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Perspective
In the Yemen Arab Republic onions have traditionally been supplied from Al Mawsa on the Tihama Plain and from the mountain plateau. The supply pattern was seasonal, the yield relatively poor and the quality low. In an area northeast of Al Bayda, in the southeast corner of Yemen, a farmer had experimentally introduced onions in 1978. The crop had proved ideally suited to the area. As a result of ideal agronomic conditions incredible yields were achieved, about 120 tonnes per hectare. The quality was excellent and harvesting was possible throughout the year. All the growers in the area took up onion production and transported the onions in one-tonne trucks to the distant city markets.
Action
Clearly the growers had a comparative advantage in onion production over other farmers in this part of the Arabian peninsula. The challenge was to exploit this advantage fully. All the growers belonged to the same tribe and the tribal chief was encouraged to play a leading role in organizing them. Firstly, they agreed to coordinate their transport, so instead of sending small volumes of produce to the market in one-tonne pick-up trucks, which cost 0.5 Yemeni rials per kg, they decided to hire eight-tonne lorries. This reduced the transport cost to 0.2 Yemeni rials per kg. Instead of just growing the highyielding variety of onion (Texas Grano) the growers also grew an Indian red variety (Red Puna) which had significantly better keeping qualities. The growers coordinated their growing in order to achieve a smooth supply of onions throughout the year After harvest the produce was allowed to dry for three days and packed into 25-kg sacks to await collection at the side of the road.
Result
The eight-tonne trucks were sent to market with both Red Puna and Texas Grano onions packed in separate sacks. The farmers never sent more than one lorry to each of the main markets at one time, thus ensuring that they did not oversupply the market. Instead of delivering their produce to wholesalers the truck driver and the grower representative would sell the onions by the bag off the back of the lorry direct to retailers. Normally the onions with the shorter shelf life were sold first, and the longer-storing varieties were stored at the back of the lorry for later sales. Table 4 demonstrates that this approach to marketing, i.e. collective transport and direct sales, improved grower returns by over 40 percent.
By making bulk shipments and having a product mix which ensured a relatively long shelf life the farmers could afford to carry out their own marketing. Because of their much lower costs of production the Al Bayda growers could undercut the other suppliers. They used this to attract custom away from the traditional wholesalers. By coordinating the supply to all the markets they ensured that the markets were never glutted and thus maintained good prices. Both the social pressure of being a member of the tribe and the improved prices prevented growers from attempting to market individually.
It is interesting to note that this farmer group had also registered itself as a cooperative in the People's Democratic Republic of Yemen, the border between these two countries being very indistinct. Whenever they heard by radio that the prices were higher there, they would redirect their transport accordingly.
TABLE 4. A comparison of farmer prices for onions from Al Bayda & Al Mausa, Yemen
At Bayda |
Al Mawsa |
|
| Item | Direct sale |
Via wholesaler |
| Retail price | 5.00 |
5.00 |
| Retail margin | 2.10 |
2.00 |
| Wholesale price | 2.90 |
3.00 |
| Wholesale margin | - |
0.50 |
| Transport costs | 0.20 |
0.50 |
| Sack cost | 0.06 |
0.06 |
| Farmer price | 2.64 |
1.94 |
Important notes
1. The tribal chief imposed the necessary collectivism and discipline on the growers in terms of varieties grown, programming production and trusting the farmer representative who undertook the selling on their behalf.
2. The growers had sufficient comparative advantage and market strength to sell direct and not through the normal wholesaler system. Initially they could afford to offer onions at lower prices than wholesalers which gave the retailer the chance of a higher profit margin.
3. The farmers kept themselves well informed on the market by an information network, which included radio, telephone messages to the nearest town and messengers so that further lorryloads were dispatched when market supplies were getting low.
Perspective
This case study is taken from a small island in the Caribbean with a population of 70 000. The main industry is tourism. Most vegetable growers planted their crops at traditional times of the year. The supply pattern had become increasingly seasonal with major supplies arriving on the market from October through to December while during the period April to August domestic supplies of vegetable commodities were insignificant. Prices fluctuated greatly depending on whether the vegetables were in or out of season. There was a strong demand, particularly from the catering trade, for offseason vegetables.
Action
One taxi driver and part-dine farmer recognized the opportunities for high prices if he could provide off-season vegetables consistently. He was not in a position of m eke any investment in machinery. His only capital investment was a crop sprayer. Ploughing and soil cultivation was carried out by a neighbouring farmer on contract. He did have his own transport which provided opportunities to deliver produce direct and establish close contacts with buyers.
The farmer purposely planted his vegetable crops when the majority of growers were not growing. To save labour costs for weeding end to conserve moisture-and therefore extend production into the dry season-he developed a production technique using weedkiller. In the early crop stages he would cover the plants with large tins and spray the entire field. Later he would use a spray hood to ensure that there was no crop damage. The dead weeds acted as a mulch to conserve moisture as well as giving other benefits such as weed suppression, soil temperature moderation and protection against erosion.
Result
Off-season vegetable production was achieved with minimal investment in equipment or labour. High prices were obtained by direct sales to supermarkets, hotels and restaurants. Increasingly the farmer plans his crops to match the requirements of his buyers. The farmer has now invested in a pick-up truck and become a full-time farmer. He rents out his taxi cab to a driver at a profit.
Important notes
1. The farmer organized his production to meet the demands of the buyers.
2. He minimized his risk by keeping his production costs strictly under control. Investments were kept to a minimum. Money was spent on a sprayer and crop protection chemicals which would ensure him a harvest.
3. He has intelligently utilized his resources, land, transport and good contacts with the hotel trade.
4. This approach would only suit individual farmers or a small group of farmers. If too many farmers concentrate on this relatively small, high price, off-season market then prices will fall.
Perspective
In Egypt there have been significant changes recently in the marketing of horticultural produce. Firstly, the major wholesale market in Cairo is so overcrowded that an increasing proportion of produce is by-passing the market and being sold direct. Although the bulk of the produce is still sold by street stalls there is a growing demand amongst the wealthy for higher quality produce. Specialist shops and supermarkets represent new and developing points of sale. Secondly, with regard to production there has been an expansion in the use of walk-in and low polythene tunnels. Tomatoes, cucumbers, peppers and sweet melons can now be supplied virtually all the year round. Growing under polythene tunnels has also improved the quality of produce. A new exchange rate policy has improved the viability of exporting produce. The transport links to external markets are constantly improving.
Action
One farmer had made a significant investment in walk-in tunnels. His financial viability depended on maximizing his income as his level of fixed costs, or overheads, was much above those of small farmers. In order to maintain his profit levels he pursued a policy with two major objectives.
Firstly, he aimed at maximizing his yields. He gave his staff specialist responsibilities with specific targets. For example, each group of six tunnels had an individual manager who was given a bonus if his tunnels could yield above a target.
Secondly, he completely changed his marketing policy. He recognized that his business had special advantages which could be exploited. He could supply crops over an extended season and he could produce high quality crops. He also recognized that he could reduce the risk from changes in market prices by selling his produce through a number of different outlets.
He established contact with supermarkets in Cairo and agreed to supply them with his top-quality produce. Depending on the requirements of the individual shops crops were sold either packed in reusable plastic boxes, or prepacked in one-kg nets. Supermarket sales accounted for 40 percent of his sales.
He also arranged with exporters to take another 15 percent of his produce. This was sold both to the European and Arabian markets. From the outset a firm policy was taken on prices to save management time and disputes. Supermarkets were charged 10 percent over the wholesale price and exporters 15 percent.
Finally, he arranged a contract with a supermarket in Kuwait to supply Iceberg lettuce for nine months. The contract guaranteed a minimum payment which would cover his growing costs, so the financial risk of growing this new crop was removed. This crop accounted for about 5 percent of his planned production.
The remaining 40 percent was sold to the traditional wholesale markets.
Result
Sales income increased so much that the business has paid off its capital investment in two years rather than the planned three. The success of the marketing venture has encouraged the company to establish its own marketing operation. The business has further diversified into supplying planting material to the surrounding small growers. The long-term aim will be to use the supply of elite planting material coupled with the services of the marketing company to be able to programme the production and centrally market the produce of the surrounding small farms to both the local market and the export markets of the Gulf.
Important notes
1. The prices of off-season fruit and vegetables normally go through three phases. In the very first season when the produce arrives at the market outside the normal period it is treated with suspicion and often disappointing prices are obtained. Once this suspicion has been overcome prices improve dramatically. Excellent profits can be made by those who have invested early in the technology. However, as more growers start growing off-season crops, prices will fall. Sometimes over-production can occur and prices can drop below the cost of production. In this example we have seen how one grower has responded to this third phase (over-production) in the development of off-season technology.
2. The grower managed to sell direct to supermarkets by using his three special advantages. He could produce a quality product over an extended season and had the transport to deliver direct. Although this was more expensive for supermarkets than buying from the wholesale market they were prepared to pay the extra money because of the convenience. Supply was guaranteed and the buyers only had to quote on the telephone what volume of crops they required.
3. Contract production for supermarkets is a highly advanced method of marketing and is particularly well developed in the USA. As this was a risky venture in the first year, the farmer negotiated a contract which would cover the production costs of lettuce, even if no produce was shipped. The risk was completely eliminated.
4. With his organized office, telephone and telex facilities he could successfully deal in these four different markets and thus spread his risk.
5. Large growers with a number of regular, wage-earning staff and a large investment in capital equipment carry high fixed costs or overheads (i.e. those costs which always have to be paid whatever crops are grown). In small farms most of the labour is carried out by members of the family. They generally have lower fixed costs and can therefore produce some crops cheaper than large farmers. The advantages are particularly noticeable in labour-intensive crops.
Perspective
Antigua is a small island in the West Indies. Three times a week a 747 jumbo jet lands enroute to London with spare cargo capacity. During the winter months, November to March, there was an oversupply of tomatoes and cucumbers owing to a government fixed-price buying scheme. These crops were being dumped at a high cost to the government. The country wanted to export the surplus production to the United Kingdom.
Action
A survey of the British market immediately revealed that Antiguan tomatoes and cucumbers could not compete in terms of either quality or price. However, the market research did indicate that there was a demand from the Asian and West Indian community for special tropical fruits and vegetables, many of which are grown in Antigua. Market opportunities were identified for green mangoes, okra, chill) peppers, scotch bonnet peppers (a specialist hot pepper) and even for a plant locally thought to be a weed, called bitter gourd or karella. A special airfreight rate was negotiated with the airline for regular shipments of over a tonne of horticultural produce. This was well below the normal cargo rate. Preliminary financial calculations suggested that these crops could be exported profitably. All the interested importers requested samples. Examples of suitable cardboard cartons were taken from the British market for copying by a Caribbean packaging company. In order to impress on the farming community the quality of produce required by the export market, samples of competing products were airfreighted back to Antigua.
It was agreed that the next step was to carry out a test marketing programme. Independent advice was soughs to identify reputable importers amongst those which had expressed a keen interest in obtaining Antiguan produce. Sample consignments were sent to a panel of six importers:
At the end of the test marketing programme one wholesaler/importer was chosen because he specifically supplied the West Indian community and was well placed to market Antiguan horticultural produce. During negotiations he was persuaded to open an irrevocable letter of credit at a local bank for negotiated fixed prices. Although this price was less than the average wholesale price which might be resumed on a consignment basis it did guarantee a level of profit and thus minimized risk.
Working with the importer the requirements in terms of volume, quality and seasonality for the selected products were agreed on. This was translated into a production programme and each export farmer was provided with the correct seed, production notes and dates and areas for ploughing and planting. Contracts were signed with the farmers, setting out buying prices for stipulated quantities and qualities. Export cartons were manufactured and supplied in advance and a simple grading table made.
Result
During the first season about two tonnes a week, mainly of scotch bonnet peppers and okra, were exported. In the subsequent seasons exports continued with the bulk of sales being made direct to a retail chain. This has increased prices. As a result of the new markets the government reduced and finally stopped paying fixed prices for surplus vegetables. The high incomes of export farmers and the status they achieved by being seen to export successfully resulted in a number of young men resuming to farming. In the mid 1980s a refrigerated container shipping service bringing meat for the tourist trade from North America started to visit Antigua. The empty containers on the return voyage are now being used to export cucumbers. This is an even bigger export operation but it has been built on the experiences and successes of the airfreighted horticultural exports.
Important notes
Perspective
Kenya has been successfully exporting fruit and vegetables to Europe by air for over a decade. The volumes sold now exceed 40 000 tonnes. In 1983 the European importers commented that improvements were needed in the quality of produce, particularly in view of increased competition from other suppliers. The main crops sold are fine and extra fine french beans, a range of Asian vegetables, avocadoes, strawberries, passion fruit, extra large pineapples and cut flowers. Export production is carried out by small farmers, large farmers and cooperatives. Most exports are made by private Kenyan companies. The Horticultural Crops Development Agency (HCDA) is a government-backed organization which carries out some exports on its own account to fund its role as the representative of the private exporters. The HCDA decided to act on improving quality standards.
Action
Discussions with the government crop inspectors and importers in Europe showed that most of the grading problems occurred at the beginning of the season. A frequent complaint was that mixed sizes were being packed together. Field observation showed that:
Field trials were undertaken whereby pickers covered their beans with a damp cloth in the field and field storage was in a tent clad in dampened material. This enabled the latent heat of evaporation, i.e. the cooling effect of water evaporating, combined with the shade, to prevent heat build up in the produce. Slide photographs were taken after one, three and five days to show the differences between the various post-harvest handling systems (see colour insert).
Strict sizing specifications differentiate fine and extra fine beans. Extra fine beans must be longer than 100 mm but thinner than 6 mm while a fine bean must be thinner than 9 mm. In order to enable new graders to check these sizes at the start of the season a stick was made 100 mm long tapering from 9 mm width at one end to 6 mm. This could be made out of tin, wood or cardboard and was provided to new pickers to help them measure beans into the correct sizes.
A bean measuring stick for checking grades
For harvesting above the waist a picking bag was required. This could be made out of a kanga--a shawl universally available in Kenya. Two comers were tied over the neck and the other two corners were tied up to the shoulders to make a bag. Into the bag were placed two three-kg cardboard boxes. Pickers picked and graded as they worked. The skin damage to the harvested crop was reduced and high work rates were possible because the bag was comfortable to work with (see colour insert).
Result
Having established that there were some relatively simple and inexpensive steps that the export industry could take to improve its performance, the HCDA decided to communicate these findings and recommendations in the form of a conference before the start of the export season. The exporters passed on the improved post-harvest handling techniques to their growers. Importers in Europe reported a significant improvement in Kenyan export qualities.
Important notes
