Market of Fresh Fruits and Vegetables 1

Purpose of the Module - To create awareness and understanding among National Governments/focal points as well as producers in countries on Global and ASEAN Markets on FFV 2

Outcome of the Module Participants will understand: - What is the main production of FFV in the region - What is the pre-harvest factors influencing market of FFV - How to link production and market - What is the major challenges for FFV market in the region 3

Overview of the Module - Contribution of FFV to Human Health - ASEAN Production of FFV - Pre-harvest factors for market - International Trade of FFV - Production and Market Linkage - Developments of ASEAN GAP 4

The contribution of Fresh Produce to Human Health -Fruits and vegetables are important sources of essential minerals and vitamins in the human diet. -Vegetables are essential for the control of chemical reactions in the body. -Fruits and vegetables, and to a lesser extent root crops, are important sources of vitamin C and other essentials. 5

Production Fruits -ASEAN has always been recognized as the centre of origin for a number of cultivated tropical fruit trees -The major fruits produced in ASEAN are: Banana: Philippines, Indonesia, Thailand and Vietnam Mango: Indonesia, Thailand and Philippines Pineapple: Thailand, Vietnam and Indonesia 6

Vegetables -Over fifty different vegetables species are commercially grown and traded in the ASEAN region. -Eleven major vegetables with respect to their share in total vegetable area are : Chili pepper, Tomato,Yardlong bean, Cabbage, Shallot, Cucumber, Eggplant, Kangkong, Bulb onion, Chinese cabbage, Bamboo shoots 7

Pre-harvest factors in produce marketing 1. Pre-harvest influences post harvest performance -The overall quality and condition of fresh produce cannot be improved after harvest. -The final potential market value of produce depends on producer’s decisions on what and when to plant and on the subsequent cultivating and harvesting practices. -if they want to improve the post harvest performance of produce they may need to refer to the Good Agricultural Practices (GAP) Scheme. 8

2. Market factors for the produce -potential purchasers for the produce: neighbors, townspeople, retailers, jobbers or middlemen, commission agents? -quality requirements of the buyer: size shape, maturity, appearance, perishability of the produce; -pricing limitations of the buyer 9

3. Influences of production practices Water supply (irrigation). -Growing plants need a continuous water supply for both photosynthesis (the process by which plants convert light to chemical energy and produce carbohydrates from carbon dioxide and water) and transpiration (the giving off by a plant of vapor containing waste products) 10

Soil fertility and Fertilizers ข Lack of plant nutrients in soil can seriously affect the quality of fresh produce at harvest. Cultivation practices -GAP is important in achieving good yields and quality of fresh produce Agricultural chemicals -There are of two types: -pesticides and herbicides -growth-regulating chemicals 11

4. When is fresh produce ready to harvest? -Normally any type of fresh produce is ready for harvest when it has developed to the ideal condition for consumption. how is harvest maturity identified - Most growers decide on when to harvest by looking and sampling. -Sight: colour, size and shape -Touch: texture, hardness or softness -Smell: odour or aroma -Taste: sweetness, sourness or bitterness -Resonance: sound when tapped 12

Trade 1. International trade on fresh fruits -The EU is the leading destination as well as source of supply in the global fruit and vegetable trade. -International trade is dominated by temperate varieties of fruit, that are most heavily consumed in the large markets such as Europe and the United States 13

-The largest exporters of fresh fruit are Spain, the United States, Italy, the Netherland, France and Ecuador, which together account for 54% of sales by value -The principal varieties of fruit sold and consumed throughout the world are oranges, apples, grapes, bananas, peaches, pears and pineapples. -Of these, bananas, pears and pineapples are predominantly consumed in their natural state, oranges and apples as juice, while most grape production is transformed into wine or juice, and peaches into nectar or canned fruit in syrup. 14

-there has been an increase in recent years of imports of so-called exotic fruit, typically from tropical climates, such as guavas, mangos, papayas and kiwifruit. -According to the FAO international consumption of tropical fruits should increase by around 40% between 1995 and 2005, equivalent to an annual growth rate of 3.5%. 15

-Demand for fresh fruits is concentrated in Europe and the United States, which absorb around 60% and 11% respectively of international imports. -The European and US markets are extremely dynamic, and are notable as major producers and exporters of fresh fruits. 16

2. International Trade on Fresh Vegetables -United States has had a major role as both an importer and exporter. -The world’s leading exporters of fresh vegetables in 2002 included Mexico ($2 billion), the United States ($1.38 billion), the European Union (EU) ($1.35 billion), China ($742 million), and Canada ($553 million) -The top 5 fresh vegetable import markets in the world include the United States, EU, Canada, Japan, and China. 17

-the EU vegetable market is tightening while the U.S. market is opening - The largest single item is tomatoes, which account for 17 percent of the total. -The category of beans, peas, and lentils accounts for another 14 percent. -Other relatively major commodities in the fresh vegetable trade include onions, potatoes, asparagus, mushrooms, and various types of sweet and pungent peppers. 18

Linking Production and Marketing of Fruits and Vegetables for Better Farm Incomes -There are two fundamental routes by which farmers can increase their incomes from the marketing of fruit and vegetables. -With the demand route, there are a number of options: Directly linking with the end buyer Better use of better market information Fixing incomes by contracting -With the supply route the basic option is to establish better economies along the supply chain 19

Demand Oriented Options -The most efficient way for farmers to learn the requirements of the markets is to engage themselves in the value chain. -A massive percentage of all fresh produce is now sold by the major supermarket chains. 20

-Supermarkets have increasingly integrated their operations involving many aspects of the post farm gate operations. -There are increased standards of technical, environmental and social requirements. -This is particularly true for horticultural produce. 21

-In simple terms a value chain is a series of participants along the entire marketing spectrum who collaborate to satisfy market demands for specific products or services to their joint and collective mutual benefit. -The advantages of being a participant in a value chain are: Reduction in the cost of doing business Increase in the bargaining power Improved access to advanced technology, information and capital Continual exposure to innovation creates its own momentum 22

2. Contract Farming -Contracts are an important mechanism to coordinate production, distribution, and retail arrangements between different actors in the value-chain. -Contracts will typically specify various details regarding: Terms of trade such as prices, quantities, delivery dates, and payment terms Input provision Production specifications such as specific production practice 23

-the prerequisites for successful contract farming include: Appropriate government policies in land, price, credit and exports An appropriate dispute settlement mechanism Production capabilities, such as suitable soil and water resources Crop characteristics 3. Market Information -Growers can improve their returns by making better use of market information. There are two aspects to this: 24

Supply Oriented Options The principle supply oriented option for fruit and vegetable producers to increase their income is through supply chain management. Supply Chain Management -Supply chain management refers to the process whereby the movement of a product(s) from the initial supplier to the penultimate user occurs with all non- value adding expenses removed 25

Economic Performance of Sectors along Food Supply Chain -The sectors belonging to the food supply chain – agriculture, the food processing industry and the food wholesale and retail distribution sectors –are economically important and have many interactions with other sectors of the economy, either as purchasers or as suppliers of intermediate inputs. -the performance of these sectors (in terms of productivity, price, quality, variety etc.) has immediate repercussions elsewhere and in particular for final consumers. 26

AEC and ASEAN GAP 1. Project Origin -A project on Quality Assurance Systems for ASEAN Fruit and Vegetables or ASEAN GAP was prepared by a joint ASEC/AusAID design team in October

-The project responds to the ASEAN plan to achieve an ASEAN Community by the year 2020 (ASEAN decided to speed up AC five years earlier-2015) which would rest on the three pillars of “ASEAN Security Community”, “ASEAN Economic Community” and “ASEAN Socio-cultural Community” embodied in the Declaration of ASEAN Concord II (Bali Concord II). -The development of harmonized agricultural standards is fundamental to achieving this goal. 28

2. Regional Development Challenge to be Addressed 2.1. Enhanced Rural Income and Food Security -ASEAN witnesses the gap existing among members in particular, CLMV whereas per capita GDP is still below 1,000 USD -The production of high value horticultural crops is a key contributor to rural incomes and has been recognized as an enterprise appropriate to smallholders 29

-Trade in fresh horticultural produce in ASEAN is significant as the figures have shown that just over a decade trade of fruits and vegetables is growing almost three times -The production and marketing of fruit and vegetables provides a means of bringing smallholders into the mainstream of export-oriented enterprises, provided they are appropriately guided by QA systems. 30

2.2. Need for appropriate technological innovations in the region -ASEAN is faced with the challenge of developing or sourcing and applying appropriate technological innovations in its bid to achieve competitiveness in horticultural enterprises. -The scale and nature of horticulture production and marketing gives rise to technological needs peculiar to this sector. -Along with other small and medium enterprises (SMEs) in ASEAN, the markets for their products cannot be sustained because of their inability to meet quality, safety and phytosanitary requirements. 31

2.3. Ensuring that human resources contribute to regional development and shared prosperity -Regional cooperation aimed at further enhancing the image of ASEAN as a reliable supplier of quality- assured fruit and vegetables needs to accommodate the specific requirements of CLMV, while addressing remaining strategic needs among the more experienced ASEAN member countries. -ASEAN has been increasingly confronted by the need to ensure that the formulation of international standards and guidelines for these commodities gives adequate consideration to the unique features and needs of production and marketing systems in ASEAN. 32

Previous and Ongoing Initiatives 1. ASEAN Context ASEAN agreed to implement the following initiatives within the Hanoi Plan of Action (HPA): -Enhance marketability of ASEAN food and agriculture products through the development, harmonization and adoption of quality standards and regulations for food and agriculture products -Development of QA systems supports the ASEAN Free Trade Area (AFTA) vision of easy movement of goods across boundaries within the region. 33

2. Multi layer QA system The standards should be divided into three distinct sections suitable for introduction as desired by the member countries, -Awareness program, designed to introduce the concept of QA, food safety and general product quality issues on a generic basis. 34

-Generic ASEAN-GAPs based on through chain food safety requirements with reference to environment and socio- economic issues suitable for the ASEAN countries, climate, farming methods and social fabric. -ASEAN-GAPs based QA system with third party auditing system. The ASEAN GAPs will carry more importance than individual country GAPs on the international trade area 35

Generic ASEAN Good Agricultural Practice (GAP) Quality Assurance (QA) standard (ASEAN GAP) developed for all member countries It is important for ASEAN countries to harmonize standards and a generic ASEAN GAP will assist this in a number of ways: Firstly, it will assist with the development of a harmonized standard across the ASEAN member countries. Secondly, it will give the ASEAN standard a level of importance compared to individual country standards. Thirdly, it will assist by providing common material in training and delivery of the standards. 36