SUPPLY CHAIN OF FRUITS AND VEGETABLES IN CANLAON CITY

MA. KYLLA A. FERNANDEZ

STEPHANIE T. DURAN

THIS TERM PAPER IS SUBMITTED TO PROF. ROMNICK CAPUYAN OF

CENTRAL PHILIPPINE STATE UNIVERSITY IN PARTIAL FULFILLMENT
OF THE REQUIREMENTFOR THE SUBJECT
CONCEPTS AND DYNAMICS OF MANAGEMENT

BACHELOR OF SCIENCE IN AGRIBUSINESS

MAY 2022
 Abstract

The purpose of this study was to identify and rank the relative relevance of important constraints fa
ced by stakeholders involved in the development of representative fruit (papaya and breadfruit) and 
vegetable (head cabbage and tomatoes) value chains in Samoa. Its purpose is to serve as a found
ation for the development of actionable actions in support of the Fruit and Vegetable Sector 
Strategy (FVSS),which was launched under the 
EU funded All ACP Agricultural Commodities Programme (AAACP).
Although one of the study's primary goals was to evaluate the limits, the lack of data on crucial
sectors of agriculture for various types of farmers.  This was unattainable due to production and
marketing constraints. Consequently, the research efforts to describe and analyze "generic" chains
for four different types of chains fruits and vegetables that are representative and conceptualized
on the basis of a collection of assumptions about the costs and returns of new
technology investments in the production of important crops on a small, but growing, scale scale
commercial. Using a combination of value chain mapping and gross margin analysis analysis, the
study aims to determine the relative importance of several factors. by calculating the value lost to
the chain as a result of the constraint the existence of these restrictions. Despite the fact that the
projected values are influenced by the assumptions made,They provide a guidance to the types of
constraints that are most likely to stymie the development of the respective value chains when
combined with focused surveys of key stakeholders.The relative importance of the various
restrictions under each category varies by crop variety, which indicates where to focus early
operations to ensure that constraints are alleviated in a timely and effective manner. Export
markets for fruits (papaya and breadfruit) offer the potential to boost production returns. However, I
the lack of consistent quality volumes of fruit to take advantage of sea freight options, which would
greatly cut costs, and (ii) the current capacity to cure fruit for export, severely limit these potential.
Significant value added opportunities exist for breadfruit in domestic markets, while papaya has the
potential to substitute for temperate fruit imports, particularly in tourism-related market segments.
While initiatives to overcome the severe export limits are addressed, these domestic market
potential may give a more viable option for enhancing returns in the medium term. However,
production restrictions (soil suitable for papaya, availability of seedlings, and harvest equipment)
need to be evaluated further, especially given the difficulty in obtaining funding to cover investment
and working capital needs. Gross margin analysis suggests large returns on investment for supply
to domestic markets for vegetable items (head cabbage and tomatoes).

The study offers activities that are in keeping with these findings.
with the Fruit and Vegetable Sector Strategy, which was developed with EU funding
Agricultural Commodities Programme for All ACP Countries.
The study also provides extensive and up-to-date gross margin evaluations.
helps to close a big data gap discovered throughout the research process
strategy formulation, as well as a foundation for more in-depth feasibility studies.
investigations into the actions outlined in the FVSS implementation plan.
 Chapter I

Introduction

Stakeholders involved in the production, during the first half of 2009,

Samoa took part in a workshop on the processing and marketing of fruits and vegetables. sector
diagnosis and strategy development procedure. The results of the strategy document and an
implementation plan were created as part of the process. An identified key intervention areas
aimed at easing critical restrictions to the sector's continued development. A key flaw that was
identified throughout the strategy's development. The limited understanding of the project and its
implementation strategy specific fruit and vegetable product value chains' existing functionality, a a
situation made worse by the scarcity of available information of essential criteria including
production levels, prices, and domestic and international trade Market demand from abroad. In
order to establish specialized actions in support of the a considerably enhanced ope rationalization
of the implementation plan knowledge of the present value chain structure and the restrictions that
it faces enhanced functionality, particularly in terms of how the chains interact with and affect one
another is necessary for smallholder producers.

Objectives
The objectives of this study are therefore to:
• identify representative fruit and vegetables for analysis
• develop product specific value chain maps, depicting key activities and actors and populated with
available information on production, trade and marketing activities
• on the basis of the maps, to identify critical constraints to value chain development, including key
deficiencies in information availability
• assess alternative potential activities in support of the implementation of specific components of
the Fruit and Vegetables Sector Strategy (FVSS) and which address the key constrains to sector
development.
Scope and Delimitation

This study is limited to all farmers of Canlaon City. This study is focuses on the Supply chain
analysis for fruits and vegetables. The participants are the Farmers of Canlon City which has
estimated population with the total of 50 farmers, generally it composed of 20 females and 30
males.

Significance of the Study

This study is about Supply chain analysis for fruits and vegetables in Canlaon City. This
research work is beneficial to the following people:

Consumer

This study will help them know the information about the things against the supply chain of
fruits and vegetables, for them to know the sovereignty of their choice of goods guaranteed.

Farmer. This study will help them manage their decision making and help them in planning
the things needed to meet their requirements and quota supply.
Future Researcher. The result of this study can serve as basis for further study on supply
chain analysis for fruits and vegetables.
Retailer. The purpose of this study is to help them enhance their service and boost supply
chain speed by improving upstream and downstream processes.
Supplier. The result serves as the bases for their strategic plans.
Wholesaler. This study will help them to be make a steps on what are the things needs to
be consider especially the prices.
Definition of Terms

The following terms will be defined both conceptually and operationally for the purpose of
this study.
Consumer. a person or organization that uses a commodity or service
Farmer. a person who owns or manages a farm.
Retailer. is a person or business that sells goods to the public.
Supplier. is a person or company that provides you with goods or equipment.
Supply Chain. is all of the various stages, in order, of a
product's progress from raw materials through production and distribution of the finished product,
until it reaches the consumer.
Wholesaler. is a person whose business is buying large quantities of goods and selling
them in smaller amounts, for example to shops.
 Chapter II

Review Related Literature

The supply chain of fruit and vegetables is characterised by a large number of participating
agents and consequently with a wide range of different distribution channels. In the following
chapter the different agents of the supply chain and the importance of their distribution channels
will be described in detail (see Figures 5 and 6)4. Based on official statistics and other publications,
some calculations have been done in order to illustrate the product flow in the supply chain
between the different agents. Difficulties regarding data availability in particular for the wholesale
level and producer organisation
made it necessary to conduct two surveys. The first was carried out under the 127 member
companies of the German fruit trade association (DFHV). The questionnaire was returned by 22
wholesale companies. The second survey addressed the 57 member companies of the federal
association of producer organisations for fruit and vegetables (Bundes Vereinigung der
Erzeugerorganisationen für Obst und Gemüse). So far, 19 producer organisations have returned
the questionnaire. The response rates of 17 and 33% respectively do not allow representative
conclusions, but give valuable information on both the wholesale trade and the producer
organisations. The chapter is structured according to the position of the different agents in the
supply chain. It starts with the inputs for the producers and ends with the final demand of
consumers.
This is a horizontal quality assurance system, the abbreviation stands for European
Retailer Produce Working Group Good Agricultural Practice. The system defines different
standards with regard to production, environmental, social and hygienic aspects. Important criteria
which have to be fulfilled are the safeguarding of a flawless production, the reduction of pesticide
applications, use of integrated production methods, protection of the natural resources and use of
traceability systems of the production. The food retailers generally view the EurepGAP as a
minimal standard (ROTHER, 2004, p.11f). Another important horizontal quality assurance system
is the IFS (International Food Standard). It was founded in 2001 to develop some international
security standards for businesses, which supply the retailers with private brands. The IFS is
compatible to the DIN EN ISO 9001 and comprises of the following chapters: 1) requirements for
the quality assurance system, 2) responsibility of the business management, 3) management of
resources, 4) production process, 5) measurements, analyses and improvements. The auditing is
carried out by accredited consultants (ROTHER, 2004, p. 14).
 Contract farming is frequently mentioned as a
substitute for poorly functioning or absent markets. Contract farming is an agreement
between a farmer and a firm – either a simple verbal commitment or one based on
written documents – where the farmer produces a fresh or partially processed product and t h e
firm is committed to buying it under certain
stipulated conditions (Glover and Kusterer 1990; Grosh 1994). Contract
f a r m i n g s e r v e s a s a n e c o - nomic institution operating between spot markets
and vertical integration (Grosh 1994; Key and Runsten
1999), and arises as a response to the selective or simultaneous market failures for credit,
insurance,information, factors of production or products (Key
and Runsten 1999). Contracts are one of the various ways of coordinating
economic activities between a farmer and a processing firm, thus enforcing a certain
type of the supply chain management for the given commodity (Hobbs 1996). There
are a numb er of ty pes of contractual ar-r a n g e m e n t s w h i c h c a n d i f f e r i n t h e
c o n d i t i o n s o f price and payment, the services provided, the quality and production
requirements and the input supply pr ovision s (Gr osh 1994 ). The ch oice o f a
con tra ct depends on the characteristics of the parties and the market where they
interact.The effectiveness of contract farming can be con- sidered from the
perspective of the farmer and of the trading firm. Firms can use a variety of
institutional arrangements to obtain raw products for processing or marketing,
relying on different degrees of vertical co-ordination and the related governance
structures. One extreme is the spot market, where the transaction takes place among
several actors and the price is set during the transaction. The firm does not
participate at all in the production process and all other aspects of the transaction
(i.e. quality, quantity, and timing) are non-negotiable. In this situation, there is no
real
supply chain management (Hobbs 1996). The other extreme position is the full
vertical integration, where there is a continuous flow of products and informa-
tion during different stages of the supply chain and th e t r a n s a c ti o n s fo l lo w a
c o r p o r a te - b a s e d sc h e me rather than a negotiating party’s scheme. Here, the firm
has a complete control over production Contract farming takes an intermediate
position allowing the firm to participate and thus to exert dif-ferent levels of control over the
production process without formally owning or operating the farms. It is mainly a way to
distribute the activities in the supply chain and the corresponding risk between the firm and
farmers. The farmer bears most of the production risks and the firm most of the processing and
market-ing risks. The exact allocation of risk depends on the specifications of the contract. The firm
chooses an optimum contract considering the transaction costs and profit (Key and
Runsten 1999), depending on the prevailing market uncertainty related to the
transac-tion, the degree of the asset specificity (influencing its bargaining position), the
frequency of the transactions (Hobbs 1996), and the monitoring costs surrounding the
production process (Singh 2002). In general, contracts can be classified into three cat-
egories which are not mutually exclusive :( 1) Market specification contracts, (2)
production management contracts and (3) resource providing contracts (Minot 1986;
Williamson 1991; Hobbs 1996; Key and Runsten
1999; Singh 2002). Market specification or procurement contracts are simple pre-har vest
agreements where the firm commits to provide a market outlet for the farmer (Hobbs 1996).
Usually, there are stipulated the conditions regarding price, quantity, quality, and
timing (Singh 2002). The farmer reduces the market a n d p r i c e u n c e r t a i n t y a n d
t r a n s f e r s i t t o t h e f i r m without losing the control of the production proc- ess
(Hobbs 1996). Production management contracts require the farmer to adopt
specific growing prac- tices, input regimes and post-harvest management practices
under the technical supervision of the firm. Resource-providing contracts require the firm
not only to provide a market outlet for the farmer’s produc-tion, but also to deliver
specialized input packages and supervision to the production process. Hence, th e
fir m ob tains a fu ll con tr ol o f the far m and the
farmer almost becomes an employee. Resource-providing contracts are the closest situa-
tion to the full vertical integration (Hobbs 1996; Key
and Runsten 1999; Singh 2002). The selection of any of these contractual forms varies
according to the type of commodity, the characteristics of the agents, and the market
conditions for the given period of time ( H i l l a n d I n g e r s e n t 1 9 8 2 ; K e y a n d R u n s t e n
1 9 9 9 ) . However, there are many different variants of con-tracts that can be derived from
the aforementioned three main categories, and empirical analyses have focused on
the specific situations rather than on a
generic contract institution (Singh 2002).While the firm decides on its
organizational strat-egy, the farmers, in turn, can choose to engage in a
c o n tr a ct o r to se l l t h e h a r ve st b y s o me o t h e r w a y .
The decision o f far mer s to a ccep t a con tr act typi- cally depends on their attitude
towards risk and on the specific market failures that they face. Since the
contract guarantees the farmer an outlet, marketing
risks are reduced. Contracts have the potential to provide the mecha- nisms for the
incorporation of small and low income farmers into the market economy (Glover
1984; Key and Runsten 1999). However, several authors argue
that contracts could also lead to the market segmen-tation and exclusion, thus generating
more negative than positive effects on farmers (Glover and Kusterer
1990; Grosh 1994; Little 1994; Porter and Phillips- Howard 1997; Torres 1997;
Siddiqui 1998).
Contract farming reduces marketing risk and sta- bilise s the far mer s’
in co me , an d, in this sense, the agr ibu siness partne r pro vid es a fo rm of
in su ran ce (Featherstone and Sherrick 1992; Watts 1994; Jackson and Cheater 1994;
Runsten and Key 1996; Flaskerud and Klenow 1999; Martin 1999; Sofranko et al.
2000). Marketing risk is reduced as a result of the agribusiness
contract to purchase the output of the farmer and the income is stabilized because of the
repetitive nature of required deliveries and payment. At the same time
contract s may simplif y production and marketing decisions thus improving the farmer’s
effectiveness. The reduction of marketing risk through the demand
assurance embodied in a contract is also appealing to farmers producing products where
the markets are thin (Hudson 2000).

Chapter III
 RESULTS AND DISCUSSION

The empirical results and discussions are presented

in the following two subsections. In the first subsec- tion, the descriptive analysis
was used to summarize the profile of respondents. The next section provides an analysis on
the actors that motivate the contract farmers to engage in contractual
arrangements.

Descriptive analysis

Two hundred and eight farmers were interviewed, o f w h i c h f o r t y - o n e

f a r m e r s w e r e in v o l v e d i n c o n - tract farming. Table 1 shows the demographic profile
of the contract farmers from seven selected states. Table 1 illustrates that more than one
third (36.6%) o f t h e f a r m e r s w e r e i n t h e a g e c a t e g o r y b e t w e e n 41–50 years.
26.8% of the farmers were from 31–40
years old category, while about 17.1% of the farmers were from the age category of less
than or equal to 50 years. The finding shows that about 63.4% of the farmers from the
age category of 31–60 were actively involved in farming in the Peninsular
Malaysia. In terms of gender, 38 (92.7%) were male and 3 (7.3%) w e r e f e m a l e .
R e g a r d i n g t h e i r e t h n i c s t r u c t u r e , 3 0 (73.2%) were Malay farmers, 8 (19.5%)
were Chinese farmers, 2 (4.9%) were Indians.In terms of education, the findings
showed that 2 (2.4%) of the farmers have never been to school, 12 (29.3%) of them
passed primary education, 21 (51.2%) of them went to secondary school and 6 (14.6%) of
them had tertiary education. A total of 37 (90.2%) farmers were involved in full
time farming, while 4 (9.8%) of them were part-time farmers. I n te r m s o f
e xp e r i e n ce , 1 2 .2 % o f t h e m h a d b e e n involved in farming for 1–10 years. 31.7%
were in-volved for 11–20 years. Only about 2.5% of the farm- ers had been farming
for more than 41 years. About 31.7% of the respondents were involved in farming
for 11–20 years.
In terms of the types of contract, the majority of the farmers were involved
in marketing contract and about 26.8% of the farmers involved in production
contract. A total of 73.2% of the farmer dealt verbally
with the sponsors and 26.8% of the respondents signed formal contract arrangements. With
82.5 million inhabitants, Germany is the largest market for fresh fruit and vegetables in the EU. Due
to natural production limitations 50% of fresh vegetables and 80% of fresh fruit have to be imported
from foreign countries. Until now, most of the imports are from other EU-countries. In case of
further liberalisation between the EU and the Mediterranean countries in the framework of the
Barcelona-Agreement, big market opportunities exist for Mediterranean countries with comparative
advantages in the production of fruit and vegetables. One of the most important driving forces for
the consumption of fresh fruit and vegetables is their healthy image and the resultant promotion in
modern lifestyles. It is expected that the consumption of fruit and vegetables will further increase in
the next years. Nevertheless not all fruit and vegetables will gain from this. Especially dynamic
products are considered to be nectarines, grapes strawberries, lemons and pineapples for fruit and
paprika, onions, courgette and chicory for vegetables. Less demanded products are mandarins and
bananas for fruit and cabbages and lettuce for vegetables. Two demographic trends (aging of the
German population and the decrease in household size) are also expected to influence the
demand for fresh fruit and vegetables. As it could be already observed in the last years, the share
of processed or frozen fruit and vegetables will continue to rise and also out of home consumption
will grow in importance. Exporters of fruit and vegetables to Germany are
well advised to carefully explore the changing consumption patterns and the supply requirements
of this market channel. Another demand driven change in the supply chain of fruit and vegetables
is the increasing importance of quality assurance systems for all actors in the supply chain. As
consumer awareness with regard to food quality and food safety has risen dramatically in the last
years, politicians and food retailers have reacted by the implementation of mandatory quality
systems for the suppliers and traders of fruit and vegetables. The fulfillment of quality systems like
EurepGAP, IFS or Q+S will soon
be a pre-condition for the market entry in Germany. At the moment the supply chain of fruit and
vegetables in Germany is characterised by its complexity. Unlike in the Netherlands and the UK, a
large number of different actors and marketing channels exist,
though the amount of information on the flow of products is very limited. Using different secondary
sources and the results of an own survey we were able to identify the main market channels. One
major trend in the supply chain is the growing importance of retailers at the expense of the
wholesale trade, resulting in a similar situation like in the UK and the Netherlands. In the long run,
the integrative approach of supply chain management will certainly become more important,
though specialized marketing channels will always co-exist and can be another way for exporters
to enter the market in Germany. Nevertheless, the already started concentration process at all
levels of the supply chain is very likely to increase. Until now, there is a large number of small
enterprises engaged in every level of the supply chain. The concentration process at the wholesale
level will also affect the producers of fruit and vegetables. Already the traders and retail chains are
requiring large, uniform and certified supplies, a trend which will also increase the pressure on
producers for cooperation and/or growth.
 Chapter IV

Summary

The study aims to determine the relative importance of several factors in the development of fruit
and vegetable value chains. It uses a combination of value chain mapping and gross margin
analysis. The results provide a guidance to the types of constraints that are most likely to stymie
the respective value chains when combined with focused surveys. Export markets for fruits
(papaya and breadfruit) offer the potential to boost production returns. Domestic market potential
may give a more viable option for enhancing returns in the medium term. Gross margin analysis
suggests large returns on investment for supply to domestic markets for vegetable items.
Conclusion

The changes needed in F&V production, value chains and consumption can only be achieved with
the commitment of all stakeholders; adequate funding; the formulation and implementation of
evidence-based policies, laws, regulations and programmes; and proper measuring, monitoring
and evaluation. Value chains that improve F&V supply and consumption can be promoted through
the following policy actions: Establishing a dedicated public institution or institutional mechanism
mandated to promote intersectoral and cross-value chain actions related to diverse and healthy
diets, sustainable production and value chains rich in F&Vs, as well as public-private partnerships;
Supporting better funding, capacity building, and upgrades of F&V value chain infrastructure;
Promoting shorter value chains that make F&Vs more affordable; Implementing more inclusive
public food procurement programmes; and Reducing food loss and waste to generate
environmental and human health benefits. Through these measures, F&V value chains can be
improved to increase F&V production, availability and affordability, thus leading to increased
consumption and reduced nutrient deficiencies in local diets.
Recommendations

A strategy document and an implementation plan were created as part of a workshop on the
processing and marketing of fruits and vegetables. A key flaw that was identified throughout the
strategy's development was the limited understanding of the project and its implementation
strategy specific fruit and vegetable product value chains' existing functionality.
 Chapter V

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