially for the Region 11, these
are sold to private entities or cooperatives. The private entities or cooperatives in turn
process these rejects into dired banana pellets for feed purposes. Banana felelts are sold to
SMC and nearby feed mill plants. On the other hand, banana flour are also process for food
quality.
B. Price Trends
1. Export Market
There is growing demand for Class A bananas in China especially in large coastal population areas,
while interior population center still accept Class B bananas. The export standards for Class A fruit for
China in reality are a mixed pack Class A/B and as such China FOB prices are generally lower than for
Japan/Korea and Middle East markets.
Value added packs such as small hands, consumer packs and small box packs (7.2Kgs and 4.7kgs) for
Middle East markets can improve grower returns as more fruit is sold to export markets.
Since there is a growing export demand of fresh Cavendish banana in the world market computed at
a rate of 3-6%, its export price also increased at a rate of 292% of its price per box in 2013 compared
44
to that of 2003. (FAOSTAT,2003-2013) In 2003, fresh Cavendish banana’s price is at $2.40 to $3.00
per box, but in 2013 it ranges from $10.00 to $15.00 per box. Export prices to Japan average at about
$15.00 per box C&F while exports to the Middle East are priced at $11 – $13 per box. Exports to China
command a lower $10 - $12 per box.
Table 19 : Price of Fresh Cavendish Banana per Major Destination, 2011-2013
PHP Equivalent of
Country
Low ($)
High ($)
2013 Price
Japan
14.00
16.00
616.00 to 704.00
Middle East
11.00
13.00
484.00 to 572.00
China
10.00
12.00
440.00 to 528.00
Source: CATIF, Philippines Agribusiness Competitiveness And Benchmarking Study
2. Domestic Market
Per capita banana consumption is estimated at 50Kgs/person and growing. Since it is a competitive
industry, small growers have limited bargaining power to influence price. To improve profitability,
however, it can improve quality of banana to fetch higher price. It can also improve productivity to
reduce per unit cost of production especially that prices of inputs are rapidly increasing It is essential
to address infrastructure and institutional constraints to reduce production and marketing costs
Domestic market for fresh banana is through the middle men getting the produce from farm. Fresh
Fruits and Vegetables Traders/Agents buy bananas from farmers. Shippers are at the port of origin
including Cagayan de Oro, GenSan, Davao and the proposed Malalag, Davao del Sur.
Consignees/receivers are at the port Manila for sales distribution to wholesalers and jobbers.
Wholesalers or jobbers’ market is from all over Luzon and Retailers target market are fruit stands in
rich neighborhood, supermarkets, wet market and Mobile retailers (cart). These prices differs in every
stages of the season wherein during rainy season, the price of Cavendish in domestic market is almost
50% lower compared to that of during dry season.
Table 20 : Domestic Price Trend of Fresh Cavendish Banana, per kg., 2014
Particulars
Low
High
Farm Gate
10.50
16.00
Pier-End (FOB Point of Origin)
12.00
17.00
FOB (Port of Destination)
17.00
22.00
Wholesalers/ Jobbers
22.00
26.00
Retailing/ Selling Price
30.00
37.00
Source: KII/ FGD
45
2.
Section 5: Support Services
A. Financial Services
Table 21 - Demand for Finance among Value Chain Players
Player
Input Providers
Laborers
Individual
Grower/
Farmer
Demand for finance
Working capital to buy farm inputs in adequate
quantity of right kind and at the right time.
Paid on daily on per work basis
Money for daily basic needs
Working capital to buy inputs and pay for cost
labor.
Saving products, various types of insurance
including crop insurance
Cooperatives of
Growers
Money for daily basic needs and emergencies –
while waiting for harvest
Working capital to buy farm inputs for
distribution to farmer members
Current Sources of
Financial Services
Banks with guarantee
Farmer/Grower/MNCs
Buyers
Private lending
institutions
Banks
Banks
Private lending
institutions
Working capital to buy produce from farmers
including harvesting and transportation costs
Multinational
Company
Grower
Consolidator/
Trader/ Exporter
Capital or term loans for investment in storage,
transport, processing facilities, etc.
Working capital to buy inputs, propagation of
planting materials, pay for cost labor,
investment in harvesting and post harvesting
facilities
Working capital to buy produce from growers
including transportation/shipment and export
costs
Banks
Banks
Source: KIIs/FGDs in November and December 2014
There are two kinds of financing products and add-in services offered by financial institutions including
informal lenders in ARMM that cater to financial needs of banana farmers, these are: 1) cash flowbased lending, and 2) asset-based lending cash flow-based lending uses regular household cash flow
analysis and collects periodic payments. Asset-based lending rely on the debtor’s asset size as
collateral to lend money in any case the debtor is unable to pay its obligation to the creditor.
Value chain actors, particularly those smallholders need financial services with training and technical
assistance on agricultural finance portfolio management. Cooperatives and association can seek
46
assistance in evaluating their system in providing financing to its members to make sure that all unit
costs are adequately factored and risks are cost-effectively managed.
Safety nets, savings, and insurance products are also needed to improve the resiliency of smallholders
and other resource poor players in the ARMM Cavendish banana value chain. This can be implemented
through membership with a cooperative or an association where such services are to be included as
an approach to make the member-farmers resilient against farming/production-related and even
health risks.
B. Non-financial services
Agribusiness development services in the ARMM Cavendish banana value chain is provided in the
following manner:
1. Informal:
Industry information, knowledge, skills and advices available to farmers and other VC players are
carried out through social relationships. This includes information and advices on costs, prices,
and market and technology trends through social networks with the community and the value
chain.
2. Embedded:
Services are provided within a buying or selling transaction, the costs of the service provision form
part of the overall cost calculation of the service provider, while the service user does not have to
pay for service delivery. Embedded services are added features to the main business line.
Examples of these are the following:
- Multi-national companies: technical person assigned to provide extension services
primarily via the cooperatives or association of farmers.
- Traders/assemblers/cooperatives/associations: harvesting and post-harvest services;
transportation, technical advice and quality control services.
- Cooperatives and NGOs: capacity building, value formation, community development and
other extension services.
3. Fee-based services: services offered to VC players for a certain fee.
Growers/cooperatives/association: rental of tractor and other machineries for fee.
Laboratories: soil analysis
Opportunity and area for improvements in the delivery of agribusiness development services in the
Cavendish banana value chain in Maguindanao is summarized below:
1. Small growers have issues on the low capacity to finance farm facilities and operations coupled
with poor credit access. Various supply arrangements, including contract growing, where the
buyer advances the financing requirements or provides part of the input requirements have
helped address these issues with respect to short-term financing needs but not for long-term farm
investments.
47
Section 6: Enabling Environment
A. Formal Rules, Regulations, and Policies
The following are the formal rules6 governing the Cavendish banana industry in the
Philippines:
1. Accreditation
Each exporter needs to be accredited by the bpi, as laid out in BPI MO 36 s 2008. In addition
to documents that show legitimacy of business, such as SEC, DTI and LGU registration and
permits. There are currently 114 bpi-accredited banana exporters. Renewal of the
accreditation, previously required annually, is now required every two years as ordered
under bpi mo 19 s 2010 to ease the bpi workload.
2. Phystosanitary Certificate
Each shipment of exported banana requires a Phytosanitary Certificate (PC) issued by the
BPI-PQS. The pc certifies that the shipment is free from pests and diseases and is compliant
with the requirements of the importing country with respect to food and plant safety. The
PC is required of the importer by the quarantine authority in the importer’s country. The
BPI’s recognition as the country’s quarantine authority on plant and plant products is
mandated by PD 1433 or the quarantine law of 1978 pursuant to obligations under the
International Plant Protection Convention (IPPC). The bpi’ s issuance of pc specific to banana
is governed by bpi mo 36 s 2008.
B. Informal Rules and Socio-Cultural Norms
Banana production and exportation in Philippines has long tradition which dated back to the
colonial Spanish era up until the time of the American occupation where majority of the
plantation are since then owned by multinational companies.
In Maguidanao, Cavendish banana production is owned of by multinational company whose
market are institutional buyers. The multinational company hire laborers from middlemen
who deploy workers to banana plantation company owner when it requires.
It is also a tradition in Maguindanao that a laborer follows instructions from the person they
recognized a leader in their community. Hiring of plantation supervisors who are not known
to the workers often resulted to insubordination.
6
Philippines Agribusiness Competitiveness and Benchmarking Study
48
Section 7: Constraints and Opportunities
Table 22 - Constraints and Opportunities
Constraints
Opportunities
Input prices are high
Inputs are widely available from the multinational companies
Average increase in production cost is about
37.5% during the last 3 years.
Average yields and productivity of small
producers are low
Vast land in the ARMM is ideal for Cavendish
cultivation
Land use and credit access difficulties brought
about by carp
Technology to preventing and managing
diseases are available
Underinvestment in farm production and postharvest.
Ban on aerial spraying due issues of health,
sustainable development and
environmental effects in the areas where
there are banana plantations.
Widespread of banana disease (fusarium
wilt of banana)
Labor rights violations
Hiring of plantation supervisors who are not
known to the workers often resulted to
insubordination.
Consolidation/packing
Limited capacity of post-harvest facilities
caused by underinvestment.
Improved post-harvest facilities reduces
costs related to consolidation/packing and
marketing and distribution
PLGU is willing to share in the construction
and/or upgrading of farm-to-market roads
Inefficient logistics
ARMM is easily accessible to major PPA
ports (Davao and General Santos City) for
transshipment of goods that are also due for
privatization to enhance its services
Weak trade
management
facilitation
policies
and
House Bill No. 4994: Bangsamoro Basic Law
provides mechanism on trade and commerce
with autonomy from Central Government of the
Philippines.
49
Constraints
Opportunities
Price determination of bananas for export has
remained under the control of big institutional
buyers.
Issues related to compliance to international
standards on food quality and safety.
There is a huge potential for expanding the
existing markets of Cavendish banana producers
of Maguindanao in countries of Asia and MiddleEast.
Interfirm and Supply Chain Governance
Presence of insurgency/rebellion and incidence
of extortions.
House Bill No. 4994: Bangsamoro Basic Law
provides mechanism on peace development
program in the ARMM
Peace building program can address peace and
order and poverty problems through productive
agriculture.
50
8.
Section 8: Competitiveness Directions
A. Competitiveness Vision
To develop a sustainable banana industry in Maguindanao aimed to becoming one of the leading
banana-producing provinces in the country, and boost its competitive edge in the global market
through broad-based rural agro-industrial development.
The participants in the Stakeholders Conference cum Workshop and Key Informant Interviews
identified the following priority areas for action:
1. Adoption of sustainable production practices and land use and the achievement of sustainable
certification;
2. Efficient farming and production technologies including sourcing of planting materials and
inputs to ensure that cost of production will meet market expectations, allow the industry to
be competitive in world markets, and improve industry profitability; and
3. The need to address infrastructure and resource deficiencies that are impeding the efficiency
of industry.
B. Priority Constraints/Opportunities and Interventions
To achieve the above vision for competitiveness, the following are the key intervention
strategies as identified by stakeholders:
1. Input provision
DA-PRDP to provide the necessary support for LGUs in the crafting of its Provincial
Commodity Investment Plan that will include the required input provision available not
only to multination national companies but to small growers and cooperatives of growers.
DA-BPI in partnership with DA-HVCDP to facilitate development/establish nurseries of
affordable quality planting materials for small growers or cooperatives.
DA-HVCDP to capacitate the LGUs to provide technical support to smallholder nursery
operators.
2. Farming/Production
The low capacity to finance farm facilities and operations coupled with poor credit access is an
issue for small growers. This problem can be addressed by:
51
Various supply arrangements, including contract growing, where the buyer advances the financing
requirements or provides part of the input requirements have helped address these issues with
respect to short-term financing needs but not for long-term farm investments. It is reported that
major investments in modern and large scale irrigation systems and other infrastructure like
cableways and drainage systems, which used to be financed by the big exporters and corporate
farms, have declined as production shifted from corporate leased farms to growership by individual
farmers and cooperatives.7
3. Consolidation/Packing
The limited capacity of postharvest facility can be address by sound investment on the required
infrastructures for postharvest facilities coupled with capacity building and business development.
Poor condition of existing farm-to-market roads leading to consolidation/packing facilities can be
addressed with the implementation of FMRs through DA-PRDP, DA Food Security Program and the
concerned MLGUs.
4. Marketing/Distribution
That small growers have no power on pricing further stifles their initiative to pursue productivity
improvements. Banana farmgate prices are partly dictated by organizational and partnership
arrangements among and between farmers and exporters. This is exacerbated by the lack of
transparency in pricing and the absence of regulations in pricing mechanisms.8
DTI, DA and DFA shall provide the support for Cavendish is by way of policy. This includes
accreditation of exporters, and trade promotion assistance in the negotiation for and monitoring
of markets undertaken. Review BOC’s E2M system to allow for corrections in papers should these
be required.
DA-PRDP and the PLGU of Maguindanao to express and lobby support for the immediate
privatization of Sasa Wharf in Davao City and Makar Wharf in General Santos City to enable
modernization of physical and soft infrastructure. These can be in a form of letter/position paper
of support to fast track the privatization to enhance the facilities of these seaports.
House Bill No. 4994: Bangsamoro Basic Law provides mechanism on trade and commerce with
autonomy from Central Government of the Philippines. This requires support from the Provincial
Government of Maguindanao to facilitate trade of good to export markets. While the Bill reforms
in agriculture, the final version of the Bill or the law itself, when enacted, may or may not affect the
implementation of PRDP projects in Maguindanao and in the ARMM as a whole.
7
“Analysis of the Banana Export Value Chain.” Dwyer, J., 2010.
8
World Bank, Policy Note, 2010.
52
4. Interfirm/Supply Chain Governance
The presence of insurgency and extortions in the several production areas can be resolved
through peace building program to conflicted areas designed addressing poverty through
productive agriculture.
At present, House Bill No. 4994: Bangsamoro Basic Law provides mechanism on peace
development program in the ARMM.
Table 23 - Priority Constraints/Opportunities and Interventions
Input provision
Constraints:
High input price
Inputs average production
cost increased by about
37.5% during the last 3
years.
Opportunity:
Inputs are widely available
from the multi-national
companies
Approaches
DA-PRDP shall provide the
necessary support for LGUs in
the crafting of its provincial
commodity investment plan
that will include the required
input provision available not
only to multination national
growers and cooperatives of
growers.
DA-BPI in partnership with
DA-HVCDP shall facilitate
development/ establish
nurseries of affordable
quality planting materials for
small growers or
cooperatives.
Who can do it?
Public
Private
DA-PRDP
Technical and
financial
assistance
DA-BPI and DABAR
Technical
assistance on
quality of
planting
materials
Multinational
Companies/coo
peratives
Supply of
quality planting
materials
Banks/Private
Lending
Institutions
Financing
LGUs
Technical
assistance
DA-HVCDP to capacitate the
LGUs to provide technical
support to smallholder
nursery operators.
Farming/Production
Constraints:
Average yields and
productivity of small
producers are low
Land use and credit access
difficulties brought about
by carp
necessary support for
PLGU/MLGUs in the crafting
of its provincial commodity
investment plan that will
include the required input
provision requirement s
available not only to
multination national
DA-PRDP
Technical and
financial
assistance
DA-BPI, DAHVCDP and DABAR
Technical
assistance on
Multinational
Companies/
cooperatives
Technical
assistance
Production
Banks/Private
Lending
Institutions
53
Limited capacity for preand post-harvest
investments.
Underinvestment in farm
production and postharvest.
Ban on aerial spraying
Widespread of banana
disease (fusarium wilt of
banana)
Poor farm-to-market roads
Hiring
of
plantation
supervisors who are not
known to the workers often
resulted to insubordination.
Opportunities:
Vast land in the ARMM is
ideal for Cavendish
cultivation
Technology to preventing
and managing diseases are
available
LGU is willing to co-share in
the construction and/or
improvement of farm-tomarket roads.
Approaches
growers and
cooperatives/association of
growers and exporters.
PRDP I-REAP and I-SUPPORT
programs:
DA-PRDP, DA-HVCDP and
concerned MLGUs must
established a task force,
composed of representatives
of national and local
agencies, PBGEA, and
MBGEA, to conduct a
massive information drive
particularly involving small
growers so that any
occurrence can be
immediately contained of
diseases in bananas.
Who can do it?
Public
Private
good
Financing
agricultural
practices
NIA
Provision of
irrigation
system
LGUs
Technical
assistance
Institutional
development
Land use
necessary technical support
for Social and Environment
Safeguards to laborers in the
Cavendish banana industry in
Maguindanao.
DA-HCDP to create the
banana research and
development institute, an
agriculture-research body
that will be able to address
the technology-related
problems the industry is
facing.
LGUs in coordination with
DA-HVCDP to identify specific
areas for expansion.
DA-HVCDP to coordinate
with NIA for the provision of
irrigation to expansion areas
for plantation of Cavendish
DA-PRDP through i-BUILD
program and LGUs to
improve/upgrade and
54
Consolidation/Packing
Constraints:
Limited capacity of
postharvest facilities
caused by
underinvestment.
Opportunity:
Improved postharvest
facilities reduces costs
related to consolidation/
packing and marketing and
distribution
Marketing/distribution
Constraints:
Inefficient port (PPA
controlled) services
Opportunities:
PPA’s ports in Sasa, Davao
City and in Makar, General
Santos City are being
Approaches
maintain farm-to-market
roads specifically in the
existing production areas and
in the proposed identified
expansion areas.
Who can do it?
Public
Private
DA-PRDP I-BUILD Program:
postharvest infrastructure to
facilitate
consolidation/packing of
by small growers or
cooperatives of growers. The
concerned MLGUs must at
least provide the necessary
20% counterpart for the
construction of post-harvest
facilities.
DA-PRDP
Technical and
financial
assistance
DA-PRDP i-reap:
DA-PRDP, DA-HVCDP,
PHILMECH and MLGUs to
establish a capacity building
program designed to provide
the needed knowledge and
skills in proper
handling/packing of
Cavendish banana following
the international standards,
and to provide business
development technical
assistance and support to
small growers/consolidators
in order to access the export
market.
LGUs
Technical
assistance
Institutional
development
Land use
DA-PRDP I-BUILD program:
postharvest infrastructures
that will facilitate
consolidation/ packing of
by small growers or
cooperatives of growers.
The concerned MLGUs must
at least provide the
necessary 10% counterpart
DA-PRDP, DAHVCDP
Technical and
financial
assistance
Multinational
Companies/coo
peratives
Market
information
DA-BPI-PQS,
BoC
Technical
assistance, and
regulations
Banks/lending
institutions
Access to
financing
DA-HVCDP, DABPI-PQS and
DOST
Technical
assistance on
food handling
and safety
Regulation of
exportations
Multinational
Companies/
cooperatives
Technical
assistance for
capacity
enhancement
Marketing and
promotion
Banks/lending
institutions
Access to
financing
55
proposed for privatization
to enhance its operation.
There is a huge potential
for expanding the existing
markets of Cavendish
banana producers of
Maguindanao in countries
of Asia and Middle-East.
provides mechanism on
trade and commerce with
autonomy from Central
Government of the
Philippines
Approaches
for the construction of postharvest facilities.
DA to request for the
amendment of EO 554 to
allow the DA-BPI to charge
full cost for the phytosanitary
certification services, while
ensuring that inspectors
remain fully compensated for
overtime and reimbursed of
expenses.
Who can do it?
Public
Private
DTI
Marketing
matching
Market
information
LGUs
Technical
assistance
Institutional
development
DA-PRDP, DA-HVCDP, and
concerned MLGUs to support
the efforts of PPA in the
immediate privatization of
Sasa Wharf in Davao City and
Makar Wharf in General
Santos City to enable
modernization of physical
and soft infrastructure. And
review BOC’s E2M system to
allow for corrections in
papers should these be
required.
Interfirm relations/supply chain governance
Constraint:
Develop peace building
DA-PRDP
Presence of
program to conflicted areas
- Technical and
insurgency/rebellion and
designed addressing poverty
financial
incidence of extortions.
through productive
support
agriculture.
Opportunity:
LGUs
- Relationship
building
provides mechanism to
support
resolve the peace and
order problem in
PNP/ AFP
Mindanao
- Peace and
security
Cooperatives/g
rowers/
multinational
companies
- Relationshi
p building
support
56
Section 9: Conclusions and Recommendations
Cavendish banana exports had been controlled for a long time by multinational companies in
Mindanao with limits on hectarage of banana for export in place until 2008. These multinationals and
their partner local corporate farms were and are very capable of accessing the most important
productivity-enhancing technical and physical innovations for the industry.
The main government support for Cavendish is by way of policy through DA-PRDP I-REAP Program.
This will include the accreditation of exporters, and trade promotion assistance in the negotiation for
and monitoring of markets undertaken jointly by the DTI, DA and DFA. DA-PRDP through its I-BUILD
program in partnership with the Provincial Government of Maguindanao shall implement
construction/improvements of farm-to-market.
The implementation of agrarian reform mandated in 1986 as well as the lifting of the limits on
hectarage for export bananas in 2008 pave the way for the emergence of many small growers and
exporters operating in and surrounding the areas traditionally planted to bananas, taking advantage
of the exporting infrastructure already in place. These small exporters and growers, unlike the big
corporations, need help accessing financing and technology for sustaining productivity and export
market access. Some problems of these small players, like pest and disease management and quality
consistency, could affect the whole industry if not attended to or left unresolved.
To make Maguindanao competitive in the Cavendish banana export industry, the government in
partnership with private-sector industry players must focus on addressing issues with following
interventions:
1. Address the peace and order situation in the identified expansion areas. The proposed
Bangsamoro Basic Law provide mechanism on peace development;
2. Establish postharvest facilities in the identified expansion areas;
3. DA to request for amendment of EO 554 to allow the DA-BPI to charge full cost for the
phytosanitary certification services, while ensuring that inspectors remain fully compensated for
overtime and reimbursed of expenses;
4. DA and PLGU of Maguindanao to support the immediate privatization of Sasa Wharf in Davao City
and Makar Wharf in General Santos City, in a form of a letter or position paper, to enable
modernization of physical and soft infrastructure;
5. DA-PRDP to provide the necessary technical support for Social and Environment Safeguards (SES)
to laborers in the Cavendish banana industry in Maguindanao;
6. DA to initiate for the review BOC’s E2M system to allow for corrections in papers should these be
required; and
7. Provide market information and market linkages for small growers to access the export market.
57
Annex A
List of Cavendish Banana Value Chain Players
Name of Company
Input Providers/Producers/Trader/Distributor
1
La Frutera, Inc.
2
Alip River Development Export Corporation (ARDEXCOR)
3
Delinanas Development Corporation
4
Paglas Corporation
Address
Paglas Estate, Brgy. Digal, Buluan Maguindanao, ARMM,
Datu Paglas, Maguindanao, ARMM
Datu Abdullah Sangki Municipality, Maguindanao, ARMM
Datu Paglas, Maguindanao
Contact No.
(082) 286-1032
58

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