Spring, 2009 The Political Economy of Food Commodity Chain Project Philippine Dried Mango

General Information One of 4 major fruit crops grown in the Philippines national fruit of the country because of its many uses with demand for processed mango increasing Carabao mango is the most popular of the mango varieties Philippine mango industry continues to be one of the backbone industries of the countrys agriculture sector o Contributes 14.9 billion pounds per year to agriculture GVA o 3rd most important food in the country in terms of volume of production (after bananas and pineapple) th among major mango producing countries in the world in terms of production 7 value 3% to the 27.7 million metric tons of world production (Mexico is first) o Second largest mango exporter in the world with 8.03% of the worlds exports in 2003 2005: country produced 984,343 metric tons of mangoes with a growth rate of 1.7% from 2004 2006: $46.17 million in total Philippine mango exports with dried/pureed/juiced as 42% (vs. 58% fresh) 99% of mangoes are consumed locally or processed Imports of dried mangoes and guavas to the United States rose from $0.9 million (0.2 million kilos) in 1992 to $2.23 million (0.6 million kilos). Thailand, the Philippines and Mexico are the main suppliers.

Statistics: In 1998, total area planted to mangoes was estimated at 94,245 hectares that registered a minimal growth of 1.3% from previous year's total. However, the average increase in farm area devoted to mango during the period 1994-1998 was higher at 10.1%. The total production in 1998 was estimated to be 950,070 metric tons which posted a decline of 7.6% from its 1997 production volume of 1.03 million tons o The drop in production can be attributed to the lower yield of 10.1 metric tons per hectare compared to 11 metric tons in 1997 mango production was adversely affected by the El Nino phenomenon The biggest mango producing regions in 1998 were the Ilocos Region with 29% share, Cagayan Valley with 19% share, Southern Tagalog with 16% share, Western Visayas and Central Luzon with 9% and 8% respective shares. The highest growth in production was registered in Southern Tagalog region at 48% followed by Central Luzon at 22% during the period 1994-1998 There were three regions which experienced negative growths during the same period: Bicol, Central Visayas, and the Caraga (Agusan and Surigao provinces) regions Mango is a priority crop in the Philippines under the High Value Crop Law and therefore protected by the Department of Agriculture (DA) o This ensures the development of the mango industry Mango Industry Value Chain: Chain o Input suppliers o Growers o Sprayers o Traders/middlemen (contract buyers, sprayer-traders, wholesalers, retailers/supermarkets) o Exporters o Processors/exporters o End consumers From grower-sprayer, 59% goes to retail supermarkets, 28% to exporters, 9% to direct consumers, 4% to institutional buyers (restaurants, hotels, etc.) Philippine mango industry not dominated by any multinational corporation (unlike banana and pineapple industries, the other two big players in the Philippine export industry) o However, Dole Philippines and Lapanday Corp. have started venturing

into mango production o Dole contracting into a large mango farm where they provide assistance in terms of agricultural inputs and management practices Land Use Mango farming dominated by small growers with farms less than 3 hectares Seed subsidies occurring with the intention of increasing Philippine mango production and increasing its standing from #7 world producer of mango Mango seedlings are being subsidized at a price of P15 per seedling The Philippines Department of Agriculture is targeting 10,000 hectares of mango plantations to exist in South Cotabato in the next 3 years Using a plant now, pay later scheme for poor farmers in seedling distribution just to increase overall production now Aim here is to have a year-round supply to local and international markets In the region of Sarangani, around 8,000 hectares has been planted with mango The Malungon region has the largest plantation of 5,000 hectares of fruit-bearing trees Sarangani produces an annual average of 16,000 metric tons of mango Central Minanao region has almost 20,000 hectares of mango plantations Production Plantation o Mango trees blossom in the Philippines in the month of March o Manual pollination occurs while the flowers are blooming and attracting bees, flies and other pollinators Manual pollination is required to maximize the pollination process and ensure a higher yield of fruits to harvest at the end of the season Artificial pollination is difficult because mango trees are large, about 10-30 meters Requires intensive labor o After 1 week, green mangoes appear, at which point producers wrap each mango in a plastic bag to prevent scars, disease and pests Requires manual labor, especially because Philippine mangoes (unlike other varieties) are more delicate, have softer skin and are juicier They easily become bruised during handling and transportation o Trees start growing fruits from 6 years old and produce them until over 50

years old o Harvested by hand, either by climbing a tree or using a picking bag with a cutting edge o Hard to judge how ripe a mango is from appearance, but size is often used as a guide Storage o Harvest season is between June and October o Mangoes are stored in a controlled environment and are sorted depending on their ripeness Washing and Peeling o Mangoes are sorted manually based on color, size and deformities o Mangoes are washed and sent to the peeling section by conveyer o Mangoes are peeled at a rate of 1 mango per second by hand o Washed again before moving to a controlled temperature area for slicing o Skin and other unusable parts are used as fertilizer or food for domestic animals Slicing o Mangoes are sliced in three sections: prime side (part with thickest flesh) is used for producing dried mangoes o Side section is used for making candy o Stone is used for producing nectar and puree Drying o See section below Packing o Mangoes are transferred by conveyer belt to the automatic weighing and filling machines o Dried mangoes are weighed to meet the required packing weight o At the packing section, the packages of mango are closed o Then goes through labeling machine o Finally goes through metal detector machine and a machine that checks for impurities Packaging o The finished products are packed into cartons to be prepared for shipment around the globe

Drying Process At the dried mango production line, sliced mangoes are washed again to avoid oxidation

They then move to the mechanical dryer The amount of moisture content in the dryer can be adjusted in the mechanical dryer to meet the desired chewy and softness level of the dried mango At the end of the drying procedure, sugarcane is added to maintain the sweetness of mangoes and keep the dried mangoes from sticking together Processors mostly use first-grade mangoes that are not immature, without bumps, cracks and black spots for dried mango o For carabao variety, size required by processors is at least 180g (classified normally as super small)

Hot water sterilization treatment Types of Contracts in Mango Production Informal arrangements between growers and traders/middlemen are common because the majority of growers are backyard, small-scale growers o Relationships forged over the years builds trust among suppliers and buyers where no formal contract is necessary o However, big processors and exporters draw contracts with suppliers who can be either the growers themselves or wholesalers o Payments often made in cash Leasehold Contract Fixed per tree o No sharing of output involved between contractors and farmers o Farmer leased out trees for certain period of time in exchange for a fixed amount of money or rent (paid in cash at beginning of season)

o Usually lasts for average 1 year so contractor can recover expenses in case of losses during first fruiting season o Leaser then temporary owner of tree Output Sharing Scheme o 50 or 40% of Gross Sale or total harvest goes to farmer/tree owner while remainder goes to contractor o Contractor pays farmer after harvest period o No fixed duration of contract as long as farmers are willing to contract out their trees o Sprayer-traders provide spraying services and take charge of harvesting, packaging, transporting and selling o Contractors provide the hired labor Contract buying o Do not provide spraying services to tree owners but only buy the fruits o Offer prices to mango producers before harvest time o Offer price based on prevailing market price for different sizes of fruits o Also provide harvesting and packaging materials o Advance payment done before harvest period to ensure fruits would be sold to them

Labor Dried mango production (as oppose to fresh) has opened a labor market for women o Women are now being hired as workers in the production of processed mango (including drying and pureeing) o Before, women primarily worked to clean and prune the mango trees In some regions of the Philippines, there is not enough profit to pay the cost of labor, meaning some fruit just rots on the trees o This is more the case with smaller farms where village residents help farmers during harvest season / peak season o This led to the Strategic Development Cooperation Asia (SDCAsia) to organize farmers into a cooperative o Aid was then sourced through the SDCAsia to establish a common facility of a drier and a mango pulper o The members of this cooperative signed an agreement where the Producers Association will supply mango processors with 500 kilos of mango weekly o Current production capacity of the cooperative is 3 tons weekly, with

dried mango priced at P35 per 100 grams Health Code Phytosanitary requirements limit fresh mangos market potential in the US, as only Guimaras mangoes are allowed entry into the US market subject to a vapor heat treatment Only Guimaras Island has been identified as pest-free from seed weevil and mango fruit flies o The island has been certified by the USDA as an eligible supplier of fresh mangoes to US markets Pest infestation in mango orchards is a major problem and limits export o This affects young and mature fruit Climate change has decreased mango production as well The region of Central Mindano recently received a P1.5 million grant from the Chinese government for the construction of an extended hot water treatment facility for mango fruits because China wants to buy fruit from this region The Bureau of Product Standards (BPS) specifications for dried mangoes: o Specifies grading, sulfur dioxide residue, additives, moisture content, packaging and labeling requirements Technology Biotechnological advances in farming techniques have increased the potential for mango export, which has been a main push of producers o The goal here is to increase exports and supplies in the local markets Currently, the Philippines is just 7% of the global market Standards of the international market must be met, which technology will improve For example, the hot water treatment for fresh fruit is being widely applied to increase standards and decrease disease Many US-based agricultural companies have substantial business operations in the Philippines o This has implications for future trade negotiations o Monsanto and Pioneer Hi-Bred sell agricultural chemicals and seeds to the Philippines, the gross sales of which have been estimated at $30 million Preharvest technologies application of integrated nutrient, water and pest management strategies will cost P$27 million but will enhance fruit quality and quantity Controlled atmosphere technology

Market promotion to strengthen market information system Technology will help expand production areas to meet demand

Mango processing factory Export Dried mango has significant markets in Hong Kong, the US and Singapore Dried mango exports have an advantage over fresh mangoes in the US market because of the problem of short shelf-life and transportation challenges 1,497 tons of mango were exported to the US in 2003, with 1,280 tons dried at a value of $5.5 million (vs. fresh mango at $243,000) Export demand has increased to require year-round supplies to local and global markets Philippine market push for identification with the Sarangani Golden Mango to identify it with the specific providence as being superior to other dried mango producers o For marketing purposes, this identification implies theres a standard Annex B: Mango Export Requirements Traditional crops give farmers a gross income of P10-60 thousand per hectare per year with average farm 1.5-2.5 hectares of land planted with Mango trees Company Profile: Profood International Corporation Profood International Corporation is the largest Philippine-based dried mango producer Began as a small company in 1980 that only catered to the local market now is the leading Philippine producer of various dried fruits, fruit preserves, purees, concentrates and juices Products available all over the Philippines and exported to Asia, Europe, Canada and the US

Company centered on island of Cebu, a major mango producer and in a central location gives the company an advantage over other processed fruit exporters Due to its location, Profood has access to a continuous supply of fruit from all over the Philippines, which it processes Use more technology in production than other companies rely much less on manual labor and more on automatic processing for drying and packaging Equipment is shipped from two US companies: Cherry-Burrell USA and Scholle USA

Consumption Consumers dictate the price of mango o Brand awareness plays a major role in the market for processed mangoes International, year-round market Japan is the biggest consumer of Philippine dried mango, which is why many Philippine packages are in Japanese o Packaging is a big cost for companies, so they export products with Japanese wording to other countries in order to minimize cost Biggest setback for Philippine mango industry is the stringent restrictions imposed by Japan and US on the minimum residual levels of hazardous chemicals and the presence of the mango see weevil that has the ability to survive vapor heat treatment o Irradiation process that has recently been implemented in the Philippines is the best method of eliminating the threat posed by the Mango seed weevil and fruit fly o Irradiation lengthens shelf life or delays ripening of the treated fresh fruits and vegetables o Extended shelf life allows mangoes to be shipped or transported to the US or Japan o Irradiation process resulted in a net income of P26 million per year o Doubles export income of the Philippine Mango industry o This provides livelihood to processors, traders, manufacturers and growers of dried mango Dried mango has increased the industry because it can be exported with less concern for shelf life, shipping and seasonality o Serve international markets even during the off season Issues and Challenges Although grower sometimes has direct links with the consumer in the chain, there

are many layers of middlemen/traders that act as clutter No appreciation for good growing practices that enhance fruit yield, productivity and quality Growers have no market information, so are unaware of the size or quality requirements of exporters and processors because produce is mostly coursed through contract buyers, wholesalers and retailers o Also, standards are not very readily imposed o Country experiences high rainfall and temperature fluctuations that affect fertilization, pruning and irrigation o Also results in variety of growing conditions, which makes for too much variety in mango growing o There are only a few input suppliers for the chemicals especially potassium nitrate (used for off-season production) High transportation costs because the Philippines is an archipelago o Inter-island transport by air, land and sea can be very expensive particularly in areas far from key transport points o Mango is not considered a priority cargo Low recovery rate for dried mango: 10-12% 95% of countrys production in local consumption

Issues affecting linkage development in mango industry: High cost and low quality of sugar High cost of agricultural chemicals Low quality of seedlings High cost of packaging materials Smes cannot meet volume and quality requirements Pole-vaulting Inadequate access to credit Lack of market access Low quality of products Lack of market information (price, volume, buyers) High freight/shipping cost High cost of sugar/liquidation of sugar High labor costs due to mandated wages Succession issue in CARL Lack of incentives to invest in agriculture because ownership large land is prohibitive High raw material costs

 Unavailability of supply of raw materials Peace and order problem Difficulty in meeting standards required by export markets (aseptic, haccp,etc)

Supplementary Images http://www.philonline.com.ph/~webdev/da-amas/mango.html#PriceStatisticscs

Sources Benefit Diffusion and Linkage Development in the Philippine Tropical Fruits Sector (Larry Digal) Food Drying Science and Technology, Y.H. Hui Google books Philippine Department of Agriculture, www.da.gov.ph Republic of the Philippines: Department of Agriculture o http://www.da.gov.ph/wps/portal/! ut/p/kcxml/04_Sj9SPykssy0xPLMnMz0vM0Y_QjzKLN4g3NAoESYGYj vqRMJEgfW99X4_83FT9AP2C3IhyR0dFRQAXNdN/delta/base64xml/L0lDU0lKQ1RPN29na21BISEvb0VvUUFBSVFnakZ JQUFRaENFSVFqR0VBLzRKRmlDbzBlaDFpY29uUVZHaGQtc0lRIS8 3XzBfMUxTLzU5MjA!? WCM_PORTLET=PC_7_0_1LS_WCM&WCM_GLOBAL_CONTEXT= /wps/wcm/connect/Subj2_Agribiz/Philippine+Agribusiness/Commodity+ Profile%7CFact+Sheet%7CRoad+Map/Mango Fresh Plaza: Global Fresh Produce http://www.freshplaza.com/news_detail.asp? id=214 Mango Industry: http://www.rboiarmm.org/uploads/DOC_FILES/MangoIndustry.pdf Mango Government Statistics: http://www.philonline.com.ph/~webdev/daamas/mango.html#PriceStatisticscs Mango Export Potential: http://www.gov.ph/news/default.asp?i=11873 Profood International Corporation: http://www.profoodcorp.com/company.html Map of Philippines:

Main mango producing regions: Luzon, Manila, Cebu, Mindanao