The Comparative Study on Agricultural Marketing Systems between Taiwan and Thailand. Wan-Tran Huang and Aree Wiboonpongse
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1 International Symposium Agribusiness Management towards Strengthening Agricultural Development and Trade III : Agribusiness Research on Marketing and Trade The Comparative Study on Agricultural Marketing Systems between Taiwan and Thailand by Wan-Tran Huang and Aree Wiboonpongse Multiple Cropping Center, Chiang Mai University National Chung Hsing University The Ministry of Agriculture and Cooperatives 2001
2 The Comparative Study on Agricultural Marketing Systems between Taiwan and Thailand 269 The Comparative Study on Agricultural Marketing Systems between Taiwan and Thailand * Wan-Tran Huang 1 and Aree Wiboonpongse 2 Abstract This research is one of the academic collaborative projects between National Chung- Hsing University and Chiang Mai University. The purposes are to compare agricultural marketing systems of both ROC and Thailand and to suggest some policy implications drawn from the research results. The results show that some of the marketing systems are similar between ROC and Thailand, such as governmental interventions in agricultural marketing, multiple marketing channels, focusing on improving efficiency, major marketing functions played by marketers of the private sector, and most of production being offered to domestic demand. Also, there are many differences of the marketing systems between those countries, such as the wholesale market system, promotion strategies, international trade, processed farm foods, farmer s organizations, WTO shocks, and farm market structures. Some marketing policy implications are drawn from the research results. The policy implications of ROC experiences for improving agricultural marketing in Thailand include the wholesale market system for fruits and vegetables, marketing functions played by farmers organizations, marketing strategies, and food safety systems. However, Thai experiences give some implications for enhancing agricultural marketing in ROC, such as methods of exporting agricultural products, the scopes of processed foods, adaptive experiences joining WTO, and the relation of selling farm products to tourists. Keywords: agricultural marketing system, rice, fruits, vegetables, marketing policy, marketing channel, price policy. 1 Professor, Department of Agricultural Marketing, National Chung-Hsing University, Taiwan 2 Associate Professor, Department of Agricultural Economics, Faculty of Agriculture, Chiang Mai University, Thailand
3 270 Agribusiness Management towards Strengthening Agricultural Development and Trade The agricultural sectors have had many important contributions to their economic growth with respect to both ROC and Thailand for a long time period. In ROC, the ratio of values of agricultural products to GDP was 8% in 1980 and 3% in 1997; in Thailand, 23% and 11%, respectively. In terms of employment populations, the ratio of agricultural employment to total employment is 8.8% in ROC and 50.3% in Thailand. There are some agricultural relationships between ROC and Thailand in terms of international trade. The values imported by ROC from Thailand were US$163 million in 1989 and US$388 million in The values exported by ROC to Thailand were unstable at the same time period; i.e., US$83 million in 1989, US$123 million in 1995, and US$96 million in Rice is the basic staple for both ROC and Thailand. Also, these two countries produce many kinds of fruits and vegetables, especially tropical fruits produced by Thailand. Hence, this paper will focus on the research of the marketing system of these three kinds of crops. The definition of agricultural marketing system is shown by the following diagram. Suppliers Producers Middle Agents Wholesalers, retailer, transportations, storage, processing, and information Consumers (Markets) Government Policy The purposes of this paper are to compare agricultural marketing systems of ROC (Taiwan) and Thailand and to suggest some policy implications drawn from the research results. The methodology used by this paper is to review the relevant studies and then synthesize the findings found by these studies. Hence, the following sections will show the comparative results of the involved crops marketing systems between ROC and Thailand, and then to present the policy implication for Thailand from ROC experiences and for ROC from Thai experiences. The paper ends with conclusions.
4 The Comparative Study on Agricultural Marketing Systems between Taiwan and Thailand The Comparative Results of Rice Marketing Systems Table 1 indicated some differences of the rice marketing system between ROC and Thailand in terms of rice marketing policy and rice marketing. These two countries have similar rice marketing policy, which is the governmental intervention in rice marketing activities. As for rice marketing, Thailand has 35% of total rice production, exporting to other countries in the world; ROC does not export rice to other countries (in addition to political purposes). Per capita consumption of rice in Thailand is three times over that in ROC i.e., kg and kg, respectively. Table 1 The Comparison of Rice Marketing Systems Between ROC and Thailand I.Rice Marketing Policy 1. Governmental Intervention 1) High degree of intervention for a long time, which focused on domestic markets. 2) Intervention contents include: price level, food zone, rice quality, purchasing and disposal, and marketing played by public sector. 2. Price Policy 1) Low food price policy before 1974 and high food price policy after 1974 due to set up of food buffer fund scheme. 2) Guaranteed purchasing of rice by government after Policy Goals 1) Focusing on increasing rice production coinciding with domestic demand before ) Balancing supply with demand due to consider to join WTO after Marketing Strategy 1) Public and private sectors get together for promotion of farm produces. 2) To implement 4Ps simultaneously. 1) High degree of intervention for a long time but focused on both domestic and foreign markets. 2) Intervention contents include: price level, rice credit, rice quality, and marketing played by public sector. 1) To forbid rice export before 1986, and to release export after ) To adopt price support program and target price policy before Increasing rice production coinciding with increasing domestic demand is the main policy. Marketing Strategy is neglected by Thai government but they emphasize on improvement of rice seeds and varieties.
5 272 Agribusiness Management towards Strengthening Agricultural Development and Trade Table 1 (Continued) II.Rice Marketing 1. Rice Trade 1) It had few export in addition to political purposes. 2) It does not export and import rice recently. 2. Domestic Demand 1) Per capita consumption 56.74kg in 1998,but decreasing. 2) All production offered to domestic demand but most are for fresh uses. 3) Rice is an inferior goods since Marketing Channels 1) Complicated and multiple stages 2) Marketing on public rice is played by former Food Bureau. 3) Marketing on private rice is played by millers and rice marketers. 4. Marketing Costs 1) Farmer s share is 41%. 2) Marketing cost is 0.55 US $/kg. 3) Millers share with high profits. 5. Fluctuation on Rice Price The price of farm gate is highest between March and May; The lowest is between June and September. 6. Marketing Mix 1) Product strategy: different package sizes, high quality rice, organic rice, and CAS quality brand. 2) Place strategy: the ratio of private rice is ¾, which is handled by millers. 3) Price strategy: The nature of rice market structure is oligopoly in addition to government 1) The ratio of quantities exported to total rice production is about 35%. 2) Half of quantities exported are distributed to Asia countries. 1) Per capita consumption is 160.8kg but it fluctuates in recent years. 2) The ratio of quantities demanded to total rice production is 65%. Half of quantities demanded is for fresh use and other half for rice processing. 3) Rice has been an inferior goods since ) Complicated and multiple stages. 2) There are many kinds of marketing channels in terms of rice types and varieties. 3) There are many kinds of rice marketers with respect to locations. 4) Farmers organizations have little marketing functions. 1) Farmer s share is 68%. 2) Marketing cost is 0.16 US $/kg. 3) Exporters and millers share with high profits. The price of farm gate is highest between August and October; The lowest is between April and May. 1) Product strategy: Focusing on rice variety and rice quality, different package sizes, and multiple uses of rice. 2) Place strategy: different marketing channels, millers and local shippers are important in domestic areas and commission agents and exporters are important in foreign markets.
6 The Comparative Study on Agricultural Marketing Systems between Taiwan and Thailand 273 Table 1 (Continued) III. Marketing Problems and Solutions Purchasing. 4) Promotion strategy: Public and private sectors get together for promoting farm products. 1) WTO shocks will happen to Taiwan rice market. 2) To adjust the functions of buffer fund scheme and guaranteed price. 3) Rice quality is used as the criterion on the market segmentation. 3) Price strategy: Price is determined by free market. 4) Promotion strategy: It is not emphasized by Thai government and private sectors. 1) Improving the marketing service quality. 2) Improving the rice storage, package, and dry methods. 3) Enhancing the marketing efficiency of middlemen. The Comparative Results of Fruits Marketing System Table 2 indicated some differences of fruits marketing system between ROC and Thailand in terms of fruit marketing policy and fruits marketing. Like the rice sector, there are many government interventions in fruits marketing activities from these two countries. ROC has a better wholesale market system than that of Thailand so as to have good functions of pricing discovery mechanism in ROC. Thailand has a net export of fruits being processed for a long time in contrast with net import of fruits in ROC after Table 2 The Comparison of Fruits Marketing System Between ROC and Thailand I. Fruits Marketing Policy 1. Governmental Intervention 1) High degree of intervention for a long time, which focused on both domestic and foreign markets. Recently, most of fruits are imported from USA and Thailand so to intervene quality brand in domestic markets. 2) Intervention contents include: export activities, wholesale market, information, fruits brand, teams of production and marketing. 1) Government put fruits marketing into important policy in recent two decades, especially to foreign markets. 2) Intervention contents include: increasing production, improving marketing efficiency, improving fruits quality, and reduced subsidy.
7 274 Agribusiness Management towards Strengthening Agricultural Development and Trade Table 2 (Continued) 2. Price Policy 1) To found pricing discovery system. 2) This system consists of the pricing methods of negotiation, auction, and vote. 3. Policy Goals 1) Exporting fruits was emphasized by public sector before II. Fruits Marketing 2) Recently, government focuses on domestic demand and on building fruits quality brand to segment domestic markets from foreign markets. 1. Fruits Trade 1) Net export before ) Net import after 1988; Net import increases year by year. 3) All of tropical fruits are from Thailand. 2. Domestic Demand 1) Per capita consumption is kg in 1998, and is increasing but unstably 2) 95% of total production flow into domestic markets. 3. Marketing Channels 1) There are three types of marketing channels but shippers channel is the major one. 2) Farmer s organizations including farmers associations and fruits cooperatives also have major roles on marketing functions. 3) Wholesale markets offer the functions of assembly and distribution in the marketing process. 4. Marketing Efficiency 1) There exist the asymmetric price transmission and asymmetric price bargain power within domestic markets. 2) The retailers often adopt the mark-up approach to set up retail price. 1) Price level is determined by free market. 2) Negotiation is the only way of pricing discovery. 1) Increasing production is to supply the demand for domestic and foreign markets. 2) Recently, government focuses on fruits quality and promotion activities. 1) Net export for a long time. 2) Processed fruits are the major item which is 80% of total fruits export. 3) Fresh fruits are the major item of importing fruits, ex. Apples. 1) 70% of total production flow into domestic markets. 1) The structures of domestic markets are divided into three levels, i.e., local central markets, Bangkok markets, and other Provinces markets. 2) The major marketers of local central market are local assemblers and local shippers. The major marketers of Bangkok markets are wholesalers and retailers. 1) The operations of farm gate markets and wholesale markets are similar to the functions of pure competition market. 2) The retailers often adopt the mark-up approach to set up retail price.
8 The Comparative Study on Agricultural Marketing Systems between Taiwan and Thailand 275 Table 2 (Continued) III. Marketing Problems and Solutions 1) How to enhance the operations of wholesale markets is the first important problem. 1) The marketing problems are how to improve fruits quality, package, and do promotion. 2) How to respond to the trends faced by wholesale marketers, such as joining WTO, modern retailer types, and consumers preferences, is the second problem. 2) How to smoothly recover marketing activities after financial crisis. The Comparative Results of the Vegetables Marketing System Table 3 indicates some differences of the vegetables marketing system between ROC and Thailand in terms of vegetables marketing policy and vegetables marketing. In ROC, the government interventions in vegetables marketing activities were obviously the key factor of making progress in vegetables marketing. Also, there is a guaranteed program for the vegetables of the summer season because of weather conditions. By contrast point, the Thai government does not intervene directly in the market functions but indirectly in the marketing process, especially to improve operational efficiency. Net export is also an important feature for vegetables marketing in Thailand. Table 3 The Comparison of the Vegetables Marketing System Between ROC and Thailand I. Vegetables Marketing Policy 1. Governmental Intervention 1) High degree of intervention for a long time, which focused on domestic markets. 2) Intervention contents include; wholesale market system, transaction methods, purchasing by guaranteed price, booking planted allocation, food safety, and quality brand. 2. Price Policy 1) Purchasing by guaranteed price for summer vegetables. 2) Electric auction. 1) Royal Project steps into marketing activities. 2) Intervention contents include: marketing channels, package, cool chain operation, and distribution. Free market transaction.
9 276 Agribusiness Management towards Strengthening Agricultural Development and Trade Table 3 (Continued) 3. Policy Goals 1) Both domestic and foreign markets were the same weights during 1950s and 1960s, but active to promote the export of mushroom and asparagus at that time. 2) The key policy is to fill domestic demand recently so as to emphasize on food safety, vegetables quality, and on segmenting domestic markets from imported vegetables. 4. Promotion Mix 1) Organizing the teams of production and marketing in terms of Good Agricultural Practice (GAP). II. Vegetables Marketing 2) Public sector actively helps create product brand, direct marketing, and e-commerce for vegetables farmers. 1. Vegetables Trade 1) A lot of amounts of vegetables were exported to other countries during 1950s and 1960s. 2) Net import after Domestic Demand 1) Per capita consumption is 104kg in 1998 and is increasing year by year. 2) Most vegetables production is to fill domestic demand. 3. Marketing Channel 1) Wholesale markets play the key marketing functions. 2) Multiple marketing stages 3) The roles played by farmers organizations are increasing 4) The growth speed of direct marketing is quick. 4. Price Variations 1) There exists the highly different production environments between summer and winter seasons. 1) Upgrading vegetables quality. 2) Improving the marketing efficiencies for vegetables. 3) Diversification of exports items of processed vegetables. 1) There exists the contracted retailer chains for vegetables produced by Royal Projects. 2) Thai Airline International is a big buyer for high quality vegetables. 1) Net export for a long time. 2) Most of export items are the various processed vegetables. Most vegetables production is to fill domestic demand. 1) Both wholesale markets and traditional channels play the key marketing functions. 2) The importance of Royal Project stepping into marketing is increasing. 3) Multiple marketing stages. 1) There are no seasonal price differences. 2) The price level of organic vegetables is stable.
10 The Comparative Study on Agricultural Marketing Systems between Taiwan and Thailand 277 Table 3 (Continued) III. Marketing Problems and Solutions 2) The highest of price level for vegetables is between September and October each year. The lowest is between January and February. 1) WTO shocks sill happen to vegetables markets. 2) There are some problems of the operations of wholesale markets and of privatization. 3) To improve the operations and efficiencies of teams of production and marketing. 4) How to really carry out the food safety system, direct marketing approach, and e-commerce are the very important problems faced by public and private sectors. 1) To improve marketing efficiency, especially to wholesale markets and logistic distributions. 2) How to transplant the experimental results from Royal Projects to common vegetable farmers is a key factor inducing to make vegetables marketing progress. 3) To emphasize the analysis of marketing costs and consumer behaviors. 2. Marketing Policy Implications 2.1 Implications for Improving Agricultural Marketing in Thailand from ROC Experiences. 1) Employing the system of wholesale markets The ROC government set up the system of wholesale markets for fruits and vegetables in These markets play the functions of assembly, equilibrium, and distribution. Also, these markets carry out modern pricing methods; for example, electric auction makes the pricing discovery transparent. Thirdly, these markets disseminate quickly, marketing information to the users, including market farmers and governors. Hence, this wholesale system induces higher marketing efficiency (i.e., pricing efficiency and operational efficiency). There are many similar wholesale markets for fruits and vegetables in Thailand but they do not run as the case of ROC. There after, Thailand may copy the system of wholesale markets in ROC, especially to follow the Transaction ACT for Agricultural Market, operation of wholesale markets, methods of pricing discovery, and information dissemination.
11 278 Agribusiness Management towards Strengthening Agricultural Development and Trade 2) The Roles played by farmers organizations stepping in marketing Farmers organizations in ROC have actively engaged in agricultural marketing for a long time. Farmers Associations help their members market the pork, fruits, and vegetables to wholesale markets via the joint marketing manner. After 1990, the cooperatives of marketing or production take part in the marketing for fruits and vegetables. These organizations again promote GAP, quality, brand, via the teams of production and marketing. Thailand had these organizations named by cooperatives which also carry out marketing activities, but the roles played by these cooperatives are less than those of private marketers and the public sector. Hence, it is a better way for enhancing the vital energies of these cooperatives to improve marketing efficiency and to benefit farmers. If this is the case how do we apply the marketing behaviors of ROC? 3) Thailand needs to learn the marketing mix approaches used by ROC The ROC public and private sectors have joined together to utilize many methods of marketing mix for a long time. These mixes include the strategies of product, place, price, and promotion. The public sector focuses on quality brand, and the private sector emphasizes on the features the product lines. Both sectors utilize the means and instruments of promotion. In Thailand, the public sector strongly supports export agricultural products but does not often use the marketing mix with respect to domestic markets, or improving crops varieties. The experiences with good cooperation to do the marketing mix between private sector and public sector in ROC are good lessons for promoting agricultural products in Thailand. 4) Food safety system in Thailand The ROC government is devoted to founding the quality brand system, such as the Chinese Agricultural Standard (CAS) and GAP. Like the scenario of the marketing mix, both public and private sectors cooperate to implement these quality umbrellas for producers, manufacturers, and marketers. Although Thailand has net exports for many kinds of agricultural products, most of the agricultural products are offered up to domestic markets, especially the fresh farm products. Methods of food safety systems will benefit consumers concerning the food safety problem.
12 The Comparative Study on Agricultural Marketing Systems between Taiwan and Thailand Implications for Enhancing Agricultural Marketing in ROC Based on Thailand s Experiences 1) Advantages agricultural exports As mentioned before, Thailand has been a net export or of agricultural products, with competitive advantages resulting from low production costs and producing tropical crops. ROC (Taiwan) can also produce sub-tropical crops, and use the advantages of high level biotechnology, so as to produce high quality crops to overcome the disadvantages of high production costs. 2) Processing agricultural products Thailand has various kinds of processed agricultural products and these constitute the main body of agricultural exports. Currently, ROC (Taiwan) has the higher level of food processing technology. Thailand can follow this example. Combining process technology with a knowledge-based economy, is a good way to reopen the opportunity of exporting ROC s agricultural products. 3) The Experiences with adjusting WTO shocks from Thailand Thailand is one of the negotiated-members of WTO, and is experienced at negotiating WTO based problems. Also, 35% of total rice production flows into rice export. ROC will join WTO in the near future. There is a special problem with rice market access for COA s decisions. Hence, ROC should learn from Thailand s experiences of adjusting to WTO shocks. 4) Selling of agricultural products to tourists Thailand has good business in the tour service industry. This industry utilizes the advantages of Thailand s farm products. For example, The Royal Project designs their marketing to coincide with tourists' destination. Thai Airlines is a big buyer of strategy the Royal Products high quality crops. ROC (Taiwan) can learn from Thailand s experiences to make farm products equal tourists expectations. 3. Conclusions This paper gives some understandings of agricultural marketing systems with respect to rice, fruits, and vegetables between ROC and Thailand. Also, the last section reveals some
13 280 Agribusiness Management towards Strengthening Agricultural Development and Trade marketing policy implications drawn from the comparative results of this paper. These implications benefit the upgrading marketing activities undertaken by ROC and/or Thailand. In sum, the results show that some of the marketing systems are similar between ROC and Thailand, such as governmental interventions in agricultural marketing, multiple marketing channels, focusing on improving efficiency, major marketing functions played by marketers in the private sector, and most of the production being offered to domestic demand. Also, there are many differences of the marketing system between those countries, such as wholesale market systems, promotion strategies, international trade, processed farm foods, farmer s organizations, affects of WTO shocks, and farm market structures. References Arayarangsarid, S., 2000, The Comparison of Vegetable Marketing Systems of Urban Cities in Taiwan and Thailand. Chiang Mai University, Chiang Mai, Thailand. Huang, W. T., 2000, Rice Marketing System in Taiwan. National Chung-Hsing University, Taiwan, ROC. Jealviriyapan, P., 2000, Fruit Marketing System in Thailand. Chiang Mai University, Chiang Mai, Thailand. Lee, T. R., 2000, The Comparison of Vegetable Marketing Systems of Urban Cities in Taiwan and Thailand. National Chung-Hsing University, Taiwan, ROC. Liao, W. C. 1998, The Research of GAP Vegetables Marketing Policy. Department of Agriculture and Forestry, Taiwan Provincial Government. Wann J. W., 2000, Comparison of Fruits Marketing System Between Taiwan and Thailand. National Chung-Hsing University, Taiwan, ROC. Wiboonpongse, A. and Y. Chaovanapoonphol, 2000, Rice Marketing System in Thailand. Chiang Mai University, Chiang Mai, Thailand
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