full report banana nov112009 notc

WORKING PAPER

DEPARTMENT OF AGRICULTURE AND

JAPAN INTERNATIONAL COOPERATION AGENCY

Formulation Team on the Drafting of the

Strategic Agribusiness Development Plan

COMMODITY SITUATION REPORT: BANANA

Prepared by

JOSE ULYSSES J. LUSTRIA

November 2009

____________________

Mr. Lustria is OIC-Chief, Public Investment Program Division (PIPD), Planning Service,

Department of Agriculture. He would like to acknowledge the assistance of Ms. Acquilyn

Morillo and Mr. Aldrin Nacional (Technical Assistants, PIPD) in preparing this report.

1

I. OVERVIEW

A. Background

Banana (Musa sapientum var.), a common tropical fruit in the Philippines and one of the

major fruit crops in the country, generates revenues for the country being one of the regular

export commodities. Banana is a good source of Vitamin C and Potassium and is used as

snack and dessert. It may serve as a substitute for staple food aside from root crops (DA-BAS,

2004).

The popular banana varieties are Cavendish (Musa acuminata), Bungulan (Musa

sapientum var. suaveslens), , Lacatan (Musa sapientum L. var. lacatan), Latundan (Musa

sapientum L. var. linérea), and Saba (Musa paradisiacal var. Saba). All these varieties

except Cavendish, can be considered as small bananas.

Based on the Japan-Philippine Economic Partnership Agreement (JPEPA), small bananas

include Inabaniko, Lakatan, Latundan, Morado, Pitogo, Saba and Señorita bananas (Joint

Committee on the JPEPA, 2008). Other small banana varieties are Cardaba and

Bungulan/Balangon.

(Photo Source: Maghirang, R., Banana Strategic Plan 2005-2010. August 2007.)

2

Cavendish is grown in plantation scale in Mindanao. Small bananas are mostly grown in

smallhold farms. Lakatan and Latundan are grown commercially intended for the Luzon and

Visayas markets. Cardaba is grown mainly for the banana chips industry. Balangon or

bongolan is grown organically in Tupi, South Cotabato. Organic Cavendish is being grown by

the multinational corporations (MNCs).

There are 5.9 million farm households depending on banana as their source of income.

Banana is still the leading fruit crop in the Philippines in terms of area, volume, and value of

production with 2,273,834 farms (NSO, 2002). The national average yield is 9.4 MT per

hectare while corporate plantations produce 40 MT per hectare. It is a widely grown fruit in

the country, planted as a component of farming system or as a main crop in large plantations

in Mindanao. It is an important source of income for small farmers that constitute 80 percent

of the banana growers (DA GMA-HVCC, 2008; Rivera, 2004).

B. Contribution to the Economy

Banana's economic contribution is increasing. For the period 1998 to 2008, banana

recorded an average contribution of 8.44 percent to total value of agricultural crop production

(increasing from 5.65% to 9.87%), and 4.08 percent to total value of agricultural sector output

(increasing from 2.79% to 4.71%) (see Annex 1).

II. SITUATIONAL ANALYSIS

A. Production

1. World Production

a) Major Producing Countries. The Philippines is the third largest banana

producer in the world in 2007 and has been among the top producers since

1998.

India26.9%

China

8.8%

Philippines

8.6%Brazil8.6%

Ecuador7.6%

Indonesia6.2%

Costa Rica2.8%

Mexico2.7%

Thailand2.5%

Colombia

2.2%

Others23.2%

3

Figure 1. Top 10 banana producing countries, in percent, 2007.

(Source: FAO, 2009)

Table 1. Top 10 banana producing countries, in „000 MT, 1998-2007.

(Source: FAO, 2009)

b) Productivity and competitiveness. Philippine banana is also competitive in

terms of yield. It can be noted, however, that the level could be improved

further since even the world average is higher.

According to the Philippine Agriculture 2020 report (NAST, 2008), banana is

also price competitive under export trade scenario because export parity price

ratio is greater than 1. It is also cost competitive because resource cost ratio

for export is less than 1.

Country 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

India 15,100 16,810 14,140 14,210 16,820 11,954 11,388 11,710 20,858 21,766

China 3,734 4,407 5,140 5,477 5,784 6,126 6,211 6,667 7,115 7,100

Philippines 3,493 4,571 4,930 5,061 5,275 5,369 5,631 6,298 6,795 7,000

Brazil 5,322 5,478 5,663 6,177 6,423 6,801 6,584 6,703 6,956 6,972

Ecuador 5,463 6,392 6,477 6,077 5,528 6,454 6,132 6,118 6,127 6,130

Indonesia 3,177 3,376 3,747 4,300 4,384 4,177 4,874 5,178 5,037 5,000

Costa Rica 2,429 2,351 2,181 2,065 1,975 2,144 2,118 1,875 2,220 2,240

Mexico 1,526 1,738 1,863 2,028 1,886 2,027 2,361 2,250 2,196 2,200

Thailand 1,720 1,720 1,750 1,750 1,800 1,900 2,300 2,000 2,000 2,000

Colombia 1,517 1,735 1,613 1,470 1,561 1,536 1,577 1,765 1,750 1,800

Others 16,714 16,807 16,809 17,313 17,585 18,034 18,778 19,083 18,975 18,830

World 60,194 65,385 64,313 65,928 69,020 66,522 67,955 69,647 80,030 81,038

4

Cavendish44%

Saba32%

Lakatan12%

Others12%

Table 2. Leading high-yielding countries of banana in the world (kg./ha), 1998-2007.

(Source: FAO, 2009)

2. Domestic Production

The major varieties are Cavendish, saba, and lacatan. Small bananas comprise 66 percent

of the total production (in MT) in 2007.

Figure 2. Share of major varieties of banana to total production, 2007.

(Source: DA-BAS, 2008)

Country 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Costa Rica 517,160 480,904 454,545 463,878 468,209 513,446 501,230 455,683 519,906 520,930

India 328,260 343,061 300,851 302,340 247,352 261,182 291,626 289,715 347,456 349,830

Mexico 229,652 230,550 258,968 285,424 299,719 278,974 299,888 292,315 295,428 293,333

Ecuador 264,022 330,164 256,444 265,390 268,883 276,024 270,715 276,745 292,671 291,905

Colombia 307,136 309,762 304,339 287,854 282,198 270,736 251,458 272,324 273,438 276,923

China 199,390 208,199 199,148 215,677 224,637 231,095 226,957 233,842 241,114 240,677

Philippines 106,580 122,815 150,067 130,937 132,533 131,014 135,853 150,763 158,454 162,791

Indonesia 122,919 125,134 141,394 155,249 162,988 150,262 154,887 164,368 161,977 161,290

Brazil 102,659 105,639 107,924 121,048 127,685 133,460 134,073 136,475 137,859 137,024

Thailand 128,358 128,358 129,629 129,629 129,496 130,136 129,943 130,718 130,718 130,719

World 156,293 164,098 158,128 160,619 162,332 160,441 162,425 166,395 182,864 184,189

5

Table 3. Major varieties of banana, in metric tons, 2002-2007.


Small bananas comprise 83 percent of the total banana area (in hectares) in 2007. The

percentage shares remained basically the same since 2002.

Figure 3. Share of major banana varieties to total area, 2007.


Variety 2002 2003 2004 2005 2006 2007

Cavendish 1,810,085 1,902,223 2,127,619 2,490,271 2,810,985 3,323,072

Saba 2,005,776 2,017,267 2,018,687 2,204,393 2,285,809 2,385,614

Lakatan 678,872 674,918 714,483 774,050 836,016 875,271

Others 780,093 774,569 770,461 829,511 861,754 900,116

Philippines 5,274,826 5,368,977 5,631,250 6,298,225 6,794,564 7,484,073

6

Table 4. Major varieties of banana, in hectares, 2002-2007.


a) Major Producing Provinces. The top banana producing provinces in 1998-

2007 are in Mindanao.

Figure 4. Top banana producing provinces, in percent, 2007.


Variety 2002 2003 2004 2005 2006 2007

Cavendish 44,051 46,142 50,059 51,568 67,803 74,013

Saba 173,906 179,875 182,259 185,168 181,568 183,028

Lakatan 50,439 51,002 51,761 52,315 52,377 53,155

Others 129,609 130,981 130,431 128,704 127,056 126,566

Philippines 398,005 408,000 414,510 417,755 428,804 436,762

Davao Oriental2%

Compostela Valley15%

Davao Province15%

North Cotabato8%Lanao del Norte

4%

Others56%

7

Table 5. Top banana producing provinces, in metric tons, 1998-2007.


Below are the top producers of lakatan and saba.

Figure 5. Major producing provinces of lakatan, in percent, 2007.


Province 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Davao Oriental 1,056,588 717,359 769,986 783,366 797,328 811,753 841,271 899,402 1,009,849 117,255

Compostela Valley - 475,293 535,250 547,416 566,289 600,561 698,471 952,194 1,087,356 1,159,805

Davao Province 295,838 344,816 398,453 448,736 468,492 470,887 492,113 523,288 538,571 1,138,089

North Cotabato 114,702 124,972 156,185 174,514 264,192 319,989 372,876 474,798 527,601 579,274

Lanao del Norte 252,338 290,815 304,195 314,055 325,241 296,230 274,869 275,171 279,304 286,033

Others 2,387,232 2,617,385 2,765,503 2,791,273 2,853,283 2,869,557 2,951,650 3,173,372 3,351,883 4,203,616

Philippines 4,106,698 4,570,640 4,929,570 5,059,360 5,274,826 5,368,977 5,631,250 6,298,225 6,794,564 7,484,073

North Cotabato16%

Lanao del Norte10%

Davao del Sur10%

South Cotabato8%

Davao Oriental6%

Others50%

8

Table 6. Major producing provinces of lakatan, in metric tons, 2002-2007.


Figure 6. Major producing provinces of saba, in percent, 2007.


Province 2002 2003 2004 2005 2006 2007

North Cotabato 55,743 57,802 86,183 109,449 134,501 139,855

Lanao del Norte 100,820 91,851 85,680 85,590 87,993 90,295

Davao del Sur 51,657 52,687 62,159 65,814 77,547 84,784

South Cotabato 58,641 57,688 58,561 57,501 62,916 66,245

Davao Oriental 42,132 43,917 45,412 52,648 54,160 52,813

Lanao del Sur 51,717 48,603 46,888 46,072 42,387 41,085

Maguindanao 43,546 43,237 43,178 42,793 42,620 42,690

Mindoro Oriental 26,111 27,729 28,863 35,749 32,292 32,826

Bukidnon 25,692 26,410 26,557 26,799 27,840 30,200

Zamboanga del Norte 21,024 23,532 24,657 27,720 29,810 30,895

Othes 201,789 201,462 206,345 223,915 243,950 263,583

Philippines 678,872 674,918 714,483 774,050 836,016 875,271

Davao del Sur

14%

North

Cotabato11%

Isabela

9%

Lanao del

Norte8%Mindoro

Oriental5%

Others

53%

9

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Production 4,106,6 4,570,6 4,929,5 5,059,3 5,274,8 5,368,9 5,631,2 6,298,2 6,794,5 7,484,07

-

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

met

ric to

ns

7%

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Area 353,707 372,127 382,491 386,703 398,005 408,000 414,510 417,755 428,804 436,762

-

100,000

200,000

300,000

400,000

500,000

hect

ares

2%

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Yield 11.61 12.28 12.89 13.08 13.25 13.16 13.59 15.08 15.85 17.14

0.00

5.00

10.00

15.00

20.00

MT/

HA

4%

Table 7. Major producing provinces of saba, in metric tons, 2002-2007.


b) Volume, area planted, and productivity. Banana production is increasing due

to gradual increase in area and significant increase in yield. However, as noted

earlier, yield could still be improved significantly.

Province 2002 2003 2004 2005 2006 2007

Davao del Sur 238,197 239,520 248,879 264,803 267,305 267,742

North Cotabato 119,742 121,282 145,589 185,975 199,953 216,346

Lanao del Norte 166,814 152,258 144,121 144,502 145,819 150,303

Isabela 81,791 68,573 53,850 109,232 149,777 171,242

Samar 98,413 99,871 95,372 95,348 87,839 89,993

Mindoro Oriental 77,636 83,622 81,638 106,552 97,151 99,621

Others 1,223,183 1,252,141 1,249,238 1,297,981 1,337,965 1,390,367

Philippines 2,005,776 2,017,267 2,018,687 2,204,393 2,285,809 2,385,614

10

Figure 7. Banana production, area and yield, 1998-2007.


c) Value of Production. Value of production is increasing at an even higher

average rate of 11 percent.

Figure 8. Banana value of production (at constant prices), 1998-2007.


B. Supply and Demand

1. Supply

As presented in the Supply and Utilization Account - SUA (Table 2),

production is increasing at an average growth rate of 8%. There were imports in

1998 but the amount is very small.

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Banana 6,252 8,181 8,824 9,056 9,442 9,610 10,080 11,274 12,162 13,397 15,551

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

mill

ion

peso

s

11

Table 8. Supply and utilization of banana, in metric tons, 1998-2008.


2. Demand

a) World demand (Exports). The SUA shows that fresh exports shared an average

of 31 percent of gross supply. The SUA also show that fresh exports are

increasing at an average rate of 7 percent.

Using FAO data, Philippines contributes 11 percent of world export quantity

and 6 percent in terms of value.

Total

Per

Capita in

Kg/yr

Per Capita

in gm/d

1998 4,106,698 37 4,106,735 1,149,552 - 177,431 739,296 2,040,456 28 76

1999 4,570,640 - 4,570,640 1,319,632 - 195,060 812,752 2,243,196 30 82

2000 4,929,570 - 4,929,570 1,599,352 - 199,813 832,555 2,297,850 30 82

2001 5,059,360 - 5,059,360 1,600,707 - 207,519 864,663 2,386,471 31 84

2002 5,274,826 - 5,274,826 1,684,986 - 215,390 897,460 2,476,990 31 85

2003 5,368,977 - 5,368,977 1,829,384 - 212,376 884,898 2,442,319 30 83

2004 5,631,250 - 5,631,250 1,785,458 - 230,748 961,448 2,653,596 32 88

2005 6,298,225 - 6,298,225 2,024,321 - 256,434 1,068,476 2,948,994 35 95

2006 6,794,564 - 6,794,564 2,311,540 - 268,981 1,120,756 3,093,287 36 97

2007 7,484,073 - 7,484,073 2,217,741 - 315,980 1,316,583 3,633,769 41 112

2008P 8,687,624 - 8,687,624 2,192,553 - 389,704 1,623,768 4,481,599 50 136

Growth Rate 8% 7% 8% 8%

Ave. Share to

Gross Supply

100% 100% 31% 4% 17% 48%

Net Food Disposable

Imports Gross SupplyFeeds &

Waste

Year

Supply Utilization

Production Exports Seeds Processing

12

Table 9. Philippine share of banana in world export quantity, in „000 metric tons, 1998-2005.

(Source: Generated using FAO data.)

Table 10. Banana: Philippine Share of banana in world export value, in „000 $, 1998-2005.

(Source: Generated using FAO data.)

Total export value is US$ $439M in 2007. The major products are fresh bananas and chips.

Figure 9. Export value (in %) of banana by product, 2007.

(Source: NSO, 2008)

1998 1999 2000 2001 2002 2003 2004 2005 AVE

Philippines 1,150 1,320 1,600 2,129 1,685 1,829 1,797 1,794 1,663

World 13,915 14,307 14,336 14,588 14,489 15,238 15,762 15,946 14,823

Phil share 8% 9% 11% 15% 12% 12% 11% 11% 11%

Phil growth rate - 15% 21% 33% -21% 9% -2% -0.2% 8%

1998 1999 2000 2001 2002 2003 2004 2005 AVE

Philippines 217,040 240,703 291,651 297,371 308,887 333,000 326,425 430,000 305,635

World 4,899,749 4,737,538 4,234,430 4,199,549 4,287,025 4,687,096 5,001,277 5,651,321 4,712,248

Phil share 4% 5% 7% 7% 7% 7% 7% 8% 6%

Phil growth rate 11% 21% 2% 4% 8% -2% 31.7% 11%

Fresh

90%

Chips

9%

Others

1%Product F.O.B Value

(in US$)

Fresh 396,279,318

Chips 39,316,539

Others 3,529,508

439,125,365

13

Figure 10. Philippines‟ top markets of fresh banana, in percent, 2007.

(Source: NSO, 2008)

Table 11. Philippines‟ top markets of fresh banana, in million metric tons, 1998-2007.

(Source: NSO, 2008)

Looking at Philippine export data from DA-BPI , there is world demand for fresh small

bananas. Senorita is the most preferred variety from 2002 to 2007 and bungulan/balangon

from 2008 to 2009.

However, volume of small bananas exported is fluctuating. It is also minor compared to

total fresh banana exports. For example, in 2006, the total fresh banana export was

2,311,540 MT or more than 2.3 billion kg. In the same year, small bananas exported was only

2,689,986 kg. or .1%.

Japan (Excludes Okinawa)

42%

China6%South Korea

13%

United Arab Emirates

8%

Iran19%

Others12%

14

Figure 11. Export volume (in %) of fresh small bananas by variety, 2009.

(Source: DA-BPI, 2009)

Table 12. Export volume (in kg.) of fresh small bananas by variety, 2005-2009.


In 2009, Japan is the biggest market. From 2005-2007, the biggest market was Korea

followed by Japan.

Saba

0.22%

Lacatan

5%Latundan

6%

Bungulan/balangon

58%

Morado

0.02%

Senorita

31%

Variety 2005 2006 2007 2008 2009

Cardaba 149.00 1,169.00 0.35 0.27

Saba 875.00 424.00 8.86 36.27 3.25

Lacatan 376,062.00 593,845.40 32.65 533.49 69.29

Latundan 179,244.00 341,906.00 339.07 435.98 91.62

Bungulan/balangon 2,003.28 852.88

Morado 29,884.00 33,161.00 4.17 2.99 0.31

Senorita 1,278,953.04 1,717,105.00 515.89 1,417.77 459.69

Tindok 2,376.00 0.23

Unclassified 158,120.00

GRAND TOTAL 2,023,287.04 2,689,986.40 900.99 4,430.27 1,477.04

15

Figure 12. Top export markets of small bananas in percent, 2009.


Table 13. Top Export Markets of small bananas, in kg., 2005-2009.


The country is number 1 in banana chips export with .03 MMT valued at US$39 M in

2007 (NSO, 2008). Based on the quantity exported from 1998-2007, the top markets for

banana chips are:

Korea

28.6%

Japan

71.0%

Others

0.4%

Country 2005 2006 2007 2008 2009

Korea 1,525,356.04 2,261,430.00 553.96 1,769.27 422.57

Japan 497,931.00 403,442.00 346.09 2,639.21 1,048.34

China - 25,104.00 0.04 - -

Others - 10.40 0.90 21.79 6.13

Total 2,023,287.04 2,689,986.40 900.99 4,430.27 1,477.04

16

Figure 13. Philippines‟ top markets of banana chips, in percent, 2007.

(Source: NSO, 2008)

Table 14. Philippines‟ top markets of banana chips, in million metric tons, 1998-2007.

(Source: NSO, 2008)

b) Domestic demand. Based on the SUA, net food disposable is 48 percent

(Table 8). Per capita consumption is increasing at an average growth rate

of 8 percent indicating growing domestic demand.

USA

16%

Germany

14%

U.K. (Great

Britain and N. Ireland)

10%China

4%Taiwan

2%

Others

53%

17

C. Value-Chain System

1. Agribusiness System

Figures 14 to16 show the stakeholders in the industry and the major activities

specifically for Cavendish and saba/cardaba (Davao Region Industry Cluster Plan,

2008).

Figure 14. Banana industry stakeholder map.

Figure 15. Major activities and linkages in the cavendish banana production sector.

18

Figure 16. Major activities and linkages in the saba/cardaba banana production sector.

The banana industry is composed of growers, traders, middlemen, transporters,

buyers/exporters, and processors. The key producers include: Tagum Agricultural

Development Corporation (TADECO), Lapanday Holdings, Davao Fruits Corporation,

Marsman Estate Plantation, and Stanfilco Division of Dole Phils., Inc. Some of these

companies have contract-growing schemes with small- and medium-sized farms. The key

buyers are Dole Asia and Del Monte Fresh Produce. For banana chips, the players are mostly

located in Davao and Butuan. These are Pacific Fruits, Archmen, Natural Fruits Corporation,

Basic Fruits, and Philexson International, Inc. (PCARRD, 2003).

Some practices/description of market participants are (DA-GMA-HVCC, 2008):

Domestic markets for fresh banana is through the middle men getting the produce

from the farm

Fresh fruits traders/agents – buy banana from farmers

Shippers can be found at the port of origin – Cagayan de Oro, General Santos,

Davao and the proposed Malalag, Davao del Sur

Consignees/receivers can be found at the port of Manila for sales distribution to

wholesalers and jobbers

Wholesalers or jobbers come from all over Luzon

Retailers have fruit stands in rich neighborhood, supermarkets, wet market and

mobile retailers (cart)‏

19

We could further understand the market by looking at commodity flows and market

channels such as below.

Figure 17. Commodity Flow of Lakatan and Latundan Grown in Southern Philippines.

(Source: Davao Region Industry Cluster Plan, 2008)

Figure 18. Banana, Saba/Cardaba: Marketing Channel.

(Source: Davao Region Industry Cluster Plan, 2008)

20

Figure 19. Marketing system participants and general marketing flow of smallhold bananas.

(Source: PCARRD 2006)

More detailed discussions are provided for banana cardaba under Processing Industry

(item C.4) below.

2. On-Farm Costs

Some production costs as well as prices are shown in Figure 20.

Figure 20. Selected production costs and prices of bananas (in PhP/kg.).

(Source: Maghirang, 2007)

21

Organic Fertilizer

29%

Inorganic Fertilizer

24%

Labor23%

Seedlings12%

Others12%

For cardaba production, the major cost driver is fertilizer. (For details, see Annex 2.)

Figure 21. Average on-farm major costs of cardaba, 2006-2010.

(Source: Banana Cardava Production, 2005)

Planting materials account to 12 percent of production cost for cardaba banana (Figure

21), which shows that it is one of the major cost drivers in production.

Fertilizers and pesticides, which manifest an increasing trend in their prices, are also

considered as one of the major cost drivers. For banana, about 55 percent of total production

cost was spent on fertilizer and chemicals (Calderon & Rola, 2003). For Cardaba production,

organic and inorganic fertilizers constitute 29 percent and 24 percent of its production cost,

respectively (Banana Cardava Production, 2005).

In nonplantation farms, agricultural machinery and equipment are not major cost items

since only simple tools like plow and harrow and harvesting implements are utilized.

On the other hand, multinational companies have fully integrated operations,

implementing cost-reduction and productivity-enhancement programs. They invest in new

technology and equipment for mechanization in order to maintain their leadership position in

the industry (Digal, 2005).

Labor is employed from planting to harvesting, as such; it is considered a major cost

driver and accounts to 23% of production costs for cardaba banana.

22

3. Logistics

The logistics practices in the banana sector, particularly in Davao (Davao region is the

largest banana producer in the Philippines) cover packaging, transport, storage and

warehousing. Annex 3 presents the detailed description (Center for Research and

Communication [CRC], 1999).

The identified logistics-related problems in the banana sector for growers are (CRC,

1999):

(1) workers' salary is quite expensive while other workers are slow;

(2) quality deterioration of harvest, poor handling and expensive materials;

(3) storage problems due to damage, lack of care, lack of facility, and lack of capital;

(4) poor roads ( a dominant transport problem);

(5) long hours of transport;

(6) “lagay”;

(7) lack of working capital and high interest rates;

(8) lack of postharvest facilities and;

(9) lack of awareness of new technologies.

Moreover, better practices followed by exporters are not applied by the buyers,

wholesalers and traders who sell to the domestic market, because the additional cost cannot be

absorbed by the domestic prices. Unless they produce higher-quality products, they cannot

demand for higher or premium prices.

The identified logistics-related problems in the banana sector for grower

wholesalers/retailers/traders are (CRC, 1999):

(1) Materials related – kaing and crates get destroyed, crates are expensive and cellophane not

available;

(2) quality deterioration due to use of closed vans, long or difficult trip, and rain; poor handling

and packaging material;

(3) storage losses can reach up to 20 percent due to lack of appropriate facilities, poor

temperature control, and losses to vermin;

(4) poor roads, long transport time, quality deterioration, traffic/truck ban; and tong ranging from

Php 50-Php 100;

(5) very high freight rates charged by the shipping lines and the limited availability of “fruit

vans” or chiller vans. Thus, bananas in Davao are mostly sold in the city and nearby

provinces. Only limited volumes are shipped to Manila since traders are unable to compete

with suppliers closer to Manila; and

23

(6) lack of working capital and high interest rates on loans.

4. Processing

Based on the SUA 1998-2007, 17% of gross supply is processed. Only three (3) percent of

this is exported, indicating that there is a very big export market potential if we expand our

processing industry. Banana processing is dominated by the saba banana chips industry.

According to Argañosa, et. al. (2006), in Mindanao alone, there are 26 processing plants

for banana chips with a capacity of 20-60 MT/day per plant. In a survey conducted in 2003,

the total plant capacity was at 40 MT/day but the actual average daily volume of banana chip

produced was only 242 MT/day or short of 198 MT/day. The total banana chip production on

daily basis of 242 MT is far short from the estimated 600 MT daily requirements for banana

chips.

There are 12 big companies engaged in the production of banana chips (Annex 4). In a

study conducted in Regions 11, 12, and 13 on banana chips production, only five companies

are included in the DTI list while five others are not. There are other three big banana chips

producers in the three regions that did not provide any information during the conduct of the

study. The results of the study showed that each company is producing at least 10 MT per day

of banana chips.

Moreover, her report also revealed that the total production of banana chips in the country

is estimated at 400 MT/ day. It is 200 tons short of the 600 MT requirements for banana chips

on a daily basis. The banana chips export in 2004 was estimated at 36,538 MT valued at US$

36.86 M.

In her survey covering the Southern Tagalog Region (Region 4) where six small banana

chip processors are involved, it was found that their banana chips are marketed locally. It

could be presumed that their production is not part of the annual estimate of total banana chips

production in the country. Hence, it is actually difficult to estimate the total production of

banana chips in the Philippines.

A USAID report (USAID and Strategic Development Asia, 2007) gives us a detailed

description of the industry (refer to Figure 22).

24

Figure 22. Banana cardava subsector map, 2007.

The main findings are as follows:

a) Some degree of preferred buyer-supplier relationship exists. But, in general, spot market

transactions are practiced with price as the main factor.

b) Most farmers prefer to sell their produce to those who provide loans and advances. They

also give priority to buyers who offer a higher price. Main sources of disagreements

between farmers and traders are the reliability of weighing scales and quality judgment.

For procurement per hand basis, the issue is on the manner of the counting of the hands

(e.g., three medium-sized hands counted as two and two-small sized hands as one).

c) On average, about 25 percent of bananas delivered to processors are rejected. If the

bananas were delivered by farmers, in many cases they prefer to leave the rejected

bananas rather than spend for transportation to bring these back to the farm or to a

distributor.

d) Distributors/agents/assemblers usually get from the farm the cardava bananas that cannot

be processed anymore (ripe or undersized). Banana stocks which do not meet the

specifications of processors are bought at a lower price except during peak season

(December to February). Table 15 shows the specifications followed by processors.

25

Table 15. Specifications of Cardava Banana Processors.

GRADE SPECIFICATIONS

Banana for

Chips

Semi –mature (90-105 days),

unripe, green color of skin,

light yellowish color of flesh,

not less than 3 inches in length

Banana for the

Local Market

Mature/Over mature, semi-

ripe/unripe, yellowish color of

flesh, unblemished or with

blemishes, less than 3 inches in

length.

e) Local market cannot absorb the large volume supply of cardava banana when there is a

slowdown in banana chips production, thus creating a market glut. On the other hand,

during peak banana chips production season, there is a shortage of supply of banana of

processing grade. During the stakeholders‟ workshops, farmers do not fully understand

demand requirements of exporters because it is very rare for these two players to

interact. Traders have some degree of understanding of the demand and supply

requirements but they generally depend on signals received from their buyers.

f) Most distributors practice “alsada” by letting the retailer sell fresh bananas at the

prevailing price on delayed payment basis, with the retailer getting a percentage of the

sales. Another practice is trading by “rachada” or using retailers to facilitate the sale of

day-old cardava at discounted prices but on consignment basis. The seller is paid a

commission.

g) The wholesale buying price of cardava for local consumption is based on the

prevailing price in the market. This is usually determined by the traders who are the

main suppliers of banana traded in public market. As bananas ripen, the price becomes

lower.

h) Processors dictate the wholesale buying price of cardava for chips. The price is based

on their export contract price and the prevailing price of coconut oil (which is a main

cost center).

i) Assemblers/agents offer a higher price if the assembled quantity of cardava exceeds 1

MT.

26

j) Banana chips are currently being exported to 32 countries with the biggest shipments

going to the Europe, China, and the United States. Growth during the last 5 years has

been mainly due to the expansion of the China market.

k) After a decline of about 3 percent in 2005 over 2004 figures, export volume from

Mindanao during the first quarter of 2006 has increased by 245 MT compared with the

same period in 2005. It is forecasted that the banana chips international market can

absorb around 10 percent to 15 percent more per year growth.

Annex 5 gives more detailed description on the cardaba industry players.

To better understand the processing industry, a case report of Snapsnax, Inc., a processor

and banana chips exporter, is shown in Annex 6 (Source: Davao Region Industry Cluster Plan,

2005-2010. March 2008.)

In processing, the price of cooking oil is a major cost driver especially in the first frying.

Table 16 shows the cost contribution of various marketing players in the banana industry

(Source: USAID and Strategic Development Asia, 2007).

Table 16. Cost contribution of various marketing players in the banana industry.

Player Selling Price per kilogram

(in Php)

Cost Contribution/ Kilogram Chips

Amount

(in Php)

Percent Share

(in %)

Farmers 3.50/kg fresh (farm gate) 14.00 28 %

Traders 3.90/kg fresh 1.60 3%

First Fryers 32.00 – 37.90/kg chips 16.40 – 22.30 44 %

Processors 50.54/kg chips 12.64 25 %

Notes:

Php 16.40 – Cardavas purchased directly from the farmers

Php 22.30 – Cardavas sourced from traders

27

Figure 23. Cost contribution for 1 kilogram banana chips.

From the Php 50.54/kg export price of banana chips, 44 percent (Php 22.30) goes to first

fryers, 28 percent (Php 14.00) goes to the farmers, 25 percent ((Php 12.64) goes to the

processor/exporter, and 3 percent (Php 1.60) pays for the services of the trader. First fryers

contribute the biggest share of the production cost as labor is more intensive, and more oil is

consumed in first frying than in 2nd frying of processors. Though traders take the smallest

percentage of the proceeds, his business cycle is very short. All his transactions from buying

of fresh cardava from farmers up to delivery to processors can be completed in less than one

day. Farmers on the other hand, need to wait 14 months to harvest from each banana

seedling/flower.

The study of Argañosa, et. al. (2006) also looked into the gaps between services needed and

services offered (Table 16). They noted that support services are available to assist small

banana processing businesses in the different areas of their projects. However, these services

are not usually availed because of the following reasons: (a) lack of awareness on the

availability of such services, (b) leniency in the compliance of existing policies on food

sanitation and handling as well as waste management, (c) difficulty in complying to the

documentation and collateral requirements in availing financial capital, and (d) high cost

involved in the adoption of good manufacturing practices.

28

Table 17. Gaps between services needed and services offered.

The problem tree analysis of the banana chips industry is presented in Figure 24.

29

Fig

ure

24

. B

anan

a, P

roce

ssed

: P

roble

m T

ree.

30

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Farmgate-green 3.08 3.85 3.5 3.5 4.16 4.21 5.57 6.27 4.58 4.71 5.17

Wholesale-ripe 5.67 5.88 4.83 5.18 5.46 5.39 6.16 6.3 6.23 6.16 6.79

0

1

2

3

4

5

6

7

8

pe

so/k

g.

Bungulan

7%

2%

D. Prices

1. World Prices

Philippine banana is competitive based on comparison of producer prices.

Table 18. Producer Prices (US$/tonne) of Top Banana Exporters, 1998-2007.

(Source: FAO, 2008)

2. Domestic Prices

The trend of banana prices and price ratios were presented in Figures 19 to 26. The price

of banana is increasing (note positive average growth rates). Using price ratios, the gainers

and losers can be determined.

Figure 25. Prices (current) of bungulan, 1998-2008.


31

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Farmgate-green 5.31 7.38 5.49 5.73 6.35 6.7 7.84 8.61 8.83 9.41 10.47

Wholesale-ripe 11.16 12.6 11.43 11.79 11.88 12.42 14.31 15.66 15.39 16.92 19.44

Retail-ripe 15.57 17.46 16.65 17.1 17.64 17.91 19.35 20.7 21.6 24.21 25.83

0

5

10

15

20

25

30

pe

so/

kg

.

Lakatan

5%

6%

8%

Figure 26. Price ratios of bungulan, 1998-2008.

(Source: Generated using DA-BAS data, 2009)

Bungulan farmers are the gainers since farmgate prices are closer to wholesale prices (from

just 54 percent in 1998 to 76 percent in 2008).

Figure 27. Prices (current) of lakatan, 1998-2008.


1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Ratio (farmgate/wholesale) 54% 65% 72% 68% 76% 78% 90% 99.5% 74% 76% 76%

0%

20%

40%

60%

80%

100%

120%

pe

rce

nt

32

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Farmgate-green 4.5 5.6 4.2 4.34 4.52 5.17 6.11 6.73 6.93 7.26 7.69

Wholesale-ripe 10.1 10.5 8.9 9.5 9.8 9.9 10.7 11.6 12.1 12.4 13.4

Retail-ripe 12.4 13.7 12.2 13.2 13.5 13.5 14.6 15.4 15.9 17.4 18.1

0

2

4

6

8

10

12

14

16

18

20

peso

/kg.

Latundan

4%

3%

6%

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Ratio (farmgate/wholesale) 48% 59% 48% 49% 53% 54% 55% 55% 57% 56% 54%

Ratio (wholesale/retail) 72% 72% 69% 69% 67% 69% 74% 76% 71% 70% 75%

Ratio (farmgate/retail) 34% 42% 33% 34% 36% 37% 41% 42% 41% 39% 41%

0%

10%

20%

30%

40%

50%

60%

70%

80%

pe

rce

nt

Figure 28. Price ratios of lakatan, 1998-2008.


Lakatan farmers are also gainers since the farmgate/wholesale and farmgate/retail ratios

increased. Wholesalers are also gainers.

Figure 29. Prices (current) of latundan, 1998-2008.


33

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008




0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

pe

rce

nt

Figure 30. Price Ratios of latundan, 1998-2008.


Latundan farmers are gainers but wholesalers are losers.

Figure 31. Prices (current) of saba, 1998-2008.


1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Farmgate-green 3.51 3.42 2.86 3.24 3.4 4.2 4.3 4.6 4.52 5.31 5.48

Wholesale-ripe 6.66 7.02 6.21 6.66 7.02 7.11 8.19 9.18 8.82 10.17 10.98

Retail-ripe 8.73 9.27 8.28 8.91 9.27 9.36 10.8 11.88 12.15 14.94 15.03

0

2

4

6

8

10

12

14

16

pe

so/

kg

.

Saba

6%

5%

5%

34

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008




0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

pe

rce

nt

Figure 32. Price ratios of saba, 1998-2008.

(Source: Generated from DA-BAS data, 2009)

Saba farmers and wholesalers are losers. This can indicate that retailers are the gainers.

3. Price Formation/Differentiation

The domestic markets of fresh banana are dominated by middlemen and traders while the

export market is handled mostly by multinational corporations. In small farms, bananas are

sold on a finger count basis while in commercial plantations, they are sold by weight (Rivera,

2004).

Furthermore, Lantican (2008) confirmed that the pricing system for banana is inefficient

considering that price transmission is so weak between the local market and reference market

For example, Saba farmgate prices in Oriental Mindoro was nonstationary, hence it could not

be co-integrated with wholesale prices in Metro Manila and retail prices in Tarlac and

Batangas. She further cited limited access to reliable and updated market information and

poor farm-to-market roads that entail high transportation cost in hauling banana as the

contributory factors to weak market integration between farm and wholesale or retail markets.

These findings are supported by a past study on “Banana Marketing in Nine Selected

Areas in the Philippines” (ASSIST, 1994), which documented price formation in some major

producing provinces as well as in Metro Manila. This study shows that price formation is

area- and banana type-specific and affected by many other factors. (See Annex 7 for details.)

Evidently, the buying price of banana has been dominated by traders. However, a report (

35

Figure 33) found that farmers (specifically in Mindanao) are having a bigger say in price

setting (USAID and Strategic Development Asia, July 2007).

Figure 33. Price setting shift in banana, 2007.

E. SWOT Analysis

The strengths, weaknesses, opportunities, and threats (SWOT) were consolidated from

various sources (DA-GMA-HVCC, 2008; Davao Region Industry Cluster Plan, 2005-2010,

March 2008; DA, Banana Strategic Action Plan, 2002).

The strengths are: large number of experienced and technically capacitated banana

growers; strong, dedicated and credible leadership in the industry; extensive membership;

strong multisectoral linkages; strong industry associations such as Minfruit: Mindanao Fruit

Shippers Association, Inc., and Banana Industry Council of Southern Mindanao, Inc.; large

potential areas for expansion; existing R & D facilities with mature technologies; presence of

multinational companies; and program/project support – such as Growth with Equity in

Mindanao (GEM) and GMA-HVCC program.

The strengths specific to Lakatan/Latundan are: easy to grow cultivar, non-seasonal fruit,

high nutritive value, can be grown organically, availability of propagation protocol for tissue

36

culture materials, availability of selected production/post-production technologies, large

domestic market, and established market niche to Japan (lakatan).

The strengths specific to Saba/Cardaba are: easy to grow relative to lakatan/latundan; non-

seasonal fruit; potential for steady year-round production especially in Mindanao; thrives

under wide range of soil and climatic conditions, tolerant to sigatoka, planting materials

relatively available, suitable for intercropping, can be grown organically, health food – due to

excellent starch quality, high potential yield, country is sole producer in large quantities,

harvesting of fruits for chips can be done in 90 days after debudding compared to 120 days for

other products, has many other alternative uses (chips, flour, catsup vegetable, feeds), price

competitive if produced in farms w/in 50 km radius of chip manufacturing plant, versatile

processing methods make the business affordable to small businesses, high demand in the

export market, and continued dominance of banana chips in the export market.

Despite the many strengths, there are many weaknesses: pest and diseases such as bugtok,

bunchy top and sigatoka; lack of disease surveillance and early warning system for bananas;

fragmented production areas for bananas other than cavendish; high cost of investments;

inadequate access to financing institutions; weak farmer-grower organizations; lack of an

efficient marketing system for cardaba, lakatan, and other cultivars; inadequate support

facilities such as ports and farm-to-market roads; high postharvest losses; lack of data banking

facilities/system; pesticide residue analysis function is very weak; lack of traceability system;

and lack of awareness on food safety.

The weaknesses specific to lakatan/latundan are: prone to typhoons and strong winds,

limited availability of planting materials, sporadic planting, lack of irrigation system in typical

farms, lack of standard nutrient levels for banana plants, high incidence of pests and diseases,

poor quality fruits and high postharvest losses, unreliable supply of quality fruits, lack of

market infrastructures, and disorganized groups of stakeholders (e.g., growers, shippers and

consignees).

The weaknesses specific to saba/cardaba are: reliance on old stocks to replenish planting

materials, low intensity use and sporadic application of fertilizer, susceptibility to bugtok and

other diseases, poor quality fruits and high postharvest losses, unreliable/unpredictable supply

of quality fruits, unreliable supply chains, lack of harmonized quality standards, lack of

market infrastructures, disorganized groups of stakeholders (e.g., growers, shippers and

consignees), limited support to RDE, small to medium scale manufacturers pay little attention

to food quality and safety, chips manufacturers serving only the local market priced their

product at a premium, normally twice over those that are export-oriented, lack of system in

product handling and transporting, and cold storage is not used.

37

The opportunities are: greater access to markets, presence of ICT facilities, heightened

global consciousness for health foods, high employment and investment generator, typhoon-

free area (Mindanao). The opportunities specific to lakatan/latundan are: growing domestic

demand for latundan (for babies and the elderly), expanded markets for lakatan to Asian

countries, high demand for lakatan in the domestic market, could be exported as an organic

fruit (lakatan), and biotechnology tools available for varietal improvement. The opportunities

specific to saba/cardaba are high demand in the export market, overseas buyer demand a

steady and predictable source of banana chips, and new export markets.

The threats are: high cost of farm inputs especially fertilizers, high cost of transport,

unpredictable china market in the case of banana chips, banning of aerial spraying in Davao

City, unfair trade practices disease outbreak, rapid changes in customer preferences, peace and

order, climatic disturbances (e.g. El Nino/La Nina), political disturbance/instability, possible

global market oversupply/market saturation, agrarian reform law - caused division of farms

into smaller units thereby affecting economies of scale. The threats specific to

lakatan/latundan are: entry of Ecuador in the Japanese market which is the traditional market

for Philippine lakatan, and competition with other fruits produced locally and outside the

country. The threats specific to saba/cardaba are: distribution systems in markets abroad

particularly in China and the European Union are controlled by a few large distributors;

changing consumer preferences especially for healthy, low sugar products; availability of

lower-priced substitutes; absence of mandatory international or local standards; high cost of

inputs – cooking oil accounts for 40% of sales and saba accounts for 35% of sales; and

possible relocation of production and processing operations of Filipino manufacturers to

neighboring countries (e.g., Indonesia).

F. Problem Tree Analysis

Figure 34 shows the problem tree analysis for fresh banana. The SWOT analysis above

was used as a main input in its formulation. Among the commodities in the country‟s fruit

industry, banana has already established a very competitive edge in the world market.

Alongside with the investment opportunities seen by the multinational companies in banana

sector, changes in the production and marketing system has also been triggered by the

increasing demand for this fruit, both in the domestic and international markets. Despite of the

competitive edge of the industry in the world market, there are still opportunities to improve

and develop banana industry to tap the higher value chains and considerably improve quality,

production capacity and enhance competitiveness.

Although banana has different varieties, it can be noted, however, that issues prevailing in

the industry are common among the all types of banana. Hence, each issue significantly

38

hinders the development of the industry. In the case of Cavendish, production is highly

dominated by multinational companies. Farmers/growers are often engaged in contract

growing with these large firms. This set-up enhances the technological transfer and technical

skill development of the farmers betrothed on the contract. However, there are still existing

issues that are encountered by these firms. Among these issues are high cost of inputs

especially fertilizers and labor, declining soil fertility due to farming and fertilizer application,

and high incidence of pests and diseases. Apparently, these problems also come across in the

production of other varieties of banana.

Sustaining the supply of quality fruits starts at the farm level production. The

implementation of Comprehensive Agrarian Reform Law has prohibited the ownership of

large land. Hence, investors will be more reluctant to invest in the industry inasmuch as

incentive to expand the production will be more costly and problematic. Lands that are under

the reform law cannot be used as collateral to the bank which leaves the farmers with limited

access to credit. Thus, farmers rely on old stocks to replenish their planting materials and

cannot buy certified or quality materials to enhance the production capacity and quality.

Moreover, farmers limit the application of fertilizer since it will be more costly for them to

follow the required amount of the chemicals to have a good grown banana plant.

Another repercussion of the agrarian reform law is the fragmented production area of

different varieties of banana. 80% of the banana growers are small farmers. The crop is

grown along the road side, on mountainside, on home lots and in small farms. As a result,

standards set by the market are hardly met by small growers. This is further aggravated by the

absence of mandatory international or local standards which eventually causes the lack of

harmonized quality standards of the produce of small growers. Weak pesticide residue

analysis further reinforces the fact that there is a need to improve the quality of the produce.

However, weak pesticide residue analysis should not be overstressed since research and

development to improve the production capacity and quality of the banana also needs more

support from the government and the concerned agencies.

39

Fig

ure

34. B

anan

a, f

resh

: p

roble

m t

ree.

40

The industry is also lacking on data banking system/facilities for the other varieties of

banana. Some growers and traders, therefore, have insufficient knowledge whether they are

meeting the demand for banana in the domestic market. The inability to trace the origin of the

rejected and low quality produce is also contributing to the slow development of the industry.

Aside from quality of the produce, typical farms have relatively low yield. Climate change

(e.g., uncontrollable climatic disturbances such as occurrence of typhoon) highly influences

the production of banana. For some growers, the low productivity of their farm is due to

inadequate support facilities such as irrigation system. This is also compounded by the

declining soil fertility due to continuous farming and fertilizer application. Lack of disease

surveillance and early warning system for banana and its susceptibility to diseases

significantly influence the yield of its production as well.

Handling the produce at the postharvest stage is as important as maintaining the quality of

the fruit at the farm production level. Apparently, there is a lack of good system for handling

and transporting the produce. Most of the produce was transported without using cold storage

which is necessary to maintain the freshness of fruits before reaching its destination market.

The archipelagic nature of the country and sporadic production of banana area also drive up

the transportation cost. Lack of market infrastructure, including farm-to- market roads, further

intensified this problem. Likewise, most of the farmers have difficulties in marketing their

produce because of the fragmented production and inefficiencies of its marketing system.

III. SUMMARY, ISSUES AND RECOMMENDATIONS

The banana industry is already globally competitive already but big improvements could

still be done in terms of production and yield, and in the supply chain.

The processed export industry also still has a big potential. The Philippines market share

could be increased. During an agribusiness stakeholder consultation (DA, 2008), Mr. Ruben

See, President of See‟s International, a banana chips exporter, encouraged the growing of

saba because it is easy to cultivate and there is market for saba. There is also no problem on

Maximum Residue Limit (MRL), since it is “organic by neglect”. The problem is always a

shortage in supply due to typhoon. Table 19 illustrates the issues and gaps in the banana

industry, accordingly, recommendations were also provided.

41

Table 19. Issues and recommendations in the banana industry.

Supply chain Issue/Gap Recommendation

I. Input Supply Subsystem

Seeds and Seedlings, etc. Insufficient planting

materials with high

quality

Provision of quality planting

materials – especially for small

bananas

Fertilizer and Pesticide Increasing costs Improvement of logistics; utilization

of organic fertilizers

Agricultural

Machinery/equipment

Need for standards

in farm equipment

Establishment of standards

Labor Increasing cost of

labor

Maximum utilization of family

labor

II. Production Subsystem Inconsistent supply;

fragmented

production

Expansion of production areas;

integration of supply

III. Marketing Subsystem Inefficient

marketing system

Improvement of logistics (to address

high postharvest losses);

establishment of an efficient

marketing system for small bananas

through better market information

and trade systems

IV. Processing Subsystem Inadequate

postharvest and

processing facilities;

need for standards in

equipment

Increase and improvement in

processing and postharvest facilities

(e.g., processing and packaging

plants, peeling and cutting

machines); utilization of

biotechnology

V. Support Subsystem Inadequate support

systems

Provision of more support facilities

such as ports, farm-to-market roads,

cold chain systems, irrigation

facilities; also regulatory and food

safety system (e.g., traceability,

database/s); promotion of GAP;

credit and crop insurance facilities;

strengthen RDE system

42

DA-GMA-HVCC identified some investment opportunities - growership for cavendish

export, Individual production of fresh banana for local and export markets, banana chips

production, organic - fresh and processed, and production inputs: organic fertilizers, tissue

cultured plantlets. But more investments would come in if the gaps are addressed.

It is recommended that there should be reviews on the existing programs formulated by

the government to solve the concerns of the industry - from access to agricultural resources

and services to market information- to strengthen its competence in dealing with the

prevailing issues of the fruit industry. One good example is the Food Terminal Concept

which is developed by DA. This concept is especially designed to develop market

infrastructure of the industry by establishing chain of marketing facilities from farm to

consumers and developing distribution centers (food terminal hubs) which are designated

regional or provincial agro-industrial centers for proximity to value-adding and processing

activities. Active involvement of LGUs, NGOs, private sector, GOCCs, and joint-venture

between any of the parties above is highly encouraged to operate the hubs so that trading

system will be more efficient and transparent and market information will be more accessible

to the agents of the market.

IV. REFERENCES

Agribusiness System for Statistical Information Services and Technology (ASSIST). (1994).

Banana marketing in nine selected areas in the Philippines.

Argañosa S. A., et. al. (2006). Analysis of banana processing businesses and their support

environment in the Philippines.

Banana Cardava Production. (2005). First Bukidnon Banana Congress: Banana cardava production-

an alternative crop. Powerpoint Presentation. November 3-4, 2005. Retrieved on October

2008 from <http://www.hvcc.da.gov.ph/pdf/cardaba2.pdf>

Calderon, R. P. and Rola, A. C. (2003). Assessing benefits and costs of commercial banana

production in the Philippines. Working paper no. 04-03. ISPPS, CPAF, UPLB.

Center for Research and Communication. CRC. (1999). Enhancing the Global Competitiveness of

Agribusiness through a Strategic and Integrated Transportation Action Program.

43

Davao Region Industry Cluster Plan, 2005-2010. March (2008).

Department of Agriculture. (2002). Banana strategic action plan. April 2002.

Department of Agriculture. (2008). Proceedings of the agribusiness situation analysis,

stakeholders consultation meeting. Quezon City. December 9-10, 2008.

Department of Agriculture-Bureau of Agricultural Statistics. (2008). Countrystat. Retrieved on

December 2008 from <http://www.countrystat.bas.gov.ph>

Department of Agriculture-Bureau of Agricultural Statistics. (2004). Situationer on banana,

1999-2003.

Department of Agriculture-Bureau of Plant Industry. (2009). Export report on fresh small

bananas, 2005-2009.

Department of Agriculture-Ginintuang Masaganang Ani High Value Commercial Crops (DA - GMA-

HVCC) Banner Program. Commodity profiles. Retrieved on October 2008 from

<http://www.hvcc.da.gov.ph>

Digal, L.N. (2005). Benefit diffusion and linkage development in the Philippine tropical fruits sector. Retrieved on October 2008 from http://siteresources.worldbank.org/INTPHILIPPINES/ Resources/Digal-word.pdf

Food and Agriculture Organization (FAO) of the United Nations, 2008. Retrieved on October 2008

from < http://faostat.fao.org/default.aspx/ >>

Joint Committee on the Japan-Philippine Economic Partnership Agreement. December 11,

2008. Operational Procedures referred to in Chapter 2 (Trade in Goods), Chapter 3

(Rules of Origin) and Chapter 6 (Mutual Recognition). Agreement between Japan and

the Republic of the Philippines for an Economic Partnership. Retrieved on September

2009 from http://www.mofa.go.jp/region/asia-paci/philippine/agree0812.pdf

Lantican, F. A. (2008). The Philippine banana industry: Market performance, constraints and

policy directions.

Maghirang, R. (2007). Banana strategic plan 2005-2010.

National Academy of Science and Technology, Department of Science and Technology.

(2008). Philippine Agriculture 2020: A Strategy for Poverty Reduction, Food Security,

Competitiveness, Sustainability, Justice and Peace. Main report. January 2008.

http://www.countrystat.bas.gov.ph/

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http://www.mofa.go.jp/region/asia-paci/philippine/agree0812.pdf

44

National Statistics Office. (2002). Census of agriculture and fisheries.

National Statistics Office. (1994-2007). Quantity and value of exports and imports. 2008.

PCARRD. (2003). Banana and mango. R & D status (2000 and beyond).

PCARRD (2006). Marketing system participants and general marketing flow of smallhold

bananas, Philippines. Cited in A.P. Aquino, et. Al. Exploring the Link Between

Supply Chain Management and Transaction Cost Economics: A Cursory Evaluation of

Export Mango and Small-hold Banana Marketing in the Philippines. International

Seminar on “Economics and Marketing of Tropical and Sub-tropical Fruits.” Kuala

Lumpur, Malaysia, 16-18 July 2007.

Rivera, R.A. (2004). Philippine banana production and marketing. Retrieved on August 2008 from

<http://www.hvcc.da.gov.ph/pdf/banana_phil_prodn_market.pdf>

USAID and Strategic Development Asia-SDA. (2007). Banana agrichain competitiveness

enhancement. Implementation Plan – Year 1.

45

V. ANNEXES

Annex 1. Gross value output of selected fruits, in million pesos, 1998-2008.

(At constant prices)

(Source: BAS, 2009)

46

Annex 2. 5-Year (2006-2010) cardaba production cost and return analysis for one hectare.

(Source: 1st Bukidnon Banana Congress, November 3-4, 2005)

2006 2007 2008 2009 2010

I. COST (pesos)

A. Land Preparation 1,500 3% - 0% - 0% - 0% -

B. Labor

Stacking 200 0.5% - 0% - 0% - 0% -

Hauling/Planting 1,000 2% - 0% - 0% - 0% -

Weeding 2,000 5% 2,000 8% 2,400 9% 2,400 9% 2,400

Fertilization 900 2% 900 4% 1,080 4% 1,080 4% 1,080

Deleafing/Debelling 800 2% 800 3% 960 3% 960 4% 960

Desuckering 1,500 3% 1,500 6% 1,800 7% 1,800 7% 1,800

Harvesting - 1,000 4% 1,200 4% 1,200 4% 1,200

C. Materials

Seedlings 17,600 40% - 0% - 0% - 0% -

Lime 540 1% - 0% 600 2% - 0% -

Organic Fertilizer 8,800 20% 8,800 35% 8,800 32% 8,800 32% 8,800

Inorganic Fertilizer 6,520 15% 6,840 27% 7,180 26% 7,520 28% 7,900

Medicine 720 2% 720 3% 720 3% 720 3% 720

Harvest Basket - 1,200 5% 1,200 4% 1,200 4% 1,200

D. Technical Services 1,500 3% 1,500 6% 1,500 5% 1,500 6% 1,500

43,580 100% 25,260 100% 27,440 100% 27,180 100% 27,560

II. PRODUCTION

Fruit (kg.) - 38,500 38,500 38,500 38,500

B-suckers (pc.) 13,200 13,200 13,200 13,200 13,200

Soybeans (kg.) 2,000 - - - -

III. Income (pesos)

Fruit - 134,750 134,750 134,750 134,750

B-suckers 66,000 66,000 66,000 66,000 66,000

Soybeans 30,000 - - - -

96,000 200,750 200,750 200,750 200,750

42,420 175,490 173,310 173,570 173,190

0.97 6.95 6.32 6.39 6.28

Note: P10,000 production cost for soybeans was deducted to arrive at a net income of P42,420 (year 2006)

Sub Total

Gross Income

Net Income

ROI

47

Annex 3. Logistics practices in the banana industry.

Extracted from: Center for Research and Communication. Enhancing the Global

Competitiveness of Agribusiness through a Strategic and Integrated Transportation Action

Program. 1999.

Packaging. The post harvest practices of growers are: cleaning, sorting, grading, packing.

Growers use various packaging/containers such as: kaing (3 sizes), sack, crate (2 sizes) before

and after processing. Wholesalers/Retailers/Traders perform a wider variety of steps than

growers: repacking, sorting, cleaning, kalburo, packing, grading, cutting, weighing. There is

no standard sequence. A variety of containers are used, with crated of 30-32 kilos most

popular. Kaings of 4 sizes and baskets are also mentioned. These practices show lack of

standardization.

Transport. For growers, the produce is more often picked up by customer in own vehicle. For

some cases, the produce is delivered using either jeep, motorcycle or utility vans. Weekly

volume ranges from 30 to 80 kilos, except 1 big player cited 4 tons. Delivery is mostly to

Toril. Fee ranges from P20 to P250. Frequency ranges from daily to every 15 days. Bananas

are mostly packed in crated of 30-32 kilos. Assemblers deliver green, unripe saba to banana

chips processors (Celebes and Basic Fruits). Processors shoulder the transport cost from the

assembly point (trader‟s house) to the processing plant. Company vehicles pick up the

produce according to a daily schedule.

For Wholesalers/Retailers/Traders, pick up by customer in customer‟s vehicle is more

common than delivery, in customer‟s vehicles. Travel distance ranges from 3 to 12 km and

time from 15 minutes to 2 hours. Fee ranges from P20 to P1500. Per Dizon Fruitworld,

containers used are either „cattle vans‟ which can hold 245 crates, or regular 20 foot dry vans

which can hold 207 crates with air passage allowed between crates, and one container door

left open and subject to pilferage. Each crate can hold 35 kilos latundan/30 kilos saba. Solid

Shipping Lines is typically used by Dizon, sailing from Tefasco wharf. There are also

instances of crude practice, where banana hands are piled on top of each other, without

container crates or cartons, inside a smaller dry van. Bananas at the bottom are damaged by

the weight above them.

Storage & Warehousing. The type of storage used by growers is either sheds or house.

Bananas are stored in kaings or cartons, waiting for buyers or ripening and are held on the

average for less than 2 days.

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Wholesalers/Retailers/Traders mostly store the bananas prior to sale. Storage areas vary from

sheds, to stores or small warehouses. Sheds range from 30 to 60 sq.m. and can contain 6 kaing

up to 500 crates. A small warehouse may hold 50 to 300 kilos, while a store is smaller,

holding 15 to 100 kilos only. Shed rental can be P10000 to P20000 per month. Bananas are

packed in crates or kaings. Reasons for storing are: ripening or waiting for buyers. Most store

for 1 day, others longer, up to 15 days. Losses experiences range from 5% to 20%.

The existing logistics practices for export are already satisfactory as these have been set by the

importers themselves. Exports to Japan, Middle East and Korea are in cartons containing 13

kilos, while exports to Hong Kong & Singapore are in cartons containing 18 kilos.

Logistics Cost of Banana

Transport Costs. The two transporters (interviewed in the study) ship once a week an

average of 1.5 tons and 4 tons. Trip is from Calinan to Divisoria and they charge P3000 and

P8000. Shipments are in crates of 30 kilos and the crates are in containers. Freight per kilo is

P1.83 to P2.

Typical Price Structure

TYPICAL SABA BANANA PRICE STRUCTURE (CFA-UA&P WORKSHOP, 1999)

PER KILO LOW HIGH

Farm Price 1.45 2.45

+ Hauling Cost 0.05 0.05

= Farmgate Price 1.50 2.50

+Transport Cost and Margin 0.20 0.20

=Assembler‟s Price 1.70 2.70

+Supplier‟s Margin 0.20 0.20

+Transport, Hauling Cost 0.10 0.10

=Processor‟s Price (Butuan City) 2.00 3.00

LOGISTICS COST + MARGINS 0.55 0.55

% OF PROCESSOR‟S PRICE 28% 18%

% OF FARM PRICE 38% 22%

Storage & Warehousing Costs. Both transporters reported being aware of new storage

technology, but are not using any because it is expensive.

49

Annex 4. DTI list of companies which are into production and export of banana chips.

(Source: Argañosa S. A., et. al. (2006). Analysis of banana processing businesses and their

support environment in the Philippines)

50

Annex 5. Actors in the cardaba industry.

(Source: USAID and Strategic Development Asia-SDA. (2007). Banana agrichain competitiveness

enhancement. Implementation Plan – Year 1)

51

Annex 5. Actors in the cardaba industry. (continued)

52

Annex 6. Case report of Snapsnax, Inc., a processor and banana chips exporter.

(Source: Davao Region Industry Cluster Plan, 2005-2010. March 2008)

Firm Name: Snapsnax Inc.

Sector: Processor and Banana Chips Exporter

Principal Products and Services: Banana Chips

Address: Northern Binugao, Toril, Davao City

Telephone Numbers: 082-2912542 (Fax), 082-2912458

Date: February 22, 2008

(1) Linkages/ networking

a) Existing linkages/ networking in conducting your business

Sales

: 100 percent of production is sold directly to China, U.S., and Germany.

80 percent to China, 10% to U.S., and 10 percent to Germany (broken chips)

Distribution – none locally

Procurement

: 70-80 percent of total raw material (Cardaba Banana) is delivered to the plant

by farmers, while 20-30 percent is bought through their agent in the areas.

About 70 percent of raw material is sourced from Davao del Sur and the 30%

is sourced from Davao del Norte.

: Cardaba is „all-in‟ acceptance from supplier. No classification in purchasing,

but classify it according to sizes in processing due to market requirement

where one market require big sizes and others small (3-4 inches)

Source of business information

: Export buyers

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Others

: Information from media regarding incidents in Luzon (like typhoons) that

affect the supply of Cardaba since Manila processors will source their raw

materials from Mindanao and compete with local suppliers for the sourcing of

raw materials.

b) Linkages/networks you are expecting in conducting your business:

(and what do you think is the benefit from forming the linkage/ network?)

Has linkage with the DTI, particularly the information on the availability of

GMP training and other training opportunities.

c) Trade/industrial associations

Trade/industrial associations involved in - President Ruben See is a member of

the Banana Chips Processor Organization, a loose organization that gets

together only when confronted with a problem like scarcity of raw material.

Trade/industrial associations you are not involved in: Davao City Chamber

(2) Markets

a) Current markets (customers/ users)

Major market

: China

Other markets

: US and Germany market

Satisfied with current buyer to China as turn-around payment is just two weeks

compared to U.S. where the turn-around is 1.5 months. No plan for further

development as limited by the supply of raw materials.

b) Potential/ expecting markets (customers/ users)

c) Requirements for penetrating into the potential/ expecting markets

No plan for penetration to other markets.

(3) Competitors

a) Competitors: Compete with Luzon processors on the raw material supply and not the

market. Luzon buyers of Cardaba offer 1 Peso more per kilo to farmers.

54

b) Competing factors (price, quality, sales channels/ techniques, others): price

(4) Technologies

a) Issues relating to technology: None

b)Technological information you like to obtain:

Processing is very simple and technology is matured, and no need of new

information on current technology.

c) Research themes to solve the current technological problems: None

(5) Technologies/technical skills

Processing activities are very simple and technology and trends are not very

critical to its competitiveness. It is the price and availability of raw material,

particularly cardaba and vegetable coconut oil used for frying, that are critical

to its operation and competitiveness.

Processing activities – Peeling – Frying – Sweetening - Packaging

(6) Current Development issues and potentials of the clusters

a) Issues industry players are being confronted with.

Scarcity of raw material particularly cardaba as Manila processors also source

their raw material from the Davao Region particularly if typhoons hit Luzon

and areas of sources of Luzon processors. Manila buyers of Raw Cardaba also

offer higher prices.

The big increase in the price of the cooking oil.

b) Development potentials of the cluster (market potential of the major activities)

1. Development Intervention of relevant government agencies (past performance,

and current key direction of interventions)

- Received training on GMP/HACCP through DTI‟s facilitation

-Would like to be GMP/HACCP certified.

55

Annex 7. Price formation for banana.

(Based from ASSIST. Banana Marketing in Nine Selected Areas in the Philippines. November

1994)

Cavendish

Cavendish is mostly exported and thus farmgate and wholesale prices are affected by the

world price.

Lakatan

South Cotabato and Sarangani - Wholesale buying prices of traders are based on prices

outside the market center and the buying prices of fellow traders. During lean months, most

distributors demand higher prices from buyers.

Semi-ripe bananas command higher price than ripe ones at the retail level. Retailers based

their selling prices based on demand and supply situation and prevailing market price.

Latundan

Misamis Oriental- The buying price is based on the count of the buyer. Different traders use

varying methods of counting bananas; this count serves as the basis of price-setting by traders.

Farmers normally do not bargain over prices. Thus, the Manila or Cebu trader sets the price

for the provincial assembler based on the former‟s count. The provincial assembler sets the

price for the agent/assembler, who in turn sets the price for the farmer.

Saba

Davao del Norte - Processors dictate the wholesale buying price of cardaba for chips to their

contractors and direct suppliers. They normally base their price on their export contract price.

Contractors set their buying price from which their suppliers will receive a commission per

kilogram.

The wholesale buying price of cardaba intended for local consumption (ripe and undersized)

is based on the prevailing price in the market. This is usually determined by traders who are

the main suppliers of banana traded in the public market.

Retail price is based on the current price in the market or the retailer-set price which includes

additional marketing costs.

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Metro Manila – Saba prices are stable. Latundan and lakatan vary at times due to changes in

quality and size.

Provincial assemblers who deliver to medium distributors usually dictate the price in the

markets and even in supply areas. For permanent supplier/distributor relationships, an

advance notice of change in price is given by the supplier usually one week before the

next delivery. Freelance viajero and their spot buyers negotiate on the price. Divisoria

distributors have a better edge in price negotiation due to their permanent location and

regular supply.

Suppliers who sell at the pier dictate the price and give a one-week notice before

implementing price change.

Retailers base their selling price on their buying price from distributors, including

overhead expenses and their margins. Overhead expenses include handling,

transportation, fees, stall rentals and others. Retail markets with high stall rental fees have

higher retail selling prices compared to ambulant vendors or to talipapa retailers.

full report banana nov112009 notc

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