CHAPTER 4 DATA COLLECTION AND ANALYSIS

Transcription

1 CHAPTER 4 DATA COLLECTION AND ANALYSIS 4.1. OVERVIEW This chapter presents the data collected through literature review, secondary data archive analysis and primary data collected through the interviews. The tabular and graphical methods used for secondary data analysis and Tabular method used for the primary data analysis. In the analysis part, the secondary data and literature review analysed under the methods of tabular and graphical analysis method. The analyses of primary data were done under the farmer s perspectives and industrialist s perspectives. The industrialists divided in to main three categories under experience based. In depth data collected through interviews would be presented the issues, constraints, challenges, and prospects of the fruit and vegetable export industry in Sri Lanka. 4.2 SECONDARY DATA COLLECTION & ANALYSIS Figure 4.1: Export Markets

2 The EU is the leading destination as well as source of supply in the global fruit and vegetable trade. During , the EU countries accounted for nearly half of the world s imports and over 40 percent of the exports. The European agro-food industry itself is a leading global exporter, and it affords significant added value and offers scope for growth within new EU Member States, development of regional economies and exploitation of cultural diversity and tradition. Though the EU is importing almost one-third of its fresh fruit, the import from Asia is low: 0.5% of the fresh fruits, 3.3% of the fruit and vegetable juices (Huang, 2004) Sri Lankan s exports compared with world imports Figure 4.2: Sri Lanka Exports compared with Worlds Imports When we compare our total export of Vegetable, fruit and related food items with the world s imports of same items, it has reported only 0.3% out of world s imports it means Sri Lanka is not playing a significant role in the fruits and vegetable market. 52

3 4.2.2 Vegetable & Fruits Exports in Sri Lanka The fresh fruit and vegetable export is very low when we comparing other agricultural exports in Sri Lanka as figure 4.3 chart. But the growth of vegetable and fresh fruit is increasing year by year. The figures of 4.3 and 4.4 clearly indicate it Figure 4.3: Value of export for fruits and vegetables in Sri Lanka Source: Sri Lanka Customs Figure 4.4: volume of export for fruits and vegetables in Sri Lanka Source: Sri Lanka Customs 53

4 The table 4.1 and 4.2 shows that the export growth of vegetable and fruit in value and volume. Table 4.1: Annual growth rate of exports of Fruits and Vegetables - Value Year Vegetable (%) Fruit (%) Table 4.2: Annual growth rate of exports of Fruits and Vegetables - Volume Year Vegetable (%) Fruit (%) The Figure 4.3 clearly shows that the vegetable exports have been increasing trend from year 1999 to year But it has recorded that the vegetable export has decrease slightly in year According to the Table 4.1 & 4.2 the average annual 54

5 growth rate of vegetable maintain at 38.66% and 17.06% for value and volume. Also for the fruit, it maintain at the level of 17.88% and % for value and volume. Figure 4.5: Production and Export Statistics for selected fruits and vegetables 2009 Source: (Sri Lanka Department of Agriculture, 2010) Few big companies are dominating the processing industry in Sri Lanka. They have their own farms to obtain the fresh produce they need. They also involve themselves in the marketing chain, buying directly from the farmer, collector or at the point of wholesaler. Then the fresh produce is transported to the processing plant and at the end; the processed product is distributed to the retailers. Therefore, the fruits and vegetables industry should be encouraged. The supply- chain management is a main approach for the increasing the fresh fruits and vegetables export industry. 55

6 4.2.3 Export Performance of fruits and vegetables with compared to other Exports Table 4.3: Export Performance by major product sectors (US $ Mn) No Product Sector % Gro wth 2006 % Gro wth 2007 % Gro wth Tea Rubber Coconut spices Essential oils % Gro wth Fresh fruits Vegetables Cashew nuts Cut flowers & foliage others PRIMARY DATA ANALYSIS This section will provide a qualitative analysis of the perception of senior management level of the different departments in Sri Lanka related to the issues associated to the export industry of fresh fruits and vegetable. 56

7 Table 4.4: Summarizes the views of different experience level executives on issues and their recommendations on the required actions ISSUES/PROBLEMS Less than 5 years experiences- Senior management 1.Less effective National Plan for Fruits and Vegetables production Food security Export Crop specific 2.Farmers lack of technological know-how Poor transfer of technology for fruits and vegetables production Weak linkage between Research and Extension Less focus on horticulture by extension Less emphasis on Research and Development in horticulture Lack of entrepreneurship skills among farmers High incidence of pests and diseases Non-uniform fruit maturity 3.Inconsistent supply and high cost of inputs High cost of inputs Lack of quality seeds and planting materials High dependence on inorganic fertilizers and chemicals 4.Improper water/irrigation management Dependence on rains Lack of resources for adopting modern technology Low water use efficiency 5. Limited/inadequate credit and crop insurance facilities 57

8 Year 5-10 experiences- Senior management 1. Improper post-harvest handling technologies resulting in high losses Inappropriate harvesting practices Inappropriate time of harvesting Lack of proper handling Inadequate storage/cold storage facilities at the farm level Improper use of chemicals 2.Lack of infrastructure facilities Storage cold storage Transportation cold chain, vans/containers 3. Packaging/Handling Labelling (TBT) Bar coding c. Packaging materials (plastic crates, ventilated CFB) d. High cost of packaging Processing Low processing recovery Limited modern processing industry More than 10 years experiences- Senior management 1. Inadequate/lack of access to international market for fruits and vegetables 2. Lack of improved marketing facilities 3. Lack of market information (supply, demand, price) Low producers share in price spread 4. Complex marketing system Lengthy marketing channel Source: Compiled by author according to the primary data collected According the table 4.3, all groups have mentined about the issues of pre harvest technologies, post harvest technologies and marketing strategies. As a conclusion all the groups have given their top priority to the quality assurance and also marketing. 58

9 However, all the factors mentioned other than the preharvesting technologoes, post harvest technologies and marketing can be considered as internal matters of the business which directly imfluencing the export industry of fruits and vegetable industry. However, those factors are important for the business to make better internal working environment, which can be effctively used for quality assurance, innovation and better product marketing Farmers Perception According to the figure 4.6, the identity of farmer s mind, if they describe a fresh fruits and vegetable exports industry of Sri Lanka recorded as Pre harvest technologies under, if they describe marketing it recorded as marketing, if they describe post harvest technologies, it recorded as post harvest and if they talk about any of the quality (taste, packaging, etc.) recorded as quality. Figure 4.6: Farmers Perception regarding the issues of fresh fruits and Vegetable export Industry Source: Compiled by the author by using the primary data collection The figure 4.6 pie chart has summarized the farmers perception on issues and constraints of the fresh fruits and vegetable industry in Sri Lanka. According to 59

10 that they have stated the issues related to the all factors as mentioned and the majority of them have mentioned the issues related to the post-harvest losses. Such as losses of harvesting, packaging, transporting and, etc. Other two main issues also have mentioned by the farmers with little different weightings. According to the primary data collected in the research find out that the main problem is in with supply chain of fruits and vegetable industry. The fruit and vegetables supply chain is very fragmented. The sector is composed of a large number of small growers who, as individual suppliers, cannot influence the market price. Growers are mainly price takers and margins are predominantly determined by middlemen and collectors linkages between growers, processors, and exporters are weak. Figure 4.7: Supply chain of Fruits and vegetable exports-unnecessary layers Contract farming still accounts for only a small fragment of the production of fruits and vegetables. This is the result of a lack of commercial discipline; contracts are not honoured by either the farmers or the off takers and corporate buyers. When 60

11 there is no alternative market for the produce, contract farming appears to work well, as in the case of gherkins. By and large, the fruits and vegetables sector lacks tailor-made financial products and medium. and long-term credits. Some initiatives have started to introduce contract farming combined with so-called forward sales as advance funding, but such initiatives have been targeted to a few farmers in pilot situations. Contract financing should be further explored. Under contract farming, the farmer (or farmer group) is obliged to grow a certain volume and quality for a specified off taker (trade house or supermarket chain). Once the relationship between the farmer and off taker has proven to be sustainable, contract financing can be introduced where financial institutions tend to farmers using the off taker contract as collateral. 4.4 NEW MODELS AND FINANCING INSTRUMENTS FOR AGRICULTURAL SUPPLY CHAINS Financing structure along the supply chain could help expand credit availability for agriculture, especially to small landholders. Supply-chain finance, however, has not been used it s fullest in Sri Lanka because chains are mostly long and fragmented. With the exception of tea. This section discusses possible interventions and mechanisms for strengthening agricultural supply chains and developing new financing instruments linked to the chains. Some of these mechanisms (such as warehouse receipts and agricultural service centres) were piloted in the past with weak outcomes because of excessive reliance on the state and insufficient involvement of key market players. New efforts to develop financing structures along the supply chain should carefully consider preconditions for success. These recommendations also explore risk mitigation instruments, in particular weather insurance, which could enhance farmers creditworthiness and encourage them to invest more in their farms. 61

12 4.4.1 Value Added Centers Value added centers can be a farmer owned and controlled business units that can help integrate primary producers in the market. For example, value added centers can act as collection points for fresh produce delivered directly from farmer, and undertake preliminary post-harvest processing They can be organized to serve a cluster of villages and linked to terminal markets or integrated with vertical supply chains at the retail end. These functions should enhance the value of farmers products and stem from the high degree of post-harvest wastage (estimated at percent for the fruits and vegetables sector). In addition, value added centers can facilitate inputs, such as seeds, agrochemicals, and fertilizers, and provide other extension support services, including advice on farming technique subsequent investments can be made at the value- added center to initiate branding of products. Value added centers can facilitate short and medium term financing for irrigation, development, or farm machinery. Lending can be done directly by the center or financial institutions. The centers dose knowledge of the farmer reduces its credit risks, while its scale allows it to gain better access to financing compared to individual small holders. Financial institutions are also likely to regard farmers associated with the value-added center as more creditworthy because the center enhances the value of the farmer s products Warehouse Receipt Financing Warehouse receipt finance is a secured lending mechanism widely used in developed and emerging economies, and its application for agricultural finance in Sri Lanka should be seriously considered. Warehouse receipt financing also can be used as a price-risk management instrument by farmers; low-cost finance allows farmers to hold a commodity alter the harvest and sell it when market prices peak. In the mid 1990s, the Sri Lankan government tried to adopt a warehouse receipt system for paddy farming but with poor results. An experimental system was implemented in a major paddy growing area in the dry zone. The government, with close involvement of a commercial bank, arranged to store farmers surplus paddy product in a centrally located storage facility a receipt was issued by the storage facility that 62

13 the farmer could use as collateral to obtain a short-term loan from the bank. The government was trying to solve the chronic problem of low post-harvest prices and also increase farmers access to finance independent of their creditworthiness. However, the system (ailed for many reasons, including cumbersome implementation procedures, excessive state intervention, and the insufficient credibility of participating commercial banks. In Sri Lanka, participants in a number of sufficiently developed and liquid markets of non-perishable commodities could benefit from a warehouse receipt lending. It could be started with one commodity and gradually expanded to others based on results. The new system would need to be carefully designed to avoid past mistakes, rely on market mechanisms, and allow the government to focus on creating enabling conditions Regulatory framework A warehouse receipt lending system can only work if supported by a robust regulatory framework that clearly defines the rights of various parties and permits easy transfer of the receipt Efficient Warehouses Development of a reliable and efficient warehousing commodity system is critical from the lender s perspective because improper storage or inaccuracies in the warehoused quantity/quality would reduce the security cover. Efficient warehouses are usually privately operated since they can avoid the operational restrictions that apply to publicly managed services. Previous Sri Lankan experiences with publicly owned arid managed commodity warehouses were not successful. An efficient licensing procedure that guarantees minimum standards for the warehouses also needs to be in place. This procedure could be managed by the government or subcontracted to the private sector. The government of India, for example, has been examining the possible establishment of a warehouse receipt system, including the creation of a central warehouse registry and a central regulatory authority. 63

14 Warehouse receipt financing has been successfully used in many countries, including the United States, Japan. Brazil. Poland. and more recently Vietnam. The U.S cotton industry began using electronic warehouse receipts in After it secured a small amendment to the United States Warehousing Act ensuring that states treat electronic warehouse receipts the same as paper receipts. (CBI, 2009) Since enactment of the cotton amendment, over 90 percent of the cotton crop stored has been represented by electronic receipts. The availability of electronic receipts has sped up transactions of all types. Banks also finance commodities using the receipts as security Brazil operates a system of financing based on warehouse receipts Thu system is largely restricted to goods stored in bank-owned warehouses. In Sri Lanka, traditional public interventions in agricultural finance have led to poor results, discouraging further involvement of private financial institutions. Supply chains offer new avenues for making financing available to small producers. Unfortunately, most agricultural supply chains, including chains of the spices and fruits and vegetables sectors, are fragmented. By and large, small producers are disconnected from markets, which weaken their credit risk profile and access to finance. The tea sector is notable exception to this pattern. There is great scope for strengthening supply chains and developing new financing structures linked to the chains. These interventions mainly rely on market-based mechanisms. However, the government can still play a pivotal role by bringing together various stakeholders within the chain and possibly promoting a number of public-private partnerships. 64

15 4.5 ACTIONS SHOULD BE ADOPTED BY THE AGENCIES The Table 4.5 below has listed the fresh fruits, and vegetable export business adopted actions and measures under the different main factors as identified. Table 4.5 Actions should be adopted by fresh fruits and Vegetable Export business under the different main factors. STRATEGIES/ACTIONS Post Harvest Technologies Develop an effective National Plan for fruits and vegetables Crop/orchard zoning Crop diversification for export Demand-driven production Promote consumption of fruits and vegetables Food security through promotion of fruits and vegetables AGENCY/ORGANIZATION sector Private/government/ Farmer Quality improvement of seeds and planting materials Strengthening Research and Development Strengthening Research and Extension linkage Encourage public-private sector partnership Adoption of Good Agricultural Practices (GAP) according to local condition through development of GAP manual for individual crop based on best practices existing within a particular country Provision of demand-driven training and research Promotion of IPM Develop and disseminate technology for uniform/early season/off-season maturity Enhance access to quality inputs at affordable prices Promote use of appropriate cost effective farm machinery Promotion of Bio-fertilizer/Organic farming/ipm/ipnm Promotion of farmers groups/associations/ cooperatives / private /farmer Farmer/government farmer /Farmer/private /Farmer/private /Farmer/private 65

16 Effective water management through adoption of appropriate technology Construction, improvement and expansion of irrigation systems Enhance credit accessibility through specific financial institutions Encourage crop insurance to minimize risks Provision of credit to farmers on soft terms Pre Harvest Technologies Establishment of national grades and standards for fruits and vegetables for particular markets Develop harvesting indices and manual for individual fruit and vegetable Develop mechanism to implement market specific fruits and vegetables standards Capacity building of farmers/local traders/ exporters through training and effective information system Promote public and private partnership in establishment of cold storage/chain facility Encourage use of standard cost effective packaging Introduce labeling as per international standard Promoting investment in packaging industry Conduct of Research and Development for fruits and vegetables processing Promotion of package of technologies for processing of fruits and vegetables for SMEs Establish export processing zones for food Encourage private sector participation Provision of credit for SMEs engaged in food processing Private and farmer 66

17 Marketing strategy Identification of potential markets Development of niche products Create product awareness among consumers Farmer/private -led Provide basic infrastructure facilities at existing markets Establish wholesale markets Promote hygiene and food safety measures in traditional markets Provide timely market information (supply, demand, price, potential markets) through local media/internet Develop market chain (farmers groups/cooperatives/clusters) Direct marketing/contract marketing Promote transparent trading and fair auction Farmer/private Farmer/private Source: Compiled by author according to the primary data collected 4.6 Summary By using literature review and secondary data analysis details, data or information about first and second objectives was obtained. Details about third objective were obtained by analyzing the primary data. Tabular method was used to analyze the primary and secondary data. EU imports 33% from Asia of their total fresh food import. Sri Lanka supply only 0.4% of total world fresh food import. It is apparent that positive growth can be seen in both fruit and vegetable export revenue when considering the statistics of year 1999 to This has shown the 67

18 revenue growth of Rs million in fruit and Rs million vegetable for the time period of 10 years. According to the third objective, it was establish a issues related to the small producers from the view of senior executives which has experience of below 5 years, 5 to 10 years and more than 5 years. It revealed that, the major issues were less effective national plans for fruits and vegetable production, Lack of knowledge of farmers, inadequate credit facilities for farmers, improper post harvest handling, and lack of access to international markets, Lack of market information and finally the poor supply chain management. According to the farmers perception the most significant issue for fresh food export was post harvest technology and poor financial stability. It was recording 43% while the lacking of pre harvest technology contributing 32% and poor marketing counted 25%. 68