Supply Chain Analysis of High Value Vegetable

Professorial Chair Lecture

Metro Manila Commission Chair Lecture

Place

Department of Agricultural Economics, UPLB

Date

6-29-2010

Abstract

The paper is designed primarily to analyze the supply chain of four high value vegetables in the country and suggest policy directions and strategies to address the key binding constraints that affect the productivity and competitiveness of these crops.

Among the four high value vegetables covered in the study, cabbage, and carrots contributed bulk (93%) of the country's production. Although commercially traded in domesticated market, bell pepper and broccoli are still cultivated in limited areas.

Locally grown cabbages, carrots, bell peppers, and broccoli can compete with imported ones in the domesticated market in terms of prices at comparable quality. Import parity prices are found to be much higher than domestic wholesale prices of these types of high value vegetables in the local market.

The supply chain of four high value vegetables is composed of five major components: input supply, production, post production, marketing and trade and consumption. Key participants involved in the supply chain of fresh high value vegetables at the micro level are input suppliers, growers, brokers/agents, assembler-wholesalers/viajeros, wholesalers/distributors, wholesaler-retailers, retailer and consumers (institutional buyers and household).

Benchmark farms in selected areas in Benguet which adopted improved production technologies incurred lower production costs in cabbage, carrots, bell peppers, and broccoli production that typical farms. The practice of using more of organic than inorganic fertilizers and adoption of IPM significantly reduced the costs of production of the benchmark farms compared to typical farms.

Assembler-wholesalers who assumed the function of transporting cabbage from production areas in Benguet to Metro Manila received the highest share of net income in the supply chain followed by retailers and wholesaler-retailers. Framers obtained the lowest share of net incomes.

For carrots, assembler-wholesalers in the Benguet-Divisoria distribution channel generated the highest share of net income white the Benguet-Balintawak distributional channel, it was the retailers. The difference in net income distribution is a result of the difference in buying prices of the assemblers-wholesalers between two trade channels and the difference in value of postharvest losses at the retail level. Assembler-wholesalers shouldered the cost of collecting and bringing carrots from the farms and trading post in Benguet to Divisoria and Balintawak markets for selling on wholesale basis. They used plastic bags to pack the washed fresh carrots and ordinary truck, which are either owned or rented to transport the produce to the main markets in Metro Manila. Retailers, being the last link in the marketing chain, charged the highest average price to the institutional buyers and consumers to compensate for the post harvest losses incurred in retailing carrots. The least share of the net income wet to truck/wholesalers since they assumed minimal participation in the logistics and marketing operations.

Given the major findings of the study and problems/constraints identified by key players in the supply chain of fresh high value vegetable, the following policy directions and strategies are recommended: (1) promotion of IPM, production programming and organic/green farming in major production areas; (2) conduct of massive information campaign on the best practices of benchmark farms; (3) conduct hands-on training on proper post harvest handling practices/technologies; (4) strengthen the marketing assistance program of the government ; (5) strict enforcement of the anti-smuggling law; (6) provision of adequate market infrastructure; and (7) provision of effective and timely market information system.

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