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Producing commodities that meet market needs

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Title Producing commodities that meet market needs
 
Creator Technical Centre for Agricultural and Rural Cooperation
 
Description The markets for traditional export crops from ACP countries have become very competitive. New producers are offering additional quantities of most tropical products of higher quality and lower costs. In many sectors ACP agriculture-based exports are losing market share often despite an overall increase in total demand. As agriculture seems destined to remain the major source of income for almost all ACP countries more consideration must be given to the ever-changing requirements of world markets.



Successful agricultural businesses today are 'marketed' rather than 'production-driven'. Traditionally, many crops were grown for subsistence and on]y the surplus, such as it was, was offered for barter or sale. Quantity, quality and regularity of supply were not considered important since any gain from such sales was a bonus; the family's basic survival was ensured by the proportion of the crop that was retained and sales of surpluses provided extra consumer goods or savings. Since the family usually retained the best of the crop or the livestock for its own use, the



attitude to quality for saleable products was poorly developed. Even now, many growers of fruit and vegetables in Africa and the Caribbean find it hard to comprehend the standards of quality demanded for produce offered for sale when, at home, they eat and enjoy produce that is blemished, bruised or even attacked by insects.



The sale of crop surpluses has resulted in a 'production-driven' marketing attitude and it has extended into the large-scale production of many commodities grown specifically for sale. Sugar, cereals Such as rice, sorghum and maize, beverages such as cocoa, coffee and tea, oil crops including oil palm, coconut and groundnuts, and fibres such as cotton and sisal are still grown by most farmers on the basis that yield is of paramount importance and, that having harvested their crop, it will be sold, ultimately, in one market or another. Marketing boards, guaranteed prices and other government policies have, in the past, encouraged support for the attitude that the grower's responsibility for his produce ends at his farmgate and that the final responsibility for selling the crop rests with others.



More countries, and more farmers in most countries, are growing the major tropical export crops than two decades ago. Consumption of these products has increased in most instances. Industrialized countries, the major importers, have increased consumption of beverages, vegetable oils, spices and fresh fruit, vegetables and flowers. But in most cases increases in production have exceeded increases in consumption. World prices have fallen in a market that is in surplus, partly as a result of the severe 1991-92 recession and the loss of demand from the former states of the Soviet Union and other East European countries.



Surpluses and low prices have also affected tropical cane sugar because of increased production of beet sugar in temperate Europe and North America. Some temperate vegetable oils also have competed with and displaced tropical oils, while synthetic yarns (polyester and polypropylene) have competed with cotton, jute and sisal, and synthetic insecticides with pyrethrum. There has been some swing back to natural products but the seriousness of the situation is demonstrated by a fall of nearly 50% in world prices for most of these products between 1980 and 1990. In Africa the real price indices for cocoa and coffee have plunged by 60%, and 70% according to a recent study by the International Labour Organisation (ILO).



Market-led production



Market-led production is in complete contrast with production-driven marketing. Instead of producing in the blind hope of making sales it becomes necessary to determine what markets exist and to produce for those markets. It is necessary also to look for new market opportunities, to recognize opportunities when they occur, and even to help create new markets. There is a need to move from the passive marketing of crops produced in bulk and of variable specification to active marketing of products grown to specified requirements of variety, size, colour, flavour, moisture content, packaging and seasonality. There are several successful precedents which can be studied.



Until the 1960s western Europe was unfamiliar with the avocado fruit. A carefully planned and imaginative advertising campaign launched by Israel then introduced this new product to several countries where rising standards of living and increasing foreign travel were making the buying public more adventurous in its eating habits. The name of the product was changed from avocado pear or alligator pear to avocado. This helped resolve the confusion in many minds where the term 'pear' was associated with dessert fruit whereas the opportunity seen by the Israelis was for a product that could be eaten at the start of a meal or in salads as a savoury dish. Demonstrations, videos and free recipes consolidated consumer interest. The Carmel avocado was selected which provided a fruit of medium size which would fit into pre-pack trays for air-freighting and subsequent display.



At the end of World War II in 1945 the UK market was hungry for bananas. Both Fyffes and Geest recognized this and vigorously marketed their fruit from Belize and Jamaica and the Windward Islands respectively, to the benefit of many thousands of people in the Caribbean. Kenya Coffee was also marketed successfully at this time: when 'coffee bars' were coming into fashion in English towns in the 1950s and 60s, Kenco coffee was offered as something new and flavour some. The benefits for Kenya and its coffee farmers continue three decades later.



Jamaican 'Blue Mountain' coffee and 'Golden Grain' sugar from Mauritius are contrasting examples of successful market led production. For many years Jamaican coffee has been recognized as having exceptional flavour and quality and over 80% is now marketed to a highly appreciative Japanese market. The remainder is sold in the US and EEC where demand remains unsatisfied; one Italian buyer recently asked to treble his purchases but he remains disappointed. In contrast Mauritius, a country largely dependent on sugar exports at Independence, saw the opportunity of adding value to a commodity over and above the price paid under EEC-ACP preferential trade terms. By modifying the refining process, a less bleached white sugar was produced and this provided an alternative to European consumers looking for a 'more natural' product but who found the taste of brown sugar in beverages unacceptable. Mauritius also developed and marketed special sugars for the Scandinavian and Australian markets where imported cane sugar does not benefit from Lomé Convention terms of trade and where bulk 'commodity' sugar is traded at prevailing world prices. Again this allowed the exporting country to benefit from a product that is sold at a premium.



Opportunities at home



Markets in producing countries often remain under-exploited for their own products. In many Caribbean countries tourist hotels offer only imported canned fruit juices, imported conserves and even imported packeted sugar. Yet the same countries produce citrus and other fruit suitable for juicing and conserves, and grow sugar cane. In Ghana tomatoes are widely grown and available in large quantities in markets and yet tomato ketchup and canned tomatoes on sale are imported.



Increasing standards of living among nationals and growing numbers of overseas visitors (expatriate workers and tourists) should offer opportunities for increasing sales of high quality produce which can be sold. There are also opportunities for agroindustries to add value locally through juicing, preserving and other processing. This provides additional local employment and saves foreign exchange by substituting for imports.



In India, for example, ILO found that an investment of 10 million rupees ($35,000) created 500 new jobs in the tea industry, 35 in sugar refining and 38 in natural rubber based production. In contrast the same investment would produce only 16 new jobs in me chemical industry.



Exporting is attractive because of the lure of foreign exchange but the risks are higher and fresh produce requires air-freight capacity to be available. But it should be much easier and less costly to investigate and supply markets within a country than to develop and satisfy markets abroad. Then, once a local market has been developed, it can provide a secure base of experience and expertise from which to launch export initiatives.



The development of a home market, however, does often require a change in attitude among consumers, who have too often been brought up to believe that imported products are best (See Speaker's Corner - p. 7).



The improvement of quality is a prime requisite when producing crops and processed products for specific markets. And quality goes beyond appearance and taste, important as these two aspects are. Hygiene is of paramount importance and growers and processors must be aware of all aspects of hygiene in the growing, harvesting, transport, storage and processing of agricultural produce.



Improving quality and reliability



Vegetable crops are particularly vulnerable to bacterial and viral contamination where dirty water is used for irrigation or even worse, food processing. In many cities (Accra, Bamako, Lilongwe and Nairobi for example) there has been a rapid growth of urban agriculture (see Spore No. 33) and vegetable production forms a major part of the cropping cycle. Water for irrigation may come from shallow wells, rivers or urban drains and the latter are invariably polluted with pathogenic organisms. Only clean water is safe for irrigating fresh produce. Similarly, water used for ' washing and processing l crops must be from sources l free of any risk of contamination by human, animal or industrial water products.



Hygiene must also be maintained during drying and storage. Pepper and cocoa contaminated with rat excrete and cereals and spices infested with insects are certain to discourage buyers and earn a poor reputation and indifferent prices for suppliers. Imports of contaminated spices in the United States will be banned.



Supplies of cocoa from one source in the Pacific were found always to be contaminated with beetles and other insects which reduced the price offered for an otherwise high quality cocoa. It was found that dockside warehouses had not been fumigated for nearly two years and the problem, was solved at relatively small cost by reinstating a regular fumigation programme.



Regulations concerning fumigation are changing as certain products are considered no longer suitable by importers. It is very important that exporters keep up-to-date with requirements and do not use banned fumigants or forbidden insecticides.



Importers also require consistency of quality and regular supplies during specified periods that accord with seasonal availability. New varieties can help to extend periods of availability but care must be taken that these supplies do not clash with existing exports from another part of the world. If they do, the new source of supply must offer a competitive edge of price, appearance, flavour or packaging over existing supplier's produce.



Whether the market is a hotel or hotel chain in the country of origin or a supermarket overseas, it is essential that suppliers entering market-led production develop from the start a reputation for reliability. If buyers lose confidence, for whatever cause, they will turn to alternative sources. There is no denying that in almost every sphere of agricultural production it is a buyer's market and market-led production practices are based on the acceptance of this situation.



Fact or fiction?



How real are the opportunities for market led production? The short and possibly unpalatable answer is that this may be the only economic option for exporters of agricultural products in the future. The consoling fact is that there are numerous examples of success among a wide range of crops, some of which were described earlier.



There are other noteworthy examples from ACP countries, including Kenya's exports of Asian vegetables which dominate the UK market, and also fresh strawberries and green beans and fresh and processed pineapples; Zimbabwe's export of green beans and passion fruit; Burkina Faso's exports of mango to France; Madagascar and Mauritius as suppliers of litchees to the EEC; St Lucia, which dominates the market for breadfruit in the UK and Canada; Jamaica, which pioneered and retains the market in the UK and The Netherlands worth ECU 1.0 million for its special citrus fruits, the ugli fruit and ortanique; and Swaziland, which has developed a market for oranges and grapefruit in France, Germany and the UK. Specialist niche markets that have been developed successfully include processed ackee from Jamaica; spent cloves from Zanzibar, which are used in India to pin together betel leaves in chewing pan; ngali nuts (Canarium sp) from the Solomon Islands, which are being processed for their oil in collaboration with the Body Shop chain of cosmetic suppliers; Grenadian and Jamaican cocoa, which is in demand for blending with other cocoas; and Jamaican pimento and ginger. Jamaican ginger is of such high quality that it currently sells for US$4000 per ton whereas Nigerian ginger, which is produced in large quantity but without much concern for quality, is selling at little more than US$300 per ton. Ethiopia has established a useful market for paprika which can be used as a colouring agent; Dominica Coconut Products dominate soap production in the Eastern Caribbean; Côte d'lvoire produces bergamot oil, an essential ingredient for eau de cologne originally produced in Calabria, Italy; and Swaziland exports eucalyptus oil to Australia, the home of the eucalyptus!



The development of good markets requires careful analysis of the opportunities, the strength of competitors, the requirements of buyers and the feasibility of local producers meeting these specifications (see Spore No.40 'Conquering Europe's fruit and vegetable markets'). Transport in-country and to overseas markets can also be a major constraint. And sufficient finance must be available to investigate and develop markets.



To be successful, producers have to work closely with wholesalers and exporters and a mutual trust is important. Private enterprise has undoubtedly proved more adept at recognizing and even creating markets and adapting to market changes. Governments can assist by ensuring that transport infrastructure is improved and may be able to influence availability and pricing of airfreight charges demanded by national and foreign carriers. Governments can also help by encouraging realistic pricing rather than setting prices which fail to reflect supply and demand: cloves of similar quality are currently offered by Zanzibar and Madagascar at substantially different prices. And governments can provide fiscal incentives to encourage investment in agro-processing plants and get the right technologies at the correct scale.



Hurdles will still remain. In some instances the prospect for a market may be illusory, as in the case of Zimbabwe supplying fresh limes to the EEC in competition with Brazil and Central America. A Zimbabwean mission investigated the market and concluded that their producers would not be able to grow limes at a low enough price. When considering canning of pineapples, for example, it has to be accepted that the minimum economic volume is 10,000-20,000 tonnes per year. And with highly individual products, such as hot sauce produced in the Caribbean, it has to be realized that the global market will always remain limited and there is no virtue in trying to expand production.



Developing new markets is a long term venture. Local strengths and weaknesses and overseas opportunities and competition must be assessed diligently. Investment will be rewarded by careful planning and disciplined production and rigorous application of quality standards. This is a far cry from traditional marketing of commodity crops but it is probably the only profitable approach to marketing that will help to sustain the economies of countries dependent on their agriculture.
The markets for traditional export crops from ACP countries have become very competitive. New producers are offering additional quantities of most tropical products of higher quality and lower costs. In many sectors ACP agriculture-based exports are...
 
Date 1993
2014-10-08T13:41:29Z
2014-10-08T13:41:29Z
 
Type News Item
 
Identifier CTA. 1993. Producing commodities that meet market needs. Spore 43. CTA, Wageningen, The Netherlands.
1011-0054
https://hdl.handle.net/10568/45902
http://collections.infocollections.org/ukedu/en/d/Jcta43e/
 
Language en
 
Relation Spore
 
Rights Open Access
 
Publisher Technical Centre for Agricultural and Rural Cooperation
 
Source Spore