Vca Of Banana Cardava (mindanao).pdf 5h285e

PHILIPPINE RURAL DEVELOPMENT PROJECT (PRDP) I-PLAN Component Mindanao Cluster

VALUE CHAIN ANALYSIS AND COMPETITIVENESS STRATEGY: CARDAVA BANANA Mindanao

DEPARTMENT OF AGRICULTURE Mindanao Regions MB/II.- CARDAVA VCA STUDY, DA-PRDP- MINDANAO CLUSTER

October 2014

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CONTENTS CONTENTS

Page

EXECUTIVE SUMMARY

6

Section 1: INTRODUCTION

10

A.

Background Information and Objectives

10

B.

VCA Objectives

11

C.

Methodology and Approach

12

Section 2: OVERVIEW OF THE INDUSTRY

13

A.

Production Description

13

B.

Production Trends

15

Section 3: NATURE AND STRUCTURE OF INDUSTRY

28

A.

Value Chain Mapping

28

B

Key Players and Function

34

C.

Nature of Interfirm Relationship

42

D.

Price and Cost Structure

44

Section 4: MARKETS AND MARKET OPPORTUNITIES

49

A.

Markets and Market Trends

49

B.

Price Trends

54

Section 5: SERVICES

56

A.

Financial Services

56

B.

Non-Financial Services

56

Section 6: ENABLING ENVIRONMENT

58

A.

Formal Rules, Regulations, and Policies

58

B.

Informal Rules and Socio-Cultural Norms

58

Section 7: CONSTRAINTS AND OPPORTUNITIES

60

Section 8: COMPETITIVENESS DIRECTIONS

66

A.

Competitiveness Vision

66

B.

Priority Constraints/Opportunities and Interventions

67

Section 9: CONCLUSIONS AND RECOMMENDATIONS

81

Annex 1, 2, 3, 4, 5, AND 6: PRIORITIZATION OF INTERVENTION STRATEGY PER REGION

82

MB/II.- CARDAVA VCA STUDY, DA-PRDP- MINDANAO CLUSTER

1

LIST OF TABLES No.

Title

Page

1

Key Cardava Products Traded in Mindanao

15

2

World production of Banana, 2009 and 2013

15

3

Breakdown of Banana Production (In MT) by Genotypes: 2010

16

4

Cardava Production in the Philippines by Region ranked according to Volume, 2013

18

5

Top Ten Cardava Producing Provinces in the Philippines, 2013

19

6

Cardava Production Trends in Zamboanga Peninsula, 2009 to 2013

21

7

Cardava Production Trends in Northern Mindanao, 2009 to 2013

22

8

Cardava Production Trends in Davao Region, 2009 to 2013

23

9

Cardava Production Trends in SOCCSKSARGEN, 2009 to 2013

25

10

Cardava Production Trends in CARAGA, 2009 to 2013

26

11

Cardava Production Trends in ARMM, 2009 to 2013

27

12

Banana Chips Exporters in Mindanao

38

13

First Fry Facilities and Subcontractors in Mindanao

40

14

Indicative Costs and Return for 1 hectare of Cardava Banana

44

15

Relative Financial Position of VC Players: 1 kilo of fresh banana

47

16

Relative Financial Position of VC Players: 1 kilo of banana chips

47

17

Volume and Value of Banana Chips Exports, 2007 to 2011

50

18

Size Classification of Cardava Banana

51

19

Banana Shipments from Mindanao, 2009

53

20

Farm Gate Price of Cardava in Mindanao Regions, 2009 to 2013

55

21

Constraints and Opportunities

60

22

Summary of Constraints/Opportunities and Interventions

79


2

LIST OF FIGURES No.

Title

Page

1

USES AND BY-PRODUCTS OF CARDAVA BANANA

13

2

BANANA GENOTYPES AND CONSUMPTION GROUPS

17

3

PERCENTAGE BREAKDOWN OF BANANA PRODUCTION IN THE PHILIPPINES BY GENOTYPE, 2013

18

4

BREAKDOWN OF BANANA PRODUCTION IN THE PHILIPPINES BY ISLAND GROUP, 2013

20

5

PERCENTAGE BREAKDOWN OF BANANA PRODUCTION IN MINDANAO REGIONS BY GENOTYPE, 2013

20

6

VALUE CHAIN MAP FOR FRESH CARDAVA FOR RETAIL MARKETS

28

7

FLOW OF CARDAVA FROM MINDANAO TO KEY URBAN CENTERS

29

8

TYPICAL MODE OF DELIVERY TO BUYING STATIONS IN MINDANAO

29

9

VALUE CHAIN MAP FOR PROCESSED BANANA

30

10

COLLECTION OF CARDAVA FROM BUYING STATION IN MAGUINDANAO FOR DELIVERY TO DAVAO BANANA CHIPS EXPORTER

31

11

FLOW OF CARDAVA TO PROCESSOR-EXPORTERS

31

12

VALUE CHAIN MAP FOR CARDAVA SNACK FOOD

32

13

BANANA CUE VENDOR BUYING CARDAVA FROM A PROCESSING PLANT

33

14

GEOGRAPHIC FLOW OF CARDAVA

33

15

PHILGAP CERTIFIED CARDAVA FARM IN DAVAO DEL SUR

35

16

EXAMPLE OF A WELL-MAINTAINED CARDAVA FARM IN DAVAO DEL SUR

36

17

TYPICAL BUYING STATIONS IN MINDANAO

37

18

CARDAVA REJECTS AT BUYING STATION

37

19

KEY PROCESSES IN BANANA CHIPS PRODUCTION

39

20

CARDAVA SNACK FOOD INDUSTRY

41

21

RELATIVE FINANCIAL POSITION OF VC PLAYERS: FRESH CARDAVA TO MANILA MARKET

46

22

RELATIVE FINANCIAL POSITION OF VC PLAYERS: BANANA CHIPS FOR EXPORT MARKET

48

23

AVERAGE PERCENTAGE SHARE TO EXPORT SALES BY KEY DESTINATION COUNTRIES, 2007 TO 2011

49

24

COMMON QUALITY PROBLEMS ENCOUNTERED BY PROCESSORS/CONSOLIDATORS

52

25

AVERAGE FARM GATE PRICE OF CARDAVA IN MINDANAO REGIONS, 2009 TO 2013

54

26

SYNTHESIS OF COMPETITIVENESS VISION 2014-2020

66


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ACRONYMS ACEF AC ACCESS AFMP AMCFP ASEAN ARC ARMM BAFPS BACs BAS BAPC BFAD BSWM BPI DA DA-BAR DENR DOH DOST DTI FAO FEP FGD GAP GBEs GATT GMP ha IQF KII LBP LGU MFIs MFI MLGU MRDP MT NCCAP PCIP

Agricultural Competitiveness Enhancement Fund Agricultural Credit Policy Council Accelerating Change in the Countryside thru Equity Sharing Strategy Agri-Fishery Microfinance Program Agro-Industry Modernization Credit Finance Program Association of Southeast Asian Nations Agrarian Reform Communities Autonomous Region in Muslim Mindanao Bureau of Agricultural and Fisheries Product Standards Bank-Accredited Cooperatives Bureau of Agricultural Statistics Bukidnon Agricultural Productivity Center Bureau of Food and Drugs Bureau of Soils and Water Management Bureau of Plant and Industry Department of Agriculture Department of Agriculture Bureau of Agriculture Research Department of Environment and Natural Resources Department of Health Department of Science and Technology Department of Trade and Industry Food and Agriculture Organization Farmer Entrepreneurship Program Focus Group Discussion Good Agricultural Practices (Global GAP) Grading and Bailing Establishments General Agreement on Tariffs and Trade Good Manufacturing Practices Hectare(s) Individually Quick Frozen Key Informant Interview Land Bank of the Philippines Local Government Unit Micro Financing Institutions Most Favoured Nation Municipal Local Government Units Mindanao Rural Development Program Metric Tons National Climate Change Action Plan Provincial Commodity Investment Plan


4

PDP PLGUs PRDP PSA RCEP SAS SOCCSKSARGEN SUCs VCA WII

Philippine Development Plan Provincial Local Government Units Philippine Rural Development Project Philippine Statistics Authority Regional Comprehensive Economic Partnership Sustainable Agriculture Standard South Cotabato, Cotabato, Sultan Kudarat, Sarangani and General Santos City State Universities and Colleges Value Chain Analysis Weather-based index


5

EXECUTIVE SUMMARY This report provides an overview and analysis of the Cardava industry in Mindanao with the aim of identifying main leverage points and key strategies to improve competitiveness and promote development in a pro-poor and sustainable manner. It will provide the basis for the formulation of the Provincial Commodity Invest e t Pla a d ill la the fou datio fo P‘DP s oope atio ith the private sector and other government agencies active in the Cardava industry. Bananas are generally classified into two main categories: cooking bananas and dessert bananas. Cooking bananas are categorically known as balbisiana cultivars. There are numerous cooking banana cultivars such as the Cardava, Abutan, Inabaniko, Turangkog, Sabang puti, Mundo, Gubao, Saba sa Hapon and Bigihan. However, the most common cultivar in the Philippines with both social and economic importance is the Cardava or Saba. Same as with the dessert banana, Cardava is rich in carbohydrates. It is, however, less valued as a fresh product even when mature, as it still contains starch at this stage. The Cardava is consumed necessarily cooked, whether green or ripe. In some cases, Cardava is consumed as an alternative staple food in lieu of rice. The Cardava can be processed into various product forms such as chips, sauce, flour, and made into snacks. To date, the most dominant s of Cardava are the banana chips industry, snack food subsector, and home consumption for the preparation of various traditional Filipino desserts and dishes su h as the po he o . The banana chips industry requires the processed grade Cardava while those intended for home consumption would generally be medium to jumbo sizes. Small ripe bananas go to the snack food market. In a way, the varying requirements of these three dominant s provide markets for different qualities and sizes of banana. The Philippines is the only producer of Cardava banana. Other countries such as Thailand, Indonesia, Ecuador, and African nations have their own local cooking banana varieties. There are ambiguities with regards to production statistics on the cooking bananas. The FAO statistics distinguish between a a a a d pla tai ut it is ot lea hat these t o te s o e . The ost i di ati e statisti s on cooking bananas is from Lescot (2010) of Fruitrop/CIRAD Market News Service. Based on the 2010 statistics, cooking bananas which included plantains (under CIRAD categorization) comprised 41% of total world banana production. The Philippine Cardava or Saba variety ed for about 6% of the estimated 47,208,190 MT cooking banana world production in 2010. In the Philippines, Cardava is grown nationwide. According to the Bureau of Agricultural Statistics (BAS)/Philippine Statistics Authority (PSA), the country produced 2,556,986.07 MT of Cardava, cultivated in 183,479.01 hectares. The top three Cardava producing regions in the Philippines in 2013 were Davao Region, SOCCSKSARGEN, and Northern Mindanao. National average yield in 2013 was 13.94 MT per hectare. The top 3 high yielding regions in Philippines are SOCCSKSARGEN (36.77 MT/ha), Davao Region (24.21 MT/ha), and Northern Mindanao (22.61 MT/ha). Except for Caraga and ARMM, regions in Mindanao had higher productivity than the rest of the Philippines. It is possible for farm yields to be from 50 to 80 kilos/bunch with the combination of improved pest control management, use of clean planting materials (tissue, cultured) and appropriate fertilizer application. MB/II.- CARDAVA VCA STUDY, DA-PRDP- MINDANAO CLUSTER

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Mindanao regions ed for 60% of the national Cardava production. The top 2 cardava producing provinces in Mindanao and in the Philippines in 2013 were North Cotabato with 272,733.03 MT and Davao del Sur 271,165.41 MT. Cardava comprised about 21.7% of Mindanao s overall banana production. Total production in Mindanao in 2013 decreased by 7% over 2012 performance. Among Mindanao regions, Davao had the highest percentage of decrease in production with an average of 3.09% per year, mainly due to typhoon Pablo devastation and Pa a a u tok disease, ith Co postela Valle as the ost affe ted a ea ith a d a ati decrease of 52% in its production volume from 152,903.96Mt in 2012 to 74,201.17MT in 2013. On the other hand, SOCCSKSARGEN ed a steady average growth of 2.28% annually. In Zamboanga Peninsula and Caraga, Cardava comprised a higher percentage of the banana production while in ARMM, quantity of Cavendish and Cardava production in 2013 was almost of the same level. Davao Region, Northern Mindanao, and SOCCSKSARGEN produced more Cavendish than Cardava in 2013. It would seem that areas with significant number of Cavendish banana plantations had higher yields than areas that were predominantly producing Cardava. There are basically two types of Cardava production system in Mindanao. The first one is the backyard production, which is the more prevalent system in Mindanao. Under this system, Cardava banana is grown in backyards of rural households and in small farms. Size of farms under this system ranges from 0.25 to 1 hectare. The second system employed by farmers is the intercropping or mix crop production. In this system, Cardava banana can be a primary or secondary crop or planted together with dessert bananas. Farms classified under this system range from 1 to 3 hectares. Traders perform the important tasks of negotiating, collecting, sorting, and transporting. Traders also act as financiers in the chain. There are the different types of traders depending on their scope of operations: Agents/Local Traders/Buying Stations; Assemblers/Consolidators; Consignee; Jobbers/Wholesalers: Although there is an increasing number of medium and high end restaurants serving Cardava based snacks by giving it a twist (e.g., serving with ice cream, mixing relatively expensive ingredients), the biggest segment engaged in the preparation and retail sales of maruya, turon, and banana cue are the microprocessors and the street food vendors. The street food vendors are important market channels particularly for matured bananas (undersize/over size). A vendor purchases from 300 to 1,000 kilos per month depending on location. Vendors source their bananas from farmers, traders, and the wet markets. Nationwide, there are about thirty-five banana chips exporters. Twenty-five companies are located in Mindanao and, of which, twenty-one (21) have their factories in Davao Region (DTI RODG Study). About 60% of the 25 exporters have production capacity of more than 50 tons per day. Processors, especially the big companies, indicated that they are only able to utilize 60% to 80% of their capacity due to difficulties in sourcing Cardava. Some exporters also tried ing first fry facilities but only a few have been successful. For a first frying facility to be viable, it should have a wide base of suppliers of Cardava and a production capacity of at least 4 tons daily. Exporters are generally willing to provide some assistance (e.g., supply of coco oil, technical assistance), but only after the facility has proven its reliability and trustworthiness. More farmers especially in Davao Region and SOCCSKSARGEN are taking on more functions in the chain such as collective marketing and training services. The more established cooperatives have ventured into first frying operations. Agrarian reform communities are generally into the production of banana chips for the local market. Cooperatives linked to lead firms (e.g., processors, assemblers) MB/II.- CARDAVA VCA STUDY, DA-PRDP- MINDANAO CLUSTER

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appear to be more successful in scaling up their operations than those who are trying to penetrate on their own the banana chips retail market Marketing relationships between traders and farmers are informal and characterized by the concept of the suki s ste o pe so alized e o o i elatio s. The suki s ste , hi h is si ila to the preferred supplier-buyer relations, proliferated in efforts to find ways to minimize risks and vulnerabilities to opportunistic behaviour and cheating (both trader and farmer). Players see the a ket as ho oge ous a d i te s of the e t a to i the hai —the person who bought their produce. Traders, on the other hand, are often reluctant to share information on where products are sold. Compliance with product and process standards is weak. To date, there is now openness among processors to develop longer-term and more collaborative relationships with farmers. The big processors are incrementally integrating backwards into farming communities especially those who can offer them specific advantages such as big volume, organic/natural farming, and consistent quality. Main Cardava-based product that is currently exported is the banana chips. There are three main market segments for banana chips, namely: a) the food processing market; b) the retail market; and c) the catering market. The food processing market is by far the largest segment for the banana chips, thus putting pressure on prices. During the recent years, Vietnam has become a transshipment point for banana-chip exports to China. Vietnam benefits from the trade as it enjoys advantageous tariff rates due to bilateral pacts with China. Some Chinese buyers prefer to buy first fry chips and have these processed further in Vietnam. The big European import companies order an average of 25 40 footer containers of banana chips per year per company while medium and small importers order in average 10 40 footer containers per year per company. They shift between Thailand and Philippine suppliers. Although the Philippines has remained the leading exporter of banana chips, competition is also intensifying from countries like Vietnam, Thailand, and Malaysia in key export markets. Markets are increasingly concerned with the specifications of both products and processes further back along the value chain in a number of different ways: a) quality and safety - based upon product and process controls: b) conformance with social and environmental standards; c) traceability and authenticity; d) reliability and guaranteed supply in order to avoid stock outs; e) just-in-time delivery; and f) product differentiation and innovation as a means of adding value and margins. About 62% of total available supply or an average of 600,000 to 800,000 MT are sold in the domestic market. Mindanao banana (all types) production for the domestic market goes to Cebu and MetroManila largely through ports in Cagayan de Oro, Agusan, Ozamis, Iligan, and Surigao. Based on 2009 data, about 73% of the banana shipped out of Mindanao seaports originated from the port in Cagayan de Oro. To sustain and grow the world market for Cardava, the i dust s isio of eati g lo g-term competitiveness and sustainability centers on the establishment of an efficient and integrated supply chain management geared towards the achievement of the following: a) Adequate supply and widespread use of tissue cultured planting materials to minimize risks of pest and disease infestation and, consequently, ensure stable supply of Cardava b)

Improved access to, availability, use, and utilization of organic fertilizer and other inputs appropriate for Cardava banana farming while reducing environmental costs


8

c) Enhanced flow and quality of extension services for Cardava farming to facilitate adoption of GAP for improved productivity and product quality d) Improved access to GMP compliant postharvest and distribution technologies and facilities to reduce postharvest losses and maintain product quality e) Availability and access to improved processing technologies, product development services, and GMP and Halal compliant common service facilities to facilitate the production of commercially viable Cardava-based products f)

Improved physical/infrastructure linkages to input, , and product markets


9

Section : INTRODUCTION A. BACKGROUND INFORMATION AND OBJECTIVES1 The agricultural sector strategy (Agri-Pinoy) embodied in the Philippine Development Plan (PDP) for 2011-2016 advances the principles of inclusive growth, food staple sufficiency, natural resource management and area-based development. Agri-Pinoy also includes the following new strategies: (i) institutionalizing regionally-based, 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 Agri-Pinoy 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. The Philippine Rural Development Program (PRDP), a flagship program of the Department of Agriculture (DA), is aligned with the Agri-Pinoy strategy. It is a six-year program (2013-2019) desig ed to esta lish the go e e t s platfo fo a ode , li ate-smart and market-oriented agri-fishery sector. 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:   

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:    

I-PLAN: Investment for AFMP Planning at the 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-: Implementation to PRDP

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 platform for promoting inclusive, climate resilient, and sustainable growth in key agricultural subsectors and value chains. The Cardava banana is one of the selected priority products on which the PRDP will concentrate during Year 1 of PRDP implementation. Cardava s for 41% of the land area planted to banana in the Philippines. Export industry is concentrated in Mindanao with Cardava as one of the most important raw materials. The Cardava is among the three cultivars included in the Banana Industry Cluster, which is among the top priority clusters being promoted and ed by the government under the National Convergence Initiative (NCI).

1

Overview of PRDP was taken from the Program Information Document – World Bank website


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The Cardava is economically and socially important for many sectors in Mindanao for the following key reasons: a) For the thousands of Cardava banana farmers, a Cardava plant is the equivalent of having money grown on trees. Banana is fast-growing fruit crop that starts fruiting in 8 to 12 months from field-planting. With minimal expenditures on inputs or other care, a household can harvest a small number of bananas on a weekly basis, bring them to a market for sale and use the proceeds to buy food, i.e. the very definition of food security. b) Cardava is the ai a ate ial fo To date, demand exceeds supply.

a a a hips hi h is a o g the ou t

s top exports.

c) Thousands of street food vendors derive a significant portion of their income from selling Cardava-based snack food. d) It is one of the important sources of food in the rural areas. Cardava banana is often used to extend, supplement or substitute staple food such as rice and corn. Banana may be the new potatoes in the future. A research carried out by CGIAR agricultural partnership says that bananas may replace potatoes in some developing nations as a result of climate change. An enterprise in Davao has started the promotion of banana fries both in the local and export market. e) Almost every part of the Cardava banana can be economically utilized. The inflorescence is consumed as vegetable. The peels can be made into patties and can be a good substitute for meat. The leaves are used as wrapping and decorative materials. The pseudo stem is chopped finely, cooked and used as feed for livestock. Waste materials can be composted and processed into organic fertilizer. f)

It can be grown in marginal areas and has low input requirements.

B. OBJECTIVES OF THE VCA The decision to shift to a Mindanao cluster level value chain analysis was borne out of the need for the six regions to tly exploit the trade potentials of Cardava banana in the domestic and export markets. The cluster approach also recognizes that the 6 regions in Mindanao are interdependently linked with each other in various functions in the chains particularly with regards to inputs markets and distribution or marketing of Cardava. The cluster level approach to value chain analysis also hopes to bring cohesiveness into the various Cardava development initiatives that would be undertaken on a provincial basis. This report provides an overview and analysis of the Cardava banana value chain with the aim of ide tif i g ai le e age poi ts a d ke st ategies to i p o e Mi da ao s o petiti e ess a d promote development in a pro-poor and sustainable manner. It will provide the basis for the formulation of the Provincial Commodit I est e t Pla a d ill la the fou datio fo P‘DP s cooperation with the private sector and other government agencies active in the Cardava industry. Specifically, the value chain analysis aims to: a) Provide an in-depth understanding of the range of factors and relationships that affect the performance of the Cardava industry in Mindanao, including end markets, enabling environment and coordination/cooperation among firms. MB/II.- CARDAVA VCA STUDY, DA-PRDP- MINDANAO CLUSTER

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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 catalyze private and public sector stakeholders in the Cardava industry to collaborate for improved industry performance

C. METHODOLOGY AND APPROACH An initial desk study was conducted to collect and summarize information from currently available reports and studies. It provided guidance to issues that needed to be the focus of field research. The field work component of the study was conducted using qualitative research techniques particularly value chain analysis workshops, key informant interviews (KII), and focus group discussions (FGDs). Key informants and participants to the workshops and FGDs consisted of farmers, traders, processors, exporters, and representatives from relevant government agencies. Key informant i te ie s e e used fo olle ti g data o i di iduals pe spe ti es, e pe ie es, a d ua titati e data. FGDs were effective in generating broad overviews of issues of concerns to the groups or subgroups represented and in the triangulation/vetting of information obtained from the KII. Constraints and interventions were identified and further elaborated based on iterative and inductive analysis of responses during the KII and FGD/Stakeholders Workshop primarily from the following perspectives: 

Context of key informants and FGD participants



Third party observations (e.g., government agencies, providers, VC facilitators with experience in Cardava VC development projects, etc.) were important for suggesting important issues to explore and for substantiating the results of the company interviews



Past assessment studies of the Philippine Cardava banana industry

Competitiveness is generally defined as the ability to efficiently produce goods (and services) for which there is high demand that leads to increased income generation capacities that are sustainable in the future. Strategy is about choice --- choosing what to do to build competitiveness from a long list of viable and promising options. Given the competing and varied incentives and motivations among and between stakeholders and players, the process required iterative ranking and prioritization and arriving a consensus on what needs to be done within the next 5 years. The competitiveness strategies proposed in this report reflect the choices made as a result of extensive a al sis of the i dust s ke o st ai ts a d a dialogue ith stakeholde s a d pla e s.


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Section : OVERVIEW OF THE INDUSTRY A. PRODUCT DESCRIPTION Bananas are generally classified into two main categories: cooking bananas and dessert bananas. Cooking bananas are categorically known as balbisiana cultivars. There are numerous cooking banana cultivars such as the Cardava, Abutan, Inabaniko, Turangkog, Sabang puti, Mundo, Gubao, Saba sa Hapon and Bigihan. However, the most common cultivar in the Philippines with both social and economic importance is the Cardava or Saba. Unlike the Cavendish which is cultivated primarily by large plantations, Cardava is grown in backyards of rural households and in small farms. It can be cultivated in nearly all kinds of soil but deep and friable loam soil with good drainage and aeration offers higher production and better fruit quality. Areas with uniform warm and humid conditions with a minimum rainfall of 60 inches annually, whether through heavy and evenly spaced rainfall and a temperature between 27 and 30 degrees centigrade offers the most favorable condition for growing Cardava banana. Cardava bunches are big with 8 to 16 hands having 12 to 20 fingers per hand. The fruits are short and stubby and highly angular. The skin is thick and yellow when ripe. The flesh is white, starchy, and fine textured, making it ideal for cooking and processing.


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Same as with the dessert banana, Cardava is rich in carbohydrates. It is, however, less valued as a fresh product even when mature, as it still contains starch at this stage. The Cardava is consumed necessarily cooked, whether green or ripe. In some cases, Cardava is consumed as an alternative staple food in lieu of rice. The Cardava can be processed into various product forms such as chips, sauce, flour, and made into snacks. To date, the most dominant s of Cardava are the banana chips industry, snack food subsector, and home consumption for the preparation of various traditional Filipino desserts and dishes su h as the po he o . Banana chips are thin slices of banana which are deep-fried to become crispy. Chip products may be sweetened, honey-dipped, unsweetened, cinnamon- or chocolate-flavored and salted. Chips are available in various cuts such as whole, halves, quarters, diagonals, diced and broken cuts. These are consumed as a snack or used as ingredient for breakfast cereals, muesli, mixed fruits, and chocolates. Products are mainly geared for the export market. The most popular snacks made of Cardava a e the a a a ue hole f ied a a as dipped i brown sugar a d sold i a oo ske e s a d tu o f ied a a a sp i g olls . A othe popula Cardava-based snack is the a u a o a a a f itte s. These a e usuall o su ed as idafternoon snacks. The snack foods are sold via street vendors, school canteens, and restaurants. During the recent years, a Davao-based manufacturer has started exporting frozen turon and boiled banana to countries with significant Filipino and Asian population. A banana chips company in Davao has also expanded into individually quick frozen (IQF) snack products. The banana chips industry requires the processed grade Cardava while those intended for home consumption would generally be medium to jumbo sizes. Small ripe bananas go to the snack food market. In a way, the varying requirements of these three dominant s provide markets for different qualities and sizes of banana. Other by-products of the Cardava banana are the catsup, vinegar, and flour. In Lanao del Norte, one agrarian reform cooperative is engaged in the manufacture of catsup. Production though is still low and market is currently limited within the locality and neighboring provinces (via trade fairs). The puso o the da k ed i flo es e e of the a a a is also edi le. Aside f o ooki g the puso into the t aditio al gi ataa o kila i , it can also be made into vegetarian patties. Banana peels are traditionally used as feeds or converted into organic fertilizer. Another alternative use of banana peels is as meat substitute and extenders. It can also be utilized as a material for making paper and paper boards. The leaves are used as packing materials in markets and traditional wrappings of native dishes. While Davao Region is the main producer of banana chips, Northern Mindanao is the largest supplier of fresh Cardava for the retail markets and local Cardava based snack food in key urban areas in the Philippines. Although SOCCSKSARGEN has companies engaged in banana chips, a greater percentage of its production is sold fresh either to banana chips exporters or to traders dealing with the fresh retail market. Caraga also produces banana chips with a significant percentage geared for the export market. Maguindanao in ARMM is a key supplier of fresh banana for banana chips companies in Davao. Production in other provinces of ARMM is sold fresh in the local market. All of the regions in Mindanao have thriving Cardava-based snack food businesses consisting mainly of street vendors --- from ambulant vendors selling boiled bananas in bus stations to turon and maruya stalls near schools, parks, and malls. MB/II.- CARDAVA VCA STUDY, DA-PRDP- MINDANAO CLUSTER

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Table 1. Key Cardava Products Traded in Mindanao Region

Fresh Banana for Retail Market

Banana Chips

Snack Food (Local Market)

IQF Cardava Snacks (for Export)

Zamboanga Peninsula







Northern Mindanao







subcontractor

Davao Region









SOCCSKSARGEN







Caraga







ARMM







Legend 

Dominant



Secondary

Source: KII/FGD

Other by-products of the Cardava banana are the catsup, vinegar, and flour. In Lanao del Norte, one agrarian reform cooperative is engaged in the manufacture of catsup. Production though is still low and market is currently limited within the locality and neighboring provinces (via trade fairs). The puso o the dark red inflorescence of the ba a a is also edi le. Aside f o ooki g the puso i to the t aditio al gi ataa o kila i , it can also be made into vegetarian patties. Banana peels are traditionally used as feeds or converted into organic fertilizer. Another alternative use of banana peels is as meat substitute and extenders. It can also be utilized as a material for making paper and paper boards. The leaves are used as packing materials in markets and traditional wrappings of native dishes.

B. PRODUCTION TRENDS 1. Global Production Bananas (Musa spp.), including dessert banana, plantain, and cooking banana, are the eighth most important food crop in the world, and the fourth most important in the least developed countries (FAOSTAT, 2013). Bananas are produced in 135 countries and territories across the tropics and subtropics. The vast majority of producers are smallholder farmers who grow the crop for either home consumption or for local markets (less than 15% of the global production of more than 100 million MT is exported). The international banana export trade (17 million MT approximately) is worth some US$ 7 billion per year.


15

Table 2. World production of Banana, 2009 and 2012 Country

Volume (MT) 2009

% Share

World

100,223,702

100%

India

26,469,500

Philippines

Country

Volume (MT) 2012

% Share

World

101,992,743

100%

26.41%

India

24,869,490

24.38%

9,013,186

8.99%

China

10,845,265

10.63%

China

9,006,454

8.99%

Philippines

9,225,998

9.05%

Ecuador

7,637,324

7.62%

Ecuador

7,012,244

6.88%

Brazil

6,783,482

6.77%

Brazil

6,902,184

6.77%

Indonesia

6,373,533

6.36%

Indonesia

6,189,052

6.07%

Tanzania

3,006,400

3.00%

Angola

2,991,454

2.93%

Guatemala

2,544,240

2.54%

Guatemala

2,700,000

2.65%

Mexico

2,232,361

2.23%

Tanzania

2,524,740

2.48%

Colombia

1,993,759

1.99%

Mexico

2,203,861

2.16%

Others

25,163,463

25.11%

Others

26,528,455

26.01%

Source: FAOSTAT (updated)

World banana production increased from 100,223,702 MT in 2009 to 101,992,743 MT in 2012. With the sig ifi a t i ease i Chi a s p odu tio , Philippines dropped from being the 2nd largest producer in 2009 to 3rd place in 2012. India remains the top producer of banana in the world. Philippines ed for about 9.05% of the global banana production in 2012. Philippine production increased from 9,013,186 MT in 2009 to 9,225,998 MT in 2012.

Table 3. Breakdown of Banana Production (In MT) by Genotypes: 2010 Region (World)

Cooking Banana

Dessert Banana

Total

Plantain (AAB)

Highland Bananas + ABB + others

Cavendish

Gros Michel +others

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 MB/II.- CARDAVA VCA STUDY, DA-PRDP- MINDANAO CLUSTER

16

The Philippines is the only producer of Cardava banana. Other countries such as Thailand, Indonesia, Ecuador, and African nations have their own local cooking banana varieties. There are ambiguities with regards to production statistics on the cooking bananas. The FAO statistics distinguish between a a a a d pla tai ut it is ot lea hat these t o te s o e . The ost i di ati e statisti s on cooking bananas is from Lescot (2010) of Fruitrop/CIRAD Market News Service. Based on the 2010 statistics, cooking bananas which included plantains (under CIRAD categorization) comprised 41% of total world banana production. The Philippine Cardava or Saba variety ed for about 6% of the estimated 47,208,190 MT cooking banana world production in 2010.

2. Domestic Production Based on BAS data, the country produced 8,645,748.66 MT of cardava in 2013 in 445,934.67 hectares of land, with Cardava ing for about 29% of national banana production, Cavendish (49%) and Lakatan (11%). Latundan and other cultivars ed for about 11%.


17

Cardava is cultivated in 183,479.01 hectares in 2013. Collectively, Mindanao ed for 41% of the area planted to Cardava. Total national production was reported at 2,556,986.07 MT. The top three Cardava producing regions in the Philippines in 2013 were Davao Region, SOCCSKSARGEN, and Northern Mindanao.

Table 4 . Cardava Production in the Philippines by Region ranked according to Volume, 2013 Region

Volume (MT)

Area (Ha)

Yield (MT/ha)

% Share to RP Volume

Philippines

2,556,986.07

183,479.01

13.94

100%

Davao Region

487,433.13

20,136.00

24.21

19.1%

SOCCSKSARGEN

356,727.43

9,702.00

36.77

14.0%

Northern Mindanao

295,655.65

13,076.00

22.61

11.6%

Cagayan Valley

255,377.19

15,792.00

16.17

10.0%

Western Visayas

203,869.72

18,929.00

10.77

8.0%

Eastern Visayas

169,426.82

14,646.80

11.57

6.6%

ARMM

145,612.72

15,173.50

9.60

5.7%

Zamboanga Peninsula

138,878.30

8,540.00

16.26

5.4%

Central Visayas

123,176.13

12,941.00

9.52

4.8%

Caraga

101,025.42

8,671.43

11.65

4.0%

Mimaropa

98,915.44

11,848.71

8.35

3.9%

Calabarzon

77,558.71

17,582.33

4.41

3.0%

Bicol Region

43,196.36

9,514.00

4.54

1.7%

Central Luzon

29,128.29

2,429.00

11.99

1.1%

Ilocos Region

21,451.93

3,144.23

6.82

0.8%

CAR

9,552.81

1,353.00

7.06

0.4%

Source: BAS/PSA


18

National average yield in 2013 was 13.94 MT per hectare. The top 3 high yielding regions in Philippines are SOCCSKSARGEN (36.77 MT/ha), Davao Region (24.21 MT/ha), and Northern Mindanao (22.61 MT/ha). Except for Caraga and ARMM, regions in Mindanao had higher productivity than the rest of the Philippines. It is possible for farm yields to be from 50 to 80 kilos/bunch with the combination of improved pest control management, use of clean planting materials (tissue-cultured) and appropriate fertilizer application.

Table 5. Top Ten Cardava Producing Provinces in the Philippines, 2013 Province

Volume (MT)

Area (Ha)

Yield (MT/ha)

% to RP Volume

North Cotabato

272,733

6,335

43.05

11%

Davao del Sur

271,165

6,685

40.56

11%

Isabela

160,271

8,620

18.59

6%

Lanao del Norte

153,414

3,860

39.74

6%

Maguindanao

90,879

8,138

11.17

4%

Samar

85,070

3,506

24.26

3%

Iloilo

80,393

7,275

11.05

3%

Compostela Valley

74,201

3,992

18.59

3%

Oriental Mindoro

73,988

6,770

10.93

3%

Davao Oriental

72,826

3,542

20.56

3%

Source: BAS/PSA

The following provinces in Mindanao were among the top producers of Cardava in the Philippines in 2013: a) North Cotabato - 272,733.03 MT; b) Davao del Sur - 271,165.41 MT, and; c) Lanao Del Norte - 153,414.20 MT. Davao del Sur caters primarily to banana chips exporters while Lanao del Norte sells to fresh retail markets in key urban areas. North Cotabato, on the other hand, is trying to penetrate the fresh retail market so as to have a more diversified base of buyers. Seven of the ten major producers of Cardava are provinces in Mindanao. These ten provinces ed for 53% of the Cardava production in 2013. Mindanao regions ed for 60% of the national Cardava production. Cardava comprised about 21.7% of Mindanao overall banana production. In Zamboanga Peninsula and Caraga, Cardava comprised a higher percentage of the banana production while in ARMM, quantity of Cavendish and Cardava production in 2013 was almost of the same level. Davao Region, Northern Mindanao, and SOCCSKSARGEN produced more Cavendish than Cardava in 2013. It would seem that areas with significant number of Cavendish banana plantations had higher yields than areas that were predominantly producing Cardava.


19


20

Zamboanga Peninsula A Cardava production in the region slightly decreased from 140,001.57 MT in 2009 to 138,878.30 MT in 2013. The steep decline in 2011 was caused by bugtok infestation primarily in Zamboanga del Norte. Despite the increase in area planted in cardava, yield and productivity in Zamboanga del Norte continued to be in a declining trend. Average yield decreased by an average of 6.29% per year. Zamboanga del Norte though remains the top cardava producing province in the region. Zamboanga City ed positive growth rate during the last five years. It had the 2nd highest production volume in 2013 and the highest average yield 22.50 MT per hectare. Increase in production volume can be primarily attributed to increase in productivity. There was no significant increase in area planted between 2009 to 2013. Production Trends in Zamboanga Peninsula, 2009 to 2013 Table 6.- Cardava Production Trends in Zamboanga Peninsula, 2009 to 2013 Indicators

2009

2010

2011

2012

2013

Annual % Growth Rate

ZAMBOANGA PENINSULA Volume

140,001.57 143,631.06 131,130.80 131,883.57 138,878.30

-0.16%

Area Planted

8,351.00

8,399.00

8,541.00

8,550.00

8,540.00

0.45%

Average Yield

16.76

17.10

15.35

15.42

16.26

-0.60%

68,301.71

68,052.44

55,283.71

50,905.72

48,824.74

-5.70%

Area Planted

3,865.00

3,891.00

4,017.00

4,020.00

4,030.00

0.85%

Average Yield

17.67

17.49

13.76

12.66

12.12

-6.29%

22,602.33

25,877.33

25,613.83

29,699.39

37,164.87

12.89%

Area Planted

2,100.00

2,122.00

2,125.00

2,070.00

2,048.00

-0.50%

Average Yield

10.76

12.19

12.05

14.35

18.15

13.72%

12,545.47

12,244.13

12,390.15

12,708.33

12,906.76

0.58%

Area Planted

625.00

625.00

634.00

685.00

685.00

1.92%

Average Yield

20.07

19.59

19.54

18.55

18.84

-1.23%

36,552.06

37,457.16

37,843.11

38,570.13

39,981.93

1.88%

Area Planted

1,761.00

1,761.00

1,765.00

1,775.00

1,777.00

0.18%

Average Yield

20.76

21.27

21.44

21.73

22.50

1.68%

Zamboanga del Norte Volume

Zamboanga del Sur Volume

Zamboanga Sibugay Volume

Zamboanga City Volume

Source: PSA/BAS


21

Northern Mindanao Table 7.- Cardava Production Trends in Northern Mindanao, 2009 to 2013 Indicators

2009

2010

2011

2012

2013


NORTHERN MINDANAO Volume

259,750.36 269,395.26 291,200.03 294,605.18 295,655.65

2.76%

Area Planted

12,831.00

12,972.00

13,084.00

13,080.00

13,076.00

0.38%

Average Yield

20.24

20.77

22.26

22.52

22.61

2.34%

21,000.00

20,970.00

20,915.00

20,875.00

20,770.00

-0.22%

Area Planted

1,630.00

1,630.00

1,630.00

1,629.00

1,630.00

0.00%

Average Yield

12.88

12.87

12.83

12.81

12.74

-0.24%

4,847.73

4,778.98

4,850.09

4,576.63

4,252.54

-2.46%

Area Planted

960.00

960.00

960.00

957.00

952.00

-0.17%

Average Yield

5.05

4.98

5.05

4.78

4.47

-2.31%

153,251.00 156,938.09 160,903.34 154,569.27 153,414.20

0.02%

Bukidnon Volume

Camiguin Volume

Lanao del Norte Volume Area Planted

3,803.00

3,803.00

3,860.00

3,860.00

3,860.00

0.30%

Average Yield

40.30

41.27

41.68

40.04

39.74

-0.27%

30,306.00

35,864.75

41,115.80

43,160.28

46,727.91

10.84%

Area Planted

2,149.00

2,190.00

2,245.00

2,245.00

2,245.00

0.89%

Average Yield

14.10

16.38

18.31

19.23

20.81

9.52%

50,345.63

50,843.44

63,415.80

71,424.00

70,491.00

8.00%

Area Planted

4,289.00

4,389.00

4,389.00

4,389.00

4,389.00

0.00%

Average Yield

11.74

11.58

14.45

16.27

16.06

9.66%

Misamis Occidental Volume

Misamis Oriental Volume

Source: PSA/BAS

During the period 2009 to 2013, Cardava production in Northern Mindanao increased by an average of 2.76% per year. Although still small, Cardava production consistently increased from 2009 to 2013. Misamis Occidental had the highest average growth rate at 10.84% followed by Misamis Oriental at 8%. Production in Lanao del Norte and Bukidnon seemed to have reached a plateau during the last 5 years. On the other hand, production from Misamis Occidental increased by an average of 18% per year. Lanao del Norte was the highest producing province at 153,414 MT ing for 51% of the total production. Misamis Oriental ranked second with a total production of 70,491.00 MT or 24% of MB/II.- CARDAVA VCA STUDY, DA-PRDP- MINDANAO CLUSTER

22

egio s p odu tio . Misa is O ie tal a ou ted fo % of the egio s p odu tio . Bukid o and Camiguin produced 20,770.00 MT and 4,252.54 MT respectively. In of average yield, Northern Mindanao ranked 3rd with 22.61 MT/ha, which is still quite low compared against the 36.77 MT achieved SOCCSKSARGEN. Lanao del Norte had the highest average yield at 39 MT per hectare. Misamis Occidental had the highest average annual growth rate in yield at 10% followed by Misamis Oriental at 7%. This was attributed to improvements in agronomic practices. Between the period 2009 and 2013, yield in Lanao del Norte and Bukidnon slightly decreased by about 1%. Camiguin had the lowest average yield at less than 5 MT per hectare. Davao Region Despite the significant decrease in production from 571,431Mt in 2012 to 487,433Mt in 2013, Davao Region is still the leading producer of cardava in Mindanao and in the country. Production in the region went down due to the devastation of farms caused by Typhoon Pablo and aggravated by infestation of bugtok and Panama diseases in 2012. During 2013 and 2014, the region focused on rehabilitation of affected farms. Davao Region is also the leading producer of banana chips. Davao del Sur has consistently been the top producer of cardava in the region and ed for 57% of the total production in the region in 2013. During the past years, the average yield has always been above 40 MT per hectare. Yield slightly declined during the recent years due to disease infestation. The province was able to minimize the spread of the disease through good agronomic practices. Compostela Valley, the second largest producing province in the Region, posted a huge decline in its production from 152,903 MT in 2012 to 74,201 MT in 2013. The province was among those that was badly damaged by Typhoon Pablo and the Panama infestation. USAID, in partnership with the Mindanao development Authority (MinDA), launched in 2013 the USD 5 Million Typhoon Pablo Disaster Recovery Assistance Plan to the rehabilitation and expansion of production areas of cardava and other crops. Table 8.- Cardava Production Trends in Davao Region, 2009 to 2013 Indicators

2009

2010

2011

2012

2013


DAVAO REGION Volume

576,522.91 579,464.55 582,529.14 571,431.00 487,433.13

-3.09%

Area Planted

21,866.00

21,943.00

22,150.00

22,165.00

20,136.00

-1.58%

Average Yield

26.37

26.41

26.30

25.78

24.21

-1.64%

44,748.41

45,377.26

47,041.37

47,724.47

47,720.46

1.33%

Area Planted

4,302.00

4,353.00

4,365.00

4,378.00

4,356.00

0.25%

Average Yield

10.40

10.42

10.78

10.90

10.96

1.06%

274,391.76 272,411.54 273,087.60 270,946.19 271,165.41

-0.24%

Davao del Norte Volume

Davao del Sur Volume Area Planted

6,680.00

6,680.00

6,685.00

6,685.00


6,685.00

0.01%

23

Table 8.- Cardava Production Trends in Davao Region, 2009 to 2013 Indicators

2009

2010

2011

2012

2013


DAVAO REGION Average Yield

41.08

40.78

40.85

40.53

40.56

-0.25%

69,448.40

73,182.00

76,104.75

78,162.65

72,826.01

0.97%

Area Planted

3,984.00

4,000.00

4,200.00

4,250.00

3,542.00

-2.22%

Average Yield

17.43

18.30

18.12

18.39

20.56

3.59%

165,699.68 166,082.75 164,230.82 152,903.96

74,201.17

-11.04%

Davao Oriental Volume

Compostela Valley Volume Area Planted

5,330.00

5,340.00

5,340.00

5,290.00

3,992.00

-5.02%

Average Yield

31.09

31.10

30.75

28.90

18.59

-8.04%

22,234.66

22,411.00

22,064.60

21,693.73

21,520.08

-0.64%

Area Planted

1,570.00

1,570.00

1,560.00

1562

1,561.00

-0.11%

Average Yield

14.16

14.27

14.14

13.89

13.79

-0.53%

Davao City Volume

Source: PSA/BAS

SOCCSKSARGEN SOCCSKSARGEN has been the only region that had a steady growth in all indicators. Production volume increased from 320,277.32 MT in 2009 to 356,727.43 MT in 2013. During the last five years, area planted to Cardava increased by 0.76% per year. Average yield also grew by 1.46% annually. SOCCSKSARGEN is the second largest producer of cardava in the country after Davao Region. North Cotabato contributed 77% of the egio s p odu tio , becoming the largest producing province in the country in 2013, ahead of Davao del Sur. In 2013, North Cotabato had the largest area planted with 6,335 hetares as well as the highest yield at 43.05Mt/ha. Among the provinces in the region, Sarangani posted the highest percentage increase in production in 2013 with an average increase of 6.24% pe ea . F o , MT i , “a a ga i s p odu tio i eased to , MT in 2013. It also had the second highest average yield at 40.62 MT per hectare. Sultan Kudarat, on the other hand, had the highest percentage decrease in production and the lowest average yield at 11.04 MT per hectare. South Cotabato had he third highest yield in the Region with 32.03 MT per hectare.


24

Table 9.- Cardava Production Trends in SOCCSKSARGEN, 2009 to 2013 Indicators

2009

2010

2011

2012

2013


SOCCSKSARGEN Volume

320,277.32 321,522.95 334,400.71 348,476.78 356,727.43

2.28%

Area Planted

9,346.00

9,296.00

9,421.00

9,333.00

9,702.00

0.76%

Average Yield

34.27

34.59

35.50

37.34

36.77

1.46%

255837.99 265,981.80 272,733.03

2.39%

North Cotabato Volume

243,628.10 246,169.66

Area Planted

5,950.00

5,960.00

5,960.00

5,975.00

6,335.00

1.29%

Average Yield

40.95

41.30

42.93

44.52

43.05

1.03%

28,794.44

28,524.15

31,587.00

35,884.00

37,780.00

6.24%

Area Planted

728.00

730.00

916.00

925.00

930.00

5.55%

Average Yield

39.55

39.07

34.48

38.79

40.62

0.54%

27,140.50

27,176.01

28,149.42

28,951.17

29,465.88

1.71%

Area Planted

893.00

906.00

910.00

916.00

920.00

0.60%

Average Yield

30.39

30.00

30.93

31.61

32.03

1.08%

20,714.28

19,653.13

18,826.30

17,659.81

16,748.52

-3.83%

Area Planted

1,775.00

1,700.00

1,635.00

1,517.00

1,517.00

-2.91%

Average Yield

11.67

11.56

11.51

11.64

11.04

-1.08%

Sarangani Volume

South Cotabato Volume

Sultan Kudarat Volume

Source: PSA/BAS

CARAGA Caraga is also in the process of rehabilitating the Cardava damaged by successive typhoons during the last two years. The region has also been hit by the Panama disease that affected all types of bananas in Mindanao. Land Bank of The Philippines has opened a window designed to help farmers fund the rehabilitation and/or expansion of their production areas. Agusan del Norte is the top producer of cardava in the region followed by Agusan del Sur and Surigao del Sur. Surigao had the highest average yield at 20.30 MT per hectare.


25

Table 10.- Cardava Production Trends in CARAGA, 2009 to 2013 Indicators

2009

2010

2011

2012

2013


CARAGA Volume

109,531.51 114,201.17 111,910.81 108,041.40 101,025.42

-1.55%

Area Planted

9,394.00

9,417.00

8,800.00

9,030.17

8,671.43

-1.54%

Average Yield

11.66

12.13

12.72

11.96

11.65

-0.02%

58,564.29

54,645.22

50365

43,486.11

39,176.00

-6.62%

Area Planted

3,315.00

3,305.00

3,300.00

3,275.00

2,750.12

-3.41%

Average Yield

17.67

16.53

15.26

13.28

14.25

-3.87%

16,432.95

23,784.83

29,030.05

35,321.08

31,249.05

18.03%

Area Planted

3,570.00

3,575.00

3,585.00

3,545.00

2,950.00

-3.47%

Average Yield

4.60

6.65

8.10

9.96

10.59

26.03%

6,787.00

7,483.32

6,842.55

5,204.21

6,541.37

-0.72%

Area Planted

804.00

802.00

680.00

680.00

1,786.31

24.44%

Average Yield

8.44

9.33

10.06

7.65

3.66

-11.32%

27,747.27

28,287.80

25,673.21

24,030.00

24,059.00

-2.66%

Area Planted

1,705.00

1,735.00

1,235.00

1,530.17

1,185.00

-6.10%

Average Yield

16.27

16.30

20.79

15.70

20.30

4.95%

Agusn del Norte Volume

Agusan del Sur Volume

Surigao del Norte Volume

Surigao del Sur Volume

Source: PSA/BAS

ARMM The region produced an average of 134,697 MT of Cardava per year, which made it as the fourth largest cardava producing region in Mindanao, yet is still the Region with the lowest average yield at 9.60Mt/ha. On the other hand, ARMM ed the highest average growth among the regions in Mindanao ing for 3.5% annually, with Maguindanao as the top producing province in the region. ARMM also managed to remain less affected by diseases and luckily free of typhoons and major natural calamities. Maguindanao contributed 62% to total production in the Region in 2013, while Tawi-tawi had the lowest contribution with 3%. Lanao del Sur with almost the same area planted in the past 5 years had the highest average yield in the region at 11.7Mt/ha, nonetheless, still way below leading producing province in Mindanao as well as the Mindanao´s average yield of 20.26 MT/ha in 2013. Basilan posted the lowest average yield in the region and in Mindanao with 3MT/ha.


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Table 11.- Cardava Production Trends in ARMM, 2009 to 2013 Indicators

2009

2010

2011

2012

2013


ARMM Volume

123,782.29 131,333.07 134,062.76 136,543.97 145,612.72

3.53%

Area Planted

14,493.00

14,621.45

14,989.50

15,165.00

15,173.50

0.94%

Average Yield

8.54

8.98

8.94

9.00

9.60

2.47%

14,556.84

14,531.95

14,814.03

14,122.55

13,516.75

-1.43%

Area Planted

3,739.00

3,739.00

3,739.00

3,815.00

3,824.00

0.45%

Average Yield

3.89

3.89

3.96

3.70

3.53

-1.84%

27,435.00

27,410.00

27,140.00

27,149.49

27,982.52

0.40%

Area Planted

1,200.00

1,200.00

1,200.00

1,300.00

1,300.00

1.67%

Average Yield

22.86

22.84

22.62

20.88

21.53

-1.17%

66,761.04

74,491.34

77,975.64

81,292.11

90,878.50

7.23%

Area Planted

7,591.00

7,750.00

8,137.50

8,138.00

8,138.00

1.44%

Average Yield

8.79

9.61

9.58

9.99

11.17

5.40%

10,877.11

10,830.80

10,030.00

10,028.00

9,414.25

-2.69%

Area Planted

1,600.00

1,570.00

1,550.00

1,550.00

1,550.00

-0.63%

Average Yield

6.80

6.90

6.47

6.47

6.07

-2.13%

4,152.30

4,068.98

4,103.09

3,951.82

3,820.70

-1.60%

Area Planted

363.00

362.45

363.00

362.00

361.50

-0.08%

Average Yield

11.44

11.23

11.30

10.92

10.57

-1.52%

Basilan Volume

Lanao del Sur Volume

Maguindanao Volume

Sulu Volume

Tawi-tawi Volume

Source: PSA/BAS


27

Section : NATURE AND STRUCTURE OF THE INDUSTRY A. VALUE CHAIN MAPPING FRESH CARDAVA FOR RETAIL MARKET

Marketing channels for fresh banana can be further subdivided into the following: a) Cardava for retail markets in Metro Manila, Cebu, and other key urban centers Northern Mindanao is the dominant player in this chain along with Davao Region and SOCCSKSARGEN. The region ships out most of its banana to Manila and Cebu primarily via Cagayan de Oro and Ozamis. Bananas are collected weekly from farmers at their farms or these are brought at the nearest buying stations. Assemblers usually work with buying stations and agents and pick up the bananas collected weekly or twice a week. The assemblers sell the bananas to consignees based in key urban areas. The consignees sell the bananas to wholesalers and jobbers who, in turn, distribute these to wet markets and supermarkets. In the wet markets, the greater percentage goes to the banana cue/turon/ and other Cardava-based snack food vendors. For business to be viable, intermediaries deal with both Cardava and dessert bananas. Consequently, farmers in Lanao del Norte usually plant Cardava and dessert bananas in their farms. MB/II.- CARDAVA VCA STUDY, DA-PRDP- MINDANAO CLUSTER

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Attempts have been made by some cooperatives to enter this segment but were generally not so successful so far due to lack of volume (dealt mainly with Cardava) and limited scale of operations. Volume and ability to keep bananas in good condition are key success factors including reliable partners in bagsakan centers in Metro Manila, Cebu, and other key urban areas.

b) Cardava for retail markets within the locality/province Farmers with limited volume bring their bananas to wholesalers in the wet market. Bananas are sold oth kilo a d ugkus or bundled (100 pcs. or equivalent to 13-14 kilos). In some cases, farmers sell their produce directly to households within their proximity through door-to-door marketing or via makeshift stalls and sari-sari stores.


29

There are also traders/shippers who sell in the local market. Bananas that are almost ripe and small are usually sold in wet markets within the region. Bananas produced in ARMM are generally sold within the immediate locality.

PROCESSED BANANA (BANANA CHIPS/IQF SNACK FOOD) Banana processing is dominated by the banana chips industry. A greater percentage of the banana chips produced by Mindanao is intended for the export market. During the recent years, Mindanao banana chip exporters have diversified into the production of individually quick frozen (IQF) Cardava snack foods.

The processed banana supply chains can be categorized as follows: a) Processed Banana for Export This chain is dominated by Davao Region. Bananas are collected weekly from farmers at designated pick-up points either by traders or directly by the banana chips exporters. An exporter would usually have an agent or local consolidator to scout and procure bananas in a particular barangay or municipality. Agents are usually paid on a commission basis.


30

Some exporters have set-up satellite processing plants in areas with significant Cardava banana production. Others tried to set-up or work with first fry processing plants to reduce transportation costs. Many of those who tried though felt that it was difficult to sustain for various reasons: a) inconsistent quality; b) high cost of production due to lack of economies of scale and pole vaulting of suppliers; and c) threat of recipes being ed on to competitors. As such, the general preference among exporters is to set-up and operate their own plants in area/s with significant volume of Cardava. Four Seasons, one to the large processors of banana chips in Davao Region, for example, is eyeing to set-up a plant in North Cotabato. G and L, another major processor, has a plant in Davao del Sur which is the 2nd largest Cardava producing province in the Philippines.


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b) Banana Chips for Local Market Processors selling to the local market get their supply directly from farmers (for agrarian reform cooperatives), local agents, and from the wet market. Volume required by individual processors is relatively low. The banana chips are mainly sold in pasalubong outlets.

CARDAVA SNACK FOOD

Turon, banana cue, maruya and other Cardava snacks are sold both in formal and informal food establishments with the street food vendors/stalls having the bigger market. In Davao Region, vendors buy their supply of fresh banana from processors, wet market, and from buying stations/intermediaries. With the all-in procurement system, many of the medium and large scale processors sell the non-process grade banana to vendors at PhP 8-12/kilo (fluctuates depending on procurement price of bananas for chips). Non-process grade are either undersize, or oversize and over 90 days maturity. In areas other than Davao Region, main source of banana would either be the wholesalers or the retailers depending on volume required.


32

As can be seen from the different marketing channels, there is a vibrant trade of Cardava between and among Mindanao regions. Figure 14 shows the flow of products within and outside Mindanao.


33

B. KEY PLAYERS AND FUNCTIONS 1. Input Provision Key inputs in Cardava farming are the planting materials, fertilizer, and pesticides. For planting materials, majority of the farmers use suckers and corm bits which are sourced either from own farms or from neighboring farms. In effect, production of planting material is largely a function of crop production and agronomic practices used in the farm affect the quality of planting materials. The common practice of using suckers and corms has contributed to the spread of pests and disease. Although farmers indicated that they usually treat the suckers to ensure that these are pest free, fungal, bacterial and viral pathogens are not eradicated. Farmers generally do not recognize infested or diseased planting material nor do they fully understand the life-cycles and transfer mechanisms of pests and diseases, especially given the continual evolution of new races and pathogens. Based on interviews, the prevalent use of suckers vis-à-vis tissue cultured plantlets are due to the following reasons: -

-

Tissue culture plantlets are not readily available. Conventional planting materials entail minimal cost or no cost at all except own labor. Tissue cultured plantlets are considered by farmers to be very expensive. Conventional planting materials require less input and can be planted immediately in the field, unlike the more fragile tissue-culture plantlets, which need to be hardened before planting. Tissue-culture plantlets also require appropriate management practices right after being transplanted to the field The longevity of fields planted with tissue-culture plantlets tends to be shorter than the one for fields established with conventional planting materials. Farmers are not aware of tissue cultured plantlets and its benefits

The Davao Region has the most number of suppliers of tissue culture plantlets. One of the biggest suppliers of tissue culture plantlets is Bio Trends (of Lapanday Corporation). In Region 10, only Bukidnon has a functioning tissue culture laboratory. The facility in Lanao del Norte has temporarily suspended its operations and in need of fund infusion to re-start its operations. In SOCCSKSARGEN, only Plantarium Biotech is known to produce tissue cultured planting materials for Cardava but company is primarily focused on the dessert banana varieties. In recent years, an increasing number of farmers are planting the Giant Cardava. The Giant Cardava was first grown/discovered in the municipalities of Santa Maria and Malita in Davao del Sur. Sagrex Foods, Inc. was among the first to use the variety in the production of banana chips and frozen turon. It is being propagated by the company through its nominated tissue culture laboratory. Farmer usage of farm inputs such as fertilizer, insecticides and pesticides is currently very low. Key reasons for not using fertilizer are the following: (1) they have no money for buying fertilizer, (2) fertilization is not necessary since they are still able to harvest every week or twice a week and cardava has always been grown without too much care and fertilizer , and (4) fertilization is not practical because their production is only small scale. In some banana producing areas such as Malitbog and Tubod, there is a growing number of farmers who are using organic fertilizer. Organic fertilizer is prepared by farmers themselves or bought from fertilizer producers. Many of the organic fertilizer commercially sold within the region have not been subjected to scientific and laboratory testing. Likewise, these are not formulated specifically for Cardava banana. In the production of banana chips, key inputs are coconut oil and sugar. Large processors usually source the coconut oil directly from the mill. Microprocessors buy oil from supermarkets. MB/II.- CARDAVA VCA STUDY, DA-PRDP- MINDANAO CLUSTER

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Oftentimes, the price of coconut oil influences the procurement price of Cardava banana. When oil price is high, large processors tend to lower their buying price of banana to keep their prices competitive.

2. Farming There are basically two types of Cardava production system in Mindanao. The first one is the backyard production, which is the more prevalent system in Mindanao. Under this system, Cardava banana is grown in backyards of rural households and in small farms. Size of farms under this system ranges from 0.25 to 1 hectare. Farmers generally use suckers or culms from their own farms. Very minimal input goes into this system of production. In cases where farmers use inputs, they apply compost and manure. Family share responsibilities in planting, crop maintenance, and harvesting. Some farmers visit their bananas only when it is time to harvest the fruits. The second system employed by farmers is the intercropping or mix crop production. In this system, Cardava banana can be a primary or secondary crop or planted together with dessert bananas. Farms classified under this system range from 1 to 3 hectares. In many cases, farmers use a mix of organic and inorganic fertilizer (trickle off from fertilizer applied to intercropped crops). Generally, the banana farms are considered as major sources of income and, as such, are better taken cared of than the backyard farms. However, soil testing as basis of fertilizer application is rarely done. Good Agricultural Practices (GAP) is not widely adopted. There are Cardava farmers though who are already applying GAP in their farms. The first and only GAP certified Cardava farm is located in Sulop – Davao del Sur. It is owned and managed by Cardava Integrated Inland Farming, a cooperative composed of agrarian reform beneficiaries.

Banana is harvested when it is still green and requires a further 5 to 10 days to ripen. Two persons are usually needed in harvesting, namely the cutter and the helper. The cutter nicks the pseudo stem in such a way that the bunch is lowered gently. The backer then positions himself below the bunch and takes hold the lower end of the fruit stalks as the bunch is laid on his shoulder. The cutter then cuts the peduncle of the fruit. From harvest to delivery, about 10% 20% of the banana is wasted due to bruises and scratches due to poor packing and handling. MB/II.- CARDAVA VCA STUDY, DA-PRDP- MINDANAO CLUSTER

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Cardava provides a steady cash flow for farming households. Income, however, varies depending on practices and input application. Lack of nutrient replenishment and poor agronomic practices can lead to a non-sustainable situation reducing yields and productive life. Current average bunch weight is about 20 kilograms except in Tubod – Lanao del Norte, North Cotabato, and Davao del Sur (especially Malita) where a typical bunch weighs from 40 to 50 kilograms. In well-managed farms, a bunch can weigh as high as 80 kilograms. Evidently, there is good scope to increase income of farmers by increasing varietal performance, use of clean and improving production practices through appropriate use of inputs and good quality clean planting materials. Bugtok disease, hi h is a ifested the dis olo atio a d ha de i g of the f uit e e he ripe, continues to threaten Cardava production in Mindanao. The ai easo fo Bugtok i fe tio is the prevalent poor agronomic practices of farmers (and the prevalent use of suckers and corms from own farms. Progressive farmers prevent Bugtok infection by bagging, early debudding, and application of sodium chloride (table salt). Other diseases affecting Cardava production are Sigatoka, Panama wilt, mosaic, and bunchy top.

3. Trading Traders perform the important tasks of negotiating, collecting, sorting, and transporting. Traders also act as financiers in the chain. The following are the different types of traders depending on their scope of operations:


36

Agents/Local Traders/Buying Stations: Agents scout and procure banana from farmers in a particular barangay/municipality. They are usually d with processors and assemblers/shippers. In some areas, tricycle d i e s also a t as age ts of fa e s. The pi k up the a a as f o the fa e s, scout for best price offer, oversee the weighing, and deliver back the payment to the farmers. Tricycle drivers charge hauling fee/fare and are also paid commission.


37

The local traders usually have buying stations along the highway. Most of those with buying stations are engaged in the trading of various commodities. There are also traders who pick up the bananas from the farms (depending on volume and accessibility. Buying stations generally do not have sorting and storage areas adequately protected from environmental hazards and pests. The lack of proper sorting and storage facilities results to damages and bruises which contribute to significant postharvest losses. Assemblers/Consolidators: They usually collect from several local traders and take care of the delivery to processor or the shipment of the bananas to Manila or Cebu. In the case of cooperatives, they source directly from their farmer-. Traders in Northern Mindanao usually carry other banana varieties such as Latundan and Lakatan to fill up a 10 footer container van. From the collection point to the port, the bananas are transported in a truck. Loaded bunches are closely packed and layered with green banana leaves or sliced banana trunks to prevent shaking and bruises and to protect from heat and rain during transport. Consignee: They source from several assemblers from different regions. The shipper and consignee are the key players in the supply chain for they handle the biggest volume of bananas. The greatest risk occurs during sea transport for 2 days because of high transit temperatures and the bulk-loading practice. This can result in over ripening since a week has already elapsed since harvesting. Jobbers/Wholesalers: distribute the bananas to retailers. Manila-based jobbers and wholesalers generally get bulk of supply from consignees. For wholesalers in the region, they get from local traders and directly from farmers.

4. Processing Processors cum Exporters

Table 12.- Banana Chips Exporters in Mindanao Note: This is not a complete list. Region

Company

Zamboanga Peninsula

Al ia s Ba a a C a ke s

Northern Mindanao

B-G Fruits and Nuts Manufacturing Corporation

Davao Region

Arcmen Food Industries Corporation CJ Uniworld Corporation DOLE Philippines Finelineasia Group of Companies Four Season Fruits Corporation - Also produces IQF Cardava snack food GSL Food Enterprise Koki Food International Pacific Fruits International Prime Fruits International Profood Corporation - Also producing IQF snack food


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Table 12.- Banana Chips Exporters in Mindanao Note: This is not a complete list. Region

Company Royce Food Corporation Sagrex Foods Incorporated - Also produces IQF Cardava snack food See International Snap Snax Ventures, Inc. Tagum Commodities Corporation/El Coco Tropical Synergy

SOCCSKSARGEN

Greenville Agro Corporation South Cotabato Agri, Inc.

Caraga

Celebes Agricultural Corporation BGC Worldwide/Basic Fruits Corporation

Nationwide, there are about thirty-five banana chips exporters. Twenty-five companies are located in Mindanao and, of which, twenty-one (21) have their factories in Davao Region (DTI RODG Study). About 60% of the 25 exporters have production capacity of more than 50 tons per day. Processors, especially the big companies, indicated that they are only able to utilize 60% to 80% of their capacity due to difficulties in sourcing Cardava.


39

Processing activities are relatively simple and technology is matured. It is the price, quality, and availability of Cardava that are critical to its operation and competitiveness. Price of coconut oil is also critical to competitiveness of the industry. Sagrex Foods, Inc., a Davao-based corporation pioneered the production of frozen ripe boiled Cardava banana including banana fries, spring roll and other microwavable Cardava snack packs. The company has already started selling to the United States, Middle East and Canada. The company sources some of its raw materials and semi-processed products from Bukidnon. Sagrex uses the giant Cardava variety. Another Davao-based banana chips exporter who has diversified into frozen Cardava snack food for the export market is Four Seasons. The company sources its supply from Davao and Region 12 but has plans of setting up satellite plants in various parts in Mindanao if there is a critical mass of Cardava banana supply. Four Seasons prefer to use the native Cardava variety. Profood has also launched its IQF Cardava products. In line with the growing demand for natural food products, exporters are increasingly shifting to using bananas grown with minimal chemical inputs. Celebes Agricultural Corporation, a company based in Butuan City, specializes in the production of organic banana chips. Some companies like Koki Foods International went for the Kosher certification to differentiate their products. Four Seasons promotes its banana chips and snack food as all natural food products.

First Fry Facilities/Subcontractors Some exporters also tried ing first fry facilities but only a few have been successful. For a first frying facility to be viable, it should have a wide base of suppliers of Cardava and a production capacity of at least 4 tons daily. Exporters are generally willing to provide some assistance (e.g., supply of coco oil, technical assistance), but only after the facility has proven its reliability and trustworthiness. Peelers comprise bulk of the workers in banana chips companies and first frying facilities. Table 13 presents a list of some of the companies engaged in first frying and production of semi-processed/intermediate Cardava products.

Table 13.- First Fry Facilities and Subcontractors in Mindanao Note: This is not a complete list. Region

Company

Northern Mindanao

NM Enterprises - Supplies to NM Enterprises - Also produces banana chips and other Cardava based snack food for local market

Davao Region

Kooperatiba sa Nagkahiusang Mag-uuma sa San Isidro UFFAP-IMCOOP SITARBA Multi-Purpose Cooperative Mampising CARP Beneficiaries Cooperative Kabayugan Magamay Atipolo Solar Power Association (KAMASPA) Mayo ARB Multi-Purpose Cooperative

SOCCSKSARGEN

Magpet Agro Industrial Resources Cooperative Pigcawayan Fruits Association (newly established facility)


40

Micro Processors Microprocessors are mostly household-based enterprises operating with make-shift facilities. Some of the microprocessors are Agrarian Reform Communities (ARC). The ARCs have better facilities and packaging than majority of the individual micro businesses. Many of these enterprises do not have the BFAD license to operate due to non-compliance to Good Manufacturing Practices (GMP). The areas which are not usually GMP compliant are the peeling and cooking areas. Products are usually sold in the local market and pasalubong stores.

5. Production and Vending of Snack Foods Although there is an increasing number of medium and high end restaurants serving Cardava based snacks by giving it a twist (e.g., serving with ice cream, mixing relatively expensive ingredients), the biggest segment engaged in the preparation and retail sales of maruya, turon, and banana cue are the street food vendors. It is very common to see Cardava-based snack food in rolling carts or makeshift sidewalk stalls where there are churches, schools, recreational parks, or jeepney terminals, and outside the malls. Most construction workers, sales ladies, office workers, and other low- and medium-income groups grab a bite of this street food during the afternoon break time. Street food in the Philippines is not only a convenience and an economic phenomenon; it is a lifestyle.

A street food business is a small, fast, cash operation. Each street food enterprise is small in size, requires relatively simple skills, basic facilities and small amounts of capital, yet they are very numerous and have considerable potential for generating income and employment. The street food MB/II.- CARDAVA VCA STUDY, DA-PRDP- MINDANAO CLUSTER

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industry provides employment to women and migrants with low educational background. The prices of street food are low and the urban poor benefit from this. The street food vendors are important market channels particularly for matured bananas (undersize/over size). A vendor purchases from 300 to 1,000 kilos per month depending on location. Vendors source their bananas from farmers, traders, and the wet markets. In Davao region, vendors also get their supply of banana from the processing plants.

C. NATURE OF INTERFIRM RELATIONSHIP 1. Horizontal Relationships More farmers especially in Davao Region and SOCCSKSARGEN are taking on more functions in the chain such as collective marketing and training services. The more established cooperatives have ventured into first frying operations. Agrarian reform communities are generally into the production of banana chips for the local market. Cooperatives linked to lead firms (e.g., processors, assemblers) appear to be more successful in scaling up their operations than those who are trying to penetrate on their own the banana chips retail market. Success in fresh banana collective marketing and first fry operation hinges on capacity to consolidate large volume of bananas and access to capital and transport facilities. Linkages with lead firms and secure markets also jumpstarted the upgrading process. There is still a need though to strengthen associations and cooperatives currently engaged in collective enterprises. Recurrent internal organizational problems and operational inefficiencies as they grow more successful can be addressed through continuing organizational development assistance. Shared goals and their close link to real market opportunities will be central in further promoting the success of the horizontal collaboration. The best trigger for closer collaboration at the fa e s le el is the pu suit of igge and guaranteed markets. Relationship among banana traders is generally adversarial. Banana traders compete with one a othe i o e i g p odu e s supplies o asio all u i g at highe p i es - say, 25 or 50 centavos higher per kilo. Cooperation and collaboration among exporters is via the banana chips exporters association which is based in Davao. The association holds a banana congress annually. Most of the activities of the association are geared towards improvement of supply base, tariff and market access issues, and market development. 2. Vertical Relationship and Supply Chain Governance The shortage of Cardava and the entry of Manila buyers after a typhoon hit Luzon sometime in 2007 served as an impetus for Davao-based processors and traders to search for alternative options to ensure that they are able to get their Cardava supply requirements at a price that still allowed them to operate at a profit. To date, there is now openness among processors to develop longer-term and more collaborative relationships with farmers. The big processors are incrementally integrating backwards into farming communities especially those who can offer them specific advantages such as big volume, organic/natural farming, and o siste t ualit . Ba a a hips o pa ies like “ee s International, Celebes, G and L, and Four Season have gradually shifted their approach to supply chain development from an exclusively price offer and compliance point of view to a capacity uildi g pe spe ti e ith a fo us o i p o i g p odu ti it , effi ie , a d ualit . “ee s MB/II.- CARDAVA VCA STUDY, DA-PRDP- MINDANAO CLUSTER

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International and Celebes seem to be sourcing from Malitbog and their focus is primarily on the production of organically grown banana. Sagrex International is working with communities in Bukidnon interested to expand their production of the giant Saba. Some of the key preconditions that entice processors and big traders to enter into strategic alliances with Cardava farmer groups are the following: -

Demonstration of capability to meet basic quality requirements which implies the need for some upgrading and a good understanding of the required standards

-

Access to a significant volume of Cardava which calls for a well-functioning horizontal collaboration and a cooperative or association which has significant influence among their and other farmers in the area or a good scheme that will encourage farmers to consistently allocate a portion of their produce to the collective marketing/production while allowing them to sell also to other market channels.

-

Willingness to invest --- Processors are more inclined to invest when they see that the communities themselves have invested their own money/assets. Somehow, this provides a guarantee that the communities will work towards making the venture a success.

-

Aligned goals and objectives both in the short and medium term

Farmer groups are more likely to enter into strategic alliances with processors and assemblers even if the agreed price is sometimes a few centavos lower than prevailing market prices based on the following conditions: -

Prompt payment and willingness for on-site weighing and quality control

-

Transparency/honesty in of their production cost structure

-

Value adding services such as training and mentoring

-

Willingness to invest even if this comes in small parcels

-

Provision of coco oil (for first fry communities) since they find it hard to source these at lower prices due to their lack of capacity to buy in bulk

-

Social involvement in the community which in the Philippines is a very important factor (e.g., attendance during events of the associations and/or the communities).

-

Willingness for community to visit their plants --- it gives them a sort of elo gi g ess a d ei g a i po ta t pa t of the o pa s ope atio s

-

I lusio i

o pa

s goals a d o je ti es

In areas farther from the base of operations of processors and assemblers, fa e s main is the local intermediary. Marketing relationships between traders and farmers are informal and ha a te ized the o ept of the suki s ste o pe so alized e o o i elatio s. The suki system, which is similar to the preferred supplier-buyer relations, proliferated in efforts to find ways to minimize risks and vulnerabilities to opportunistic behaviour and cheating (both trader and farmer). The depth of the suki relationship differs with each relation but over time, repetitive MB/II.- CARDAVA VCA STUDY, DA-PRDP- MINDANAO CLUSTER

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transactions with the same person develops trust. On both sides, there is reduced search, negotiation, and monitoring costs because the suki lives up to the norms and values of reciprocity and comes close to becoming part of the family mindset. The bonds between people engaged in exchange are determined by informal rules or social institutions and serve to enforce the of the exchange. Suki relationships are often strengthened by the provision of credit by trader to farmer or by processor/upstream actor to local trader. In the above described supply chains, farmers are generally not aware of the end of their produce. Players see the a ket as ho oge ous a d i te s of the e t a to i the hai —the person who bought their produce. Traders, on the other hand, are often reluctant to share information on where products are sold. Compliance with product and process standards is weak. Generally, many of the constraints to the development of win-win relationships are rooted on behaviours and attitudes. Typical behavioural obstacles include the following: -

Aversion to learning or a lack of motivation to learn, often related to communication in the suppl hai a d the p a ti e of all-i p o u e e t i.e., o e p i e fo all g ades and sizes), which provides disincentives for upgrading.

-

Value chain participants do not learn from their actions over time because the most significant consequences of action at any level accrue to the final product, resulting in a vicious cycle of actions and blame.

-

Lack of trust results in opportunism, duplication of effort and a lack of information sharing. The problem of mistrust creates various other problems, such as the fear of relinquishing control.

-

The attitudes of usi ess as usual o e ha e al a s do e it this a a e e uall eal threats, as they keep people in their comfort zones and create resistance to the transformation required for collaborative initiatives.

D. PRICE AND COST STRUCTURE 1. Income and Profit Table 14.- Indicative Costs and Return for 1 hectare of Cardava Banana Assumption: 625 hills/hectare High input farm: a greater percentage of the inputs – organic inputs Amount (in PhP) Low Input – Low Yield Farm

High Input – High Yield Farm

Planting Materials

1,000

10,125

Fertilizer

1,000

6,000

Items Farm Establishment

Pest Control

5,000

Weed control

1,000

4,000

Land Preparation/Planting/Labor

5,000

8,000


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Table 14.- Indicative Costs and Return for 1 hectare of Cardava Banana Assumption: 625 hills/hectare High input farm: a greater percentage of the inputs – organic inputs Total Establishment Cost

8,000

33,125

Bagging

2,500

10,000.00

Fertilizer

1,000

4,000.00

Annual Production Cost

Weed control

2,000.00

Pest control

2,000.00

Labor: Farm Maintenance

5,000

12,500.00

Harvesting

5,000

20,000.00

Transportation

5,000

20,000.00

800

3,312.25

19,300

73,812

10,000 kilograms

40,000 kilograms

1.93

1.85

Establishment cost Total Production Cost Yield (in kilograms) Unit Cost/kg Income Unit Price/kg

5.00

5.00

Gross Income

50,000

200,000

Net Income

30,700

126,188

Profit Margin

61%

63%

Input/output Ration

2.59

2.71

Source: KII/FGD

The high input farms used as basis in the above costing use more of organic inputs than chemical inputs. These farms invest in farm maintenance and, more or less, practices are aligned with GAP. Yields of these farms range from 40 MT to 60 MT per hectare. Harvest is done usually twice a week. On the other hand, the low-input is the typical farm where labor and input investments are very minimal. For low input farms, annual net income would only be about PhP 30,000 to PhP 35,000. Yield is generally between 8 to 10 tons per hectare. In many cases, farmers do not buy planting materials and use suckers from their own farm or from neighbors. For both types of farms though, transportation cost comprise a big chunk of the expenses. The cost indicated is for roads that are relatively good --- gravel roads, not so many potholes, and not so muddy. Table 14 also shows that the output: input ratio is higher for high input farms compared to the low maintenance farms. This demonstrates better profitability and efficiency in enterprise management amongst the high input farms as compared to the low input farms. Evidently, there is good scope to increase income of farmers by increasing varietal performance and improving production practices through appropriate use of inputs as well as use of clean planting materials.


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2. Relative Financial Position of Players Fresh Banana for Manila Market

The consolidator incurs the highest percentage of added cost which is comprised mainly of transportation, ice, and labor costs. Given the perishability of Cardava, consolidators face the highest risk. Main concern of consolidators is to be able to move the products as fast as possible from the farm to the consignee in Manila. While consolidator gets the highest percentage share of the profit, it is not proportionate to his/her percentage share of the added cost. To improve their profitability, consolidators aim for high volume and send a mix of Lakatan, Latundan, and Cardava per shipment (at the minimum 20 footer container). Farming s for 12% of the production and distribution costs. Percentage share to profit is 43%. Although farmers generate the highest profit, the amount or absolute value that actually accrues to an individual farmer is small for the following reasons: a) Volume is spread thinly among the farmers: there are about 50 consolidators vis-à-vis more than 50,000 Cardava farmers in Mindanao. A consolidator typically sources from 5 to 10 traders. Each trader sources fresh Cardava from hundreds of farmers. b) Smallness of operations; lack of economies of scale c) High post-harvest losses estimated at 20% to 40% which erodes profit margin d) Unstable yields


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Table 15 -. Relative Financial Position of VC Players: 1 kilo of fresh banana Assumptions: Harvesting and transportation costs shouldered by trader Based on Northern Mindanao costing Player

Product

Costs

Profit

Margins

Total Unit Cost

Added Unit Cost

% Added Unit Cost

Unit Price

Unit Profit

% Profit

Unit Margin

% to Price

Farmer

Fresh

1.00

1.00

12%

4.00

3.00

46%

4.00

27%

Trader

Fresh

5.50

1.50

18%

7.00

1.50

23%

3.00

20%

Consolidator

Fresh

13.00

6.00

71%

15.00

2.00

31%

8.00

53%

Total

8.50

6.50

15.00

Source: KII

Banana Chips for Export Market

Table 16.- Relative Financial Position of VC Players: 1 kilo of banana chips Assumption: 4 kilos of fresh Cardava needed to produce 1 kilo of banana chips Based on Davao Region costing Player

Product

Costs

Profit

Margins

Total Unit Cost

Added Unit Cost

% Added Unit Cost

Unit Price

Unit Profit

% Profit

Unit Margin

% to Price

Farmer

Fresh

7.60

7.60

19%

22.00

14.40

47%

22.00

31%

Trader

Fresh

27.00

5.00

13%

32.00

5.00

16%

10.00

14%

First Fry

Chips (1st fry)

50.00

8.00

45%

53.00

3.00

10%

21.00

30%

Exporter

Chips

62.00

9.00

23%

70.00

8.00

26%

17.00

24%

9.60

100%

Total

30.40

70.00

Source: KII

A kilogram of banana chips requires more or less 4 kilograms of fresh banana. From the indicative FOB price of PhP 70/kilo of chips, the first fryers and exporters contribute the highest added cost at 45% and 25% respectively. First fryers contribute the biggest share of the production cost as labor is more intensive, and more oil is consumed in first frying than in 2nd frying done by processors. Traders, on the other hand, contribute 13% of the added cost which is comprised primarily of transportation and hauling costs. Farming s for 19% of the added cost. Gross profit per kilo of chips is about PhP 30.40. Of the estimated PhP 30.40 profit generated per kilo of chips, farmers have the highest percentage share at 47% followed by exporters at 26%. Profit that accrues to first fryers is only about PhP 3 to 5 per kilo. For a first frying facility to be financially viable, it has to have the economies of scale, access to coconut oil and sugar at wholesale prices, and efficient production and procurement system. Most exporters though do their own first frying.


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In of trading position, farmers have the highest risk and are price-takers primarily due to the perishability of the product. Farmers who sell collectively and with high volume are in a better bargaining position. Local traders, on the other hand, have the smallest investment and usually increases in transportation to farmers. Exporters in the local scene are the price-makers but in relation to importers have some capacity to participate but not always in favorable . In the EU, agents and importers largely control the trade of banana chips. They perform various roles --packer, refiner of the product, processor into final product, re-exporter. Discussions with key EU importers sometime in 2008 indicated that profit margin per unit is relatively low and tight for banana chips. From both the perspectives of the importers and exporters, it is low margin – high volume business. Viability of the business hinges on economies of scale, cost efficiency, and cost effectiveness.


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Section : MARKETS AND MARKET OPPORTUNITIES A. MARKETS AND MARKET TRENDS 1. Export Market Main Cardava-based product that is currently exported is the banana chips. There are three main market segments for banana chips, namely: a) the food processing market; b) the retail market; and c) the catering market. The food processing market is by far the largest segment for the banana chips, thus putting pressure on prices. The major consumer is the breakfast cereal industry. Chips are sold in two forms: whole and broken with price differences of $ 0.05 to 0.10. Banana chips for the retail market are mainly sold as ready-to-eat snacks. Main outlets are the health food stores or sections in supermarkets. Importers selling to retail markets require higher quality and added features su h as Bio a d all atu al. All atu al a d organic banana chips command a price in the market.

During the recent years, Vietnam has become a transshipment point for banana-chip exports to China. Vietnam benefits from the trade as it enjoys advantageous tariff rates due to bilateral pacts with China. Some Chinese buyers prefer to buy first fry chips and have these processed further in Vietnam. The big European import companies order an average of 25 40 footer containers of banana chips per year per company while medium and small importers order in average 10 40 footer containers per year per company. They shift between Thailand and Philippine suppliers.


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Table 17.- Volume and Value of Banana Chips Exports, 2007 to 2011 Year

Volume (MT)

Value (US$)

2007

32,993

40,725,000

2008

33,398

49,126,000

2009

30,347

38,350,000

2010

28,085

40,274,000

2011

30,142

50,575,000

Source: DTI/Presentation of DTI Undersecretary Merly Cruz

G“L P e iu Food E po t a d Fou “easo s, t o of o ld s leading suppliers of banana chips, collectively export about 2,000 MT of banana chips per month. According to them, there is an i easi g de a d fo a a a hips. Du i g the e e t “alo I te atio al de l Ali e tatio o “IAL Paris fair, banana chips were among the most saleable products in the Philippine booth. From 2007 to 2011, Philippines exported an average of 30,993 MT of banana chips. Although the Philippines has remained the leading exporter of banana chips, competition is also intensifying from countries like Vietnam, Thailand, and Malaysia in key export markets. Markets are increasingly concerned with the specifications of both products and processes further back along the value chain in a number of different ways: a) quality and safety - based upon product and process controls: b) conformance with social and environmental standards; c) traceability and authenticity; d) reliability and guaranteed supply in order to avoid stock outs; e) just-in-time delivery; and f) product differentiation and innovation as a means of adding value and margins. Export of frozen cooked banana (turon, boiled banana, fries, etc.) is gradually increasing. The companies are targeting the 12 million Filipinos living abroad --- the Kingdom of Saudi Arabia (KSA) has 1,019,577 Filipinos, the United States of America has four million, Malaysia 822,910, Canada 437,940, Japan 258,977 and United Arab Emirates 250,000. Other countries that have thousands of Filipinos also include Italy, Mexico, United Kingdom, Taiwan, Singapore, Hong Kong, Australia, Kuwait, South Korea and . Sagrex exports annually over 12 containers of Saba to the Middle East, US, Canada and other Asian markets

2. Domestic Market System of grading and classifying Cardava type bananas is provided in the Philippine National Standard (PNS) formulated by the Bureau of Agriculture and Fisheries Product Standards (BAFPS). However, in many cases, traders a d etaile s follo the all-i p o u e e t s ste ut still observe the following minimum requirements as set forth in the PNS: -

The fruit must be reasonably clean, free from diseases, insects, molds, and other contaminants. The use of chemical process for ripening is allowed provided it conforms to PNS/SAO 74. Pesticide residues shall meet the requirements of the Codex Alimentarious Commission Volume 2.

The above requirements are checked by buyers using visual observation (mata-mata). Size is determined according to the diameter and length of the fruit. Traders generally classify the cardaba on whether these are processed grade (for the banana chips market), for the snack food market, and for the fresh market . MB/II.- CARDAVA VCA STUDY, DA-PRDP- MINDANAO CLUSTER

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Table 18.- Size Classification of Cardava Banana Size

Length (cm)

Diameter (cm)

>14

>4.5

Large

12 - 14

4.5

Medium

10 - 12

4.0

Small

Not <8

3.5

Extra Large

Source: PNS

Based on the PNS, the following are the three classes of Cardava banana based on general appearance, quality, and condition: a) Extra Class: Bananas in this class are of superior quality. Hands must be matured, clean, wellformed, and well-trimmed. Likewise, the hands must be free from decay, split fingers, loose fingers, bruises, blemishes, and discoloration caused by diseases, insets, latex burn, and other deformities. b) Class I: These are bananas classified as good quality. Hands must have the same characteristics as the Extra Class bananas. c) Class II: Bananas in this class do not qualify for inclusion in the above 2 classes but satisfy the minimim requirements. Hands are matured, reasonably clean, fairly well formed, and welltrimmed. These are also relatively free from decay, split fingers, loose fingers, bruises, blemishes, discolorations, and other deformities. Traders generally do not provide prices for Extra Class and Class 1 bananas but they do not accept bananas that do not meet the minimum requirements. In the retail market, prices are oftentimes aligned to the classification system. Total available supply of Cardava in Mindanao is generally just about 60% to 70% of its total production. Postharvest lesses are estimated to be about 30% to 40% of total production. About 32% of available supply (production less postharvest losses/feeds) is utilized for banana chips and other processed products. The largest bulk goes to the processing companies geared for the export market. Industry players estimate that processing companies are able to source an average of 350,000 MT of Cardava per year. Total annual requirement of processors/exporters in Mindanao is estimated to be about 450,000 MT. The processors selling to the local market consume an aggregate of 15 to 20 MT of Cardava per year. Banana chips exporters prefer the native variety rather than the Giant Cardava. They are strict with quality standards. Quality of banana significantly affects the quality of banana chips. Bananas delivered to exporters should conform to the following standards: a) semi-mature (90 to 105 days); b) unripe, green color of skin; c) light yellowish color of flesh; and d) not less than 3 inches in length. With increasing demand for healthy food products, exporters prefer organically grown bananas. On a e age, a out pe e t of a a as deli e ed to p o esso s a e lassified as eje ts . Mai causes of rejects are immature harvesting, late harvesting, and bruises and damage during storage and transit.


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For Philippine supermarkets, the banana chips are among the slow moving products and, thus, no significant orders are made. Likewise, in many cases, presentation is poor compared to similar p odu ts i the sa e atego ies. The e is a ge e al p efe e e fo potato hips t pe of p odu ts rather than the usual presentation of banana chips. Basic requirements for suppliers: GMP/permit to operate and bar code which many of the processors are not able to comply with. Suppliers would have to invest in the promotion of the products and in development of similar product formats such as the potato chips. Ba a a hips a e u e tl o e salea le as pasalu o g . The p odu t a potentially be saleable if positioned as a healthy snack food. To be successful in this positioning, it is important that the chips are produced without preservatives and artificial additives and all other ingredients are health e.g. lo gl e i sugar, low cholesterol oil, etc.). About 62% of total available supply or an average of 600,000 to 800,000 MT are sold in the domestic market. Mindanao banana (all types) production for the domestic market goes to Cebu and MetroManila largely through ports in Cagayan de Oro, Agusan, Ozamis, Iligan, and Surigao. Based on 2009 data, about 73% of the banana shipped out of Mindanao seaports originated from the port in Cagayan de Oro, an additional 15% came from the port in Nasipit, Agusan, while about 4% were loaded in Sasa Wharf in Davao City. One of the advantages of Northern Mindanao aside from quality is that it takes only 30 hours for shipment to reach Manila from Cagayan de Oro. It takes 56 hours to reach Manila from General Santos and 48 hours from Davao.


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Table 19.- Banana Shipments from Mindanao, 2009 Port of Origin

Quantity (in MT)

% Share to National Banana Shipment

Iligan City

1,233.05

0.49

Cebu, Siquijor

Ozamis City

4,959.32

1.99

Cebu, Manila

Cagayan de Oro City

182,381.23

73.04

Cebu, Manila, Iloilo, Tagbilaran, Bacolod, Butuan

Sasa Wharf, Davao City

10,229.81

4.10

Manila, Cebu, Iloilo, Zamboanga

TEFASCO, Davao City

1,489.47

0.60

Manila

0.26

Cebu

39,430.14

15.79

Manila, Cebu, Iloilo, Bacolod, Bohol

4,251

1.70

Southern Leyte

Makar Wharf, General Santos City Nasipit, Norte

Agusan

Surigao del Norte

del

673.54

Destinations

Traders and farmers interviewed indicated that export of banana to other regions outside of Mindanao is on an increasing trend but price competitiveness and freshness are important criteria. For Mindanao to remain competitive vis-à-vis other Cardava producing areas in Luzon, consolidators opt to lower their profit margin and aim for high volume sales. Banana trading suffered a decline in the previous years due to supply constraints brought about by the destruction of many farms caused by Typhoon Sendong. The biggest market for Cardava in the domestic market is the Cardava-based snack food subsector consisting primarily of street vendors, canteens, and restaurants. Street food vendors usually procure the stock of Cardava on a daily basis from the wet market, trader, or processors (in the case of Davao City). A vendor would usually buy about 10 to 50 kilos of Cardava on a daily or bi-weekly basis. Vendors generally buy ripe, oversize, and undersize bananas. Ripe bananas are generally heape o pa ed to the atu ed a a a. In a snapshot survey conducted sometime in 2008, banana cue was the top favorite of low-income workers and school children. Respondents, however, expressed the need for variety and more hygienic presentation but within the same price range. Similarly, vendors wanted to expand their product lines to retain and attract more customers given the increasing numbers of low-end fast food chains. With low profit margin, vendors needed to sell to a critical mass in order to generate enough income to cover basic daily needs. Cardava-based dishes and snack food are also mainstays in the menu of many of the hotels, restaurants, and caterers. Cardava bananas sold in supermarkets are usually the Extra Class and Class I. In Metro Manila supermarkets, a piece of Cardava banana costs from PhP 3 – 5 per piece of PhP 30/kilo. Demand for Cardava both for banana chips and the fresh market is generally lowest during the months of April, May, and June. For the banana chips subsector, production is generally low as companies use this period as an opportunity to perform maintenance in their plants in preparation for the peak season and to finalize negotiations. In the fresh subsector, vendors purchase fewer bananas during vacation time as bulk of their customers are usually the students. MB/II.- CARDAVA VCA STUDY, DA-PRDP- MINDANAO CLUSTER

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B. PRICE TRENDS 1. Export Market Major threats to the growth of the industry are its price competitiveness and its ability to maintain quality particularly for large volume orders. Banana chips are fast becoming a commodity with price an important issue. Price fluctuations range from 1% to 5%. Importers generally switch suppliers between Philippines and Thailand from time to time primarily due to price and quality considerations. s indicate that Thailand is fast becoming preferred supplier in of price, flexibility in payment , reliability, and their ability to offer a wider range of goods in similar categories including strong and relations between the private sector and government. 2. Domestic Market

Based on interviews, farm gate price of Cardava fluctuates between PhP 4 to 7 per kilo. At the time of interview, the farm gate price hovered between PhP 4.00 to 5.00 even in Maguindanao. Based on BAS data, average price in Maguindanao was at PhP 17.78. Unfortunately, farmers interviewed were not aware of this significantly high price. The highest price enjoyed by farmers in Mindanao was about PhP 10 to 12 per kilo sometime during the end of 2013 to March 2014. The farm gate price of Cardava for local consumption is primarily based on supply and demand. This is usually determined by the consignees. As bananas ripen, the price becomes lower.


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Generally, banana chips exporters and agents offer a slightly higher price if a farmer or a group of farmers is able to consistently supply more than 1 metric ton of banana per delivery. Main determinant of price is distance between pick-up point and plant location. Another factor that affects the buying price of Cardava for the banana chips industry is the price of coconut oil. Banana and coco oil comprise the largest cost in the production of banana chips. Since coco oil price is outside of their control, slight adjustments are usually made in the purchase price of Cardava as export price of banana chips is usually fixed for a specific period.

Table 20.- Farm Gate Price of Cardava in Mindanao Regions, 2009 to 2013 Price per Kilo (PhP/kg) Region

2009

2010

2011

2012

2013


Philippines

6.19

6.87

6.51

7.01

8.35

6.98%

Mindanao

5.81

6.76

5.94

7.06

8.84

10.44%

Zamboanga Peninsula

6.32

6.66

7.17

7.37

8.41

6.61%

Northern Mindanao

9.1

11.83

7.87

6.64

7.61

-3.27%

Davao Region

4.78

4.89

4.76

5.51

7.77

12.51%

Soccsksargen

3.86

4.94

5.2

5.29

6.99

16.22%

Caraga

4.72

5.12

5.94

5.83

7.28

10.85%

ARMM

6.05

7.1

4.7

11.71

14.95

29.42%

Source: BAS/PSA


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Section : SERVICES A. FINANCIAL SERVICES Smallholders generally do not have the collateral nor signed contracts with buyers that they can present to banks. As such, farmers and resource poor players generally have limited access to formal finance and are also hesitant to avail of loans from banks and MFIs. Resource poor players, therefore, borrow money from informal sources such as traders because these are accessible; require no collateral and voluminous documents like those required by formal lending institutions. Demand side barriers that limit the access of smallholders to financial services can be summarized as follows: a) Weak producer organizations/ High risk aversion among farmer groups: many of financial products are anchored on cooperatives/associations b) Dominance of spot transactions which make it impossible for smallholders to present marketing agreement as collateral (e.g., for LBP-DA Food Supply Chain Program ) c) Low financial literacy and financial management skills d) Low productivity, margins, and cash flow for servicing loans Financial institutions in the Philippines have quite a wide range of products and add-in services that attempt to serve the needs of Cardava farmers while managing the risks of lending to them. The cash flow-based lending, for example, that uses regular household cash flow analysis and collects payments frequently provides a valuable line of credit for households engaged in farming activities but may not be appropriate among marginal farmers who do not have other sources of income. Production cost-based lending provides more promise to increase profits and help marginal farmers without other sources of income to mitigate the uncontrollable risks to agriculture.

B. NON-FINANCIAL SERVICES Government agencies especially the local government units are the main providers of extension services to the Cardava banana farmers. Services are provided for free and/or socialized payment tending to heavy subsidy. During the recent years, the Department of Agriculture – Agricultural Training Institute (ATI), local government units, and the Bureau of Agricultural and Fisheries Product Standards (BAFPS) have been working together to promote the adoption of Good Agricultural Practices among smallholders. Owing to resource constraints, outreach, depth, and breadth of services are limited. The resource limitations of the local government necessitated that budgets and extension personnel are allocated to all agricultural sectors. Learning among smallholders is generally via peer coaching or on-the-job training (older family e e s tea hi g the ou ge ge e atio . The i fo al e to s a e p ofi ie t i the t aditio al banana farming system but lack the exposure to new technology and practices to ensure high yield and consistent product quality. Likewise, whether services are embedded or fee-based or even free, farmers are more receptive to services with immediate impact on income. Farmers are generally very risk adverse resulting to low buy-in, and low level of adoption of new technology and practices. This is sometimes because impact of services received in the past was not that tangible.


56

services are available to assist processors in the different areas of their businesses. The Department of Trade and Industry (DTI) through the Product Development and Design Center of the Philippines (PDD) offers package and label design services. DTI has also been working with processors in the development of new variants of the banana chips. DTI, DA, and local government units have been active in ing the participation of enterprises and farmer groups in domestic and international trade fairs. Likewise, the Department of Science and Technology (DOST) and DTI provide training on Good Manufacturing Practices (GMP) and Hazard Analysis and Critical Control Points (HAC). In in intermittent basis, street food vendors receive enterprise development training and assistance in upgrading their facilities from the local government units, the Department of Labor and Employment (DOLE). There is, however, a lack of services that would help them improve their products and compliance to food safety.


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Section : ENABLING ENVIRONMENT A. FORMAL RULES, REGULATIONS, AND POLICIES Key policies that are relevant to the banana chips industry are: 1. Policy and implementing guidelines for food safety are in place but implementation has been constrained by: -

Lack of providers to provide assistance and assess GAP/GMP compliance Too technical presentation creating immediate resistance among farmers and enterprises Farmers and enterprises lack awareness and knowledge on its benefits and scopes Stakeholders lack capability to comply with market requirements in of quality standards, competitive prices and food safety LGU extension officers generally not equipped and trained to enforce food safety regulations Lack of harmonization between private and public GAP/GMP/HAC audit requirements.

Implementation of food safety policies has to be addressed alongside policy harmonization and capability building. 2. Poor road condition results to high transportation costs and limited access to product and markets. These infrastructure investment requirements are public goods and should be funded by the government. 3. For more than a decade, most government efforts to expand access to agricultural credit have been channelled through the Agricultural Competitiveness Enhancement Fund (ACEF) and AgroIndustry Modernization Credit Finance Program (AMCFP). Outreach, to date; of the two programs have been limited. The Agri-Agra Reform Credit Act of 2009 (Republic Act 10000) sig ed i Fe ua has ot also ee effe ti e i fa ilitati g s allholde s a ess to financial services. There is a need for government to put in place a sound risk management framework to address the issues that are at the core of private sector reluctance to lend and fa e s hesitatio to a ail of fo al fi a ial se i es.

B. INFORMAL RULES AND SOCIO-CULTURAL NORMS 1. Informal rules can contribute to the effectiveness of formal rules. If the norm is to abide by formal rules (e.g., adherence to grading standards even if the buyer does not always check), then it e o es less ostl to e fo e the egulatio s. If this is ot the ase e.g., all i procurement as the norm in cocoa bean trading) then the standards set by government agencies become a pape tige o a su sta tial a ou t of esou es is eeded to e fo e the egulatio s e.g., buyers have to send their own people to check on quality right at the point of purchase). Norms of civic cooperation reduce enforcement costs by leading individuals to internalize the value of standards and regulations even when the probability of detection for violation is negligible.


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2. The major sources of social capital among Filipino farmers are kin networks, home eigh o hood, fa eigh o hood, a d e e ship i a fa e s asso iatio . Filipi os particularly in rural areas give to interpersonal relations. Kinship reigns above all the social relations of Filipino farmers followed by farm neigbor relationship. It is characterized by strong ties, mutual trust, and norms, which promote coordination and cooperation for mutual benefit. Harnessing the kinship/interpersonal relations factor can reduce transaction cost in the sharing and diffusion of farming technology. 3. Another value related to loyalty is utang na loob or debt of gratitude. It is expected that those who are helped in their time of need will return the favor when the opportunity comes. So, a trader or a lead farmer or buyer sharing technology with kins and peers can also be regarded a form of repayment from utang na loob or depositing a help to be withdrawn later when need arises (e.g., trader expects that farmer will give him some priority when cocoa bean supply is tight). 4. Buying in tingi or piecemeal is the norm rather than an exception in the Philippines. Long before multinationals and large local companies began producing product sachets, sari-sari stores (neighbourhood stores) would buy household items such as sugar, vinegar, shampoo, cooking oil, cigarettes, etc. in bulk and sell these to the customers in piecemeal: by the stick, by the pie e, the ta lespoo o up. The ti gi s ste has sp ead i to a ious i dust ies su h as telecommunications where it became possible for s to buy phone credit or load for as low as PhP 5.00. The tingi or piecemeal mentality influences much of what the Filipinos do. The tingi mentality is also ei fo ed ith Filipi o s elati el lo p ope sit to sa e, a d p efe e e fo i ediate gratification. This is manifested even in little things, such as thei p efe e e fo i sta t p ize promotions rather than loyalty programs which might require them to accumulate points toward a larger prize (De Veyra 2004). Spending more to purchase sachets today instead of saving up to buy in bulk would be consiste t ith this te de . Like ise, the do i a e of the ti gi mentality can also be correlated to general aversion of Filipinos to risks. As such, in the conduct of training and capacity building activities as well as introduction of new technology and innovations, the p og a a uild the desig a ou d this ti gi e talit to have higher chances of success and adoption.


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Section : CONSTRAINTS AND OPPORTUNITIES Table 21.- Constraints and Opportunities Opportunities

Constraints

Province

INPUT PROVISION Use of tissue cultured planting materials can significantly improve yield of farmers Village level nurseries can potentially reduce cost of tissue cultured planting materials and provide additional income to farmers

Limited supply of good quality disease free planting materials/ Lack of tissue culture laboratories

ZAMBOANGA PENINSULA Zamboanga del Norte Zamboanga del Sur Zamboanga Sibugay Zamboanga City

Low willingness among farmers to invest in good quality planting materials

NORTHERN MINDANAO Bukidnon Camiguin Lanao del Norte Misamis Occidental Misamis Oriental DAVAO REGION Davao del Norte .Davao del Sur Davao Oriental Compostela Valley Davao City SOCCSKSARGEN North Cotabato Sarangani South Cotabato Sultan Kudarat CARAGA Agusan del Norte/Butuan City Agusan del Sur Surigao del Norte Surigao del Sur ARMM Basilan Lanao del Sur Maguindanao Sulu Tawi-tawi

The choice of planting material has a significant impact on both yield and fruit quality. Farm productivity has come under increasing threat from the spread of viruses and other phytosanitary problems transmitted in vegetative planting material. The common practice of using suckers and corms from own farm or from neighbors has contributed to the spread of pests and disease. Fa e s de isio on which planting material to use is primarily determined on issues of accessibility and affordability. Proper application and management of fertilizer and pesticides together with use of quality planting materials and

High cost of chemical inputs Limited availability and commercial distribution of

ZAMBOANGA PENINSULA Zamboanga del Norte Zamboanga del Sur Zamboanga Sibugay Zamboanga City


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Table 21.- Constraints and Opportunities Opportunities good agronomic practices can potentially result to yield of 50 to 80 kilos per bunch Agri-waste can be used in the production of organic fertilizer. There are also existing enterprises engaged in production of organic fertilizer but not specifically for banana

Constraints organic fertilizer and inputs Lack of understanding among farmers on cost benefits of proper and efficient use of fertilizer/Only very few farmers apply fertilizer Low level of purchasing power among smallholders

Province NORTHERN MINDANAO Bukidnon Camiguin Lanao del Norte Misamis Occidental Misamis Oriental DAVAO REGION Davao del Norte .Davao del Sur Davao Oriental Compostela Valley Davao City SOCCSKSARGEN North Cotabato Sarangani South Cotabato Sultan Kudarat CARAGA Agusan del Norte/Butuan City Agusan del Sur Surigao del Norte Surigao del Sur ARMM Basilan Lanao del Sur Maguindanao Sulu Tawi-tawi

Bananas remove large amounts of soil nutrients with the harvest of fruit bunch. Lack of nutrient replenishment can lead to reduced yields and shorter productive life. Use and application of fertilizer are primarily based on available money and assessment of potential returns. Most farmers refer to a lack of money to buy inputs when discussing the problems to increase the productivity of their farms. Anecdotal evidence also suggest that many of the farmers have been applying fertilizers without regular soil tests to determine the exact type of fertilizers that are required to improve and maintain soil fertility Although there are a number of organic fertilizer available in Mindanao, efficacy and effectiveness of many of the products have not been scientifically tested. The production of organically grown Cardava can provide Mindanao with a competitive advantage over other Cardava and banana chips producing areas/countries especially with the increasing attention given to food safety and the effects of chemical inputs to both people and the environment.

FARMING Upgrading of low cost indigenous technologies that have good potentials of improving farm productivity and reduce incidence of pest and disease infestation

Limited outreach of existing extension services Cardava traditionally grown with minimal investments on farm maintenance

ZAMBOANGA PENINSULA Zamboanga del Norte Zamboanga del Sur Zamboanga Sibugay Zamboanga City NORTHERN MINDANAO Bukidnon Camiguin


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Table 21.- Constraints and Opportunities Opportunities There are progressive farmers in Lanao del Norte, North Cotabato, and Davao Region especially Davao del Sur who have been trained in GAP and are willing to share best practices with peers Interest among cooperatives and traders to increase volume/ yields to get prices (traders pay higher prices if farmers/groups deliver significant volume)

Constraints Low uptake and adoption of Good Agricultural Practices

Province Lanao del Norte Misamis Occidental Misamis Oriental DAVAO REGION Davao del Norte .Davao del Sur Davao Oriental Compostela Valley Davao City SOCCSKSARGEN North Cotabato Sarangani South Cotabato Sultan Kudarat CARAGA Agusan del Norte/Butuan City Agusan del Sur Surigao del Norte Surigao del Sur ARMM Basilan Lanao del Sur Maguindanao Sulu Tawi-tawi

Although Cardava provides a steady cash flow for farming households, profits are below what can be possibly generated from a well-managed Cardava farm. Low productivity and income translate to issues on price competitiveness and erratic supply base. Improving agricultural practices would address issues of productivity, efficiency, and quality. This would improve profit margins of all actors in the chain particularly the smallholders. Cardava production in Mindanao is affected by a number of pests and diseases. Poor agronomic practices have been identified as one of the key causes of the widespread pest and disease infestation. Adoption of good agronomic practices will also contribute to reducing rejects due to fruit quality issues. GAP promotion related interventions by DA/ATI/HVCDP, non-government organizations (NGOs) and private sector have contributed to significant improvement in production and productivity. However, the reach has not been extensive enough, leaving a large segment of Cardava farmers out of the benefits of those interventions. Adoption of GAP among farmers has also been slow and low. In many cases, there is still a lack of understanding among farmers on cost benefits of GAP compliance. The Filipino farmers are calculating and generally reluctant to changes in their farming activities for this is their way of life. They have the "wait-and-see" attitude. Although many farmers are very much open to new ideas and technology, there are more farmers who would first want to see a working model or system before they follow the lead. Likewise, farmers also lack the resources to comply with GAP. To facilitate adoption of GAP, farmers need both training and on-farm mentoring and monitoring including assistance in aligning current production system to GAP at the least cost.


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Table 21.- Constraints and Opportunities Opportunities

Constraints

Province

PROCESSING Implementation and adoption of standards such as GMP can play a positive role in providing the catalyst and incentives for the modernization of the banana chips industry and the adoption of safer and more sustainable production and processing activities which can be differentiation factors that can institutionalize market competitiveness

Lack of access to skills and resources to comply with GMP (especially micro enterprises) Street food preparation not aligned with food safety protocols

ZAMBOANGA PENINSULA Zamboanga City NORTHERN MINDANAO Bukidnon Misamis Oriental DAVAO REGION Davao del Sur Davao del Norte Davao City Davao Oriental Compostela Valley SOCCSKSARGEN North Cotabato Sarangani CARAGA Agusan del Norte

GMP compliance is a basic requirement to get permits to operate which are necessary to penetrate institutional buyers and to work with big exporters. Without the basic BFAD certification, enterprises are not able to penetrate bigger and more lucrative markets. Microprocessors make use of makeshift cooking facilities and areas. Poor processing facilities are compensated with use of quality Cardava which is more expensive. A common prejudice held against street foods are that they are unsafe to eat (dirty). Food products are often prepared and stored under non-sanitary conditions. The preparation and processing of food also influence nutrient loss and, thus, affect the nutritional quality of the product. Similarly, ingredients can enhance or deteriorate health and nutrition benefits of ready to eat Cardava based meals and snacks. Likewise, it also affects perceived value of products. MARKETING The shelf-life of bananas can be prolonged by proper storage and postharvest handling

Poor postharvest handling and facilities especially among buying stations resulting to high levels of losses

ZAMBOANGA PENINSULA Zamboanga del Norte Zamboanga del Sur Zamboanga Sibugay Zamboanga City NORTHERN MINDANAO Bukidnon Misamis Oriental Misamis Occidental Camiguin Lanao del Norte DAVAO REGION Davao del Norte


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Constraints

Province Davao del Sur Davao Oriental Compostela Valley Davao City SOCCSKSARGEN North Cotabato Sarangani South Cotabato Sultan Kudarat CARAGA Agusan del Norte/Butuan City Agusan del Sur Surigao del Sur ARMM Maguindanao

Handling the produce at the postharvest stage is as important as maintaining the quality of the fruit at the farm production level. Postharvest losses at buying stations can reach up to 20% due to lack of appropriate facilities and losses to vermin and other pests. The very large population in the Philippines and increasing consciousness for healthy snack food provides opportunities to develop the local market for other processed Cardava based products Growing market products

for

halal

Weak demand for banana chips in local market

ZAMBOANGA PENINSULA Zamboanga del Sur Zamboanga City

Lack of product differentiation/ available product formats

NORTHERN MINDANAO Bukidnon Misamis Oriental

Lack of value addition in ARMM provinces

DAVAO REGION Davao del Sur Davao City SOCCSKSARGEN North Cotabato Sarangani CARAGA Agusan del Norte ARMM Maguindanao Lanao del Sur Basilan Sulu Tawi-tawi

T ade of a a a hips is ofte li ited ithi the lo alit a d pasalu o g shops. To oade the market base and increase frequency of purchase of banana chips in the local market, a new marketing concept has to be introduced to (re)position the product in the minds of the consumers. A positioning that combines gourmet snack food, with an ecological and healthy lifestyle can potentially add to the current volume of sales without affecting current positioning as a pasalu o g p odu t. The lack of initiatives among processors especially the micro enterprises and collective/coop-based enterprises to develop and diversify products can be attributed to the following: a) lack of MB/II.- CARDAVA VCA STUDY, DA-PRDP- MINDANAO CLUSTER

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Constraints

Province

knowledge of potential market segments and its requirements and product standards are based on locally accepted norms; b) weak product development skills; and c) smallness of operations and current markets including limited individual capacity to invest in product development. In ARMM provinces (especially the island provinces), trade of Cardava is usually just within the locality. The processing of banana into halal snack products can provide opportunity for small producers and farmer groups to increase the value added to primary production. LGU willing to cost share in the construction and maintenance of farm to market roads.

Poor farm to market roads

All Mindanao provinces Basilan, Sulu, and Tawi-tawi

except

Good roads can reduce cost of transactions, delays in delivery, and postharvest losses A significant number of farms are located in areas where roads are unpaved and, oftentimes, narrow for trucks to . There is a significant difference in the cost of moving goods in rural areas on dirt roads as opposed to on paved roads. This difference is usually reflected back on the price received by farmers. Likewise, road conditions and, consequently, the high transport costs, provide disincentives for traders to source from these areas. This limits the options of farmers to a few traders and forces them to be price takers. Rough roads and potholes combined with poor packaging contribute to postharvest losses.


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Section : COMPETITIVENESS DIRECTIONS A. COMPETITIVENESS VISION

The i dust s isio of eati g lo g-term competitiveness and sustainability centers on the establishment of an efficient and integrated supply chain management geared towards the achievement of the following: g) Adequate supply and widespread use of tissue cultured planting materials to minimize risks of pest and disease infestation and, consequently, ensure stable supply of Cardava h)

Improved access to, availability, use, and utilization of organic fertilizer and other inputs appropriate for Cardava banana farming while reducing environmental costs

i)

Enhanced flow and quality of extension services for Cardava farming to facilitate adoption of GAP for improved productivity and product quality

j)

Improved access to GMP compliant postharvest and distribution technologies and facilities to reduce postharvest losses and maintain product quality


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k) Availability and access to improved processing technologies, product development services, and GMP and Halal compliant common service facilities to facilitate the production of commercially viable Cardava-based products l)

Improved physical/infrastructure linkages to input, , and product markets

B.

PRIORITY CONSTRAINTS/OPPORTUNITIES AND INTERVENTIONS

Drawing on findings from the end markets and value chain analysis and the focal points of action identified by VC actors and stakeholders, below are the proposed intervention strategies and approaches to improve market competitiveness of the Mindanao Cardava banana industry while promoting broad based growth and climate change resilience. Prioritization of interventions for each of the Cardava producing provinces is presented in Annexes 1 to 6 while specific approaches for each province are indicated in Table __. Input Provision

1. Strengthen local capacity to commercially produce and distribute high yielding and disease resistant planting materials Although tissue culture technology is well developed in the Philippines, tissue cultured plantlets are not readily available to many of the banana smallholders due to insufficient and relatively underdeveloped distribution channels. A limited understanding of the benefits of tissue cultured planting materials has also contributed to limited uptake among farmers. The proposed strategy to promote the use of tissue cultured planting materials among farmers rather than the conventional suckers from own farm or neighbors which have greater risk of being infected with diseases is focused towards the development of improved and efficient market pathways to deliver clean planting materials. The set of suggested intervention approaches consists of two basic components, namely: a) strengthening the supply of tissue cultured planting materials; and b) stimulating the demand for these planting materials. Key supply side interventions consist of the following: a) Establishment and/or scaling up of existing tissue culture laboratories in key Cardava producing provinces. Main objective is to enable laboratories to produce plantlets at the most economical cost and in sufficient quantity throughout the year. b) Set-up of community-based nurseries for acclimatization and as distribution centers to ensure accessibility and reduce risks of damage due to poor packaging and transport. c) Upgrading of seed banks to the operations of the tissue culture laboratories To stimulate effective demand for tissue cultured plantlets, PRDP can implement a voucher based program or a Plant Now Pay Later scheme or other similar demand creation mechanisms rather than the usual distribution of free planting materials which undermine the development of effective demand and supply. In a voucher program, farmers pay for a portion of the cost of planting materials and redeem the voucher to a program accredited supplier of their choice. A voucher program helps increase effective demand by making farmers aware of the improved planting materials available within the locality and allowing them the opportunity to acquire small quantities MB/II.- CARDAVA VCA STUDY, DA-PRDP- MINDANAO CLUSTER

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of these materials at low risk and investment to test on their farms, which they might then purchase for themselves in subsequent seasons. The use of vouchers can also help in strengthening cash flow of nurseries as well as encourage operators to provide good quality to generate repeat clients. It is also recommended that PRDP develops the capacity of nurseries to deliver embedded technical assistance to their clients. Assistance to nurseries in the establishment of model farms as learning venues where clients can visually validate results to make informed decisions is also deemed necessary. Successful Cardava production by farmer-clients will create sustainable market for nurseries. In recognition of farmers inherent inclination to trust o e o pee s a ou ts of lesso s learned, cross-trainings and exchange visits among nurseries and laboratories should be promoted to accelerate dissemination of good practices and its adoption. Media may also be tapped to assist in the dissemination of emerging good practices and success stories.

2. Strengthen supply and demand for certified/accredited organic fertilizer parallel to promoting proper fertilizer management and application Studies show that continuous cultivation using low external inputs decreases soil fertility and crop yields. A combination of mineral and organic fertilizers is necessary to sustain and improve crop production on depleted soils. Fertilizer use can improve banana production but recommendations should be site-spe ifi a d should add ess e isti g ut ie t defi ie ies i fa e s fields. It is, therefore, proposed that program s the development of a vibrant market for organic fertilizer, which is 50% to 75% cheaper than chemical inputs. Likewise, there is a need to provide farmers with access to services to guide them in proper fertilizer management and application to boost productivity parallel to improving profitability. Specific interventions under this strategy would consist of the following: (1) Set-up of community-based organic fertilizer plant and/or upgrading and scaling up of existing fertilizer enterprises including assistance to get the necessary certification/ accreditation. Establishment of community-based plant for technological inputs will reduce dependence on expensive external inputs and facilitate shift towards sustainable, regenerative production systems. This will also contribute to employment generation and solid waste management. Aside from assistance in setting up the necessary infrastructure, capacity building should also be geared towards helping enterprises produce fertilizer (from agri-waste materials such as banana peels, trunks, coco husk, etc.) that match agro-ecological zones and cropping systems of banana growers in their area parallel to increasing their productivity, production capacity, and product quality. This will enable fertilizer enterprises to offer consistent and reliable supply of alternative fertilizer products of better quality and improved effectiveness at lesser cost, which will result to lower production costs of Cardava. . Training and coaching on business management and marketing will assist CBPUs to improve its internal infrastructure to better serve the clients while ensuring its financial viability. (2) Development of distribution network/ retail network to ensure proximity of supply to farmers Program may want to explore the viability of utilizing sari-sari stores as among the retail outlets. Producers may want to explore the viability of distributing these in small affordable packs in line ith the sa het o ti gi e talit of s allholde s a d thei ash flo . The s all pa k app oa h is i te ded to e a le s allholde s to a hie e i emental gains in yield and income over a few seasons and ultimately graduate to using the required fertilizer application


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(3) Development of capacity of organic inputs providers and retailers to deliver technical advice to farmer clients and basic soil test analysis or via partnership with providers of soil analysis Promotion of fertilizer use must be complemented with extension services to ensure that fertilizers have the correct formulation to meet local soil needs, are applied in the correct amount and at the optimal point in the planting cycle, and are used alongside complementary inputs such as improved planting materials. Without proper application, fertilizer use can actually decrease profitability by creating a significant added cost without a corresponding increase in crop yields. As such, in addition to assisting fertilizer producers to scale up their production capacities, they must also be capacitated to deliver advisory services to their farmer clients. It may also be possible to integrate soil testing services with fertilizer distribution. Fertilizer demand must be promoted with an integrated approach to increasing the profitable use of fertilizer by farmers through extension services, and linking farmers to output markets. d) Interventions to create effective demand Demand for fertilizer may be stimulated through the following approaches: i) demo farms highlighting organic fertilizer use and appropriate crop and soil management; ii) point-of-sale knowledge transfer; iii) voucher programs (as described under planting materials) or similar market-based based mechanisms; and iv) tri-media dissemination of emerging good practices and success stories. Farming

3. I p o e fa

e s a ess to skills a d esou es that ould e a le the to adopt good agronomic practices parallel to ensuring that there are sufficient market-based incentives to facilitate chain wide upgrading

The proposed strategy involves the development and/or strengthening of localized capacity for learning and innovation through promotion of inter-firm cooperation and to set-up and/or strengthening of community-based extension services delivery system. This will facilitate access of farmers to technology and resources that will enable them to improve their agronomic practices parallel to improving chances of the latter adopting the practices to their benefit. Technology transfer will focus on enabling farmers to incrementally shift to production systems aligned to principles of GAP and sustainable farming. This will address o u ities eed fo i eased fa productivity, reduced production risk, maximized use of land or better resource allocation, and enhanced diversity and ecological balance. GAP adoption will also facilitate improved compliance to food safety which has become a primordial factor of quality and competitiveness both for domestic and export markets. Likewise, it will contribute to streamlining social and environmental sustainability in Cardava production. The following are the key interventions under this strategy: a) Formation of farmer training groups or learning clusters organized around consolidators (e.g., cooperatives, assemblers) or lead firms (banana chips processors). This will involve the organization of interested farmers into farmer training groups. Each group will have lead farmers selected based on interest, experience, and leadership qualities. Lead farmers will receive in-depth training on GAP and may be compensated with the produce from the project ed demonstration farms. The lead farmers will provide training to peers with lead firms or consolidators providing the marketing perspectives and market assurance. MB/II.- CARDAVA VCA STUDY, DA-PRDP- MINDANAO CLUSTER

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Upgrading is a collaborative undertaking among all participants in a chain. Establishing clear standards and goals that are communicated on a regular basis is critical to successful upgrading. As such, the participation of farmers and their buyers in the upgrading process is important. Based on experiences also, farmers are more receptive to new practices and technology when lead firms or buyers are involved in the upgrading process. It gives them some confidence that upgrading will result to tangible benefits. b) Development of lead farmer-trainers per cluster including delivery and financial sustainability schemes This is aimed at complementing the extension services provided by ATI, LGUs, and input suppliers. Diversity of extension provision, from government extension officers to community-based and value chain-based providers, will give farmers greater choice of sources of information, knowledge, and skills to the long-term sustainability of their farm enterprise, An influential core group of farmer-trainers can be leveraged to involve their peers and make that one small shift that produces widespread change. Aside from providing training services, the of this core group can become role models and help to reduce uncertainty about a new idea by adopting it, and then conveying a subjective evaluation of the innovation to peers. To avoid volunteerism fatigue, it is crucial to develop financial sustainability schemes. Community trainers can, perhaps, be given a commission from sales of bananas of the group he/she is working with or a share in the sales from demonstration farms. c) Harmonization of pricing structure based on standards and improvement of supply chain governance Many (mis)trust issues stem from varying interpretations and uneven implementation of standards and price structure. Harmonization of interpretation of standards and reflecting these in the price structure will provide incentives for upgrading. Effectiveness of collaboration among and between value chain players and their consequent collective adherence to standards depend to a great extent on whether they view themselves as having shared goals and mutual interests. Therefore, it may be necessary also for PRDP to provide organizational development as well as conduct social marketing campaigns. However, the best trigger for tighter collaboration and cooperation is the pursuit of bigger markets and better prices. d) Interventions to stimulate adoption of GAP/sustainable farming practices To begin a dialogue about upgrading, there is need to first identify issues that participants could readily connect with. By linking the benefits of upg adi g to fa e s p io it issues a d de elopi g an understanding of the impacts each actor could have on the whole value chain, there is a high probability that participants at different points on the value chain can be encouraged and motivated to wo k togethe . At the ti e of the field o k up to the “takeholde s Co sultatio , for example, a key issue among farmers was the high incidence of pests and diseases during the recent years. It may be difficult for value chain actors to see how an abstract o ept su h as good p a ti es ill result in tangible benefits to them. Using an incremental approach, PRDP can start with those improvements that address the most pressing needs of producers, buyers, and traders.


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It is recommended to employ participatory learning methods, such as demonstration plots and hands-on training, to build knowledge of less well-understood areas, such as pest control. Conduct of friendly competition is also a way to make learning and upgrading fun. The contests can provide incentives to farmers to become aligned with GAP, while simultaneously demonstrating the effects of good practices. Good practices and innovative solutions that will emerge from the competitions can be incorporated into the GAP manual and training modules, helping capture and further disse i ate e lea i g. The o petitio s a e also a a to ui kl o ito fa e s understanding of different elements of GAP and take corrective action whenever necessary. It is also suggested to involve media in the dissemination of technical and market information, as well as in highlighting successful initiatives and innovations. Disseminating information in a variety of ways—print materials, in-person events, competitions, and main-stream media—ensures that as many value chain actors as possible can hear and understand the messages. Processing

4. Improve capacity of enterprises to comply with GMP This will involve the set-up of GMP/HAC compliant toll processing facility or upgrading of existing facilities for production of banana chips and similar products. This can also serve as an incubator/R and D laboratory for promising Cardava-based products. ‘athe tha de elopi g a si gle o e size fits all p o ide ", the p oje t can work with a range of providers in order to be able to match competencies and structures of different groups of players at various links in the chain. Providers of food safety related services may consist of progressive farmers, traders and leaders in communities, graduating food technology students, government technicians, and food technologists. It is important that the development of modules is done in coordination with key VC players especially buyers to ensure integration of market standards and requirements. Snack Food/Street Food Vendors Although this supply chain is dominated by players from poor communities, a significant volume of Cardava produced by smallholders is marketed through this supply chain. PRDP may want to explore the viability of a GMP compliant common service facility/community food kitchen to serve as commissaries for healthy and nutrient dense Cardava-based meals and snacks. This will address concerns on food safety, nutrition, and sustainable production. Providing an environment conducive to hygienic and eco-friendly preparation and sale of food will catalyze uptake of good practices, improve productivity and overall perception of street food. Parallel to this, PRDP can develop a pool of GMP trainors consisting of progressive vendors. There is also a need to the development and ing of commercially viable Cardava recipes to the informal food service industry to stimulate growth in demand and improve profit margins. This may be ed with the development and promotion of hygienic snack food carts under a rent-to-own scheme or similar mechanism. Care, however, must be given that interventions do not displace existing vendors.


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Marketing

5. Development and/or upgrading of marketing infrastructure for all types of banana to enhance collective marketing and bulk storage This strategy involves the establishment of a GMP compliant packing house cum trading center ed with extension services on good postharvest practices. For packing house and trading center to be commercially viable, it is important that area has the volume that is sufficiently attractive to lead firms and consolidators. A basic prerequisite is for farmers to be willing to collectively market their produce. As such, interventions will also include organizational development and the promotion of win- i elatio ships et ee fa e s g oups a d consolidators or lead firms. A GMP compliant packing house cum trading center equipped with an appropriate level and scale of post-harvest technology can play a pivotal role in providing a clean environment for the proper washing, sorting, grading, packaging, and storage of bananas. It is a critical and important component of the infrastructural base to value adding and quality and safety management in fresh banana supply chains. Presence of packing houses cum collection centers within the proximity of Cardava production areas will also reduce hauling and transport costs of farmers.

6. Upgrading of existing processed products and development of related products that Mindanao can sustain as a marketing proposal in the domestic market with a view of laying the groundwork for export sales It is suggested that PRDP s the product and market development of Cardava-based food products targeting the healthy food sector. Product research and development are important aspects of the processed snack food industry given increased competition with the entry of more players and the influx of imported brands. The big players in the snack food industry have their own research and development teams to come-up with new and interesting products in better and attractive packaging to attract a wider range of consumers. In addition to the pasalubong market, a potential niche for the Cardava-based food products is the healthy gourmet markets. An emerging trend in the snack industry is to make classic favorites more appealing to the health conscious. To cash in on the healthy food trend, food manufactures have to make adjustments to their formulas by using ingredients that are all-natural or organic, low in calories, no preservatives and chemical additives, etc. The healthy positioning has also to be reflected in the packaging (e.g., eco-friendly materials) and in the whole operations. The major challenge and opportunity for Northern Mindanao enterprises is to combine tradition, health, and convenience into high quality new food solutions produced efficiently. Possible directions that the processed Cardava subsector can pursue: a) Development of all natural healthy snack food. Aside from formulation of healthy delicious recipes, this also implies using ingredients that are all natural (e.g., naturally farmed eggs, muscovado or other healthy sugar, low-fat milk from organically raised cattle, etc.). b) Mo i g a a f o the o e size fits all o ept of p odu tio a d fo us o the tastes a d recipes that appeal to different demographics (e.g., infants, elderly, Halal food products, etc.) c) quality flour for gluten free applications


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Marketing ranging from trade fair participation, selling missions, brochures, etc. should be uilt a ou d the ag eed i age a d p odu t diffe e tiatio fa to s. This a also se e as a incentive for producers to upgrade their products and processes in order to be a part of the marketing campaign.

7. Construction and/or upgrading of farm to market roads Farm-to-market road rehabilitation or construction will help farmer to access markets and vital services. Improvements of rural infrastructure can reduce transportation and labor costs and, more generally, the cost of transaction. Shorter travel time and good road conditions will minimize risks of product deterioration. The overall reduction of transaction costs will contribute to improving price competitiveness and/or better profit margins that can help farmers cope with price fluctuations. Public investments in road infrastructure can potentially stimulate agribusiness investment, vertical coordination with buyers, and inclusion of small farmers in remote areas.


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Table 22.- Summary of Constraints/Opportunities and Interventions Constraints/Opportunity

Province

Intervention Strategy and Approach

Who Can Do It? Public

Private

INPUT PROVISION Limited supply of good quality disease free planting materials/ Lack of tissue culture laboratories

ZAMBOANGA PENINSULA Zamboanga del Norte (1 to 6) Zamboanga del Sur (2 to 6) Zamboanga Sibugay (2 to 6) Zamboanga City (2 to 6)

Low willingness among farmers to invest in good quality planting materials

NORTHERN MINDANAO Bukidnon (1 to 6) Camiguin (2 to 6) Lanao del Norte (1 to 6) Misamis Occidental (2 to 6) Misamis Oriental (2 to 6)

Opportunities Use of tissue cultured planting materials can significantly improve yield of farmers Village level nurseries can potentially reduce cost of tissue cultured planting materials and provide additional income to farmers

DAVAO REGION Davao del Norte (1 to 6) Davao del Sur (1 to 6) Davao Oriental (1 to 6) Compostela Valley (1 to 6) Davao City (1 to 6) SOCCSKSARGEN North Cotabato (1 to 6) Sarangani (2 to 6) South Cotabato (2 to 6) Sultan Kudarat (2 to 6) CARAGA Agusan del Norte/Butuan City (1 to 6) Agusan del Sur (2 to 6) Surigao del Norte (2 to 6) Surigao del Sur (2 to 6)


Strengthen local capacity to commercially DA/PRDP Cooperatives produce and distribute high yielding and - Technical and - Management and disease resistant planting materials financial operations of nurseries (1) Establishment and/or upgrading of BPI/DOST/ HVCDP existing tissue culture laboratories - Technical assistance - R and D (2) Establishment of community-based nurseries PLGU/MLGU - Coordination (3) Implementation of voucher program - Monitoring or similar mechanisms to encourage - Follow-through farmers to use clean planting materials extension services of the high yielding varieties. - Organizational Development (4) Development of capacity of nursery - Management and operators to provide technical advice operations of tissue culture laboratories (5) the establishment and/or upgrading of seed banks. Existing tissue culture laboratories (6) Documentation and dissemination of - Mentoring and emerging good practices technical guidance

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Province



Private

ARMM Basilan (2 to 6) Lanao del Sur (2 to 6) Maguindanao (1 to 6) Sulu (2 to 6) Tawi-tawi (2 to 6)

High cost of chemical inputs Limited availability and commercial distribution of organic fertilizer and inputs Lack of understanding among farmers on cost benefits of proper and efficient use of fertilizer/Only very few farmers apply fertilizer Low level of purchasing power among smallholders Opportunities Proper application and management of fertilizer and pesticides together with use of quality planting materials and good agronomic practices can potentially result to yield of 50

ZAMBOANGA PENINSULA Zamboanga del Norte (1 to 5) Zamboanga del Sur (1 to 5) Zamboanga Sibugay (2 to 6) Zamboanga City (1 to 5) NORTHERN MINDANAO Bukidnon (1 to 5) Camiguin (2 to 5) Lanao del Norte (1 to 5) Misamis Occidental (1 to 5) Misamis Oriental (1 to 5) DAVAO REGION Davao del Norte (1 to 5) Davao del Sur (1 to 5) Davao Oriental (1 to 5) Compostela Valley (1 to 5) Davao City (1 to 5 SOCCSKSARGEN North Cotabato (1 to 5) Sarangani (2 to 5) South Cotabato (2 to 5) Sultan Kudarat (2 to 5) CARAGA Agusan del Norte/Butuan City (1 to 5)


Strengthen supply and demand for DA/PRDP certified/accredited organic fertilizer - Technical and parallel to promoting proper fertilizer financial management and application ATI (1) Set-up of community-based organic - Training and fertilizer plant and/or upgrading and technical assistance scaling up of existing fertilizer enterprises including assistance to get PLGU/MLGU the necessary certification/ - Organizational accreditation development - Follow through (2) Implementation of voucher program extension services or similar tool to stimulate purchase - Organization of and use of organic fertilizer/inputs and training and similar reduce risk averseness among farmers activities - Coordination of (3) Set-up of demo farms to showcase voucher program or benefits and venue for learning similar mechanism

Cooperatives - Management and operations of fertilizer business - Promotional campaign

(4) Development of distribution network/ retail network to ensure proximity of supply to farmers

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Province



to 80 kilos per bunch Agri-waste can be used in the production of organic fertilizer. There are also existing enterprises engaged in production of organic fertilizer but not specifically for banana

Agusan del Sur (1 to 5) Surigao del Norte (2 to 5) Surigao del Sur (2 to 5) ARMM Basilan (2 to 5) Lanao del Sur (2 to 5 Maguindanao (1 to 5) Sulu (2 to 5) Tawi-tawi (2 to 5)

(5) Develop capacity of organic inputs providers and retailers to deliver technical advice to farmer clients and basic soil test analysis or via partnership with providers of soil analysis

ZAMBOANGA PENINSULA Zamboanga del Norte (1 to 6) Zamboanga del Sur (1 to 6) Zamboanga Sibugay 1 to 6) Zamboanga City (1 to 6)

I p o e fa e s a ess to skills a d DA/PRDP resources that would enable them to - Technical and adopt good agronomic practices parallel financial to ensuring that there are sufficient market-based incentives to facilitate chain ATI wide upgrading - Training/ technical assistance (1) Formation of farmer training groups or - to learning clusters organized around certification consolidators HVCDP (2) Development of lead farmer – trainers - Training/ technical per cluster including delivery and assistance financial sustainability schemes BAFPS (3) Participatory development (with - Technical farmers, multinational/ agents, assistance traders) of modules on sustainable - Development of farming practices to ensure buy-in and low-cost measures

Private

FARMING Limited outreach of existing extension services Cardava traditionally grown with minimal investments on farm maintenance and inputs Low uptake and adoption of Good Agricultural Practices

Opportunities Upgrading of low cost indigenous technologies that have good potentials of improving farm productivity There are progressive farmers

NORTHERN MINDANAO Bukidnon (1 to 6) Camiguin (1 to 6) Lanao del Norte (1 to 6) Misamis Occidental (1 to 6) Misamis Oriental (1 to 6) DAVAO REGION Davao del Norte (1 to 6) Davao del Sur (1 to 6) Davao Oriental (1 to 6) Compostela Valley (1 to 6) Davao City (1 to 6) SOCCSKSARGEN North Cotabato (1 to 6) Sarangani (1 to 6)


Cooperatives - Base of delivery of services - Management of demo farms

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Province



in Lanao del Norte, North Cotabato, and Davao Region especially Davao del Sur who have been trained in GAP and are willing to share best practices with peers Interest among cooperatives and traders to increase volume/ yields to get prices (traders pay higher prices if farmers/groups deliver significant volume)

South Cotabato (1 to 6) Sultan Kudarat (1 to 6) CARAGA Agusan del Norte/Butuan City (1 to 6) Agusan del Sur (1 to 6) Surigao del Norte (1 to 6) Surigao del Sur (1 to 6) ARMM Basilan (1 to 6 Lanao del Sur (1 to 6) Maguindanao (1 to 6) Sulu (1 to 6) Tawi-tawi (1 to 6)

ownership of stakeholders and conformance to market requirements including technical assistance in the development of training approaches that allow quick wins to motivate and sustain adoption (4) Conduct of competitions to motivate adoption, stimulate innovation, and facilitate identification of emerging good practices as basis for regular updating of modules (5) Dissemination practices

of

emerging

to comply certification

Private with

PLGU/MLGU - Organizational development - Follow through extension services - Organization of training and similar activities - certification

good

(6) Harmonization of pricing structure based on standards and improvement of supply chain governance

PROCESSING Lack of access to skills and resources to comply with GMP (especially micro enterprises)

ZAMBOANGA PENINSULA Zamboanga City (1 and 2)

Opportunity

NORTHERN MINDANAO Bukidnon (1 and 2) Misamis Oriental (1 and 2)

Implementation and adoption of standards such as GMP and

DAVAO REGION Davao del Sur (1 and 2) Davao City (1 and 2)


Improve capacity of enterprises to comply with GMP

DA/PRDP - Technical and financial

(1) Set-up of GMP/HAC compliant toll processing facility and/or upgrading DOST/DTI to cooperatives currently - GMP Training/ engaged in banana processing technical assistance - Product

Cooperatives - Base of delivery of services - Management of Common Services Facilities

Página 77


Province



HAC and other relevant quality standards can play a positive role in providing the catalyst and incentives for the modernization of the banana chips industry and the adoption of safer and more sustainable production and processing activities which can be differentiation factors that can institutionalize market competitiveness

Davao del Norte (1 and 2) Davao Oriental (1 and 2) SOCCSKSARGEN North Cotabato (1 and 2) Sarangani (1 and 2)

(2) Development of a core group of local experts to provide hands-on training and mentoring to CSF s

Private

Development Technical Assistance

PLGU/MLGU - Organizational development - Follow through extension services - Organization of training and similar activities

CARAGA Agusan del Norte/Butuan City (1 and 2) ATMM Maguindanao (1 and 2)

MARKETING Poor postharvest handling and facilities especially among buying stations resulting to high levels of losses

ZAMBOANGA PENINSULA Zamboanga del Norte (1 to 3) Zamboanga del Sur (1 to 3) Zamboanga Sibugay (1 to 3) Zamboanga City (1 to 3)

Opportunities

NORTHERN MINDANAO Bukidnon (1 to 3) Misamis Oriental(1 to 3) Misamis Occidental (1 to 3) Camiguin (1 to 3) Lanao del Norte (1 to 3)

The shelf-life of bananas can be prolonged by proper storage and postharvest handling

DAVAO REGION Davao del Norte (1 to 3) Davao del Sur (1 to 3) Davao Oriental (1 to 3) Compostela Valley (1 to 3)


Development and/or upgrading of marketing infrastructure to enhance collective marketing and bulk storage

DA/PRDP - Technical and financial

(1) Foster linkages between farmer groups and exporters/processors including the development of business models and its piloting

PhilMech - Technology transfer - Customization of equipment/ - facilities to fit in with terrain and requirements of area

(2) Establishment and/or upgrading of buying stations (collection point, sorting, storage) for all types of banana (3) Set-up of pool of mentors to provide

Cooperatives - Management and operations of common service facilities

PLGU/MLGU - Follow through Página 78


Province



Davao City (1 to 3) SOCCSKSARGEN North Cotabato (1 to 3) Sarangani (1 to 3) South Cotabato (1 to 3) Sultan Kudarat (1 to 3)

training on good postharvest practices and to foster an entrepreneurial mind set

assistance - Organizational development ATI/DTI - Enterprise training

CARAGA Agusan del Norte/Butuan City (1 to 3) Agusan del Sur (1 to 3) Surigao del Sur (1 to 3)

Private

dev

ARMM Maguindanao (1 to 3)

Weak demand for banana chips in local market

ZAMBOANGA PENINSULA Zamboanga del Sur (1 and 2) Zamboanga City (1 and 2)

Lack of product differentiation/ available product formats

NORTHERN MINDANAO Bukidnon (1 and 2) Misamis Oriental (1 and 2)

Opportunity The very large population in the Philippines and increasing consciousness for healthy snack food provides opportunities to develop the local market for other processed Cardava based products

DAVAO REGION Davao del Sur (1 and 2) Davao City (1 and 2) SOCCSKSARGEN North Cotabato (1 and 2) Sarangani (1 and 2) CARAGA Agusan del Norte/Butuan City (1 and 2)


Upgrading of existing processed products DA/PRDP and development of related products that - Technical and Mindanao can sustain as a marketing financial proposal in the domestic market with a view of laying the groundwork for export DOST/DTI sales - Product (existing, banana chips) Development (1) Process and product development Technical Assistance targeting healthy snack food - Market and halal markets Development (2) Brand and campaign

market

Cooperatives - Management of Collective Enterprises

development PLGU/MLGU - Organizational development - Follow through Página 79


Province



ARMM Maguindanao (1 and 2) Basilan, Sulu, Tawi-tawi /1 and 2)

Poor farm to market roads

All provinces except Basilan, Sulu and Tawi-tawi

Private

extension services - Organization of training and similar activities Construction and/or upgrading of farm to market roads

Opportunity LGU willing to cost share in the construction and maintenance of farm to market roads.


Página 80

Section : CONCLUSIONS AND RECOMMENDATIONS 1. Strengthening the processed banana (chip and IQF) and fresh market (home consumption and snack food) supply chains will help stabilize the incomes of participants in the chains, particularly farmers, and provide the latter with diversified markets for their produce. The upgrading strategy should involve moving farmers and supply chains into progressively higher-value markets in small steps, with specific attention to product, process, and functional upgrading. Main thrusts of the interventions should focus on the following competitiveness issues: a) Reliability and predictability of supply b) Productivity and efficiency improvements from farm to distribution c) Improvement of capacity and capability to comply with quality and food safety standards d) Reduction of postharvest losses e) Product differentiation and diversification (organic/all natural healthy food products, Halal food products, low-cost safe and healthy snacks, etc.) f)

Functional upgrading (farmers taking up additional functions such as nursery operations, organic fertilizer production and distribution, collective marketing, processing, etc.)

2. The huge demand for halal food products in the world market is an opportunity that ARMM can potentially anchor its development directions for the next coming years. Commercial production and distribution of Halal processed Cardava snack foods may be among the product opportunities that the region can explore. 3. The typical response to bridge the demand supply gap has been to increase the area under Cardava cultivation but yield (productivity) has remained low in many areas in Mindanao. This has led to higher production cost. Increasing area under Cardava cultivation is not sustainable more so with the growing scarcity of fertile lands. A more sustainable approach would be to promote yield intensification through improved productivity. Farmers in Davao del Sur and North Cotabato have shown the yields as high as 40 MT per hectare is possible.


Página 81

ANNEX : PRIORITIZATION OF INTERVENTION STRATEGY: ZAMBOANGA PENINSULA Ranking and Prioritization of intervention Strategy per Province Ranking and Prioritization: Zamboanga Peninsula Intervention Strategy

ZDN

ZDS

Sibugay

ZC

Strengthen local capacity to commercially produce and distribute high yielding and disease resistant planting materials

1

1

1

1

Strengthen supply and demand for certified/accredited organic fertilizer parallel to promoting proper fertilizer management and application

7

7

7

7

I p o e fa e s a ess to skills a d resources that would enable them to adopt good agronomic practices parallel to ensuring that there are sufficient marketbased incentives to facilitate chain wide upgrading

2

2

2

2


4

4

4

4


3

3

3

3

Upgrading of existing processed products and development of related products that Mindanao can sustain as a marketing proposal in the domestic market with a view of laying the groundwork for export sales

6

6

6

6

Construction and/or upgrading of farm to market roads

5

5

5

5


Página 82

ANNEX : PRIORITIZATION OF INTERVENTION STRATEGY: NORTHERN MINDANAO Ranking and Prioritization of intervention Strategy per Province

Ranking and Prioritization: Northern Mindanao Intervention Strategy

Mis Or

Lanao

Bukidnon

Mis Occ

Camiguin


4

4

4

4

3


2

2

2

2

2

I p o e fa e s a ess to skills a d resources that would enable them to adopt good agronomic practices parallel to ensuring that there are sufficient market-based incentives to facilitate chain wide upgrading

1

1

1

1

1


5

5

5

5

5


6

6

6

6

6


7

7

7

7

7


3

3

3

3

4


Página 83

ANNEX : PRIORITIZATION OF INTERVENTION STRATEGY: DAVAO REGION Ranking and Prioritization of intervention Strategy per Province Ranking and Prioritization: Davao Region Davao del Norte

Davao del Sur

Davao City

Davao Oriental

Compostela


3

3

3

3

3


2

2

2

2

2


1

1

1

1

1


6

6

6

6

6


7

7

7

7

7


4

4

4

4

4


5

5

5

5

5

Intervention Strategy


Página 84

ANNEX : PRIORITIZATION OF INTERVENTION STRATEGY: SOCCSKSARGEN Ranking and Prioritization of intervention Strategy per Province Ranking and Prioritization: SOCCSKSARGEN Intervention Strategy

South Cotabato

North Cotabato

Sarangani

Sultan Kudarat


1

6

1

1


2

7

2

2

I p o e fa e s access to skills and resources that would enable them to adopt good agronomic practices parallel to ensuring that there are sufficient marketbased incentives to facilitate chain wide upgrading

3

5

3

3


7

4

7

7


4

1

4

4


5

2

5

5


6


6

6

6

Página 85

ANNEX : PRIORITIZATION OF INTERVENTION STRATEGY: CARAGA Ranking and Prioritization of intervention Strategy per Province Ranking and Prioritization: Caraga Intervention Strategy

Agusan del Norte/ Butuan City

Agusan del Sur

Surigao del Norte

Surigao del Sur


6

6

6

6


7

7

7

7

I p o e fa e s a ess to skills a d resources that would enable them to adopt good agronomic practices parallel to ensuring that there are sufficient marketbased incentives to facilitate chain wide upgrading

1

1

1

1


4

4

4

4


2

2

2

2


3

3

3

3


5

5

5

5


Página 86

ANNEX : PRIORITIZATION OF INTERVENTION STRATEGY: ARMM Ranking and Prioritization of intervention Strategy per Province Ranking and Prioritization: ARMM Intervention Strategy

Lanao del Sur

Basilan

Maguindanao

Tawi-Tawi


2

1

2

2


3

6

3

3


1

2

1

1


7

5

7

6


5

3

5

4


6

4

6

5


4

7

4

7


Página 87

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