Production volumes and exports of Philippine fruit and vegetables continue to rise

Easily the most profitable segment of the Philippines’ agriculture industry, fruit and vegetable farms continue to drive agricultural exports as well as supply produce for the domestic market. In 2013 the segment led all agricultural export commodities with 4.42bn kg of fruit and vegetables shipped worth a combined total of $1.97bn, according to Philippine Statistics Agency (PSA) data. This is the continuation of a longer-term trend that has seen fruit and vegetable exports expand from $571.74m in 1994 and $783.42m in 2004. The majority of these shipments are destined for the growing regional markets of China, the Middle East and, to a lesser extent, Russia to satisfy their demand for fresh produce (although recent trade restrictions on transactions with Russian companies have limited sales to this market beginning in 2014).

SMALL SCALE: While price inflation and moderate increases in yields have had some effect on this substantial jump in value, the volume of production has also risen over the past two decades, even though the majority of fruit and vegetable farmers operate on a limited scale. Although the size of farms varies depending on the crop and the location, in general most produce farming is done on small-scale subsistence farms of 2 ha or less. That being said, in some areas, particularly in Mindanao, companies have been able to consolidate larger tracts of land through leasing of large contiguous areas up to 500 ha from established local cooperatives and form joint ventures that employ leasers to work the land. With most small landowners thus limited in the amount of money they can invest in new technology and crop strains, any boost in production will have to come primarily from a greater number of trees, rather than increased yields from existing acreage.

The majority of fresh fruits and vegetables grown in the Philippines are consumed domestically, although a few cash crops are exported in large volumes. The most profitable of these cash crops are Cavendish bananas, 95% of which are exported, while varieties such as Lucatan and Saba are generally consumed locally.

Philippine farms produced a total of 8.65m tonnes of bananas valued at P117.15bn ($2.6bn) in 2013, down from a peak of 9.23m tonnes worth P108.13bn ($2.4bn) the previous year, according to PSA data. Concerted efforts over the past two decades to expand banana production have led to the commodity becoming the country’s most valuable crop as well as its most profitable agricultural export. Banana tree cultivation has more than doubled since 1990, increasing from 137.1m trees in 1990 to more than 280m trees in 2013. The majority of these are of the Cavendish variety, which accounts for more than 115.83m trees in 2013, along with lesser numbers of Saba (79.24m) and Lucatan (32.23m). As a result, Cavendish banana output has soared from 1.81m tonnes in 2002 to 4.23m tonnes in 2013. In spite of the growth in production, demand for Cavendish bananas among existing importers is substantially greater than what local farms can supply.

IN HIGH DEMAND: “We can only serve around 30% of the company’s banana requirement for the export market each year, so even if we were able to expand production by 10% every year, this would still be taken up by the export market,” Larry Lacson, the vice-president of AgriNurture, told OBG. “At the same time, banana prices have been at a high level from January to July 2014, so this is a lost opportunity for us.” With high demand, even small banana farmers are seeing substantial increases in profits. As a result, the commodity has become among the most decentralised in the county, with small-scale farmers negotiating increasingly favourable prices with mid-range traders dealing directly with farmers in what is a sellers’ market.

Pineapples are the second major export fruit with around 70% of output shipped out each year, while 25% of annual mango production is also exported. The pineapple market is particularly appealing for small farmers given the generally higher return on investment for the fruit as the trees require less maintenance, are less prone to disease, and more hardy when it comes dealing with natural disasters and inclement weather.

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The Report: The Philippines 2015

Agriculture chapter from The Report: The Philippines 2015

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