Increasing The Global Market Potential For Tropical Fruits - - PowerPoint PPT Presentation

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Increasing The Global Market Potential For Tropical Fruits - - PowerPoint PPT Presentation

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Increasing The Global Market Potential For Tropical Fruits Presented to the International Seminar on Economics & Marketing of Tropical and Subtropical Fruits July 16 th 2007, Kuala Lumpur, Malaysia By Bruce Milligan Malaysian Agrifood

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Increasing The Global Market Potential For Tropical Fruits

Presented to the International Seminar on Economics & Marketing of Tropical and Subtropical Fruits July 16th 2007, Kuala Lumpur, Malaysia By

Bruce Milligan

Malaysian Agrifood Corporation Plaza Sentral Block 2A, 25th Floor, Jalan Stesen Sentral 5, 50470, Kuala Lumpur, Malaysia e-mail : bruce@MAFC.com.my

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  • Established in 2006 by Khazanah Nasional Berhad
  • Specialized in managing the production and delivery
  • f safe and quality food from ‘farm to table’.
  • Rationalizing Food Supply through Crop Aggregation
  • Value Adding to the industry whilst increasing farmers

income and productivity A Food-Supply Chain Management Company A Food-Supply Chain Management Company Malaysian Agrifood Corporation Berhad

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SAFE & QUALITY PRODUCE TO ALL MARKETS

UPSTREAM

MAFC FARM OUTPUT CONTRACT FARMING

OPEN SOURCING FROM CERTIFIED FARMS

MIDSTREAM

VALUE ADDING FOOD SAFETY, TRACEABILITY COLD CHAIN INTEGRITY

CC CPPC DC DISTRIBUTION

HYPERMARKETS / SUPERMARKETS

FOOD SERVICE SECTOR

EXPORT

MAFCs Proposition

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Factors Influencing Global Market Potential for Tropical Fruits

  • Quantity and consistency of supply
  • Fruit Quality & Production Standards
  • Shelf Life & Post harvest Technologies
  • Logistic Limitations

All influenced by the economics

  • f the

business

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Consistency of Tropical Fruit Supply

  • Large retail chains want ;

– Year round (12 month) availability. – Bigger quantities at peak periods (xmas) – Stable (low) prices & Stable (high) quality

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Challenges in Tropical Fruit Supply

  • Producers & Exporters face ;

Interruptions in production. Inconsistent quality. Cargo Limitations.

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Some Basic Business Challenges for Producers & Exporters of Tropical Fruits

  • Limited access to “best” production

technologies

  • Relatively High Production & Handling Costs
  • Low or modest profit margins
  • High Business Risks
  • Slow cash turn-around
  • “ consignment” nature of the business
  • Difficulty to “stand still” in years of poor

production /sales

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Unexpected Things Happen

  • 1. No fruit / Oversupply
  • 2. No Cargo space
  • 3. Ship is delayed
  • 4. Exchange rate down.
  • 5. Customer cancelled.
  • 6. Boxes crushed.
  • 7. On -Holliday's
  • 8. Etc…..

About business risks..

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Information on Some Major Fruit Companies

Company Company type Production Started Location where Main Production Started Approx. annual turnover $ US Billion * Iconic crop Dole Food Co Inc private 1851 USA 6.1 Pineapple Chiquita Brands private 1885 Costa Rica 4.4 Banana Delmonte Fresh Produce private 1858 USA 3.2 Pineapple Fyffes Plc private 1880 Canary Islands 2.6 Banana Sunkist Growers Inc Cooperative 1893 USA 1.0 Citrus National Grape Coop Assoc Inc Cooperative 1933 USA 0.6 Grapes Zespri International Ltd Cooperative 1924 New Zealand 0.5 Kiwi Pacific Coast Producers Cooperative 1971 USA 0.3 Temperate Fruit & Tomatoes

* Source: Hoovers.com

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Players in the Tropical Fruit Business in SEA

  • Most are Small – Medium Size businesses

– Typically $US 1 to 5 Million / year sales turnovers. – Supply base often less than 100 ha.

  • Gross Profitability is typically only 10 to 15 % (or less)

– After fixed costs, net profit is typically 5 to 10 % (or less) – Risks are high + Losses are common, further reducing profits.

  • Most players survive on volume basis.

– Which can be affected by supply variations. – Does not leave enough to invest substantially in technology.

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Costly Areas For Tropical Fruit Production

  • Proper Soil Preparation and Drainage
  • Soil Conditioning
  • Irrigation
  • Fencing
  • Good Quality Planting Material
  • Pest and Disease Management
  • Proper Packing facilities
  • Road access to farms
  • Cold Rooms

Today most Tropical Fruit Farms Are Lacking in these areas mainly due to the economics

  • f the

business

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Lanchang Modern Farm

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Lanchang Modern Farm

MAFC farm

(40 ha) started 2007

3200 ha

First plantings 2005

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Area- Wide Pest Management Definition Definition

  • A long-term campaign
  • Against defined pest species
  • In a relatively large predefined area
  • To reduce population to a non-economic status

(adapted from Lindquist D.A, 2000 Pest management strategies : Area- wide and conventional. In “Area-wide control of fruit flies and other insect pests”. KH Tan ed.)

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IPPC Definitions for Pest Status

Area-Wide Pest & Disease Management

  • Pest Free Area (PFA)
  • Area of Reduced Pest Prevalence (ALPP)

“An area in which a specific pest does not occur, as demonstrated by scientific evidence and in which , where appropriate , this condition is being officially maintained.” “An area in which the occurrence of a specific pest is below an accepted threshold level ” .

Defined in ISPM 4 ,26 and also in other draft documents. Defined in ISPM 22 and also in other draft documents

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Area Wide Pest & Disease Management Opportunity at Lanchang

  • This is a large area (+ 3000 ha) dedicated to crops.
  • Most of the farms are large (40 ha+)
  • Mostly fruits and mainly for export.
  • There are relatively few pests or disease at the start.
  • The area is relatively remote, with only 3 small

villages with 5 km (Paya Layman, Kg. Tres, Kg. Jergoh)

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Pest & Disease Targets at Lanchang

  • Bacterial Dieback
  • Papaya Ring spot Virus
  • Fruit Flies
  • Scale Insects
  • Mites

Area-Wide Pest & Disease Management Area-Wide Pest & Disease Management

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AWPDM at Lanchang Modern Farm

2

2 = 1 km boarder (600 ha)

3

3 = 2 km boarder (1200 ha)

1

1 = MAFC farm (40 ha) X

  • Kg. Jergoh

X X = kg. Jergoh

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Other Countries with Area-Wide Fruit Fly Management Programs

Country Tactics Deployed USA SIT, BAT, MAT South Africa SIT China (ROC) MAT Thailand SIT Vietnam BAT Australia BAT, MAT, SIT

SIT = Sterile Insect Technique BAT = Protein Bait Applications MAT = Parapheromone lures

Area-Wide Pest & Disease Management

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Investments in Area Wide Pest Management by Other Countries

Year Country Location Area ( Ha) Pest Species Cost $ US Millions 1997 Argentina Mendoza & San Jan Provences 375,000 Ceratis capitata (Med Fly)

$ US 9 Million per year

1997 Brazil National Funding All Fruit Flies

$ US 13 Million per year

2005 USA National funding to APHIS Fruit Fly Exclusion and Detection (FFED) All Fruit Flies

$ US 57 Million per year

2006 USA California

( Mediterranean Fruit Fly Exclusion Program)

2155 sq. miles Ceratis capitata (Med Fly)

$ US 15 Million per year

2006 USA Hawaii (HAW Fly –PM program) 4 species of Fruit fly

$ US 1 Million per year Area-Wide Pest & Disease Management

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Effect of Production Area on the Total Cost

  • f Area-Wide Pest & Disease Management in Papaya

1 2 3 4 5 6 7 8 9 10 500 1,000 1,500 2,000 2,500 3,000

Production area (H a)

Cost ($ US M illions)

ANNUAL COST

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Effect of Production Area on the Relative Cost

  • f Area-Wide Pest & Disease Management in Papaya

100 200 300 400 500 600 700 800 900 1000 500 1,000 1,500 2,000 2,500 3,000 3,500

Production area (H a)

C

  • st ($ U

S

Cost / Ha / Month

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Effect of Production Area on the Relative cost

  • f Area-Wide Pest & Disease Management in Papaya

$0.00 $5.00 $10.00 $15.00 $20.00 500 1,000 1,500 2,000 2,500 3,000 3,500

Production area (H a)

$ U SA Cost / Ton

(calculated on a yield basis of 1.0 T/ha /mo)

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Advantages Advantages

Of Area-Wide Pest & Disease Management

  • Better Quality of Fruit

– leads to a better Price / Position

  • Higher Fruit Yields

– more as export–quality ( normal is only 40%)

  • Harvest at Latter Ripening Times is possible.

– Possible to do “tree ripened” fruit

  • Progressive & Sustainable farming approach

– In line with GAP including EuroGap

  • Access to Foreign Export markets

– In line with the IPPC guidelines

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Conclusions

  • The economics of Production and Export must be recognized as

an important factor limiting the market potential of Tropical Fruits.

  • New business models are needed in order to address the need

for funding improved-technologies which are needed to move the industry forward.

  • Production areas which encompass at 1000 ha or more open the
  • pportunity for cost effective Area-Wide Pest and Disease

Management Programs – These in-turn will lead to numerous benefits including an improved market potential.

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Thank you