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Vertical Coordination towards Horticultural Value Chain in Punjab Pakistan: Implications for Smallholders and Agribusiness

Muhammad Sharif

Social Sciences Research InstituteNational Agricultural Research Centre

Islamabad

July, 2012

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Table of Contents

Chapter - I: Introduction................................................................................................................................21.1 Background.......................................................................................................................................21.2 Objectives of the Study.....................................................................................................................41.3 Problem Statement............................................................................................................................51.4 Research Questions and Research Gaps...........................................................................................71.5 Justification of the Study..................................................................................................................81.6 Organization of the Study.................................................................................................................9Chapter - II: Theoretical Framework and Methodology.......................................................................112.1 Introduction.....................................................................................................................................112.2 New Paradigm of Agri-Business Development..............................................................................112.3 Agro-food Market and Smallholder Farmers..................................................................................142.4 Market Reforms and Smallholder Farmers.....................................................................................162.5 Agriculture Value Chain vs. Supply Chain....................................................................................172.6 Agricultural Value Chain Approach and Smallholder Farmers......................................................192.7 Review of Vertical Coordination towards High Value Agriculture...............................................212.8 Research Design and Implementation............................................................................................23

2.8.1 Survey design.....................................................................................................................232.8.2 Fieldwork...........................................................................................................................28

2.9 Analytical Techniques....................................................................................................................292.9.1 Transaction costs...............................................................................................................292.9.2 Profitability analysis..........................................................................................................312.9.3 The value chain analysis (VCA) model.............................................................................312.9.4 SWOT analysis..................................................................................................................32

2.10 Conclusion......................................................................................................................................33Chapter – III: Characteristics of Horticultural Value Chain Operators and Supporters.................363.1 Introduction.....................................................................................................................................363.2 Socio-Economic Profile of Primary Actors....................................................................................36

3.2.1 Socio-economic profile of sample growers and their farms..............................................363.2.2 Characteristics of sample contractors................................................................................383.2.3 Characteristics of sample commission agents...................................................................393.2.4 Characteristics of sample wholesalers...............................................................................403.2.5 Characteristics of sample retailers.....................................................................................413.2.6 Characteristics of sample consumers.................................................................................41

3.3 Activities / Functions and Description of Primary Actors..............................................................423.4 Activities / Functions and Description of Secondary Actors..........................................................463.5 Conclusion......................................................................................................................................47Chapter - IV: Market Analysis of Horticultural Sub-Sector.................................................................514.1 Introduction.....................................................................................................................................514.2 Global Market for Mango, Citrus and Tomato...............................................................................51

4.2.1 Global mango production..................................................................................................524.2.2 Global citrus production....................................................................................................534.2.3 Global tomato production..................................................................................................534.2.4 Global mango import.........................................................................................................534.2.5 Global citrus import...........................................................................................................544.2.6 Global tomato import.........................................................................................................554.2.7 Global mango export.........................................................................................................564.2.8 Global citrus export...........................................................................................................564.2.9 Global tomato export.........................................................................................................56

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4.3 Regional Market Analysis for Mango, Citrus and Tomato............................................................574.3.1 Mango in the region...........................................................................................................574.3.2 Citrus in the region............................................................................................................584.3.3 Tomato in the region..........................................................................................................58

4.4 Mango, Citrus and Tomato Production in Pakistan........................................................................594.4.1 Mango varieties.................................................................................................................594.4.2 Citrus varieties...................................................................................................................594.4.3 Tomato varieties................................................................................................................604.4.4 Mango production..............................................................................................................604.4.5 Citrus production...............................................................................................................614.4.6 Tomato production.............................................................................................................62

4.5 Marketing Channels/Supply Chain of Mango, Citrus and Tomato................................................634.5.1 Marketing channel of mango.............................................................................................634.5.2 Marketing channels of citrus.............................................................................................644.5.3 Marketing channel of tomato.............................................................................................66

4.6 Service Market for Horticulture Sub-Sector...................................................................................684.7 Conclusion......................................................................................................................................69Chapter - V: Value Chain Mapping of Horticultural Sub-Sector.........................................................725.1 Introduction.....................................................................................................................................725.2 Value Chain Mapping of Horticultural Sub-Sector through Flow Chart........................................72

5.2.1 Mapping of small holder mango growers through flow chart...........................................735.2.2 Mapping of large holder mango Growers..........................................................................745.2.3 Mapping of small holders citrus growers..........................................................................755.2.4 Mapping of large holders citrus growers...........................................................................765.2.5 Mapping of small farmer tomato value chain....................................................................765.2.6 Mapping of large farmer tomato value chain....................................................................77

5.3 An Inventory of Market Players for Horticultural Sub-Sector.......................................................785.3.1 Inventory of market players of mango and citrus..............................................................785.3.2 An inventory of market players for tomato.......................................................................82

5.4 Conclusions.....................................................................................................................................84Chapter – VI: Value Chain Research of Horticultural Sub-Sector......................................................876.1 Value Chain Research.....................................................................................................................876.2 Analysis of the Economic Viability of the Mango Growers..........................................................88

6.2.1 Calculating costs in mango value chains...........................................................................886.2.2 Profitability of mango growers..........................................................................................89

6.3 Economic Viability of Citrus Growers...........................................................................................916.3.1 Cost analysis small citrus growers.....................................................................................916.3.2 Profit analysis....................................................................................................................92

6.4 Economic Viability of Tomato Growers........................................................................................936.4.1 Cost analysis small tomato growers..................................................................................936.4.2 Profitability analysis..........................................................................................................94

6.5 Horticulture Sub-Sector Dynamics.................................................................................................956.5.1 Mango on small farms: A potential not well utilized in Pakistan......................................966.5.2 Citrus on small farms: A potential not well utilized in Pakistan.......................................976.5.3 Tomato on small farms: A potential not well utilized in Pakistan....................................986.5.4 Yield gaps and ranking of mango, citrus and tomato: A potential not well utilized in Pakistan...........................................................................................................................................996.5.5 Post-harvest losses of mango, citrus and tomato: A potential not achieved in Pakistan. 1006.5.6 Export prices of mango, citrus and tomato: A potential not achieved in Pakistan..........1006.5.7 Mango, citrus and tomato: Real investors or weakened growers....................................1016.5.8 Diverse origins for regular supply...................................................................................101

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6.5.9 Gender issues...................................................................................................................1026.5.10 Marketing: Dominated by spot transactions....................................................................102

6.6 Value Addition in Horticultural Value Chains: Understanding who Gains Most........................1026.6.1 Value addition for smallholder mango growers..............................................................1026.6.2 Value addition for large mango growers.........................................................................1056.6.3 Value addition for smallholder citrus growers................................................................1086.6.4 Value addition for large citrus growers...........................................................................1116.6.5 Value addition for small tomato growers........................................................................1146.6.6 Value addition for large tomato growers.........................................................................116

6.7 Price Structure and Cost Drivers for Horizontal, Vertical and Pre-harvest Contract System......1186.8 Systemic Constraints with Underlying Systemic Causes and Related Markets...........................1206.9 Effects of Vertical Coordination on Transaction Cost and Farm Profitability of Smallholders in

Horticultural Value Chain.............................................................................................................1226.10 Identification of Stronger Forms of Integration that could Sustainable Improve Wellbeing of

Smallholder Farmers in Horticultural Value Chains....................................................................1236.11 Implications for Smallholders, Agri-business, Public Policy and Investment Priority................1246.12 Conclusion....................................................................................................................................124Chapter – VII: Value Chain Analysis of Horticultural Sub-Sector....................................................1297.1 Introduction...................................................................................................................................1297.2 Constraints Analysis of Smallholder Dominated Horticulture Sub-Sector..................................1297.3 Identifying Incentives of Market Players and Agents of Change.................................................133

7.3.1 Bad working environment in horticulture value chains...................................................1347.3.2 Bad working conditions affect output and performance..................................................1347.3.3 Changing consumer awareness and demand...................................................................135

7.4 Formulating a Vision and Strategy for Sustainable Systemic Change.........................................1357.4.1 SWOT analysis of horticulture sub-sector.......................................................................1357.4.2 Constraints, opportunities, solutions and interventions of horticultural sub-Sector........137

7.5 Value Chain Promotion Strategy for Mango and Citrus...............................................................1397.6 Conclusions...................................................................................................................................143Chapter – VIII: Value Chain Development Schemes for Horticultural Sub-Sector.........................1468.1 Introduction...................................................................................................................................1468.2 Rationale for Pilot Mango, Citrus and Tomato Value Chains Schemes.......................................147

8.2.1 Rational for pilot mango value chain development scheme............................................1478.2.2 Rational for pilot citrus value chain development scheme..............................................1488.2.3 Rational for pilot tomato value chain development scheme............................................149

8.3 Geographical Targeting, Partnerships and Beneficiary Categories..............................................1508.3.1 Geographical targeting.....................................................................................................1508.3.2 Partnerships......................................................................................................................1518.3.3 Beneficiary categories.....................................................................................................152

8.4 Project Component Description....................................................................................................1538.5 Selection/Identification and Situation Value Chain Analysis of Sites and Potential Partners.....154

8.5.1 Selection of exact locations at different sites of proposed pilot schemes........................1548.5.2 Selection of target growers, other chain stakeholders in each site and potential project partners.1558.5.3 Situation value chain analysis/bench mark survey for each site......................................156

8.6 Establishment of RBHS for Input Provision as a First Segment for Chain Development...........1568.6.1 Input provision.................................................................................................................1568.6.2 Establishment of clean nursery........................................................................................1578.6.3 Establishment of model on farm pack house...................................................................1588.6.4 Financial services.............................................................................................................159

8.7 Capacity Building of Chain Stakeholders.....................................................................................159

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8.7.1 Capacity building of mango growers, women and children for addressing the need for productivity, quality of improvement of mango, reducing post harvest losses and value addition.............1598.7.2 Capacity building of citrus growers, women and children for addressing the need for productivity, quality of improvement of citrus, reducing post harvest losses and value addition.....................................1608.7.3 Capacity building of tomato growers, women and children for addressing the need for productivity, quality of improvement of tomato, reducing post harvest losses and value addition.............1618.7.4 Capacity building of other chain stakeholders for addressing the issue of post-harvest handing, logistic and marketing segments of value chains...........................................................1618.7.5 Specialized capacity building..........................................................................................162

8.8 Research for Chain Development.................................................................................................1668.9 Workshops / Seminars / Conference / Display.............................................................................1688.10 Costs..............................................................................................................................................1708.11 Investment and Financing Assumptions.......................................................................................1708.12 Institutional Framework for Programme/Project Implementation Organization and Management

......................................................................................................................................................1708.13 Monitoring and Evaluation...........................................................................................................172

8.13.1 Key performance indicators.............................................................................................1728.13.2 Outcome indicators for mango, citrus and tomato...........................................................1738.13.3 Output indicators for mango, citrus and tomato..............................................................173

8.14 Expected Benefits.........................................................................................................................1748.15 Issues and Risks and Follow-Up Activities..................................................................................1748.16 Conclusions...................................................................................................................................174Chapter - IX: Summary, Constraints and Strategies...........................................................................1759.1 Summary of Findings....................................................................................................................175

9.1.1 Objectives and methodology...........................................................................................1759.1.2 Profile of horticultural value chain operators..................................................................1769.1.3 Market analysis of horticulture sub-sector......................................................................1789.1.4 Value chain mapping of horticulture sub-sector..............................................................1799.1.5 Value chain research of horticulture sub-sector..............................................................1809.1.6 Value chain analysis of horticulture sub-sector...............................................................1839.1.7 Value chain development schemes of horticulture sub-sector........................................184

9.2 Horticultural Development Constraints........................................................................................1849.2.1 Input supply.....................................................................................................................1859.2.2 Smallness.........................................................................................................................1859.2.3 Management of organization...........................................................................................1859.2.4 Market access...................................................................................................................1869.2.5 Enabling environment......................................................................................................1869.2.6 Limited capacity building of horticultural chain stakeholders........................................1869.2.7 Policy...............................................................................................................................1879.2.8 Research and development constraints............................................................................187

9.3 Policy Implications of the Salient Findings/Constraints...............................................................1879.4 Opportunities Solutions and Proposed Interventions for Identified Constraints..........................1889.5 Horticultural Development Strategies..........................................................................................190

9.5.1 Reorientation of subsistence horticulture to sustainable commercial horticultural farming..........1919.5.2 Establishment of rural business hubs for input provision as a first segment for chain development..............191

9.5.3 Establishment of model on farm pack house...................................................................1929.5.4 Arrangement of contract farming....................................................................................1939.5.5 Re-orientation of research and development services.....................................................1939.5.6 Reform of agricultural education, research and extension..............................................1949.5.7 Improving efficiency, productivity and competitiveness................................................1949.5.8 Promotion of regional trade.............................................................................................194

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9.5.9 Encouraging public and private partnership and private sector investment....................1959.5.10 Capacity building of chain stakeholders of horticulture sub-sector................................1959.5.11 Policy and regulatory framework for the promotion of horticulture sector.....................1969.5.12 To improve quality..........................................................................................................1989.5.13 To upgrade vertical coordination.....................................................................................1989.5.14 To improve horizontal coordination................................................................................198

9.6 Suggestions for Further Research.................................................................................................1999.6.1 Investment appraisal analysis of fruit and vegetables products industries......................1999.6.2 How efficient and equitable fruit and vegetables value chains are with respect to competitiveness, inclusiveness, scalability and sustainability......................................................1999.6.3 Impact of WTO on fruit and vegetables export...............................................................200

10. References...........................................................................................................................................201

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List of Tables

Table 2.1: Supply chain versus value chain.............................................................................................17Table 2.2: Key attributes of two extreme types of co-ordination................................................................18Table 2.3: Sample distribution for horticultural value chain in Punjab province........................................27Table 3.1: Socio-economic profile of the sample growers..........................................................................37Table 3.2: Land holding, orchard area and source of irrigation of growers (acres)....................................38Table 3.3: Characteristics of sample contractors in the study area..............................................................39Table 3.4: Socio-economic characteristics of sample commission agents..................................................40Table 3.5: Socio-economic characteristics of sample wholesalers..............................................................41Table 3.6: Characteristics of the sample retailers........................................................................................41Table 3.7: Characteristics of the sample consumers....................................................................................42Table 3.8: Activity/functions and the description of input suppliers/nursery developers...........................43Table 3.9: Activity/functions and description of growers...........................................................................43Table 3.10: Activity/functions and description of contractors.....................................................................44Table 3.11: Activity/functions and the description of commission agents..................................................44Table 3.12: Activity/functions and description of wholesalers...................................................................45Table 3.13: Activity/functions and description of retailers.........................................................................45Table 3.14: Activities/functions and description of processors...................................................................45Table 3.15: Activities/functions and description of exporters.....................................................................46Table 3.16: Secondary actors, activities and description.............................................................................47Table 4.1: Major mango producing countries of the world in 2009............................................................52Table 4.2: Major citrus producing countries of the world.........................................................................53Table 4.3: Largest producers in the world (tonnes).....................................................................................53Table 4.4: Major mango producing countries in Asia.................................................................................57Table 4.5: Major citrus producing countries in Asia...................................................................................58Table 4.6: Largest Asian producers in world...............................................................................................58Table 4.7: Area, production and yield of mangoes in major producing districts of Punjab Pakistan 2008-09.........61Table 4.8: Citrus production in sample districts (2008-09).........................................................................62Table 4.9: Tomato production in sample districts (2008-09)......................................................................62Table 6.1: Cost analysis of small mango producers (Rs./Kg)......................................................................88Table 6.2: Cost analysis of large mango producers (Rs./Kg)......................................................................89Table 6.3: Small farmers profitability analysis............................................................................................90Table 6.4: Large farmers profitability analysis............................................................................................90Table 6.5: Transaction cost analysis of small farmers (Rs./Kg)..................................................................91Table 6.6: Transaction cost analysis of large framers..................................................................................92Table 6.7: Small farmers profitability analysis............................................................................................92Table 6.8: Large farmers profitability analysis............................................................................................93Table 6.9: Cost analysis of small tomato farmer.........................................................................................93Table 6.10: Cost analysis of large tomato farmer........................................................................................94Table 6.11: Small farmers profitability analysis..........................................................................................94Table 6.12: Large farmers profitability analysis..........................................................................................95Table 6.13: Small farmers profitability analysis based on potential output................................................96Table 6.14: Small farmers profitability analysis – potential output based on yield gap exist as compare to

the world highest yield (Cape Verde).............................................................................................97Table 6.15: Potential output based on large farmers' output........................................................................97Table 6.16: Small farmers profitability analysis – potential output based on yield gap exist as compare to

the world highest yield (Indonesia)................................................................................................98

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Table 6.17: Small farmer’s profitability analysis based on potential output...............................................99Table 6.18: Small farmer’s profitability analysis based on potential output...............................................99Table 6.19: Yield gap and ranking of mango, citrus and tomato...............................................................100Table 6.20: Post-harvest losses in mango, citrus and tomato....................................................................100Table 6.21: Comparison of export prices of mango, citrus and tomato.....................................................101Table 6.22: Small farmer mango value chain summary............................................................................105Table 6.23: Large farmer mango value chain summary............................................................................108Table 6.24: Small farmer citrus value chain summary..............................................................................111Table 6.25: Large farmer citrus value chain summary..............................................................................113Table 6.26: Small farmer tomato value chain analysis summary..............................................................115Table 6.27: Large farmer tomato value chain analysis summary..............................................................117Table 6.28: Constraints and their underlying systemic causes of mango value chain...............................121Table 6.29: Constraints and their underlying systemic causes of citrus value chain.................................121Table 6.30: Constraints and their underlying systemic causes of tomato value chain..............................122Table 6.31: Profitability of horticultural sub-sector..................................................................................123Table 7.1: Constraints analysis of smallholder dominated horticulture sub-sector...................................130Table 7.2: Constraints, opportunities, solutions and interventions of the horticultural sub-sector...........137

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List of Figures

Figure 2.1: Map showing mango, citrus and tomato growing districts of Punjab.......................................24Figure 4.1 Major mango importing countries..............................................................................................54Figure 4.2: Largest importers of tangerines, mandarins, clem....................................................................55Figure 4.3: Largest importers of tomato (%)...............................................................................................55Figure 4.4: Major mango exporting countries in world...............................................................................56Figure 4.5: Largest exports of tangerines, mandarins, clem........................................................................56Figure 4.6: Largest tomato exporters’ (%)...................................................................................................57Figure 4.7: Marketing channels of mangoes distribution in Pakistan (small farmers)................................65Figure 4.8: Marketing channels of citrus distribution in Pakistan (small farmers).....................................66Figure 4.9: Marketing channels of tomato distribution in Punjab Pakistan (small farmers).......................67Figure 5.1: Small farmer mangoes value chain in Punjab Pakistan.............................................................73Figure 5.2: Large farmer mangoes value chain in Punjab Pakistan.............................................................74Figure 5.3: Small farmer citrus value chain.................................................................................................75Figure 5.4: Large farmer citrus value chain.................................................................................................76Figure 5.5: Small farmer tomato value chain in Punjab Pakistan................................................................77Figure 5.6: Large farmer tomato value chain in Punjab Pakistan................................................................77Figure 5.7: Inventory of mango market players...........................................................................................80Figure 5.8: Inventory of citrus market players............................................................................................81Figure 5.9: Value chain mapping of tomato Pakistan’s Punjab...................................................................82Figure 6.1: Small farmer chain 1 (Horizontal coordination): Farmer » Commission Agents » Wholesalers

» Retailers.....................................................................................................................................103Figure 6.2: Small farmer chain 2 (Vertical coordination): Farmer » Exporter » International Retailers...103Figure 6.3: Small farmer chain 3 (Pre- Harvest contract): Farmer » Contractors » Commission Agents »

Wholesalers » Retailers................................................................................................................104Figure 6.4: Large farmer chain 1 (Horizontal coordination): Farmer » Commission Agents » Wholesalers

» Retailers.....................................................................................................................................106Figure 6.5: Large farmer chain 2 (Vertical coordination): Farmer » Exporter » International Retailers...106Figure 6.6: Large farmer chain 3(Pre- Harvest contract): Farmer » Contractors » Commission Agents »

Wholesalers » Retailers................................................................................................................107Figure 6.7: Small farmer chain 1 (Horizontal coordination) (a): Farmer » Commission Agents »

Wholesalers » Retailers................................................................................................................109Figure 6.8: Small farmer chain 2 (Vertical coordination): Farmer » Exporter » International Retailers. 109Figure 6.9: Channel 3(Pre harvest contract): Farmer » Contractors » Commission Agents » Wholesalers »

Retailers........................................................................................................................................110Figure 6.10: Large farmer chain 1(Horizontal coordination) (a): Farmer » Commission Agents »

Wholesalers » Retailers................................................................................................................112Figure 6.11: Large farmer chain (Vertical coordination): Farmer » Exporter » International Retailers. . .112Figure 6.12: Channel 3 (Pre harvest contract): Farmer » Contractors » Commission Agents » Wholesalers

» Retailers.....................................................................................................................................113Figure 6.13: Small farmer chain 1 (Horizontal coordination): Farmer » Commission Agents »

Wholesalers » Retailers................................................................................................................114Figure 6.14: Small farmer chain (Vertical coordination): Farmer » Processing factory » Product

Wholesalers » Retailers................................................................................................................115Figure 6.15: Large farmer chain 1(a): Farmer » Commission Agents » Wholesalers » Retailers.............116Figure 6.16: Large farmer chain 1 (b): Farmer » Processing factory » Product Wholesalers » Retailers.117Figure 7.1: Supporting agencies and services for VC analysis..................................................................142

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INTRODUCTION

This chapter is devoted to the background,

objectives, statement of the problem, research

questions and gaps and justification of the

research.

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Chapter - I

INTRODUCTION

1.1 Background

Pakistan’s economy is undergoing structural shifts that are fuelling rapid changes in consumers

spending patterns (GOP, 2006). The sound economic growth (4.5-8.6 percent per annum for the

last four years) and per capita real GDP have increased at an average of 5.6 percent per annum

during the last three years. The recent increases and past trends of the real per capita income,

urbanization and globalization have led to a sharp increase in consumer spending which have

gradually diversified the consumption pattern in favour of high value agricultural products

(HVAP) such as milk, poultry, fisheries, fruits and vegetables. Per capita consumption of cereals

(rice & wheat) slightly decreased from 12.24 kg/month in 1985 to 10.11 kg/month in 2002. For

Pakistan, Gulati et.al., 2005 estimated that the per capita consumption of fruits, vegetables, milk

and fisheries has increased by 5, 25, 35 and 15 percent respectively from 1990 to 2000. As a

result, the domestic demand for HVAP has increased. In addition, the export of fruits and

vegetables from Pakistan went up by 108 percent, meat by 600 percent and fish by 58 percent

(Gulati et.al., 2005). This transformation of agricultural sector has profound effects on the nature

of the agricultural supply chain, role of public policy and investment. Such scenario is expected

to create opportunities for smallholders but also potential threats to their continued access to

remunerative markets (IFPRI, 2005). This change is also good for smallholders as the high-value

and processed commodities augment income and generate additional employment opportunities

in rural areas. However, the experience from South Asian countries is that the producers are not

well prepared to respond to the change and make the best use of these opportunities (Joshi et.al.,

2007).

Agriculture in Pakistan in general and in Punjab province in particular is dominated by

smallholders, who derive their livelihoods by cultivating small holdings and supplementing their

incomes with fish farming, poultry and dairy. The number of such small-sized holdings has been

steadily increasing under the growing population pressure. The share of smallholdings (< 5 ha)

has increased from 74 per cent in 1980 to 86 per cent in 2000 (GOP, 2000). It is expected that

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with the same growth rate, the per cent of smallholders will be 92 per cent in 2010. Such

dominance of smallholders in the country is a real challenge for expansion of high-value

agriculture. The problems specific to smallholders include high transaction costs per unit of

output due to tiny surpluses; low risk bearing capacity; low access to information, technology

and finance; and low capacity to implement food safety measures (Joshi et.al., 2007). On the

other hand, small holder have certain advantages, primarily abundant family labour, as most of

the high value of the commodities are labour-intensive.

Punjab is one of the country's prime agricultural province noted for the production of fruits and

vegetables, cereals, and livestock. This province boasts abundant agricultural resources and.

Agriculture is a critical economic sector in the province in terms of its contribution to the

economy and the number of employment opportunities it creates within local communities in the

rural areas. Although agriculture’s contribution to the provincial gross domestic product (GDP)

has decreased over the past five years, agriculture remains highly labour intensive and is a source

of economic relief from poverty for the majority of people in the rural areas of the Punjab

province. Farming under the smallholder system in Punjab province is characteriazed by low

levels of production technology and small-sized farm holding of approximately 5 hectares per

farmer with production primarily for subsistence purposes, leaving little marketable surplus

(Sharif, 2011).

Access to markets is an essential requirement for the small farmer in rural areas of Punjab

province if they are to enjoy the benefits of agricultural growth. The participation of smallholder

farmers in high-value markets is unsatisfactory (Sharif, 2011). It may be easy to access the

market, but retaining one’s position in the market is more difficult. In this respect, investment

must be dynamic (Reardon, 2005).

The most crucial question is how to support smallholder farmers so that they can participate

consistently in the modern markets (Sharif, 2011). In order to improve market access for the

majority of smallholder farmers, the Punjab Department of Agriculture (PDA) established the

Punjab Agricultural Marketing Company (PAMCo) which consists of marketing personal for the

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main commodity groups, namely grains, livestock, cash crops and horticultural crops. PAMCo

offer economic extension to farmers from the point of production and marketing aspects.

A major challenge confronting value chain economists is how to increase the access of

smallholder farmers to high-value markets in the agribusiness value chain, and how to increase

such farmers’ participation in the process of adding value to their products (Sharif, 2011).

Ortmann (2005) and Baloyi (2010) raised the question of whether small-scale farmers can

become a successful link in the value chain, contended that participation in growing markets for

high-value products will most likely require significant vertical cooperation by small-scale

farmers with processing and marketing firms due mainly to lacking or dysfunctional markets for

some inputs and products, as well as economies of scale.

International experience has also shown that if smallholder farmers need to partake in

agribusiness value chains and access high-value markets, they should able to produce high-value

crops that are demand-driven (Baloyi, 2010). He further stated that in producing and marketing

high value-added products, transaction costs tend to be high particularly for smallholder farmers

in rural areas. Therefore, the other school of thought is that high transaction costs in the

marketing of high value-added products tend to exclude small-scale farmers from participating in

high-value markets. The major challenge confronting is the creation of an enabling environment

for smallholder farmers to successfully participate in the agribusiness value chain (Baloyi , 2010

and Sharif, 2011).

1.2 Objectives of the Study

Before suggesting possible strategies to support smallholder farmers there is need to investigate

the specific constraints which they are confronted. This study is crucial in pinpointing the

inefficiencies and weakness being experience by horticultural growers producing mango, citrus

and tomato in Punjab province and recommend possible policy options to smallholders farmers

based on their level of participation in the horticultural supply chain in Punjab province.

Emphasis is placed on the best way to supports smallholders farmers in their efforts to access

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high value markets in the agricultural value chain in the global, regional and national markets.

The specific objectives of the study are as under:

To assess the effects of vertical coordination on transaction costs and farm profitability of

smallholders in dairy, horticulture and poultry sectors.

To identify stronger or different forms of integration that could sustainably improve

wellbeing of small holder farmers in dairy, horticulture and poultry value chains.

To determine the policy implications for smallholders, agribusiness, public policy and

investment priorities.

1.3 Problem Statement

A shift in the production portfolio from food grain-based to high-value agriculture implies a

greater need for close linkages between farmers, processors, traders, and retailers to coordinate

supply and demand (IFPRI, 2005). In particular genuinely involving smallholders in the process

of agricultural transition and linking them with new opportunities to share the benefits is a major

policy challenge (IFPRI, 2005). Many farmers including small farmers are facing difficultly

coping with the rapidly changing market environment (Paroda, 2006). He further stated that the

challenge is how to reduce the cost of doing business so that farmers and producers mutually

benefit from the process. Farmers need to be empowered and integrated in the value-chain

(Paroda, 2006). He further proposed that efforts should be made to institute policy reforms

conducive to innovations, enterprise development and investment.

Earlier evidence from several developing countries indicates that such opportunities do exist for

smallholders in the high-value food segment (Barghouti et al., 2003; Von Braun, 1995). The

vertical coordination between producers and processor will generate equally competitive

opportunities for the smallholders in the face of concept of food marketing through food retail

chains. The vertical coordination towards HVAP are highly relevant one for many reasons. (i) it

incorporates all sized producers with a continuum of processors from small medium enterprises

to multinational firms, and an array of traders responsible for most of the interactions between

the other stakeholders (ADB, 2005); (ii) it provides real opportunities for enhancing farm

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incomes and reducing poverty in the developing countries like Pakistan through participation of

small farmers in value chains; (iii) there are opportunities to capture gains by small and medium

sized industries which are relatively more efficient than large processors; and (iv) the primary

production centers of HVAP commodities are largely concentrated with small farmers. (IFPRI,

2006). (v) given the perishability and high value nature of HVAP, it has strong implications not

only for the growers but also for financers, processors, exporters and retail industries (IFPRI,

2006); and (vi) further, it has also repercussions for the institutional innovations that are

emerging in an effort to link the changing consumers’ preferences and rising exports of high

value agriculture to the production decisions of the farmers, a move from plate to plough. (Joshi

et.al., 2007).

The key issue that needs to be researched is how small farmers can switch to high-value food

commodities with minimum transaction costs and market risks (Birthal et al., 2007). The forms

of institutions, such as producer associations, cooperative and contract farming, have the

potential to reduce transaction costs by vertically coordinating production, marketing and

processing (Warning and Key 2000; Narayanan and Gulati, 2002). In the context of Pakistan,

vertical coordination is newly emerging phenomenon in case of maize, citrus, banana, poultry

and milk through cooperative (Halla) and contract farming (Maize, citrus and banana). It is

encouraging to note that such innovative institutions are gradually emerging in niche areas and

are successfully coordinating with the farmers in production and marketing of high-value food

commodities namely milk and citrus (Sharif et al., 2003 and Sharif, 2004). It is important to

understand how firms coordinate with the farmers and their implications for smallholders and

agribusiness. Efforts are made to understand the modus operandi adopted by such institutions

and study its effects on smallholders and agri-business with a view to introducing to policy

changes to improve efficiency and equity of the system.

The contribution of smallholder agriculture to economic development can be realized if

smallholder farmers are linked to high-value markets in the agricultural supply chain so that they

can benefit from these lucrative markets. In recent times, there has been high demand for high-

value agricultural products, along with more stringent food safety and quality requirements and

the emergence of supply-chain integration. All these changes forebode the potential exclusion of

6

small-scale producers from the growing markets. The inability of smallholder farmers to engage

in lucrative markets is great cause for concern. Bienabe, Coronel, Le Coq and Liagre (2004)

contended that, “Agriculture is becoming increasingly integrated and smallholder farmers are

often disadvantaged, and actions must be taken to help them draw profit from their integration

into markets.”

Several studies have indicated how smallholder farmers can be linked to markets, but they have

failed to address the issue of how smallholder farmers can be empowered to benefit from high-

value markets. It is easy to link farmers to markets, but it is difficult for a smallholder farmer to

satisfy the market, achieve consistency, and remain sustainable. Before linking farmers to

markets, there is a need to ensure that farmers are consistent in marketing their produce. The

essence of the problem lies in identifying those factors that are currently preventing smallholder

farmers from benefiting from reliable markets and determining combinations of strategies that

can assist smallholder farmers to compete consistently in the market arena. To ensure that

farmers are consistent along the chain, several issues need to be analyzed and addressed,

including production factors, on-farm and off-farm infrastructure, management capacities,

ameliorating transaction costs, financial assistance, advisory support, research, and technology

adoption.

1.4 Research Questions and Research Gaps

The main research question is how smallholder farmers’ access to high-value markets in the

agribusiness value chain can be improved. In analyzing and addressing the contributing issues

mentioned above, different strategies need to be explored based on local and national markets.

Key areas for research are clustered around several questions, namely (Baloyi, 2010 & Sharif,

2011):

What are the main determinants of smallholder farmers’ exclusion from participation in

lucrative markets?

How can new institutional arrangements be developed to the extent that smallholder farmers

can improve and maintain their access to high-value markets?

7

Since studies indicate that smallholder farmers are not consistent in terms of supplying

products to the formal markets, what could be done to ensure that this actually happens?

How can smallholder farmers be supported in their efforts to benefit from their linkages to

different markets? How then could small-scale farmers improve their competitiveness by

becoming an important link in the agricultural supply chain?

How can transaction costs be minimised to enable smallholder farmers to participate

successfully in the agricultural supply chain?

How does the agricultural policy environment affect smallholder farmers? Is the agricultural

policy environment sufficiently conducive to enable smallholder farmers participate in

lucrative markets?

What could be to done to ensure that smallholder farmers engage in high-value markets?

1.5 Justification of the Study

The aim is to promote the mainstreaming of smallholder farmers in the Punjab Province so that

they can take part in all levels of agricultural activity and sizes of enterprises in the entire

agricultural value chain (Baloyi, 2010 and Sharif, 2011). The intention is to focus on smallholder

farmers and link them with potential horticultural markets in the agribusiness value chain. In

order to revive the agricultural sector and turn it into a highly competitive sector in the country,

this study aimed to pinpoint some of the constraints facing Horticultural producing smallholder

farmers. International experience has shown that too little has been done to support smallholder

farmers and that the services that should be available have not been fully accessible. These

arguments necessitated this study’s attempts to find solutions to the constraints facing

smallholder horticultural farmers and suggestions for possible strategies that can help to

smallholder farmers to access high-value markets in the country (Baloyi, 2010 and Sharif, 2011).

Many scholars have contended that research into the informal economy should consider value

chain dynamics in order to understand the complex linkages between traditional markets and

modern markets (Baloyi, 2010 and Sharif, 2011). Several studies have also shown that compared

to farmers participating in traditional markets, farmers participating in high-value markets show

higher earnings per hectare or per kilogram marketed (Reardon, Barrett, Berdegué & Swinnen,

8

2008). In accessing high-value markets, smallholder farmers need to be integrated into the value

chain and be supported along the chain so that they become competent (Baloyi, 2010 and Sharif,

2011).

This study will seek for the opportunities and threats to small farmers confronted from the

consolidating agricultural value chains for horticultural products with a view to obtain a clear

picture of these chains in place, the relative positions of the different actors, the institutions

governing their incorporation, and the benefits accruing to each which will provide the

information to identify areas of leverage for improving the position of the small farmers in

Pakistan. This research will contribute to increase understanding of horticultural value chains

and will provide new ideas for improving the integration of small farmers, small and medium

enterprises, and the poor with value chains. A study of innovative institutions such as

cooperative, association and contract farming, distribution and supermarket chains will help

achieve economic efficiency by reducing transactions costs and risk for producers and ensuring

high quality and safe products for consumers. Attempt will be made to understand the modest

operandi adopted by such institutions and study its effect on smallholders with a view to

introduce policy changes to improve efficiency and equity of the system. It will also assist the

policy makers to design policies for making agricultural markets work better for small farmers.

1.6 Organization of the Study

Following the introduction, chapter 2 is devoted to theoretical framework and methodology.

Characterization of horticulture value chain operators and supporters is presented in chapter 3.

The information on market analysis of horticultural sub-sector is discussed in chapter 4. Value

chain mapping of horticultural sub-sector is given in chapter 5. Value chain research of

horticultural sub-sector is narrated in chapter 6. Value chain analysis of horticultural sub-sector

is presented in chapter 7. Value chain development schemes for horticultural sub-sector are

chapter 8. Summary, constraints and strategies in chapter 9 complete the report.

9

THEORETICAL FRAMEWORK AND

METHODOLOGY

This chapter deals with the conceptual

framework for value chain approach to

address the issues of horticulture sub-sector

and techniques used for value chain mapping,

value chain research, value chain analysis and

value chain development strategies for seeking

sustainable outcomes of horticulture sub-

sector in the country.

10

Chapter - II

THEORETICAL FRAMEWORK AND METHODOLOGY

2.1 Introduction

The first part of this chapter reviews the current changes in agriculture development and their

implications for large farmers in general and small farmers in particular as well as on agri-

business. The main issued reviewed and discussed with reference to smallholder horticultural

farmers include new paradigm shift of agri-business development, agro-food market reforms,

agricultural value chain vs. supply chain and the agricultural value chain approach for addressing

the vertical coordination of horticulture sector in Punjab, Pakistan. The second part of this

chapter deals with the methodology used to analyze the vertical coordination towards

horticulture sector in Punjab, Pakistan.

2.2 New Paradigm of Agri-Business Development

Baloyi (2010) stated that the marketing environment is continuously exposed to a continuum and

latitude of changes, resulting in uncertainty, barriers and opportunities which demand constant

monitoring of marketing environment in order to minimize risks, reorganize, and capitalize on

opportunities. The increases in per capita income, urbanization, globalization and technology in

particular are rapidly changing trends in consumer behavior and impact heavily on the way in

which agribusinesses conduct their business (Baloyi, 2010 & Gulati et al. 2005). The changes are

also highly dynamic, changing the nature of both farming and business (Esterhuizen, 2006 &

Baloyi, 2010). In many developed countries, agricultural production is changing from an

industry dominated by family-based, small-scale farms or firms to one of larger firms that are

more tightly aligned across the production and distribution value chain (Boehlje, 2000 & Baloyi,

2010).

11

Although the process of globalization and industrialization has created opportunities for

smallholder farmers to produce a wider range of high-value crops, there is still a possibility that

the process of agro-industrialization, globalization, and market integration will exclude these

farmers from high-value markets (Baloyi, 2010). He further stated that the new lifestyles of

consumers in the developed and developing countries, along with shifting demographics, and a

growing appreciation for the link between diet and health, have contributed to different eating

patterns and influenced the foods purchased by consumers in these countries. Concerns about

food safety and the recent food scares have also heavily influenced consumer behavior who now

demand tailored foods and, to ensure that they meet their specifications, food companies want

more specific farm products from the farming community (Joshi et al., 2007 & Baloyi, 2010).

They further argued that in addition, food safety is also a concern, especially regarding fresh

food products, thus bringing about increased scrutiny and regulation in developed countries. As a

result, processors and marketers have avoided traditional spot markets and have engaged in more

direct market channels such as market and production contracts, full ownership, and vertical

integration (Kirsten & Sartorius, 2002).

The issue of market access by smallholder farmers cannot be addressed completely without

taking a holistic perspective that also takes into account the global trends in economic

transformation that have a direct bearing on the current smallholder market access situation

(Paroda, 2006 & Baloyi, 2010). The forces of globalization and industrialization in agriculture

have prompted new ways of organizing the agro-food sector (Baloyi, 2010). Vertical co-

ordination of food supply chains has attracted a great deal of attention (IFPRI, 2005; Joshi et al.,

2007 & Baloyi, 2010). They further stated that the changes in food and agricultural markets have

influenced the need for higher levels of managed co-ordination. This has resulted in the

introduction of different forms of vertical integration and alliances, which have become a

dominant feature of agricultural supply chains (Kirsten & Sartorius, 2002). Reardon and Barrett

(2000) revealed how these changes have caused small firms and farms to go out of business

under the new competitive pressures. The new competitive environment leads to industrial

concentration, with practices that result in the exclusion of domestic firms and small farmers

from the benefits and rewards of the high-value markets (Baloyi, 2010).

12

International experience has shown changes in global trends, implying new approaches and

changes of focus by smallholder farmers. Many scholars (Boehlje, 2000; Drabenstott, 1995;

Sofranko, Frerichs, Samy & Swanson, 2000; IFPRI, 2005; Joshi et al., 2007 & Baloyi, 2010)

have argued that the most dramatic changes in agriculture are taking place in terms of changes in

the fundamental business proposition and the ways of doing business:

From producing for self-sufficiency to producing in a market-oriented way;

From operating individually to operating in co-operatives;

From staple crops to high-value crops and value-adding;

From spot-market farming to contract farming;

From traditional chains to modern value chains;

From a focus on production output to a focus on commercialization;

From marketing to low-profit markets to marketing to high-value markets;

From supply-driven to demand-driven production (consumer satisfaction);

From survivalism to entrepreneurship; and

From a focus on conventional farming only to organic farming as well.

Hoggart and Paniagua (2001) provided a sound critique of agricultural change. They concluded

that the empirical evidence cautions against readily accepting that current changes are as

profound as the literature suggests, and that the pace of most agricultural change is slower than

one would assume from the literature. They contended that there is little that is new about the

current debates on agricultural change; that farmers have been buffeted by external forces for

decades, that rural economies have long been driven by the demands (e.g. consumption) of non-

markets, and that pressure on farmers to change production practices to meet the requirements of

non-populations has long been evident. Nevertheless, small-scale farmers find it difficult to make

the transition to a more commercial food system, because they struggle to meet the private

quality and safety standards set by food processors, large retailers, wholesale buyers and

exporters, while at the same time being constrained by the limited support services provided by

governments due to policy reforms, market liberalization, and fiscal and governance problems

(Bienabe et al., 2004 & Baloyi, 2010).

13

2.3 Agro-food Market and Smallholder Farmers

With the increasing commercialization of agriculture and food systems worldwide, the food

industry is increasingly dominated by large agribusiness firms whilst the influence of farmers is

declining (Reardon & Berdegué, 2002). International experience has shown that smallholder

farmers produce low-value commodities, which face declining real prices and increasing

competition from medium- to large-scale producers, and they are excluded from high-value

markets (Baloyi, 2010). As mentioned above, small-scale farmers find it difficult to make the

transition to a more commercial food system because they struggle to meet the private standards

set by food processors, etc. and are also constrained by limited government support (Bienabe et

al., 2004 & Baloyi, 2010). Experience with contract farming has shown that in both developed

and developing countries, agribusiness integrators prefer to deal with commercial farmers in

order to reduce transaction costs and also due to the need for greater consistency of quality and

supply (Key & Runsten, 1999 & Baloyi, 2010).

However, Louw, Chikazunga, Jordan and Bienabe (2007) discovered that many commercial

farmers are not interested in contracts or in supplying to supermarkets, as they are of the opinion

that their ‘profits are squeezed’ and they cannot afford the additional capital outlays to comply

with the stringent quality standards. They further argued that consequently this may offer

smallholder farmers a major opportunity to engage in contract farming if they are supported

along the value chain.

According to Louw et al. (2007) the trend in the evolution of procurement systems towards large

central procuring systems receiving fresh produce from a limited number of preferred suppliers

is creating barriers for small-scale producers that do not have growers’ programme contracts

with retailers. For smallholder farmers to supply supermarkets or wholesalers they need a

certain size of production, high-quality products, a certain size and type of product, and

consistency in quality and supply – requirements they find difficult to meet consistently.

Smallholder farmers can only have market power if they form co-operatives, which should be

established with the help of the government (Baloyi, 2010). He further stated that groups have

14

the potential to secure better terms of trade such as better sourcing prices, lower transaction

costs, and greater access to training and other services.

The expansion of agro-processors, fresh produce markets and supermarkets is posing a major

challenge to smallholder farmers in their efforts to position themselves as business driven

competitors (Baloyi, 2010). He further argued that the buying practices of supermarkets and

large processors, such as quality and safety standards, packaging and volumes, seriously

challenge small producers, who are threatened with expulsion from the agricultural supply chain

if they cannot take part in this new type of market. The chains thus require assurances from

suppliers that all safety and health standards are being met and surpassed, and small-scale

farmers must not be excluded from complying with these standards if they are to compete

successfully in the agricultural value chain (Joshi et al., 2007; IFPRI, 2005 & Baloyi, 2010).

Farmers are now faced with new challenges that include the consistent supply of products of

consistently high quality, knowledge of acceptable agricultural practices, capacity to comply

with market and regulatory requirements, new issues of conformity assessment, and traceability

which setup poses major challenges for producers, more especially smallholder farmers (Baloyi,

2010). As a result, smallholder farmers are still excluded from participating fully in the

agricultural supply chain and are not linked to high-value markets (Gulati and Mullen, 2004;

IFPRI, 2006 & Baloyi, 2010). According to Louw, Vermeulen and Madevu (2006), dominant

supermarkets and processors have tended to favour suppliers who can ensure consistent volumes

and quality, and they have thus engaged in long-term production arrangements (informal

contracts) with such suppliers. These criteria have tended to favour the more capitalized

commercial producers and processors over the emerging sector (Louw et al., 2006).

The participation of smallholder farmers in high-value markets is constrained by the many

challenges they must face (Gulati and Mullen, 2004 & Baloyi, 2010). They further stated that a

range of impediments to market participation has been identified, including lack of access to

finance, on-farm infrastructure, market information and training. The situation is worsened by

the fact that farmers are located far away from the markets and have poor access to infrastructure

(Baloyi, 2010). Kirsten (1994) and Van Rooyen, Vink and Christodoulou (1987) emphasized the

15

need for structural reform if the participation of small farmers in the commercial agricultural

sector is to be enhanced.

2.4 Market Reforms and Smallholder Farmers

The trend of market-oriented reforms following multilateral trade liberalization and especially

structural adjustment programmes in developing countries has led to the increased integration of

world markets (Baloyi, 2010). Agriculture is becoming increasingly integrated and smallholder

farmers are often disadvantaged, and therefore action must be taken to help them draw profit

from their integration into the markets (Bienabe et al., 2004). They further stated that there is no

doubt that agriculture is undergoing significant changes, and each partner in the agricultural

supply chain has to be competitive to ensure profitable returns for all. Similar to the household

sector, fresh produce markets and agro-food processing industries have a preference for certain

cultivars and quality standards depending on their needs (Baloyi, 2010).

Vink and Kirsten (2000) contended that this market liberalization has ensured a leaner and

stronger agricultural industry, with some farmers and agribusinesses able to play in a globally

competitive environment. On the other hand, Magingxa and Kamara (2003) argued that market

liberalization has widened the gap between smallholder and commercial agriculture. Small-scale

farmers are mostly ill-equipped to respond to the changing market conditions (Doyer, 2002).

Vink and Kirsten (2000) found ample empirical evidence that the deregulation of agricultural

marketing in South Africa has brought about net welfare gains for commercial agriculture and

therefore for the entire nation. Food prices have declined, investment in agriculture has

increased, higher production per hectare has been achieved, and farmers are producing higher-

value crops. However, they found that this does not necessarily imply that smallholders have

enjoyed these gains because of a number of constraints that inhibit smallholder farmers’ access

to agricultural markets in South Africa. Such constraints usually include infrastructure, market

access, credit, organizational structures, suitability of technology, and managerial capacity of the

farmers (Baloyi, 2010).

16

2.5 Agriculture Value Chain vs. Supply Chain

Hobbs and Young (1999) were amongst the first to clearly distinguish between these terms in the

economic literature. As they defined the term, supply chain refers to the entire vertical chain of

activities – from production on the farm, through processing, distribution, and retailing to the

consumer. The supply chain is the mechanism for transmitting signals from consumers to food

manufactures, as well as delivering products from the farm to the consumer’s table (Baloyi,

2010). The major components of a supply chain are input supply, production, processing or

manufacturing, and retailing (Regmi & Gehlhar, 2005).

The value chain is a particular form of supply chain, i.e. the term ‘value chain’ refers to a vertical

alliance or strategic network between a number of independent business organizations within the

same chain (Baloyi, 2010). The value chain approach places particular emphasis on the co-

ordination of different actors along the chain of activities involved in the production, processing

and distribution of products. It highlights the linkage between enterprises, how their activities are

co-ordinated and the role of lead firms in determining what is to be produced, how and by whom

(Humphrey, 2005). The value chain is not the same as the supply chain. A value chain is about

linkages generating value for the consumer, while a supply chain is about process of moving and

transforming commodities into products from producers to consumers. While a value chain is

about generating value for the consumer, a supply chain is about logistics (ADB, 2005). The

differences between supply chain and value chain are illustrated in Table 2.1.

Table 2.1: Supply chain versus value chain

Attributes Supply chain approach Value chain approachCommunication Limited Highly intensiveValue focus Cost/Price Value/QualityProduct Commodity Differentiated productRelationship Supply push Demand pullOrganizational structure Independent InterdependentPhilosophy Self-optimization Chain optimizationSource: AAFC (2004)

There is a need to move from the traditional supply chain approach to a value chain approach

where producers and processors are able to compete nationally and internationally (Baloyi,

17

2010). He further stated that the basic characteristic of a value chain is market-focused

collaboration in that different business enterprises work together to produce and market products

and services in an effective and efficient manner. The value chain allows businesses to respond

to the marketplace by linking production, processing and marketing activities to market demands

(AAFC, 2004).

The value chain approach establishes co-ordination amongst its participants by moving beyond

spot market transactions and utilizing contracts vertical integration, supply networks, alliances,

and other forms of co-ordination (Baloyi, 2010). Lummus (2004) differentiated between co-

ordination in spot markets and in modern value chain partnerships. These differences are

summarized in Table 2.2 which is adopted from Lummus (2004). Unlike in a spot market, in

order to function effectively, these dominant players organize production, processing, logistics

and trade, and distribute products to the final consumer (Lummus, 2004 & Bolayi, 2010).

Table 2.2: Key attributes of two extreme types of co-ordination

Attributes Traditional spot markets Value chain partnershipsTerm Short-term (individual transaction) Long-term relationshipsDecision indicator Made on price Made on valuePartners May Fewer selectedInterdependence Low High Production Haphazard Order-drivenCommunication Limited OpenCo-ordination Limited Strong (or total)Specific investments Avoided High (er) levelInformation Proprietary SharedDelineation Clear business boundaries Continuous delineationImprovement Unilateral initiatives Continuous joint activitiesActivities Separate EngagedDecision-making Role of bargaining power Joint decision-markingIncentives Adversarial attitudes Common, mutual attitudesGoals Disharmonious (conflicting) goals Compatible goalsOpportunism Behave opportunistically Mutual trustActing Act only in own interest Act for mutual benefitOrientation Win-lose Win-winSource: Lummus (2004)

According to Hobbs et al. (2000) value chain is a special strategic network of independent

organization; demand driven rather than supply-driven form; requires the commitment of all

participants in controlling the factors affecting product quality and consistency; responsive to

18

changing consumer needs; offers security in doing business with other members of the chain;

involves high levels of trust between parties to the alliance. In order to achieve more preferable

position in these changed market condition, the members of agri-food chain have to establish

effectively managed value chain. According to Hobbs et al. (2000) the effective value chain

management might include follows: (i) entering into consultations and negotiations with other

organizations related to market expansions; (ii) sourcing products from businesses that are not

part of the value chain; (iii) encouraging the development of new products; (iv) fostering

cooperation in the value chain

2.6 Agricultural Value Chain Approach and Smallholder Farmers

This section has derived as such from Baloyi (2010) and reproduces as such in this section. “The

concept of agricultural value chains has attracted many scholars in the marketing environment.

For smallholder farmers to be integrated along the value chain, they must able to comply with

market requirements such as economies of scale, good quality, and consistency. Transport

logistics and the cold chain are necessities for smallholder farmers if they are to participate in the

agribusiness value chain. The agricultural value chain is a vertical alliance of enterprises

collaborating to secure a more rewarding position in the market. The term ‘vertical alliance’

means that agribusiness is connected from the production stage, through the processing stage to

the marketing stage, until the products are in the hands of the consumers. Producers, processors

and marketers become interdependent in the chain and work together to discuss challenges and

share information (AAFC, 2004). For commercial stakeholders, the main advantages of being

involved in an effective value chain are the ability to reduce the costs of doing business, increase

revenues, increase bargaining power, and improve access to technology, information and capital,

and by doing so, innovate production and marketing processes in order to achieve a higher value

and provide a higher quality of product to consumers (ADB, 2005).

The value chain approach can help smallholder farmers to access secure markets and enter into

formal market contracts that can be used to access credit; to share information among partners,

thus helping poor farmers to access information better than in spot markets; to consolidate

production and minimize transaction costs; to improve their bargaining power; to add value to

19

the products; and to access high-value markets. Many scholars have emphasized that if a value

chain approach is not adopted, especially in developing countries, the ‘invisible hand” type of

co-ordination (such as opportunistic behavior, self-interest, short-term relationships, limited

information sharing) will predominates in traditional spot markets.

According to Humphrey and Schmitz (2002) smallholder producers need to access lead firms in

the value chain. They stated that research in the horticultural industry in the United Kingdom and

Africa suggests that smallholder growers are excluded from the value chains, with the main

reason appearing not to be the efficiency advantage of large producers, but rather the lead firms’

sourcing strategies, which are influenced by consumers’ expectations, the safety and

environmental requirements of governments and non-governmental organizations, as well as

labour standards.

Smallholder producers who gain access to supply chains find themselves in a steep learning

curve, because the lead firms tend to be too demanding in terms of cost reduction, raised quality

standards, and increased delivery speed. However, these firms do transmit best practices and

provide expert advice. Consequently, highly governed chains are normally characterized by such

challenges for smallholders (Humphrey & Schmitz, 2002). Hendriks and Lyne (2003) contended

that for smallholder farmers to participate successfully in the value chain, they should pool their

small individual surpluses and market them collectively. They emphasized that smallholder

farmers must co-ordinate horizontally in order to link vertically with intermediaries in preferred

supply chains.

According to Bienabe and Vermeulen (2007), there are opportunities for the inclusion of small-

scale farmers in formal retail supply chains, including:

Strategic partnerships or mentorship programmes with established farmers so that the small

farmers can increase their marketing volumes and have access to established production and

marketing infrastructure.

20

Collective action through either producer organizations or marketing co-operatives, which can

also provide alternative inclusion pathways for smallholder farmers. Dealing with franchise

stores, which can also be a viable inclusion option for smallholder farmers, since these stores

have more flexible procurement options and, in many cases, less stringent food quality and safety

requirements – especially in the case of Spar and Pick ’n Pay.

According to Shepherd (2007) there is considerable scope for adding value to agricultural

production. In international markets, for example, the growing demand for “convenience” foods

has created a market for pre-cut salads and fruits. Shepherd (2007) argued that, “NGOs and

others sometimes approach agro-processing from a supply-led rather than market-led

perspective. That is, they decide to promote processing because of an abundance of raw material

rather than because of a clearly identified market for the processed products. A further error is to

induce farmers to become agro-processing entrepreneurs. Lacking capital, education and

management skills, it is almost impossible for small farmers to successfully manage such

ventures.” Smallholder farmers often lack the experience to function in modern markets and

supply chains.

Many developing countries have relatively few or even no sizeable agro-processors. While those

companies that do exist may presently have surplus capacity, that capacity – and thus their ability

to absorb additional production – is usually limited. The promotion of small and medium

enterprises (SMEs) is seen by governments and donors as one way to encourage competition and

increase value-adding, but this may be constrained by a variety of factors, such as the lack of a

risk-taking culture, lack of entrepreneurial skills, credit constraints, the high cost of imported

processing equipment and packaging materials, poor infrastructure and low demand (Shepherd,

2007)”---- (Baloyi, 2010).

2.7 Review of Vertical Coordination towards High Value Agriculture

There relevant literature to understand the modus operandi of cooperatives, farmers associations

and contract farming institutions is briefly presented here.

21

Gulati and Mullen, 2004 examined the future of smallholders under high-value agriculture in

India. They stated that the future of small farmers depends critically on whether or not farmers

can be globally competitive. To do so, they proposed the innovative institutions that link the

farm, firm and fork in the form of contract farming and vertical coordination. They suggested

that by shortening the supply chain, transactions costs and risk of smallholder can be reduced and

their economic efficiency can be increased. Furthermore, they have argued that at the same time,

a streamlined production system can respond rapidly to consumers’ preferences.

IFPRI, 2005 made recommendations for the promotion of high-value agriculture which are: (i)

to augment income from agriculture, farmers must gain greater access to growing domestic as

well as global markets for high-value commodities which would require the identification of

critical areas for trade, marketing, capital markets, and regulatory reforms (ii) to increase the

participation of smallholders in the high-value chain, policies that unnecessarily impede their

participation must be removed. (iii) the role of innovative institutions is critical in strengthening

the linkages between the farm and agribusiness. Processes (for example, contract farming or

cooperatives) must be developed that involve smallholders in the production and marketing of

high-value commodities (iv) to reduce the production and market risks of high-value

commodities, good road networks must be developed, a reliable electrical supply must be

ensured, and the power of telecommunications must be tapped.

Birthal et al., 2007 examined the institutional mechanisms adopted by different firms to

integrate small producers of milk, broilers and vegetables in the supply chain and their effects on

producers’ costs and farm profitability. The institutions under study have covered contracting

with farmers in case of milk and broilers and producers associations in case of vegetables.

Transaction cost as a result of contract farming has been reduced by over 90 percent in case of

milk and vegetables and 58 per cent in case of broilers. The net revenue realization by contract

producers has been 2 to 4 times higher in milk and vegetables and 1.1-times in broilers. It is

observed that smallholders are benefited most from such arrangements as they have low

marketable surplus and their marketing costs are extremely high.

22

Baloyi, 2010 carried out an analysis of constraints facing smallholder farmers in the agribusiness

value chain in University of Pretoria where his work focused on analyzing the production and

marketing constraints that often prevent smallholder farmers from accessing high-value markets

in the agribusiness value chain. Access to markets is an essential requirement for the poor in

rural areas to enjoy the benefits of agricultural growth. Limited access to agricultural markets by

smallholder farmers in rural areas represents one of the most important challenges confronting

policymakers in developing countries. Several studies have indicated how smallholder farmers

can be linked to markets, but they have failed to address issues of how to increase the likelihood

of smallholder farmers benefiting from high-value markets. Due to the stringent sourcing criteria

of formal markets, small-scale farmers are excluded from the agricultural value chains. It may be

easy to access the market, but it is very difficult for smallholder farmers to retain that market.

This is attributed to the fact that smallholder farmers face various constraints along the value

chain such as production and marketing constraints.

2.8 Research Design and Implementation

In order to provide some feasible measures and suggestions about how smallholder horticultural

farmers can switch to high value food commodities with minimum transaction cost and market

risks in Punjab, Pakistan. Agricultural value chain approach/framework has been adapted. In

order to develop feasible measures and suggestions, the survey design, sampling frame, field

work and analytical techniques used in this study are briefly described in the following sub-

section:

2.8.1 Survey design

The aim of the survey was to seek for the opportunities and threats to small farmers confronted

from the consolidating horticultural value chains with a view to obtain a clear picture of these

chains in place, the relative positions of the different actors, the institutions governing their

incorporation, and the benefits accruing to each which will provide the information to identify

areas of leverage for improving the position of the small farmers in Pakistan. Keeping in view

the time and financial resources, it was impossible to compile information from the whole

23

population of horticultural growers and market intermediaries in Punjab province. Therefore, a

representative sample of the targeted population was used to draw inferences. On the basis of

more acreage under mango, citrus and tomato in the major producing districts of the Punjab

province were selected as the study area. The sampling units were producers, contractors,

commission agents, wholesalers, retailers and consumers of selected mango, citrus and tomato.

The information of sampling frame, sample size and field work is given below:

Selection of districts and commodities: The main focus of the survey was Punjab province of

Pakistan, which comprises 36 districts. Mangoes are the most important cash crop of cotton-

wheat system of Pakistan’s Punjab. Multan, Rahim Yar Khan and Muzaffargarh districts

comprised 80 percent mango area of Pakistan’s Punjab were selected to study the mangoes value

chain. Sargodha district is main citrus growing area of Punjab followed by Mandi Bahauddin and

Toba Take Singh. Therefore these three districts for chosen for conducting the citrus value chain

analysis. Muzaffargarh, Nankana Sahib, Gujranwala and Sheikhupura districts comprised 40

percent tomato production in Punjab were selected to study the tomato value chain. These

districts of mango, citrus and tomato are shown in map of Punjab at Figure 2.1.

Figure 2.1: Map showing mango, citrus and tomato growing districts of Punjab

24

International experience has shown that an important strategy for increasing the incomes of

small-scale farmers in developing countries is to help them diversify from low-value staple food

commodities into higher value commodities, such as livestock, dairy products, fish, fruits,

vegetables, and spices (Baloyi, 2010). The demand for these products in both developed and

developing countries is rising rapidly as incomes increase and consumers adopt more diverse

diets (NDA, 2009). It is a well-known fact, needing no further debate, that horticultural products

are an ideal cash crops for both commercial and smallholder farmers in developing and

developed countries. Mango, citrus and tomato were selected as the three commodities to be

studied for purposes of this study due to the fact that they are high-value crops and are

commonly produced in the Punjab province as a whole. Over and above their status as important

crops in the context of the Punjab agricultural economy, the selected commodities were also

chosen on the basis of their potential to generate a high income, particularly when prices are at a

peak. These high-value commodities can play a significant role in changing the lives of rural

farmers in the province, particularly when the production and marketing challenges confronting

smallholder farmer along the value chain are addressed. Even households that may not benefit

directly can reap indirect benefits through increased demand for hired labor in the value chain

(Baloyi, 2010).

25

The intention of selecting mango, citrus and tomato commodities for this study was to help

policymakers be better informed about the barriers preventing small-scale farmers in the Punjab

province from participating to a greater extent in high-value markets, as well as the policy

options available to reduce these barriers. In view of the prevailing favorable climate for the

production of a variety of high-value crops by smallholder producers in the province, coupled

26

with growing awareness that some of these high-value crops could solve the problem of food

security and poverty reduction among rural people (Baloyi, 2010). It has become increasingly

evident that considerable changes would be required in their farming operations if the economic

benefits of increased production are to be fully realized. These changes entail producing good-

quality, high-value crops on a large scale and accessing high-value markets. However, this will

only happen if smallholder farmers have access to comprehensive agri-support services.

Sampling frame and sample size: A sampling frame is a list of all sampling units available for

selection at a given stage of the sampling process (Barnet, 1991). The sampling frame for fruits

and vegetable producers consist of a list of growers of selected commodities in the selected

districts was prepared during the informal survey. Poate and Daplyn (1993) suggested that a

sample size of 60 is generally regarded as the minimum requirement that will yield a sufficient

level of certainty for decision-making. Rodriguez, et al (1995) selected 50 producers and 50

market intermediaries to collect information regarding expected prices of sheep and goats in

Balochistan. Hugar and Hiremath (1984) selected 120 producers to study the efficiency of

alternative channels in the marketing of vegetables in Belgaum city, India.

Keeping in view the previous studies, 150 to 283 sample sizes of horticulture growers, 5 to 400

sample size of contractors, exporters/processors, commission agents, wholesalers, retailers and

consumers of mango, citrus and tomato were chosen respectively. The sample size of growers,

contractors, exporters/processors, commission agents, wholesalers, retailers and consumers is

presented in Table 2.3.

Table 2.3: Sample distribution for horticultural value chain in Punjab

province

Actors Mango Citrus Tomato TotalProducers 269 283 150 702Contractors 27 30 0 57Exporters/Processors 05 10 03 18Commission Agents 29 20 24 73Wholesalers 27 20 22 69Retailers 32 36 27 95Consumers 400 500 400 1300

27

2.8.2 Fieldwork

Primary data were collected through surveys of mango, citrus and tomato producers, market

intermediaries and consumers. The fieldwork also involved gathering data on the prices and

market activities of these commodities. In direct observation, emphasis was placed to identify

production and marketing problems and evaluate key informants views of the structure and

operation of the marketing system against what was actually observed in the field.

Longitudinal data collection: Secondary data can help to determine internal consistency and it

also provides a quick insight into trends and relationships. Such data can also be crosschecked

with different sources of related data, through interviews with market key informants and

knowledgeable observers. For this study secondary data has been collected using various

statistics bulletins of Federal and Provincial Bureau of Statistics and various issues of Economic

Survey of Pakistan regarding the area and production under fruits and vegetables in the study

areas.

Cross sectional data collection: In this study separate interview schedules were designed for

producers and other market agencies including contractors, commission agents, wholesalers,

retailers and consumers to cover all aspects of the study. The interview schedules were written in

English but questions were asked in the local language from the sample respondents. The

interview schedules were pre-tested before the formal survey. Due to the absence of producer’s

records regarding farm activities, data collection has depended on a combination of methods

which rely on memory recall for basic information such as labor use, wages, input costs,

marketing charges and output costs. Interviews with both producers and other market agencies

were carried out soon after the marketing, in order to reduce the recall period.

Producers’ survey: Producers were assured absolute privacy, interviews were held in places of

their choice. Most of the interviews were held at the farm or in the farmer’s house. The interview

28

usually started with an introduction about the background of the researchers, the objectives of the

study and the way in which the respondent was chosen.

Market survey: Local markets in the selected districts and fruits market at Multan, Rahim Yar

Khan, Sadiqabad, Muzaffargarh, Sargodha, Bhalwal, Mandi Bahauddin, Lahore, Gujranwala,

Nankana were selected. Main focus had been given to understand the market structure and

operation of these markets. Market traders including contractors, commission agents,

wholesalers and retailers were interviewed. The interview was also supplemented with topic-

focused discussion and specific question from a structured questionnaire. The interview was held

with each market intermediaries in confidence in his office/shops/selling place. After answering

their questions, they enquired to know why the scientists would like to study value chain actors

of mango, citrus and tomato. The survey investigators informed the respondents about the

economic importance of the mango, citrus and tomato as well as the value chain aspect of these

commodities. Additional information was also collected through personal observation. Sufficient

time was spent during various visits to markets.

2.9 Analytical Techniques

Following the methodology Birthal et al. (2004), ADB (2005), IFPRI (2006) and Vorley and

Bienabe (2007), transaction economics, profitability analysis and SWOT analysis were used to

study the policy environment and horticulture sector overview, structure conduct and

performance of horticultural value chain, effects of horticultural value chain on small farmers

and strategic options to integrate the small farmer into horticultural value chain. The brief

description these analysis are as under:

2.9.1 Transaction costs

In order to compare transaction costs’ magnitude of both marketing channels under

consideration, a quantitative measure of transaction costs is needed. Although there is no

officially recognized methodology for examining the magnitude of transaction costs, the recent

works of Benham and Benham (2005) propose a standardized methodology that many authors

29

have applied to comparative analysis. In that methodology, a subset of the total costs generated

in a transaction is examined. This subset, designated as the cost of exchange Cijkm, is defined as

“the opportunity cost in resources - money, time and goods -for an individual with characteristics

i to use a given form of exchange j to obtain a good k in an institutional setting m” (Benham and

Benham, 2005). This methodology seeks to evaluate the opportunity cost faced by an agent that

undertakes a specified exchange in a specified institutional environment.

In order to structure our analysis, we divided the contractual transaction in three main direct

transaction costs items: information (I), negotiation (N) and monitoring/enforcement (M) costs

(Hobbs, 1997). Information costs occur ex ante to an exchange and include information search

on products, trading partner and market conditions. Negotiation costs also occur ex ante and

consist of the cost of realizing the transaction which may include the cost of the negotiation

process, contract redaction costs, etc. Monitoring and enforcement costs occur ex post to a

transaction and consist of the costs necessary for the agreement to be respected. These costs

include monitoring, renegotiation, maladaptation, termination and enforcement costs.

Hobbs (1997) has classified the components of transactions costs in relation to the transaction:

information costs as arising before the transaction; negotiation costs as the costs of physically

carrying out the transaction; and monitoring costs as costs of ensuring that the terms of the

transaction are adhered. Staal, Delgado and Nicholson (1997) classified transaction costs into

observable and unobservable transaction costs. The observable transaction costs include

marketing costs such as transport, handling, packaging, storage, spoilage etc. that are visible

when a transaction takes place. Unobservable transaction costs include cost of information

search, bargaining, and enforcement of contracts etc. The Unobservable transaction costs faced

by producers when selling their product to purchasers is represented by the sum of direct

transaction costs (C), composed of information (I), negotiation (N) and monitoring (M) costs.

C = Σ (I, N, M)

The transaction cost of each of the commodity for producer was estimated by summing up the

unobservable and observable transaction costs that include marketing costs such as transport,

30

handling, packaging, storage, spoilage etc. and unobservable transaction cost i.e. cost of

information, negotiation and monitoring.

2.9.2 Profitability analysis

The profitability analysis was carried out as by Triole (1993) and is given as under.

Where

Q= Quantity

C=Cost

2.9.3 The value chain analysis (VCA) model

VCA model emphasizes on the diverse interrelationships among market opportunities constraints

and directives at various levels of the supply chain and at different levels of influence, from

which specific value addition takes place. This feature of the VCA lends to its completeness, as a

strategic tool in exploring different alternative strategies for poverty reduction. The value chain

analysis model used for this study adopted from Asean Foundation and Asia DHRRA (2008)

which is presented in Figure 2.2.

VCA is a method for accounting and presenting the value that is created in a product or service

as it is transformed from raw inputs to a final product consumed by end users and typically

involves identifying and mapping the relationships of four types of features: (i) the activities

performed during each stage of processing; (ii) the value of inputs, processing time, outputs and

value added; (iii) the spatial relationships, such as distance and logistics, of the activities; and,

(iv) the structure of economic agents, such as suppliers, the producer, and the wholesaler (FIAS,

2007). The policy and reform agenda that typically emerges from the value chain approach

relates to three core areas (i) Product market issues (e.g., trade policy, competition policy, price

31

distortions, subsidies, licensing, product standards, customs, logistics, property rights,

enforcement of regulations); (ii) Factor market issues (e.g., wages, capital charges, utility market

issues, labor market rigidities, land price, zoning); and (iii) Market related issues (e.g., market

diversification, research and development, product diversification, supplier linkages).

2.9.4 SWOT analysis

The Strength, Weakness, Opportunities and Threat (SWOT) are a powerful tool used in

developing strategies for intervention. The tool provides a framework for understanding

controllable and non-controllable factors that the interventions should address for the entire

value-chain. The critical issues of the SWOT are generally categorized into the following four

broad categories:

S - What are the subsectors internal Strengths?

W - What are the subsectors internal Weaknesses?

O - What external Opportunities might move the subsector forward?

T - What external Threats might hold the subsector back?

The typical assessments of subsector’s strengths and weaknesses as well as the opportunities and

threats specific to each of the interventions consist of the following:

Figure 2.2: Value chain analysis model Source: Adopted from Asean Foundation and Asia DHRRA (2008)

Policies Rules and Regulations

Infrastructure & Enterprise Development Facilities

Research & Technology & Institutional Services

Socioeconomic & Cultural Consideration

Enabling environment

Input

Suppliers

Producers

Proce ssors Wholesalers Retailers Consumers

Exporters

Capital Flow

Information Flow

32

Production system and delivery of products in the value chain

Quality of business service provisions

Competitive advantages of the value chain members

Market access, infrastructure, management information and financial systems

Policy environment.

While designing the interventions, the focus is generally given on the exploitation of strengths

rather than simply addressing on the weaknesses. In other words, the interventions are not only

about addressing the constraints, but also nurturing the strength of the subsector. He further

stated that similarly the opportunities and threats - the external trends that influence the subsector

are also analyzed. The external opportunities and threats are usually categorized into political,

economic, social, technological, demographic and legal forces. These external forces include

such circumstances as changing business trends, increased competition, changing regulations,

and so on. They can either help the subsector move forward (opportunities) or hold the subsector

back (threats) -- but opportunities that are ignored can become threats, and threats that are dealt

with appropriately can be turned into opportunities. The non-controllable factors are generally

dealt through advocacy and networking to bring about changes in the policy framework”.

2.10 Conclusion

This chapter dealt with the conceptual framework for value chain approach to address the issues

of horticulture sub-sector and techniques used for value chain mapping, value chain research,

value chain analysis and value chain development strategies for seeking sustainable outcomes of

horticulture sub-sector in the country.

Agriculture is becoming increasingly integrated and smallholders are often disadvantaged, and

therefore action must be taken to help them in drawing profit from their integration into the

33

markets. International experience has shown that an important strategy for increasing the

incomes of smallholders in developing countries is to help them diversify from low-value staple

food commodities into higher value agriculture such as livestock, dairy products, fish, fruits,

vegetables, and spices. In order to provide some feasible measures and suggestions about how

smallholder can switch to high value food commodities with minimum transaction cost and

market risks in Punjab, Pakistan, agricultural value chain approach/framework was adapted.

As this study focuses on value chain analysis of mango, citrus and tomato in Punjab province of

Pakistan, therefore, Multan, Rahim Yar Khan and Muzaffargarh districts were selected for

mango as these districts comprised 80 percent of mango area in Pakistan’s Punjab. Sargodha,

MandiBahauddin and Toba Take Singh were selected for conducting the citrus value chain

analysis. Muzaffargarh, Nankana Sahib, Gujranwala and Sheikhupura districts were selected for

tomato, as these districts contribute 40 percent in tomato production to Punjab. For this purpose a

sample of 702 producers, 57contractors, 18 exporters, 73 commission agents, 69 wholesalers, 95

retailers and 1300 consumers of mango, citrus and tomato was selected. Transaction economics,

profitability analysis and SWOT analysis were used to study the policy environment and

horticulture sector overview, structure conduct and performance of horticultural value chain,

effects of horticultural value chain on small farmers and strategic options to integrate the small

farmer into horticultural value chain following the methodology of Birthal et al., ADB, IFPRI

and Vorley and Bienabe.

34

CHARACTERISTICS OF

HORTICULTURAL VALUE CHAIN

OPERATORS AND SUPPORTERS

This chapter attempts to present an inventory

of market players with their characteristics

and description of horticulture chain actors

(primary and secondary) along their functions.

35

Chapter – III

CHARACTERISTICS OF HORTICULTURAL VALUE CHAIN OPERATORS AND SUPPORTERS

3.1 Introduction

The success or failure of a value chain intervention depends principally on the partnerships that

are built between actors and support providers that participate in a particular chain (Lundy et al,

2004). The VC approach therefore requires that the VC operators are clearly identified. This

information enables the VC supporters involved in the design and implementation of strategies to

increase competitiveness and to promote the fair distribution of income among the VC actors.

Following this introduction, this chapter attempts to present an inventory of VC operators with

their characteristics and description of horticulture chain actors along their functions. There are

two types of VC operators namely; the primary VC operator and secondary VC operators. The

primary VC operators include inputs suppliers, growers, contractors, commission agents,

wholesalers, retailers, processors, exporters and consumers. The secondary VC operators include

research and development institution, transportation, market and communication, government

policy and regulatory policy. Following this introduction, the socio-economic profile of primary

chain actors is narrated in section 3.2. The activities / functions and description of primary and

secondary actors are presented in section 3.3 and 3.4 respectively.

3.2 Socio-Economic Profile of Primary Actors

3.2.1 Socio-economic profile of sample growers and their farms

The growers are the primary and most valued actors in the chain. Basically, two categories of

producers small and large, small farmers generally have up to 5 hectare and large farmers more

than 5 hectare on their farm. They perform almost all production functions and about 23 percent

overall farmers also perform harvesting function on their own or on a labour sharing basis. The

socio-economic characteristics of sample growers of selected fruits are presented in Table 3.1.

The sample farmers were of middle age group as the average age was about 41 years for all the

36

selected fruits and vegetable. This observation is quite similar to other socio-economic studies

conducted in Punjab (Sharif, 1986). Most of the growers were having low education as the average

education ranges form 6 to 9 years of schooling. However they had good farming experience of

almost 20 years. There was very little difference across the selected horticultural enterprises for age,

education and farming experience. An important difference between fruits (mango, citrus) and

tomato growers was found that the fulltime involvement in farming was high in the vegetable

farmers whereas the fruit farmers were engaged in farming as part time.

The most dominant family system was still joint family system as the joint family system was 55 to

68%. However in the small farmers joint family system was less as compared to large farmers for

all the three enterprises of the horticulture under discussion. Similarly the average family size of the

large farmers was large as compared to small farmers. The family size of small farmers ranged

between 7 and 10 for mango, citrus and tomato growers while large farmers family size ranged

between 9 and 13 members (Table 3.1).

Table 3.1: Socio-economic profile of the sample growers

Characteristics Mango Citrus Tomato

Small Large Over All Small Large Over All Small Large Over All

Farmers (#) (%)

18970

8030

269100

18867

9333

281100

11476

3624

150100

Age (Years) 41 40 41 42 42 42 41 42 41

Education (Years) 6 8 7 7 9 7 8 9 8

Farming experience (Years) 21 18 20 21 20 20 27 21 26Farmer involvement(%Full time) 27 36 29 47 38 44 74 75 73Family system (% joint) 65 74 68 63 67 64 53 68 55Family size (#) 10 13 11 7 9 8 9 11 10

Source: Survey results 2009-10

The farm characteristics of the sample mango, citrus and tomato growers are presented in Table

3.2. The average own land of the fruit growers was almost alike however the own land holding

of the tomato growers was less and almost half of the fruit growers for both small and large

farmers. The land tenural arrangements indicated that the tomato growers mostly rent inland

while fruit growers rent out land resulting in almost similar level of operational holding for all

the sample growers of fruits and vegetables. The operation land holding of the small farmers was

5.74, 7.48 and 7.27 acre for mango, citrus and tomato growers respectively. The operational

37

holding of the large mango growers was 50 acres, citrus growers 21 acres and tomato growers 33

acres.

One of the important results of the study as emerged from the analysis of farm characteristics is

that the percent allocation of operational holding to high value crops at small farms was high as

compared to large farmers in all the three selected commodities. The allocation to tomato

(vegetable) as percent of total operational area was less as compared to fruits. All the sample

farmers were from irrigated area and canal was the main source of irrigation but mostly

conjunctive water was being used. However more tube well water was used in tomato growing

areas as compared to mango and citrus.

Table 3.2: Land holding, orchard area and source of irrigation of growers

(acres)

Characteristics Mango Citrus TomatoSmall Large Over All Small Large Over All Small Large Over All

Farmers (#) (%)

18970

8030

269100

18867

9333

281100

11476

3624

150100

Own land 6.03 52.33 19.80 6.42 25.47 12.72 3.37 13.13 5.63Rented in 0.31 8.60 2.77 0.84 0.55 0.75 3.02 20.03 6.95Rented out 0.93 11.56 4.09 0.09 1.08 0.42 0.31 0.37 0.33Shared in 0.04 0.04 0.04 0.35 0.19 0.30 1.23 0.62 1.09Shared out 0.32 2.03 0.83 0.03 0.55 0.21 0.04 0.00 0.03Operational 5.74 50.34 19.00 7.48 24.57 13.14 7.27 33.41 13.31Orchard/Vegetable(percent of operational area) 54 41 49 66 48 59 27 17 24Irrigation Source PercentCanal 3 8 5 6 3 5 1 0 1Tube well 19 8 15 4 9 5 43 30 41Canal & Tube well 78 84 80 90 88 89 56 70 59Source: Survey results 2009-10

3.2.2 Characteristics of sample contractors

Contractors play an important role in bridging the link between mangoes growers and wholesale

market actors and exporters. They buy mangoes and citrus from the farmers and supply them to

the local city commission agents, other cities commission agents and exporters. Contractors are

guided, financed and given information by commission agents to whom they are effectively

financially bound. Contractors and contracting scenario were found differently for mango and

citrus while in tomato self marketing was prevailing and no contract out services were reported.

38

In mango contractors with family background from farm, business and business plus farm --

families were found whereas in citrus all the contractors were having some business besides

farming while 21 percent were purely from business community. The education of citrus

contractors was better than mango contractors while mango contractors were having more

experience. Nearly one third of both mango and citrus contractors were doing business in

partnership and all have obtained credit (Table 3.3). The contractors do business with the

commission agents and their selection criteria are mainly the honesty of the CA while good reputes

and working relation in the past were also equally important. With the advancement in

communication technology all have mobiles with them. The characteristics of the sample

contractors are presented in Table 3.3.

Table 3.3: Characteristics of sample contractors in the study area

Characteristics Mango Citrus Tomato

Age (years) 40 39 38Education (years) 6 10 14 Contract Exp. (Years) 16 11 15Farm Family (%)Business Family (%)Farm & Business (%)

153154

02179

132066

Partnership (%) 33 30 29Credit obtained (%) 100 100 100Selection criteria for CA: (%) - Good repute - Honest - Long working relation

30.0045.0025.00

25.0050.0025.00

304426

Own/mobile (%) 100 100 100Source: Survey results 2009-10

3.2.3 Characteristics of sample commission agents

The information on the characteristics of the commission agent is presented in Table 3.4.

Commission agent is an important member of fruits and vegetable marketing system of Pakistan.

He has a permanent place of business in the fruit and vegetable markets. All the sample

commission agents were of middle and old age with an average education of 9 years of schooling

and 18-23 years of experience. They were doing business mostly in partnership as 75% in mango

and 80% both in citrus and tomato they had partnership and only 25 to 20 percent working as

sole entrepreneurs. Mostly fruit commission agents were from business community in mango

39

while in citrus and tomato they were also farming along with commission agent. Majority of

tomato commission agents belong to farm families. All of them were having good

communication facilities both mobile and landline telephone and they were well connected with

other markets.

Table 3.4: Socio-economic characteristics of sample commission agents

Characteristics Mango Citrus TomatoAge 44 46 49Education (Years) 09 09 09Business exp. (Yrs) 19 23 18Business type (%): - Sole- Partner

2575

2080

2080

Farm Family (%)Business Family (%)Farm & Business (%)

005644

064153

524404

Communication facility (%)TelephoneMobile

100100

100100

10075

Contacts in other markets (%) 100 100 100Source: Survey results 2009-10

3.2.4 Characteristics of sample wholesalers

The information on the characteristics of sample fruits and vegetables wholesalers is presented in

Table 3.5. The wholesaler is important intermediary in the marketing channel. He purchases the

produce from the commission agent and sells to retailers. He also some time grades and repacks

the produce. In other words the wholesalers operate between the commission agent and the

retailer. The wholesaler operates exclusively in the market and works closely with commission

agents. Sometimes he may withhold the stock to create shortage and manipulate prices. The

improvements in packing also help him in getting higher price. Some wholesalers purchases

from contractors through commission agents and sell to other markets after washing and cleaning

or packing. The mean age of the sample fruits and vegetable wholesaler was ranged from 38-46

years with 16 to 23 years of business experience of wholesale market. These wholesalers of fruits

and vegetable are located with the commission agents in the markets and deal the large volume

of fruits and vegetables. Majority (100 %) of sample wholesalers belong to farm family. And 85-

95% were working as sole proprietor and all purchase from commission agents and work in the

40

market. The volume of business of mango wholesalers was 415 crates, citrus 278 crates and

tomato 112 crates on daily basis. All of the wholesalers had own telephone for communication

(Table 3.5).

Table 3.5: Socio-economic characteristics of sample wholesalers

Characteristics Mango Citrus Tomato

Age (Years)Education (Years)Business experience (Yrs) Business Family (%)Sole proprietor ship (%)LocationBusiness qty daily in season (crate)Purchasing through CA (%)

38051610095

Market415100

46072310085

Market278100

3808169590

Market112100

Source: Survey Results 2009-10

3.2.5 Characteristics of sample retailers

The last intermediary in marketing channel is the retailer. The information on the chrematistics

of sample retailers for fruits and vegetables is presented in Table 3.6. The average age of the

sample fruits retailer ranged from 35-41 years for mango, citrus and tomato. On average, the

business experience of sample fruits retailer was 13, 11 and 12 years for mango, citrus and 12

years. Mostly they purchase from wholesalers and sell at retail price.

Table 3.6: Characteristics of the sample retailers

Characteristics Mango Citrus TomatoAge (Years) 41 35 38Education (Years) 05 06 05Business exp. (Years) 13 11 12Location Mandi, bazaar and bus/

wagon stopMandi, bazaar and bus/

wagon stopMandi, bazaar and bus/

wagon stopBusiness quantity (crates/day) 4.35 4.70 3.40Purchasing from wholesaler (%) 100 70 75Selling at retailer price Yes Yes Yes

3.2.6 Characteristics of sample consumers

Consumers were interviewed for their socioeconomic characteristics. The average household size

for mango consumers was 8 and 9 for citrus and tomato consumers. The average age varies from

36 to 45 years and education above matriculation as the average education was 12, 13 and 10

years for mango, citrus and tomato. Majority of them belong to government servants followed by

41

business while 75 to 80 percent purchase from retailers and remaining from wholesale market

and street hawkers as presented in Table 3.7.

Table 3.7: Characteristics of the sample consumers

Characteristics Mango Citrus TomatoAge (Years) 36 41 45Family size (#) 8 9 9Education (Years)

124030

135010

102545

Source of income (%):- Government servant- Business- Overseas- Others

55150228

52270120

40200139

Source of purchase of fruits and vegetables (%): - Shop- Wholesale- Hawker

800510

750718

900505

Source: Survey results 2009-10

3.3 Activities / Functions and Description of Primary Actors

Wholesale markets at Multan, Muzaffargarh, Rahim Yar Khan, Sargodha and Lahore are being

run by the association of commission agents having office bearers namely President and General

Secretary. There is market committee and regulations in the wholesale markets. The products are

sold to local shopkeepers and the contractors also purchase the produce to bring to the down

country from these markets. Even the consumers may directly purchase from these markets

sometimes (Sharif, 2011). The primary actors include input suppliers, growers, contractors,

wholesalers, retailers, processors and exporters. The activities / functions and brief descriptions

of primary actors are presented in Table 3.8, 3.9, 3.10, 3.11, 3.12, 3.13, 3.14 and 3.15

respectively.

42

Table 3.8: Activity/functions and the description of input suppliers/nursery

developers

Items Mango Citrus TomatoActor Input dealers Input dealers Input dealersActivities/functions

Provide agro-input and advisory services to growers

Provide agro-input and advisory services to growers

Provide agro-input and advisory services to growers

Description Input suppliers are important partners of mango growers because they provide these inputs for the success of mango production. This requires them to identify the most appropriate inputs product. Whenever required, these input dealers advise the growers. Commission agent also provide fertilizer and pesticide to the mango growers.

Input suppliers are important partners of citrus growers because they provide these inputs for the success of mango production. This requires them to identify the most appropriate inputs product. Whenever required, these input dealers advise the growers. Commission agent also provide fertilizer and pesticide to the citrus growers.

Input suppliers are important partners of tomato growers because they provide these inputs for the success of mango production. This requires them to identify the most appropriate inputs product. Whenever required, these input dealers advise the growers. Commission agent also provide fertilizer and pesticide to the tomato growers.

Nursery developer

Nursery developer Nursery developer Nursery developer

Activity Produce mango seedlings Produce citrus seedlings Produce tomato nursery plantsDescription Public (limited level) and

private sectors involved in the mango nursery raising business. Some mango growers also involved in the mango nursery raising business

Public (limited level) and private sectors involved in the citrus nursery raising business. Some citrus growers also involved in the citrus nursery raising business

Majority of tomato growers are involved in raising the tomato nursery plants

Table 3.9: Activity/functions and description of growers

Items Mango Citrus TomatoActor Growers Growers GrowersActivities/functions

Produce mango, harvest/pre-harvesting, grade, treat, package, bulk, (retail).

Produce citrus, harvest/pre-harvest contracting, grade, treat, package, bulk, (retail).

Produce tomato, harvest/pre-harvest selling to beopari, package, bulk, (retail).

Description There are two main categories of mango growers namely small and large farmers.

Producer lack of information and knowledge for orchard cultivation and management.

Large farmers in general and small farmers particular are working in bad conditions.

There are two main categories of citrus growers namely small and large farmers.

Producer lack of information and knowledge for orchard cultivation and management.

Large farmers in general and small farmers particular are working in bad conditions.

There are two main categories of tomato growers namely small and large farmers.

Producer lack of information and knowledge for orchard cultivation and management.

Large farmers in general and small farmers particular are working in bad conditions.

43

Table 3.10: Activity/functions and description of contractors

Items Mango Citrus TomatoActor Contractors Contractors Self marketing

Activities/functions

Mango pre-harvest contractSmall farmers --- 71%Large farmers --- 82%

Mango self marketingSmall farmers

--- 29%Large farmers

--- 18%

Mango buying stages: Flowering stage =

15%Fruit formation =

26%Early maturity = 8%Matured =

20%

Labor involved in mango harvesting facing poor working condition.

Lack of skilled harvesters, collectors, packers and transporters for mango.

Citrus pre-harvest contractSmall farmers --- 94%Large farmers --- 96%

Citrus self marketingSmall farmers

--- 6%Large farmers

--- 4%

Citrus buying stages: Flowering stage

--- 5%Fruit formation

--- 3%Early maturity

--- 29%Matured

--- 48%

Labor involved in citrus harvesting facing poor working condition.

Lack of skilled harvesters, collectors, packers and transporters for citrus.

Tomato self marketingSmall farmers ---

100%Large farmers ---

100%

Labor involved in citrus harvesting facing poor working condition.

Lack of skilled harvesters, collectors, packers and transporters for citrus

Description Contractors play an important role in bridging the link between mangoes growers and wholesale market actors and exporters.

They buy mangoes from the farmers and supply them to the local city commission agents, other cities commission agents and exporters.

Contractors play an important role in bridging the link between citrus growers and wholesale market actors and exporters.

They buy citrus from the farmers and supply them to the local city commission agents, other cities commission agents and exporters.

Farmers sell their tomato by themselves. Exceptional cases are there.

Table 3.11: Activity/functions and the description of commission agents

Items Mango Citrus TomatoActor Commission agents Commission agents Commission agents

Activities/functions

Provide platform to conduct auction, and to do packing and repacking of products

Provide platform to conduct auction, and to do packing and repacking of products

Provide platform to conduct auction, and to do packing and repacking of products

Description The commission agent is a typical marketing middleman, who has a paternalistic relationship with the producers, contractors on the one hand and with the wholesalers and retailers on the other hands

The commission agent is a typical marketing middleman, who has a paternalistic relationship with the producers, contractors on the one hand and with the wholesalers and retailers on the other hands

The commission agent is a typical marketing middleman, who has a paternalistic relationship with the producers on the one hand and with the wholesalers and retailers on the other hands

44

45

Table 3.12: Activity/functions and description of wholesalersItems Mango Citrus TomatoActor wholesalers Wholesalers wholesalersActivities/functions

Bulk, storage, transport and grade

Bulk, storage, transport and grade

Bulk, storage, transport and grade

Description Wholesalers operate between the commission agent and the retailer

The wholesaler operates exclusively in the market and works closely with commission agents.

Sometimes he may withhold the stock to create shortage and manipulate prices.

The improvements in packing also help him in getting higher price.

Some wholesalers purchases from contractors through commission agents and sell to other markets after washing and cleaning or packing

Wholesalers operate between the commission agent and the retailer

The wholesaler operates exclusively in the market and works closely with commission agents.

Sometimes he may withhold the stock to create shortage and manipulate prices.

The improvements in packing also help him in getting higher price.

Some wholesalers purchases from contractors through commission agents and sell to other markets after washing and cleaning or packing

Wholesalers operate between the commission agent and the retailer

The wholesaler operates exclusively in the market and works closely with commission agents.

Sometimes he may withhold the stock to create shortage and manipulate prices.

The improvements in packing also help him in getting higher price.

Some wholesalers purchases from contractors through commission agents and sell to other markets after washing and cleaning or packing

Table 3.13: Activity/functions and description of retailersItems Mango Citrus TomatoActor Retailers Retailers RetailersActivities/functions

Grade and retail

Grade and retail Grade and retail

Description The retailers are the last link between the producers and their consumers.

There are three types of retailers i.e. shopkeeper, carrier (pushcart/street hawker) working in bazaars and bus stops and small pharias operating at the market.

The retailers are the last link between the producers and their consumers.

There are three types of retailers i.e. shopkeeper, carrier (pushcart/street hawker) working in bazaars and bus stops and small pharias operating at the market.

The retailers are the last link between the producers and their consumers.

There are three types of retailers i.e. shopkeeper, carrier (pushcart/street hawker) working in bazaars and bus stops and small pharias operating at the market.

Table 3.14: Activities/functions and description of processorsItems Mango Citrus TomatoActor Processors Processors ProcessorsActivities/functions

Grade, process and distribute

Grade, process and distribute Grade, process and distribute

Description The processors buy mangoes directly from farmers and from contractors

There are 25 mango processing units in Multan, Khanewal, Sahiwal and Lahore

Labor involved in mango processing units are facing poor working

The processors buy citrus directly from contractors

There are 120 citrus processing units in Sargodha and Karachi

The citrus are purchased through contractors, transported, washed, waxed, graded, packed and exported

The processors buy tomato from farmers, contractors and commission agents

There are 3 tomato processing units in Sahiwal and Lahore

Labor involved in tomato processing units are facing poor working conditions

46

conditions Limited

investment made by mango processors in new product technology

Very limited share of mango is being processed

Labor involved in citrus processing units are facing poor working conditions

Limited investment made by citrus processors in new product technology

Very limited share of citrus is being processed

Limited investment made by tomato processors in new product technology

Very limited share of tomato is being processed

Tomato processors import tomato pulp for processing purpose.

Table 3.15: Activities/functions and description of exportersItems Mango Citrus

Actor Exporters Exporters

Activities/

functions

Bulk, link Bulk, link

Description There are 6 mango

exporters in Multan and 20 exporters in

Karachi

There is no alliance of

mango exporters who jointly purchase and

export

Poor product quality

and poor packaging are observed

There are 25 citrus exporters in Sargodha and 10 in

Karachi

There is one alliance of 3 citrus processing enterprises

in Sargodha who jointly purchase from growers,

processed and exporter.

Poor product quality and poor packaging are observed

3.4 Activities / Functions and Description of Secondary Actors

In the mango, citrus and tomato, there are various categories of supplementary service suppliers

and different types of institutional support that define the business environment in the sample

districts surveyed. The most important of these are governmental institutions, including: Federal

Seed Certification and Registration Department (FSC&RD), Mango Research Institutions

Multan, Citrus Research Institute, Sargodha, Local Government District Councils, Ministry of

National Food Security and Research (NFS&R), University of Agriculture Faisalabad, Pakistan

Horticultural Development and Export Company (PHDEC), National Accreditation for

Agriculture and Food, Trade Development Authority of Pakistan (TDAP), Small and Medium

Enterprises Development Authority (SMEDA), Trading Corporation of Pakistan (TCP), Pakistan

Agricultural Research Council (PARC), Ayub Agricultural Research Institute, Faisalabad,

Punjab Agriculture Department (Marketing Wing), Agricultural Policy Institute (API) and

Department of Plant Protection (Table 3.16).

47

Table 3.16: Secondary actors, activities and description

Secondary Actors Activities/functions DescriptionR&D institution Conduct research

and development of mango, citrus and tomato

There is a horticulture section in almost all of the research establishments located in study areas of Punjab province. Mango, citrus and tomato variety evaluation, agronomic trials, fruits nurseries, vegetable (including potatoes) farming are their major activities.Very limited new high yielding cultivars have been developed despite the fact that there are number of institutions for R&D in the study area. The extension system in the study area remains ineffective, and whatever limited research and development work done is not properly transferred to end-users.

Transportation Transporting of mango, citrus and tomato from farm to market

Both railway, roads and air transportation facilities are available almost in surveyed districts of mango and citrus. In case of tomato road and railway facilities are available in tomato surveyed districts

Market and communication

Information availability and market place

There are regular fruits and vegetable markets in the surveyed districts. These markets are linked with other provinces and terminal market at Karachi. All these markets are very well connected in case of communication.

Government policy

Efficient and profitable production in horticulture sub-sector

Government of Pakistan has prepared horticulture policy in 2007 with the vision of transformation of country’s horticulture into a vibrant, sustainable, market driven and export based industry. The main objectives are (i) achieve efficient and profitable production and marketing (ii) deliver appropriate quality and safe products in local and export markets (iii) enhance export competitiveness and value added (iv) develop an industry to be profitable for investors and operators.

Regulatory policy Implementation of regulatory policy

Current policy and regulatory framework for horticulture sub-sector is not functioning properly and creates hurdlers in the horticultural development strategy.

These government agencies offer a wide range of support to horticultural chains, including seed

multiplication, research activities, private sector support, lobby and advocacy, legislatorial

functions, policy development and districts / local level training and extension services. The

second category of supportive institutions includes NGOs, Private Sector Horticultural

associations and Donor supported programs that offer farm-to-market chain facilitators and

integrators. Some of these government institutions and private sector play a crucial role in

developing chain capabilities and chain management competencies in the surveyed areas. The

brief description activities and functions of these actors are briefly presented in Table 3.16.

3.5 Conclusion

This chapter dealt with portraying the profile of Value Chain (VC) operators. There are two

types of VC operators; the primary VC operator, which include inputs suppliers, growers,

contractors, commission agents, wholesalers, retailers, processors, exporters and consumers, the

secondary VC operators that include research and development institution, transportation, market

and communication, government policy and regulatory policy.

48

Looking at the profile of the Primary VC operators it could be stated that the land tenure

arrangements indicated that the tomato growers mostly rent-inland while fruit growers rent-out land

resulting in almost similar level of operational holding for all the sample growers of fruits and

vegetables. The operation land holding of the small farmers was 5.74, 7.48 and 7.27 acre for mango,

citrus and tomato growers respectively.The sample growers were of middle age group having low

education and with farming experience of almost 20 years. The sampled contractors were

educated and had business experience of more than ten years. Majority of the sampled

contractors were doing business as a sloe proprietor while one third were operating in

partnership. Contractors do business with the commission agents and their selection criteria are

mainly the honesty of the CA while good reputes and working relation in the past were also equally

important. Similarly the sample commission agents were of middle and old age with an average

education of 9 years of schooling and 18-23 years of business experience. They were doing

business mostly in partnership, while one-fourth were doing business as sole entrepreneurs. All

the commission agents were having good communication facilities both mobile and landline

telephone and they were well connected with other markets. As for as, the wholesalers are

concerned, wholesaler operates exclusively in the market and works closely with commission

agents. The mean age of the sampled wholesalers was ranged from 38-46 years with 16 to 23

years of business experience. About 90% of the sampled wholesalers were working as sole

proprietor dealt more than 100 crates of tomato to 400 crates of mango per day. All of the

sampled wholesalers had own telephone for communication. The sampled retailers on the other

hand had an average age of 38 years with business experience of 11 years. Most of the sampled

retailers purchase the selected produce from wholesalers. Lastly the sampled consumers of citrus,

mango, and tomato were government servants and business community. Three-fourth of the

sampled consumers purchases these commodities from retailers.

Concluding the activities functions of different Primary Value Chain Operators (PVCO), all

operators are engaged at their own level in facilitating the quantity and quality of selected

produce enough to the consumers’ level of satisfaction at national and international level. In

support to PVCO, Secondary Value Chain Operators (SVCO) play important role on their part in

provision of supplementary services and creating conducive business environment. A long list of

49

SVCO including government organizations, statutory bodies, development institutes, civil

society and financial institutions are operating at their part in research, transportation,

information and regulations, which offer a wide range of support in developing chain capabilities

and chain management competencies.

50

MARKET ANALYSIS OF

HORTICULTURAL SUB-SECTOR

This chapter attempts to present the results of

global market analysis, regional market

analysis and national market analysis of

mango, citrus and tomato in Pakistan’s

Punjab.

51

Chapter - IV

MARKET ANALYSIS OF HORTICULTURAL SUB-SECTOR

4.1 Introduction

Horticulture is an important sub sector of world agriculture with 12% annual growth. It has a

pivotal role in the nutrition and income of the farm households around the world. Horticultural

crops are mostly cash crops and generate a significant cash income for farmers. Horticulture

have higher Employment, higher multiplier effect off- -farm jobs in processing, packaging, and

marketing (WB, 2008). Horticulture also has the potential for tremendous social impact on

employment creation and income generation as well as sustainability in term of better economic

use of water.

Horticulture is an important sub sector of agriculture of Pakistan and contributes about 12% to

the national agricultural GDP. Pakistan has not captured this opportunity yet, growing slower

than the world market (6% vs. 12% per year). Horticultural sector of Pakistan for increasing

export of premium quality horticultural produce (PHDEB, 2007). Horticulture sector also

offering multiple employment opportunities throughout the supply chain, particularly in rural

areas. However, its growth and profitability is restrained mainly by the lack of proper post

harvest management and transport infrastructure (PHDEB, 2007). The issues of the horticulture

sector in Pakistan are well recognized (i.e. low land dedicated to horticulture (6% of cropped

area, low productivity high losses low value added) however these are only symptoms of the

issue The present study has defined mango, citrus and tomato as a horticulture sub-sector of

agriculture sector.

4.2 Global Market for Mango, Citrus and Tomato

Mango is considered one of the most important tropical fruits in the world, accounting for

approximately 50 percent of total fruit production. About 90 percent of tropical fruits produced

globally are consumed in the producing countries themselves, while 10 percent are traded

internationally. Within international trade, fresh mango is one of the main products. Mango trees

52

originated in the foothills of the Himalayas of India and Burma India from where it spread early

on to Malaya, eastern Asia, eastern Africa and introduced California in 1880 (Ferguson & Co.,

2006). Mangoes are now widely grown in China, Pakistan, Bangladesh, Philippines, Haiti,

Mexico, Peru and Brazil.

The mango (Mangifera indica) is indigenous to the Indian Subcontinent and has been cultivated

in that region for at least 4,000 years. The mango is also cultivated in Latin America and tropical

and subtropical regions from Mexico to Chile. Most of the production is consumed locally,

although, India, Pakistan Mexico, Brazil, Peru and Netherlands are important exporters, India

was largest mango exporter in the world in 2008. Citrus fruits are among the most important

fruits grown worldwide. Citrus refers to a range of evergreen shrubs and tree species, which are

primarily grown for their fruit and occupy the largest area under cultivation.

4.2.1 Global mango production

The world production of Mangoes fruit experienced a steady and continuous growth in the last

decades of the twentieth century. Total 35.6 millions tones the top producers of mangoes are

India, China, Thailand, Indonesia, Pakistan and Mexico, (Table 4.1).

Table 4.1: Major mango producing countries of the world in 2009

Ranking Country Name Production (Tonnes) Percent

1. India 13557100 38

2. China 4140290 12

3. Thailand 2469810 7

4. Indonesia 2243440 6

5. Pakistan 1728000 5

6. Mexico 1509270 4

Others 9975786 28

World 35623696 100Source: FAO (2012)

53

4.2.2 Global citrus production

Total citrus production was over 123 millions tones. According to FAO, the top producers of

citrus are China, Brazil, USA, India, Mexico and Spain with 57 percent of world production.

China being the leading producer with 19 percent followed by Brazil 16 (Table 4.2).

Table 4.2: Major citrus producing countries of the world

Ranking Country Name Production (Tonnes) Percent

1. China 23088471 19

2. Brazil 19679646 16

3. U S A 10740150 9

4. India 8623080 7

5. Mexico 7161222 6

6. Spain 5240100 4

Others 48300625 39

World 122833294 100

Source: FAO (2012)

4.2.3 Global tomato production

The world production of tomato experienced a steady and continuous growth in the last decades

of the twentieth century. Total tomato production was over 154 millions tones in 2009 and

Pakistan’s production was 0.6 million tonnes as 35th largest producer in world. According to the

FAO, the top ten producers of tomato were China, USA, India, Turkey, Egypt and Italy. The six

major produces about 64 % of total world produce. China is the leading producer with 29%

global production of tomato (Table 4.3).

Table 4.3: Largest producers in the world (tonnes)

Ranking Country Name Production (Tonnes) Percent

1. China 45365543 29

2. USA 14181300 9

3. India 11148800 7

4. Turkey 10745600 7

5. Egypt 10278500 7

6. Italy 6878160 4

Others 55235464 36

World 153833367 100

Source: FAO (2012)

54

4.2.4 Global mango import

The trade of mangoes is global in scope. Though they are produced mainly in Asian regions, they

are traded and consumed in all parts of the world. According to FAO, the major mango

importing countries in 2009 were: USA, Netherlands, UAE, United Kingdom, and Malaysia.

Figure 4.1 Major mango importing countries

Source: FAO (2012)

4.2.5 Global citrus import

The trade of citrus is global in scope. According to FAO, the major Tangerines, mandarins, clem

importing countries in 2009 were: Russian Federation, Germany, France, UK, Netherlands and

Indonesia, these countries imports about 55 % of total world import of Tangerines, mandarins,

clem in value term (Figure 4.2).

55

Figure 4.2: Largest importers of tangerines, mandarins, clem

Source: FAO (2012)

4.2.6 Global tomato import

The world’s major tomato importers were USA, Germany, Russian Federation, UK, France,

Netherlands and Canada, countries imports 58 % of total world imports. Pakistan is not a major

player in import market. Data revealed that In 2009 Pakistan was the 13 th largest importer of

tomato in term of quantity in the world market (Figure 4.3).

Figure 4.3: Largest importers of tomato (%)

Source: FAO (2012)

56

4.2.7 Global mango export

The world’s major Mango exporting countries India, Mexico, Thailand Brazil Netherlands, and

Pakistan in order. In 2009 Pakistan was the 6th largest exporter of the mango in the world market

(Figure 4.4).

Figure 4.4: Major mango exporting countries in world

Source: FAO (2012)

4.2.8 Global citrus export

The trade of citrus is global in scope. According to FAO, the major Tangerines, mandarins, clem

major exporting countries in 2009 were: Spain, China, Turkey, Morocco, Pakistan and South

these countries exports about 78 % of total world exports of Tangerines, mandarins, clem in

volume term (Figure 4.5).

Figure 4.5: Largest exports of tangerines, mandarins, clem

Source: FAO (2012)

57

4.2.9 Global tomato export

The world’s major tomato exporters in tem of export volume in 2009 were Mexico, Netherlands,

Spain, Turkey and Jordan. These countries contribute 68 % of total world exports. Pakistan is not

a major player in export market. Data revealed that in 2009 Pakistan was the 20 th largest exporter

of tomato in term of quantity in the world market (Figure 4.6).

Figure 4.6: Largest tomato exporters’ (%)

Source: FAO (2012)

4.3 Regional Market Analysis for Mango, Citrus and Tomato

4.3.1 Mango in the region

Asia produces about 76 percent of the world mango production. Pakistan is 5 th largest producer

of Mango Asia with 6 percent of region production. Six major producers in Asia produced about

92 percent of region production (Table 4.4).

Table 4.4: Major mango producing countries in Asia

Ranking Country Name Production (Tonnes) Percent1. India 13557100 502. China 4140290 153. Thailand 2469810 94. Indonesia 2243440 85. Pakistan 1728000 66. Bangladesh 828161 3

Others 2108890 8Asia 27075691 100

Asia Percent of World Production 76

58

Source: FAO, (2012)

4.3.2 Citrus in the region

Asia produces about 41 percent of the world production of citrus. Six major producers in Asia

produced about 84 percent of region production. Citrus growers in Asia also exports about 37

percent Tangerines, mandarins, clem of the world total. Pakistan is 3rd largest exporter of

Tangerines, mandarins, clem of the Asian region (Table 4.5).

Table 4.5: Major citrus producing countries in Asia

Ranking Country Name Production (Tonnes) Percent1. China 23088471 462. India 8623080 173. Turkey 3513771 74. Iran (Islamic Republic of) 3135050 65. Pakistan 2132000 46. Indonesia 2131770 4

Others 7891986 16Asia 50516128 100

Asia Percent of World Production 41

Source: FAO (2012)

Citrus are traded and consumed in all parts of the world Pakistan is 13 th largest producer of

citrus.

4.3.3 Tomato in the region

Asian region produces 51 % of world tomato production. In Asia six major producers produced

about 89 % of regional tomato production and china is the major producer with 53 % followed

by India, turkey Iran, Uzbekistan and Syrian Arab Republic (Table 4.6).

Table 4.6: Largest Asian producers in world

Ranking Country Name Production (Tonnes) Percent1. China 45365543 532. India 11148800 133. Turkey 10745600 134. Iran (Islamic Republic of) 5887710 75. Uzbekistan 2110000 26. Syrian Arab Republic 1165610 1

Others 9121883 11Asia 85545146 100

59

Asia Percent of World Production 51

Source: FAO (2012)

Asia produces about 56 % of the world production of tomato. China, India, Turkey and Iran are

major tomato producing countries in Asia. Pakistan produces only 1 percent of Asian production

of tomato. In term of trade, Asian region share in exports was about 24 % of the world and only

14% of world import of tomato. In 2009 Pakistan tomato imports were 12 % total import of

world import into Asia.

4.4 Mango, Citrus and Tomato Production in Pakistan

This section deals with the varieties and production of these commodities in the country.

4.4.1 Mango varieties

Mango is one of the major fruits of Pakistan. It is mainly grown in the Punjab and Sindh

provinces. Mango season in Pakistan starts with harvest from Sindh province in late May and

finishes in Punjab in late August. Major mango varieties grown in Pakistan are Chounsa and

Sindhri whereas other varieties (Dosehri, Malda, Swarnarika, Langra, Siroli, Alphonso, Gulab

Khas, Fajri, Golden, Anwar Ratol and Began Phali) are also grown in some parts of the Punjab

and Sindh provinces. Chounsa variety dominates in Punjab. Chounsa variety of Punjab

considered by industry as good variety in terms of taste and demanded both in the domestic and

international markets (PHDEB, 2005, Humara Multan, 2011).

4.4.2 Citrus varieties

Citrus is the leading fruit crop of Pakistan in terms of area, production and export. Citrus group

comprises of diverse species including mandarins, oranges, lemons, limes and grape fruits being

cultivated in all the four provinces. However, Punjab province leads in citrus area and

production. Particularly, the Kinnow of District Sargodha (Bhalwal and Kot Momin area) is

famous for its excellent blend of taste, flavour and aroma. Most common physiological problems

of citrus include alternate bearing, fruit drop and granulation. The diseases include citrus canker

and citrus wither tip and the prominent insects of citrus include citrus psylla, citrus leaf miner,

60

scales, mite, etc. Looking at national level, over 96% of citrus is grown in Punjab, of which

47.9% is grown in district “Sargodha”. Since Kinnow (mandarin) is the predominant variety,

which is more suitable for fresh consumption. Pakistan needs to develop more packing, grading,

storage and reefer transportation facility for its export. Future development in citrus processing,

storage and export will remain centered in Sargodha. However, District Toba Tek Singh and

Mandi Bahauddin could be potential areas for establishing new grading, packaging and cold

storage facilities. The main varieties of citrus are: Mandarin: Kinnow, Feutrell‟s Early Sweet

orange: Blood Red, Musambi, Pineapple, Jaffa, Succri. Lemons: Eureka. Limes: Sweet lime,

Kaghzi lime. Grapefruit: Duncan, Foster, Shamber, Marsh Seedless

4.4.3 Tomato varieties

Tomato is relatively perennial plant and gives production throughout the year. The area and

production under tomato increased steadily over time. The main crop is produced in abundance

during summer and lowers the value of the produce in local market. However, its transportation

from one part to other part makes the market stable. The crop may suffer from rainy season

during its maturity. Major problems of tomato include bacterial canker, mosaic virus, and leaf

curl virus among diseases, while aphids and white fly are main insect pests. The main varieties of

tomato are: Lyallpur Selection-I, Peshawar Long, T-10, Money Maker, Roma, Red Top,

Marglobe, Elum-2, Roma-VF, Rio-Graind, Sunmarzano, Neema, Bright valley F-1 hybrid, Peto-

211, Peto-86, Yaki, NSC-48, and Pop.

4.4.4 Mango production

Pakistan has a wide range of climatic conditions and forms a natural resource base for the

production of a wide variety of horticultural crops. Mangoes are among the important

horticulture commodity that contribute to Pakistan’s economy through generating export revenue,

income and employment opportunities. The major mango cultivars in Pakistan are Chaunsa and,

Sindhri, however a large number of standard varieties have come onto being and is cultivated in

the different parts of Indo-Pakistan. The varietals nomenclature is so much confusing that one

variety carries many names at various places and some cases one name is applied to several

61

varieties. Langra, Aman Dusehri, Alphanso, Sammar Bahisht, Fajri Kalan, Muhammadwala,

Rataul (Anwar), Banganpali, Mango farms range in size from less than 2 hectares to more than

400 hectares (Collins et al., 2006). Mango is the second major fruit in Pakistan in terms of areas,

production and export volume. Pakistani mangoes are rich in Vitamin A, C and D and contain

carbohydrates, calcium, iron, potassium and little protein (Ferguson & Co., 2006).

Characterizing for the Pakistan mango market at the supply side is the high level of

fragmentation. Pakistan as 5th major producer of mango in world and within Pakistan, Punjab is

main mango producing areas with 77 % of Pakistan production. The major Mangoes growing

districts of Punjab are located in the cotton-wheat production system of Pakistan Punjab. The

five largest Mangoes growing districts in terms of production were Multan, Rahim Yar Khan,

Muzaffar Garh, Khanewal and Bahawalpur. In Punjab Pakistan mangoes are producing in 32

districts (Table 4.7). Chaunsa, Langra, Sindhri, Anwar Ratoul, Malda, Gulab Khas, Fajri,

Dusehri, Began Pali, Sensation are grown in Pakistan.

Table 4.7: Area, production and yield of mangoes in major producing districts of Punjab

Pakistan 2008-09

District Area(hectare)

Production(tonnes)

Production %of Punjab

Multan 31565 393028 29.67Rahim Yar Khan 28732 381606 28.80Muzaffar Garh 19222 195021 14.72Khanewal 13314 149813 11.31Bahawalpur 4350 40525 3.06Total Punjab 112413 1324875 Punjab % of Pak 77 Pakistan 171100 1727900 -Source: GOP, crop area and production (by districts), MINFAL 2010

4.4.5 Citrus production

Citrus is the leading fruit crop of Pakistan in terms of area, production and export. Citrus group

comprises of diverse species including mandarins, oranges, lemons, limes and grape fruits being

cultivated in all the four provinces. However, Punjab province leads in citrus area and production

with 97 % of national production (Table 4.8).

62

Table 4.8: Citrus production in sample districts (2008-09)

District/province/country Area Production Production %(hectare) (tonnes) of Punjab

Sargodha 89751 999632 49Mandi Bahauddin 10136 156224 8T.T. Singh 11412 160758 8Total Punjab 189784 2059507 100Pakistan 199940 2132276 97Source: GOP, crop area and production (by districts), MINFAL 2010

Citrus is among the most preferred fruits in Pakistan about 83 percent of total produce consumed

in domestic markets mainly in fresh form. With changes in the standard of living and increased

awareness about health, demand for fresh fruits is increasing in Pakistan.

4.4.6 Tomato production

According to statistics, the total tomato area of Pakistan is 53150 hectares and the area of Punjab

is 5576 hectares while the production of tomatoes in Pakistan is 561891 tonnes and in Punjab is

72475 tonnes. The percentage share of tomato area in Punjab is 10.3% and the share of tomato

production in Punjab is 13.07%. Tomato is grown in all districts of Punjab however for this study

four major tomato producing districts where selected for tomato value chain analysis. These

districts were Muzaffargarh, Nankana Sahib, Gujranwala and Sheikhupura (Table 4.9).

Table 4.9: Tomato production in sample districts (2008-09)

Districts Area (ha) Production (tonnes)

Area(%)

Production(%)

Muzaffargarh 587 7360 10.5 10.2Nankan Sahib 506 5832 9.1 8.0Gujranwala 544 8133 9.8 11.2Sheikhupura 433 5392 7.8 7.4Punjab Total 5576 72475 100.0 100.0Pakistan 53393 561891 - -Source: Crops area and production (by districts) 2007-08 & 2008-09, MINFAL, Islamabad

The percentage wise share of tomato area and production of major four districts are mentioned in

above table. Result revealed that Gujranwala is largest producer with 11.2 % production in

63

Punjab followed by Muzaffargarh 10.2 % and Nankana Sahib with 8.0 % and Sheikhupura with

7.4 % production in 2008-09.

4.5 Marketing Channels/Supply Chain of Mango, Citrus and Tomato

This section deals with the characterizing into main end markets or products for these

commodities. Here we will try to identify the main markets on which farmers products are sold.

It also deals with identifying the way by which these commodities reach end markets. It also

divides the subsector into several markets channels. The marketing channels of mango, citrus

and tomato are presented in Figure 4.7, 4.8 & 4.9 respectively.

4.5.1 Marketing channel of mango

It describes the routes taken by commodity from producers to consumers. They consist of

individuals and firms involved in the process of making the fruits or value added fruit products

available for consumption. Mangoes in sample area of Punjab Pakistan follow one of the

following two basic routes (Figure 4.7). Channel 1 involves pre-harvest contractors in between

growers and Commission agents/exporters or processors, whole sellers etc. It was noted that

majority of the farmers sell their orchard as a whole to contractors one or two months before

harvest. The deal entirely depends on trusting each other and these contractors tend to be regular

buyers of certain pockets of production or from certain groups of farmers. The contractors

perform transactional functions that involve buying arrangements, harvesting, sorting, grading,

packing and transport of fruits to markets etc. Generally, the contractors make a profit because of

their risk-taking functions but sometimes they can also come out at a loss due to lower market

prices. During the study it was observed that 71 percent small farmers sell their produce in the

hand of contractors. Channel 2 is the simplest one, in which growers themselves sell their

produce after harvesting packing and delivered to local markets to commission agents. Study

confirmed that 29 percent small fruit growers involved themselves in the direct marketing of

their Mangoes fruits.

64

4.5.2 Marketing channels of citrus

Marketing channels describe the routes taken by products from producers to consumers. They

consist of individuals and firms involved in the process of making the fruits or value added fruit

products available for consumption. Citrus in Pakistan follow one of the following four routes

(Figure 4.8): Channel A involves pre-harvest contractors in between growers and Commission

agents/exporters or processors. It was noted that mostly the growers sell their orchard as a whole

to contractors one or two months before harvest. The deal entirely depends on trusting each other

and these contractors tend to be regular buyers of certain pockets of production or from certain

groups of farmers. The contractors perform transactional functions that involve buying

arrangements, harvesting, sorting, grading and transport of fruits, overseeing the auctioning etc.

Generally, the contractors make a profit because of their risk-taking functions and advance

payments but sometimes they can also come out at a loss due to lower market prices. During the

study it was observed that 94 percent small farmers sell their produce in the hand of contractors.

Channel B is the simplest one, in which growers themselves sell their produce after harvesting

packing and delivered to local markets to commission agents. Study confirmed that 6 percent

small fruit growers involved themselves in the direct marketing of their Citrus fruits.

65

Figure 4.7: Marketing channels of mangoes distribution in Pakistan (small farmers)

Growers (pre harvest contract)71 %

Commission agent

Contractor

Exporters

Local Retailers

Consumers in Middle East Europe

Wholesaler

National Markets

Retailers

National Markets

Local Retailers

Wholesaler

2. Growers (Self marketing)29 %

Local Commission Agent

71 %

1.5 %94 % 4.5 %

1 %

38.5 %

28 %

28 %33.5 %

38.5 %28 %

33.5 %

73.1 %12.6 %

73.1 %

12.6 %

14.3%14.3%

CA/Wholesaler

Retailers at national market

Mango consumers (local +national)

100 % %%

CA/Wholesaler

66

Figure 4.8: Marketing channels of citrus distribution in Pakistan (small farmers)

4.5.3 Marketing channel of tomato

Marketing channels describe the routes taken by commodity from producers to consumers. They

consist of individuals and firms involved in the process of making the fruits or value added fruit

Growers (pre harvest contract)94 %

Commission agent

Contractor

Exporters

Consumers in Afghnistan. Russian fereration

Wholesaler

Processor

Retailers at national market

Wholesaler

2. Growers (Self marketing)6 %

62 %

14 %24 %

42 %34 %

36 %45 %

36 %5 %

89 %

6 %

89 %6 %

5 %

Retailers

Citrus consumers (local +national)

100 % %%

14 %

5 %

5 %

Commission agent

100 % %%

14 %

24 %

14 %

45 %

67

products available for consumption. Tomato in sample area of Punjab Pakistan follow one of the

following two basic routes (Figure 4.9): Channel 1 Growers market tomato through commission

agents, whole seller’s etc. farmers perform transactional functions that involve growing ,

harvesting, sorting, grading, packing and transport of to markets etc. During the study it was

observed that 99.5 percent small farmers sell their produce through this channel. Channel 2 is

the simplest one, in which growers themselves sell their produce after harvesting with loose

packing and delivered to tomato processing factory. But this channel is very small. A very small

has access to this channel.

Figure 4.9: Marketing channels of tomato distribution in Punjab Pakistan (small farmers)

Commission agent

Other Markets

17 %

CA/Wholesaler

Tomato consumers (fresh, products)

Channel 2 Growers

Processors

Local Retailers

Wholesaler

Channel 1. Growers

1 %99 %

15 % 67 %

74 %

2 %

22 %

Retailers at national market

100 % %%

1 %

2%

Product wholesaler

Product Retailers

68

4.6 Service Market for Horticulture Sub-Sector

The horticulture subsector identified a number of services used by the different horticulture

producers and the status of these services as well as related sales by the actors of the mango,

citrus and tomato value chain. Some of large farmers offer their facilities (tractors, sprayers, and

tubewell water) to the small farmers in exchange of price. These services become available

primarily because of the close clustered and intense internal harmony of the horticulture

producers in the study area. The following services are provided: (i) Pre-cultivation and

cultivation services (ii) Harvesting services (iii) Post harvesting and marketing services:

Service Phases

Type of services

Service providers

Pre-cultivation services

Knowledge and information about new seed varieties/seedling/ nursery plants and their cultivation techniques

Agricultural extension departments, private and public nursery producers Adequate services are not available Due to limited resources as well as poor knowledge about improved farming

techniques by the extension workers, nursery producers, the dissemination process is not properly functional

Moreover, the availability of such services from the seed testing laboratory only reaches a fraction of farmer’s who are near the urban or semi-urban areas

Mango, citrus and tomato producers are not satisfied with these services in the study area

Majority of the farmers get this information from farmers and local dealers. However, the quality of information is poor and the remote farmers get very little access to this information due to lack of knowledge by the local dealers. The farmers who purchase seeds for tomato and nursery plants from private and public nursery producers reported that they get update information from the service providers

Cultivation services

Knowledge and information about fertilizer and pesticide doses and their application techniques

The absence of source of appropriate knowledge and information about fertilizer and pest control has also been reported as one of the critical problems faced by the farmers.

The agricultural extension department is supposedly the primary supplier of this knowledge.

Due to limited resources the dissemination process is not at all functional. The majority of the farmers get this information from the chemical traders. However the quality of information is poor and the remote farmers get very little

access to this information due to lack of knowledge on the part of the local dealers.

Soil Testing The soil testing facilities are completely non-existent; as a result, the farmers either use an excessive amount of fertilizer or inappropriate fertilizers.

This significantly reduces yield and productivity of the mango, citrus and tomato producers

Tractor The cultivation is done by both powered equipment and manually (animal draft power).

The use of tractors is much higher in most of the areas About 10% small farmers use animal draft power to cultivate their lands because

of affordabilitySprayers Majority of the farmers rely on rented spray equipment from the pesticide dealers

69

or sprayer service providers. Sprayers are rented on hourly basis.

Tubewells This particular service is required by majority of the farmers generally who are beyond the coverage of irrigation canals.

Tubewells are also rented on hourly basis. The farmers outside the coverage of irrigation canals reported both unavailability

and inaccessibility of irrigation devises during peak seasonHarvesting and post-harvesting services

Knowledge and information about harvesting techniques, collections, grading and packaging material

Majority of farmers and contractor have limited/poor knowledge and information about harvesting techniques, collections, grading and packaging material.

Availability and affordability of packaging materials are two extremely critical problems faced by all the farmers.

The service market is not developed to provide value-added service to the farmers and contractors.

The quality of service is not only poor but also inadequate to serve the large number of large farmers in general and small farmers in particular.

The service market players are focused on relatively larger farmers with long term arrangement.

Lack of knowledge and skills as well as rudimentary technologies are one of the prime constraints faced by the majority of the farmers in the study area.

Trans-portations

The producers and traders have expressed their dissatisfaction regarding the availability of transportation services particularly in the rural areas.

The price of transportation is significant and the quality of service is generally poor.

Because of this both the producers and the traders lose about 30%-40% due to not reaching the market in time.

Cold storages

Cold storage facilities are seen as one of the critical factor in the overall profitability of tomato production and trading.

The excess supply of mango, citrus and tomato during the peak season can be stored and when the market price increases the products can be sold at the relatively higher price.

Currently there is very very limited cold storage facility available in mango, citrus and tomato producing areas of Punjab.

Lack of cold storage in Punjab province for preservation of tomatoes.

4.7 Conclusion

This chapter focused mainly on the market analysis of mango, citrus and tomato in Pakistan as

well as globally. Horticulture is an important sub sector contributes about 12% to the national

agricultural GDP of Pakistan. Pakistan is ranked fifth in respect of mango production of nearly 2

millions tons annually after, India, China, Thailand, and Indonesia. Though Pakistan do not fall

in top ten citrus producing countries with production of 123 millions tones annually but ranked

fifth in citrus export. Pakistan produces nearly 0.7 millions tones of tomato annually with

negligible share in world tomato production.

Reviewing the global import and export scenario of these selected commodities, USA is top

ranked in mango and tomato import while Russian Federation is top ranked in citrus import.

70

Similarly India is top ranked in mango export followed by Mexico, Spain in citrus followed by

China, and Mexico is top ranked in tomato export followed by Netherlands.

Sindhri and Chuansa are the most popular varieties of mango grown in Pakistan, kinnow,

Feutrell and blood red are the most common citrus varieties while Lyallpur Selection-I, Peshawar

Long, T-10, Money Maker, Roma, Red Top etc. are the common tomato varieties of tomato

grown in Pakistan.

Mango is marketed through two different channels in Pakistan: channel 1involves pre-harvest

contracts in between growers and Commission agents/exporters, processors, and/or wholesalers

followed by 71 percent farmers, channel 2is followed by 29 percent farmers where farmers

directly market their produce. Citrus too is marketed through two different channels in Pakistan:

channel 1involves pre-harvest contracts in between growers and commission agents/exporters

and/or processors followed by 94 percent citrus farmers, through channel 2farmers directly

market their produce and this channel is followed by only 06 percent citrus farmers. Similar

channels were observed in tomato marketing in the research area. Ninety nine percent tomato is

marketed through channel 1is where growers sell their produce to commission agents and/or

wholesalers while only one percent farmers opted channel 2where growers themselves sell their

produce after harvesting with loose packing and delivered to tomato processing factory.

A number of services have been identified used by different actors of mango, citrus and tomato

value chain. Some of large farmers offer their facilities (tractors, sprayers, and tubewell water) to

the small farmers in exchange of price. These services become available primarily because of the

close clustered and intense internal harmony of the horticulture producers in the study area.

Some of the common services were pre-cultivation and cultivation services, harvesting services,

post harvesting and marketing services.

71

VALUE CHAIN MAPPING OF

HORTICULTURAL SUB-SECTOR

This chapter presents understanding

relationships of chain actors. It also present

the visual representation of the connections

between businesses in value chains as well as

other market players of horticulture sub-

sector of Pakistan’s Punjab.

72

Chapter - V

VALUE CHAIN MAPPING OF HORTICULTURALSUB-SECTOR

5.1 Introduction

Herr and Muzira (2009) stated that value chain mapping is often confused with value chain

research or development itself (many value chain guides focus to a large extent on mapping

rather than the actual purpose of mapping: facilitating value chain development). They further

argued that drawing a value chain map is only a tool, an aid to illustrate the complexities of

sectors and their value chains. Mapping a horticultural chain means creating a visual

representation of the connections between businesses in value chains as well as other market

players and they help to identify bottlenecks and leverage points. Value chain mapping are

established using flow and grid charts. The flow chart looked at the different function in

horticultural value chain and illustrates them as process leading from raw material to final

consumption. This maps thus used for creating and inventory of market players along the

horticulture chain in Pakistan’s Punjab (Herr and Muzira, 2009). According to them, the grid

chart illustrates the different market channels within horticulture sector, thus underlining the fact

that value chains are never simple linear relationships, but rather a complex system with market

players feeding into different chains and markets. Grid chart illustrated different market channels

and includes further relevant information such as size of enterprise, number of workers, nature of

relationships and a flow chart illustrated different levels in the value chain and serves as a basis

for an inventory of market players of horticulture subsector as well as an analysis of

opportunities and constraints by value chain level, or for showing key information for each level

(e.g. prices) in this subsector (Herr and Muzira, 2009).

5.2 Value Chain Mapping of Horticultural Sub-Sector through Flow Chart

Value chain mapping of these commodities were established through flow chart and grid chart.

Drawing the flow chart of these commodities includes following steps: (i) mapping mango, citrus

and tomato value chains through a flow chart (ii) creating an inventory of market players for

mango, citrus and tomato (iii) using the flow chart to illustrate opportunities and constraints

(GAP analysis) for mango, citrus and tomato (iv) using the flow chart to illustrate relevant

reference.

73

5.2.1 Mapping of small holder mango growers through flow chart

Value chain was based on the sample 269 mango farmers, contractors, commission agents,

wholesaler, retailers, and exporters in three major mango producing districts of Punjab Pakistan.

Analysis revealed that 189 (70%) of sample mango farmers were in small farmer category and

80 (30%) of the sample mango farmers were in large farmer category. Here mango value chain

analysis focused on small farmers. Overwhelming majority (71%) Small farmers involved in pre-

harvest contracting of their produce through contractor, whereas (29%) small farmers were

involved in self marketing. Based on the survey data two main chain were identified and

analyzed , Chain 1 pre harvest contracting system for mango through contractor and Chain 2

farmer self marketing after harvesting, packing and transporting. Under self marketing there are

two main channels Horizontal and vertical coordination. About 29 percent Small farmers used

self marketing value chain (Figure 5.1) as the marketing channel for their mangoes after

harvesting, grading, packing and transporting to local wholesale market and sell out the produce

through Commission agent.

Figure 5.1: Small farmer mangoes value chain in Punjab Pakistan

Mango marketing system

# of farmers%

Value Chain

Self- Marketing

5429%

1. (Horizontal coordination )

2. (Vertical coordination )

Pre- harvest Contract

13571%

3. Whole Sale Maket

Total 189 100%

3 chains

Source: Develop by authors based on mango survey data, 2009

Contractor Commission Agent

Whole seller Retailer

Grower

Whole seller Retailer

Grower Exporter

Importer Retailer

Commission Agent

Grower

74

5.2.2 Mapping of large holder mango Growers

Under self marketing there are two main channels Horizontal and vertical coordination. About 18

percent large farmers used self marketing and performed the function of harvesting, grading,

packing and transporting to local wholesale market and sell out the produce through Commission

agent whereas 82% large farmer used pre harvest contract system for marketing their produce

(Figure 5.2).

Figure 5.2: Large farmer mangoes value chain in Punjab Pakistan

Mango marketing system

# of farmers%

Value Chain

Self- Marketing

1418%

1.(Horizontal coordination )

1.(Vertical coordination )

Pre- harvest Contract

6682%

3.

Total 189 100%

3 chains

Source: Develop by authors based on mango survey data, 2009

Contractor Commission Agent

Whole seller Retailer

Grower

Whole seller Retailer

Grower Exporter

Importer Retailer

Commission Agent

Grower

75

Figure 5.3: Small farmer citrus value chain

Mango marketing system

# of farmers%

Value Chain

Self- Marketing

116%

1.(Horizontal coordination )

2.(Vertical coordination )

Pre- harvest Contract

17794%

3.

Total 188 100%

3 chains

Source: Survey data, 2009

5.2.3 Mapping of small holders citrus growers

Calculation of the value chain was based on the sample data for citrus orchards in Punjab

Pakistan. The citrus valued-added chain was calculated starting with the farmer and going

through to the final market destination of each respective marketing chain. From the sampling of

283 citrus farmers in three major citrus producing districts of Punjab, 188 citrus farmers were in

small category. Majority of the small farmers 188 (67%) small farmers involved in pre harvest

contracting of their produce through contractor whereas 11 (6%) small farmers were involved in

self marketing. Two main chain were identified pre harvest contracting through contractor and

farmer self marketing (Figure 5.3).

Contractor Contractor Commission Agent Commission Agent

Whole seller Whole seller Retailer Retailer

Grower Grower

Whole seller Whole seller Retailer Retailer

Grower Grower Exporter Exporter

Importer Importer Retailer Retailer

Commission Agent Commission Agent

Grower Grower

76

5.2.4 Mapping of large holders citrus growers

About 4 percent large farmers used self marketing after harvesting, grading, packing and

transporting to local wholesale market and selling to exporter/processor (Figure 5.4).

Figure 5.4: Large farmer citrus value chain

Mango marketing system

# of farmers%

Value Chain

Self- Marketing

44%

1.(Horizontal coordination )

2.(Vertical coordination )

Pre- harvest Contract

8996%

3.

Total 93100%

3 chains

Source: Survey data, 2009

5.2.5 Mapping of small farmer tomato value chain

Value chain was based on the sample 150 tomato farmers, commission agents, wholesaler,

retailers, and processors in three major producing districts of Punjab Pakistan. Analysis revealed

that 114 (76 %) of sample tomato farmers were in small farmer category and 36 (24 %) of the

sample tomato farmers were in large farmer category. present study focused on small farmers.

Overwhelming majority Small farmers involved in self marketing. Based on the survey data two

main chains were identified and analyzed, Chain 1 self marketing through commission agent and

Chain 2 farmer selling to processing factory (Figure 5.5).

Contractor Contractor Commission Agent Commission Agent

Whole seller Whole seller Retailer Retailer

Grower Grower

Whole seller Whole seller Retailer Retailer

Grower Grower Exporter Exporter

Importer Importer Retailer Retailer

Commission Agent Commission Agent

Grower Grower

77

Figure 5.5: Small farmer tomato value chain in Punjab Pakistan

Tomato marketing system

# of farmers

Value Chain

Self- Marketing

1

2

Total 114 100%

2 chains

Source: Develop by authors based on tomato survey data, 2009

5.2.6 Mapping of large farmer tomato value chain

The majority of large farmers used this traditional supply chain as the marketing channel for

their tomato to the wholesale market to retail market. Several characteristics of this marketing

channel are given below (Figure 5.6).

Figure 5.6: Large farmer tomato value chain in Punjab Pakistan

Tomato marketing system

# of farmers

Value Chain

Self- Marketing

1

2

Total 36 100%

2 chains

Source: Develop by authors based on tomato survey data, 2009

Grower

Whole seller Retailer

Grower Processor

Product wholeseller

Retailer

Commission Agent (Local)

Grower

Whole seller Retailer

Grower Processor

Product wholeseller

Retailer

Commission Agent (Local)

78

5.3 An Inventory of Market Players for Horticultural Sub-Sector

Value chain mapping means drawing a visual representation of the chain, which involves various

linkages among the fruit (mango & citrus) growers, inputs and logistical service providers,

transporters, contractors, commission agents, wholesalers, retailers, and exporters.

5.3.1 Inventory of market players of mango and citrus

The value chain map depicts the flow of fruit in the market, activities carried out at each stage of

the value chain, the structure of actors and the support involved in the value adding process

(Figure 5.7 & 5.8). This map consists of three elements: functions, operators and promoters.

There is a clear difference between operators and promoters/supporters of a fruit value chain

(Springer- Heinz and Andreas, 2007). The people or enterprises performing the basic functions

of a value chain are operators (also called actors). At one stage in the value chain, they become

owners of the (raw, semi-processed or finished) product. Based on this definition, the mango and

citrus VC actors can be grouped by the following functions:

Production: Actors whose functions are directly related to basic production of mango and citrus,

including pre-cultivation, cultivation, harvest, or extractive activities.

Post harvest handling and processing: Actors whose functions are directly related to post

harvest management of mango and citrus (cleaning, sorting, packaging, etc) or processing of

basic goods into value added products.

Trading: Actors whose functions are related to buying and selling of the mango and citrus

(product(s))

VC promoters/supporters: Value chain promoters/supporters are the associations, networks or

organizations that provide support services and represent the common interests of the VC

operators. They remain outsiders to the regular business process and restrict themselves to

temporarily facilitating a chain upgrading strategy. Typical facilitation tasks include creating

79

awareness, strategy building and co-ordination of support activities. Whereas the services offered

by individual actors, organizations, or companies to the value chain, tangible (transport,

machinery, storage, among others) or intangible (technical assistance, training, etc.), are known

as (PHDEB).

As depicted in the map above, many mango growers in Pakistan act as integrated value chain

operators and perform two or more functions. They often arrange farm inputs (chemical

fertilizer, FYM, seedlings, pesticide, etc) on their own, dig pits and plant seedlings, manage

orchards, harvest the fruits, grade and pack them, and then assemble them and transport them to

the wholesale market in case of self marketing.

80

Figure 5.7: Inventory of mango market players

Source: Developed by authors based on field survey and literature review

Mango consumers (local and Foreigner)

Fruits importer in Gulf and EU markets

National Markets

Local marketsExporters C, agent

Contractors/Middle men

Farmers

Local tree nurseries, CAs

Quality assurance

Management

of Auction Yard/Exports

Post Harvest tech, training

& other support

Market

infrastructure, MIS

Disease, pest control, training, technical advise

Planting materials, fertilizers, training

NIPHSF

Market committee at

PHDEB etc

Punjab Agricultural Marketing Dept

PARC and Provincial Agri. Research Depart

Punjab Agricultural Extension Dept.

Consumption

Trading(Expert or Retail

&process in

domestic market)

Collection & Transportation

VC OperatorsMajor VC Functions VC Promoters

Production

Inputs

81

Figure 5.8: Inventory of citrus market players

Consumers (local and Foreigner)

Fruits Traders in Afghanistan

Processors

Local market

Exporters C, agent

Contractors/Middle men

Farmers

Local tree nurseries, CAs

Quality assurance

Management

of auction in market

Post Harvest tech, training

& other support

Market

infrastructure, MIS

Disease, pest control, training, technical advise

Planting materials, fertilizers, training

NIPHSF

Market committee

PHDEB etc

Punjab Agricultural Marketing Dept

PARC and Provincial Agri. Research Depart

Punjab Agricultural Extension Dept.

CitrusConsumptio

n

Trading(Expert or Retail

&process in

domestic market)

Collection & Transportation

VC OperatorsMajor VC Functions VC Promoters

Production

Inputs

82

5.3.2 An inventory of market players for tomato

Value chain mapping means drawing a visual representation of the chain, which involves various

linkages among the tomato growers, inputs and logistical service providers, transporters,

commission agents, wholesalers, retailers, and traders. The value chain map depicts the flow of

tomato in the market and activities carried out at each stage of the value chain, the structure of

actors and the support involved in the value adding process (Figure 5.9).

Figure 5.9: Value chain mapping of tomato Pakistan’s Punjab

Consumers Consumers

RetailerRetailer

ProcessorsProcessorsCommission AgentsCommission Agents

FarmersFarmers

Input suppliers seed, fertilizes, Pesticides

Management

of auction in market

Tomato processing into tomato products

Market infrastructure

Disease, pest control, training, technical advise

Planting materials, fertilizers, training

Districts Market committee

PHDEB etc

Punjab Agricultural Marketing Dept

PARC and Provincial Agri. Research Depart

Punjab Agricultural Extension Dept.

TomatoConsumptio

n

Retail of Fresh and process Tomato

Collection & Transportation

VC OperatorsMajor VC Functions VC Promoters

Production

Inputs

WholesalerWholesalerProduct WholesalerProduct Wholesaler

Product RetailerProduct Retailer

83

This map consists of three elements: major value chin functions, operators and promoters. There

is a clear difference between operators and promoters/supporters of a value chain. The people or

enterprises performing the basic functions of a value chain are operators (also called actors). At

one stage in the value chain, they become owners of the (raw, semi-processed or finished)

product. Based on this definition, the tomato VC actors can be grouped by the following

functions:

Production: Actors whose functions are directly related to basic agricultural production,

including pre-cultivation, cultivation, harvest in case of self marketing

Post harvest handling and processing: Actors whose functions are directly related to post

harvest management (cleaning, sorting, packaging, and delivering etc)

Trading: Actors whose functions are related to the buying and selling of the product fall under

trading in case of tomato, commission agents, wholesalers, retailers and processors

VC promoters/supporters: The associations, networks or organizations that provide support

services and represent the common interests of the VC operators are known as VC

promoters/supporters. They remain outsiders to the regular business process and restrict

themselves to temporarily facilitating a chain upgrading strategy. Typical facilitation tasks

include creating awareness, strategy building and co-ordination of support activities. Whereas

the services offered by individual actors, organizations, or companies to the value chain, tangible

are transport, machinery, storage, among others or intangible technical assistance, training, etc.

As depicted in the map, many tomato growers in Pakistan act as integrated value chain operators

and perform two or more functions. They often arrange farm inputs (chemical fertilizer, FYM,

seedlings etc) on their own, perform harvest and post harvest handling transport them to the

wholesaler.

84

5.4 Conclusions

This chapter aims to establish value chain mapping of the selected commodities. Value chain

mapping are established using flow and grid charts. The flow chart looked at the different

function in horticultural value chain and illustrates them as process leading from raw material to

final consumption, while grid chart illustrates the different market channels within horticulture

sector. The marketing channels have already mentioned in chapter 3, however in this chapter

mapping of smallholder mango growers, mapping of large holder mango growers, mapping of

small holders citrus growers, mapping of large holders citrus growers, mapping of small holders

farmer tomato growers and mapping of large holders tomato growers through flow chart were

presented. Beside this an inventory of market players of mango, citrus and tomato were also

presented.

Horticulture Sub-Sector Dynamics were captured also in this chapter and it was witnessed that

stallholders mango growers were not well utilized their potential as large holders got 4861 kg

yield per hectare due to well managed orchards and more inputs use as compare to small holders

mango growers. The potential output for smallholder mango growers could generate gross

income of Rs.131322, Rs.148920 and Rs.68382 and total cost of Rs.77447, Rs.59419and

Rs.37449 under horizontal, vertical and pre-harvest contract marketing system respectively.

Under vertical coordination farmers can earn more profit and high return. Also smallholders

citrus growers did not well utilize their potential and smallholder profitability under potential

productivity could get yield of 14335 kg per acre. This scenario could generate gross income of

Rs.220472, 142633 and Rs.91744 with total cost of Rs.169010; Rs.82283 and Rs 63074 under

horizontal, vertical and pre-harvest contract system respectively. Similarly smallholders tomato

growers could generate gross income of Rs.159009 and Rs.147369 under horizontal and vertical

coordination respectively. Total cost in this regards would be Rs.106068 in case of horizontal

coordination and Rs.75368 in case of vertical coordination.

Yield gap and ranking of mango, citrus and tomato were also analyzed in this chapter. Though

horticultural crops/industry facing a number of challenges, however, large yield gap: farm-to-

farm as well as compared to other countries; high post-harvest losses; and lower market

85

prices/export price gap were assessed. Post-harvest losses of mango, citrus and tomato produce

were estimated from 20-40%, export price differences were found to be $954 for tomato,

followed by citrus (595 $), and (410 $) per metric ton.

It was revealed that smallholders have poor and limited access to agricultural credit, which

prohibits them to undertake necessary farm investments. Also men still dominate in mango,

citrus and tomato production and their marketing and no women involvement as small

traders/retailers on local markets were observed. There was limited structured trade in the sub-

sector, there are interests expressed among players to engage in market linkages between chain

actors.

86

VALUE CHAIN RESEARCH OF

HORTICULTURAL SUB-SECTOR

This chapter deals with the value chain research

for horticulture sub-sector. It presents the results

of understanding the functioning of services,

information, knowledge and skills, innovation

markets for horticulture value chain system, the

role of these market players within this system

and their relationship to others.

87

Chapter – VI

VALUE CHAIN PROFITABILITY ANALYSIS OF THE HORTICULTURAL

SUB-SECTOR

6.1 Value Chain Analysis

Value chain Analysis is about understanding the functioning of specific markets – (services,

information, knowledge and skills, innovation, etc.) for horticulture value chain system, the role

of specific market players within this system and their relationship to others (Herr and Muzira,

2009). They further stated that Value chain research goes into much greater depth, analyzing the

reasons for specific constraints in the value chain and looking for ways to realize market

opportunities and hence value chain research therefore, (i) serves to identify the underlying

reasons for market failure of service market i.e., deficits that are preventing the value chain from

achieving certain economic and social targets (systemic constraints); (ii) helps to understand

incentives of private and public market players to engage in transactions and contribute to

solutions for addressing the failure of service market; and (iii) highlights pathways to sustainable

change for improving services market by focusing on market opportunities and relationships and

helps to identify leverage points for intervention strategies. Framework for value chain research

consists of two steps namely; (i) deciding on specific service market and relevant market player

for understanding how that market work and identify the underlying causes for market failures,

the role of market player and their centre (ii) deciding on the contents on value chain research for

assessing the underlying causes of a market systems under performance as well as the primary

obstacles to and opportunities for overcoming these problems.

The previous chapter on horticultural value chain mapping highlighted the key problems of

horticultural sub-sector which are higher cost of production, low labor productivity, poor quality

of horticultural products and low productivity, high post harvest losses, loss of opportunities for

income and employment creations, lack of investment in new productive technologies, low

income, supply shortages on product markets, low export prices and low share of processing. In

order to understand the underlying reasons there is a need to carry out the analysis of economic

viability of horticulture (mango, citrus and tomato) sub-sector in Punjab Pakistan.

88

6.2 Analysis of the Economic Viability of the Mango Growers

Costs and profitability analysis has generated information on the economic viability of

horticultural sub-sector. The brief description of such analysis is presented in the following sub-

section:

6.2.1 Calculating costs in mango value chains

The analysis of the economic viability of the sub-sector (mango, citrus and tomato) was carried

out by calculating costs in horticultural value chains and assessing their profitability. This starts

from the bifurcation of cost including production, transaction and operational to profitability,

value addition at different stages along the chains.

Costs to smallholder mango growers: The information on the costs analysis of small farms is

presented in Table 6.1. Comparing the cost by different chains for small farmers, it was highest

in case of self marketing in the traditional chain of commission agent in the whole sale market

mainly due to the high operational cost. The second case was also self marketing but in the

vertical coordinating market directly to the processors/exporters. In this case operational cost

was less than the whole sale marketing system but production cost was little high than the

farmers working with the horizontal chain. However transaction cost was less due to few actors

along the vertical coordination. The third case is the pre-harvest contract system which is main

dominated practice at small farms, no operational cost for harvesting and post harvesting

practices was involved at farmers’ level. The cost of production was almost similar to farmers

doing self marketing while transaction cost was also lowest than the other two chains.

Table 6.1: Cost analysis of small mango producers (Rs./Kg)

 Value Chain TypesProduction

cost

Transaction cost* (Rs/Kg)Total cost

Negotiation information monitoring Operational

Total

Horizontal (selling to CA) 7.79 0.075 6.11 6.185 13.97Vertical coordination 8.05 0.051 3.87 3.921 11.97Pre-harvest contract 7.78 0.035 0.00 0.035 7.82*It consists of unobservable (negotiation, information, monitoring and enforcement of contract/deal) and observable (operational consisting of harvesting, packing and marketing etc) cost

89

Cost to large holder mango growers: The information on the costs analysis of large farms is

presented in Table 6.2. In case of large farmers the cost comparison by different chains resulted

highest cost in case of self marketing in the traditional chain of commission agent in the whole

sale market mainly due to the high operational cost whereas the transaction cost was also highest.

In case of vertical coordination selling directly to the processors/exporters , operational cost was

less than the whole sale marketing system but production cost was highest than the farmers

working with the horizontal chain and pre-harvest contract system. However transaction cost was

less due to few actors along the vertical coordination than horizontal chain. In case of pre-harvest

contract system operational cost for harvesting and post harvesting practices was zero at farmers

level. The cost of production was little less than farmers doing self marketing while transaction

cost was also lowest than the other two chains.

Table 6.2: Cost analysis of large mango producers (Rs./Kg)

 Value Chain TypesProduction

cost

Transaction cost (Rs/Kg)Total cost

Negotiation information monitoring

Operational Total

Horizontal (selling to CA) 7.494 0.066 5.08 5.146 12.64Vertical coordination 8.129 0.061 2.84 2.901 11.03Pre-harvest contract 7.481 0.039 00 0.039 7.52*It consists of unobservable (negotiation, information, monitoring and enforcement of contract/deal) and observable (operational consisting of harvesting, packing and marketing etc) cost

6.2.2 Profitability of mango growers

Profitability analysis of small mango growers: Farm level profitability analysis, based on data

collected from major mango producing area of Punjab Pakistan result revealed that small farmers

which were 70 percent in our sample still don’t manage their mango farms optimally and get low

average yield (4000 kg per acre) and low returns. Large farmers have been investing more

intensively and spending more money on their farms and get more outputs 4800 kg per acre. In

order to provide an indicative picture based on data gathered during the survey, we have

considered three possible cases: small holder farm a low performing and large farms a farm

whose performance get close to the potential described earlier at local level. We developed a

case for analysis a yield potential which was achieved by a major exporter and competitor of

Pakistan in the export market.

90

This situation is characterized by an average yield of 4065 kg per acre attained by small holder

under Horizontal Coordination or traditional marketing system. This production is the result of a

present level of production practices and inputs used by small holder. Under this marketing

system small farmers generate Rs.53780 per acre. Under vertical coordination net profit generate

by small holder is highest Rs.76429 per acre with yield 4239 kg per acre. In case of pre harvest

contracting system mango plantation generate gross revenue Rs.56994 and production cost per

acre is limited to Rs.31213 per acre and the net profit was Rs.25781 per acre equivalents to the

SGM 45%. This gross profit is not a success for farmers who have been investing on long-term

activities and considering the potential of the crop.

Table 6.3: Small farmers profitability analysis of mangoes

Marketing System

Market Production/Sale (Kg/acre)

Sale Price

(Rs./Kg)

Gross Income

(Rs/acre)

Cost(Rs./Kg)

cost(Rs./acre)

Profit(Rs/acre)

Self Marketing

Horizontal Coordination

4065 27.2 110568 13.97 56788 53780

Vertical Coordination

4239 30 127170 11.97 50741 76429

Pre- harvest sale

Pre- harvest sale 3994 14.27 56994 7.82 31213 25781

Profitability analysis of large holder mango growers: In case of large farmers average yield of

4828 kg per acre attained under Horizontal Coordination or traditional marketing system. This

production is the result of a present level of production practices and inputs used by large farmer.

Under this marketing system large farmers generate Rs.81400 per acre which is higher as

compare to small farmer under same marketing system. Under vertical coordination net profit

generate by large farmer is highest Rs.101613 with yield 4964 kg per acre. In case of pre harvest

contracting system mango plantation generate gross revenue Rs.70442 and production cost per

acre is limited to Rs. 36036 and the lowest net profit was Rs.34406

Table 6.4: Large farmers profitability analysis of mangoes

Marketing System

Market Production/ Sale (Kg/acre)

Sale Price

(Rs./Kg)

Gross Income

(Rs/acre)

Cost(Rs./Kg)

cost(Rs./acre)

Profit(Rs/acre)

Self Marketing Horizontal Coordination

4828 29.5 142426 12.64 61026 81400.

91

Vertical Coordination

4964 31.5 156366 11.03 54752.9 101613

Pre- harvest sale

Pre- harvest sale 4792 14.7 70442 7.52 36035.8 34407

Source: Authors own calculation base on survey data, 2009

6.3 Economic Viability of Citrus Growers

6.3.1 Cost analysis to small citrus growers

The detailed cost analysis both at small farms and large farms is conducted for different market

chains and presented in Table 6.5. Comparing the cost by different chains for small farmers, it

was highest in case of horizontal coordination in the traditional chain of commission agent in the

whole sale market mainly due to the high operational cost. The second case was also self

marketing but in the vertical coordinating market directly to the processors/exporters. In this case

operational cost was less than the whole sale marketing system but production cost was high than

the farmers working with the horizontal chain. However transaction cost was less due to few

actors along the vertical coordination. The third case is the pre-harvest contract system which is

main dominated practice at small farms, no operational cost for harvesting and post harvesting

practices was involved at farmers level. The cost of production was almost similar to farmers

doing self marketing while transaction cost was also lowest than the other two chains.

Table 6.5: Transaction cost analysis of citrus on small farmers (Rs./Kg)

 Production

cost

Transaction costTotal cost

Negotiation information monitoring

Operational Total

Horizontal (selling to CA) 4.42 0.034 7.34 7.374 11.79Vertical coordination 4.34 0.025 1.38 1.405 5.74Pre-harvest contract 4.38 0.022 00 0.022 4.40*It consists of unobservable (negotiation, information, monitoring and enforcement of contract/deal) and observable (operational consisting of harvesting, packing and marketing etc) cost

Large holder citrus growers: The detailed cost analysis large farms is conducted for different

market chains and presented in Table 6.6. The cost was highest in case of horizontal coordination

in the traditional chain due to the high operational cost. In self marketing directly to the

processors/exporters operational cost was less than the whole sale marketing system but

production cost was low than the farmers working with the horizontal chain or wet market at

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sample farms. Under pre-harvest contract system which is main dominated practice cost of

production was almost highest while transaction cost was also lowest than the other two chains.

Table 6.6: Transaction cost analysis of citrus on large framers (Rs/Kg)

 Value Chain TypeProduction

cost

Transaction cost Total cost

Negotiation information monitoring Operational

Total

Horizontal (selling to CA) 4.58 0.038 6.04 6.078 10.66Vertical coordination 4.49 0.032 1.25 1.282 5.79Pre-harvest contract 4.69 0.022 00 0.022 4.71*It consists of unobservable (negotiation, information, monitoring and enforcement of contract/deal) and observable (operational consisting of harvesting, packing and marketing etc) cost

6.3.2 Profit analysis

Small holder citrus growers: Farm level profitability analysis, based on data collected from

major citrus producing area of Punjab Pakistan result revealed that small farmers which were 76

percent in our sample still don’t manage their citrus farms optimally and get low average yield

(7200 kg per acre) and low returns. Large farmers have been investing more intensively and

spending more money on their farms and get more output 7520 kg per acre.

This situation is characterized by an average yield around 7200 kg per acre attained by small

holder during survey period. This production is the result of a present level of production

practices and inputs used by small holder.

Horizontal coordination the citrus plantation generates gross revenue on an acre of Rs.111597

with total cost Rs.85548 generating net profit Rs.26049. Under vertical coordination yield

become little high and small farmer generate Rs.31200 per acre net profit higher than as compare

horizontal coordination. Under pre harvest contract system yield is low as compare to self

marketing gross revenue is Rs.46010 with lowest cost Rs.31632 and net profit Rs.14378 per acre.

Self marketing under vertical coordination demonstrate more profitability and competitiveness of

small holders

Table 6.7: Small farmers profitability analysis of citrusMarketing System

  Sale (Kg/Acre)

Price(Rs./Kg)

Sales(Rs./

Cost(Rs./Kg)

Cost(Rs./

Net profit

93

acre) acre)Self Marketing Horizontal

Coordination 7256 15.38 111597 11.79 85548 26049

Vertical Coordination

7411 9.95 73739 5.74 42539 31200

Pre-harvest sale Pre- harvest sale 7189 6.4 46010 4.40 31632 14378

Source: Authors own calculation base on survey data, 2009

Large holders citrus growers: In our sample showed that about 24 percent farmer fall in large

farm category average yields per acre was 7520 kg. These yields are a result well managed

orchards and more inputs use as compare to small farmers in the sample area.

In case of large farmers horizontal coordination the citrus plantation generates gross revenue on

an acre of Rs.117111 with total cost Rs.80803 generating net profit Rs.36308. Under vertical

coordination yield become little high and large farmers generate Rs.32240 per acre little lower

than horizontal coordination. Under pre harvest contract system yield is low as compare to self

marketing gross revenue is Rs.548590 with lowest cost Rs.35395 and net profit Rs.19464 per

acre. Self marketing under vertical coordination demonstrate more profitability and

competitiveness of small holders

Table 6.8: Large farmers profitability analysis of citrus

 Chain Type   Sale (Kg/Acre)

Price(Rs./Kg)

Sales(Rs./acre)

Cost(Rs./Kg)

Cost(Rs./acre)

Net profit

Self Marketing Horizontal Coordination 7580 15.45 117111 10.66 80803 36308Vertical Coordination 7658 11.2 85769.6 5.79 44340 41430

Pre harvest sale Pre- harvest sale 7515 7.3 54859.5 4.71 35396 19464

6.4 Economic Viability of Tomato Growers

6.4.1 Cost analysis of small tomato growers

Similar to the other commodities complete cost and profitability analysis under prevailing market

systems along the value chain are completely studied for the tomato. The system of the tomato

was little bit different than the fruits as there was no pre-harvest contract system. Farmers used to

work under horizontal and vertical coordination only. The cost of production was low under

horizontal coordination with more operational cost as compared to vertical coordination. The

transaction cost was also low in vertical tomato coordination resulting in low cost to the tomato

farmers selling their commodity directly to the processors.

94

Table 6.9: Cost analysis of small tomato farmer

 Chain TypeProduction

cost

Transaction cost (Rs/kg)Total cost

Negotiation information monitoring

Operational Total

Horizontal (selling to CA) 4.98 0.08 6.26 6.34 11.32Vertical coordination 5.03 0.04 1.42 1.46 6.49*It consists of unobservable (negotiation, information, monitoring and enforcement of contract/deal) and observable (operational consisting of harvesting, packing and marketing etc) costLarge holder tomato growers: In case of large farmers tomato growers complete cost and

profitability analysis under prevailing market systems along the value chain are presented in

Table 6.10. Similar to small farmers the cost of production was low under horizontal

coordination with more operational cost as compared to vertical coordination. The transaction

cost was also low in vertical tomato coordination resulting in low cost to the tomato farmers

selling their commodity directly to the processors. However the cost of large farmers was low

under horizontal coordination system while production cost under vertical coordination was high

as compared to small farmers but the operational cost was low due to large volume.

Table 6.10: Cost analysis of large tomato farmer (Rs/Kg)

 Value Chain TypeProduction

cost

Transaction costTotal cost

Negotiation information monitoring

Operational Total

Horizontal (selling to CA) 6.32 0.08 4.80 4.88 11.28Vertical coordination 5.23 0.04 1.35 1.39 6.49*It consists of unobservable (negotiation, information, monitoring and enforcement of contract/deal) and observable (operational consisting of harvesting, packing and marketing etc) cost

6.4.2 Tomato profitability analysis

Small holder tomato growers: Farm level profitability analysis, based on data collected from

major tomato producing area of Punjab, Pakistan result revealed that small farmers which were

76 percent in our sample still don’t manage their tomato farms optimally and get low average

yield (8730 kg per acre) and low returns. Large farmers have been investing more intensively

and spending more money on their farms and get more outputs 9370 kg per acre. This situation is

characterized by an average yield 8730 kg per acre attained by small holder during survey

period. Another situation in which farmers delayed harvesting for selling to processing factory

which result increased yield per acre and profitability. This production is the result of a present

level of production practices and inputs used by small holder.

Table 6.11: Small farmers profitability analysis of tomato

 Value Production/Sale Sale Gross Cost cost Profit Gross

95

Market Type (Kg/acre) Price(Rs./Kg)

Income(Rs/acre)

(Rs./Kg)

(Rs./acre)

(Rs/acre)

Margin (%)

Wholesale market

8730.0 16.97 148148.1 11.32 98823.6 49324.5 33.3

Processing factory

10820.0 12.68 137197.6 6.49 70221.8 66975.8 48.8

Source: Authors own calculation base on survey data, 2009

In self marketing case, tomato gross revenue on an acre of Rs.148148 and Rs.137198 after

harvesting through local market and processor respectively. Overall due to low input used by

small holders total cost (production and marketing) were limited to Rs.98649 and Rs.70222 per

acre respectively. Net profit per acre from local market and export sale were market Rs.49499

and Rs.66976 respectively equivalent to the gross margin 33% to 49% respectively. Due to delay

harvesting for processors total production increased significantly and unit cost decreased that

yields higher income for farmers. Looking at the higher per acre income from the vertical

coordination between farmers and processor profitability it is necessary to promote this

marketing channel an aim of moving the product smoothly from production to marketing through

processing and value addition along the value chain that can ensure farmer level profitability.

Large holder tomato growers: In case of large farmers tomato growers complete cost and

profitability analysis under prevailing market systems along the value chain are presented in

Table 6.12.Large holder and they can generate gross income Rs.168192 and Rs.147717 under

horizontal and vertical coordination respectively. Total cost which is the combination of

production and marketing costs would be Rs.105694 in case of sell to wholesale marker and

Rs.75368 in case of sell to processing factory remains a net profit per acre of Rs.62498 and

RS.72349 (Table 6.12).

Table 6.12: Large farmers profitability analysis of tomato

Value Chain Type Production/ Sale

(Kg/acre)

Sale Price

(Rs./Kg)

Gross Income

(Rs/acre)

Cost(Rs./Kg)

cost(Rs./acre)

Profit(Rs/acre)

Gross Margin

(%)Horizontal Coordination (Wholesale market)

9370 17.95 168192 11.28 105694 62498 37

Vertical Coordination (Processing factory)

11613 12.72 147717 6.49 75368 72349 49

96

6.5 Horticulture Sub-Sector Dynamics

Above mentioned support organization are crucial to increase the inflow of new technology and

good orchard management and agronomic practices which is currently limited which strongly

limit the productivity of mango, citrus and tomato. Potential yields on small vs. large farms in

Pakistan and globally are compared to assess the potential not well utilized in Pakistan. The brief

description of such potential for mango, citrus and tomato is briefly presented in the following

sub-sections:

6.5.1 Mango on small farms: A potential not well utilized in Pakistan

Potential output based on yield gap as compare to large farmers in sample area: In our sample

showed that about 30 percent farmer fall in large farm category average yields per acre was

around 4861 kg. These yields are a result well managed orchards and more inputs use as

compare to small farmers in the sample area (Table 6.13).

Table 6.13: Small farmers profitability analysis of tomato based on potential output

Marketing System

 Market Potential Productio

n (Kg/acre)

Sale Price

(Rs./Kg)

Gross Income

(Rs./acre)

Cost(Rs./Kg)

Cost(Rs./acre)

Profit(Rs./acre)

Self Marketing Horizontal Coordination

4828 27.2 131322 13.97 67447 63874

Vertical Coordination

4964 30 148920 11.97 59419 89501

Pre harvest sale Pre- harvest sale 4792 14.27 68382 7.82 37449 30932

This could be a potential output for small holder and they can generate gross income Rs.131322,

Rs.148920 and Rs.68382 under horizontal, vertical and pre-harvest contract marketing system

respectively. Total cost which is the combination of production and marketing costs would be

Rs.77447, Rs.59419 and Rs.37449 under three marketing system respectively remains a net

profit per acre of Rs.63874, Rs.89501 and Rs.30932. This scenario is a possible outcome for

small holder in Pakistan if mango farming is taken managed orchards. Under vertical

coordination farmers can more profit and high return.

97

The gap between potential and actual yields is high in a majority of farming systems in Pakistan.

Mango is not an exception. Table 6.14 demonstrated the scenario of small holder profitability

under potential productivity with regard to 18170 kg per acre the yield level of Cape Verde

highest in the world.

Table 6.14: Small farmers profitability analysis of tomato – potential output based on yield gap exist as compare to the world highest yield (Cape Verde)Smallholder Marketing System

 Market Potential Production

Sale Price

(Rs./Kg)

Gross Income

(Rs/acre)

Cost(Rs./Kg)

Cost(Rs./acre)

Profit(Rs/acre)

Self Marketing Horizontal Coordinatio

n 18170 27.2 494224 13.97 253835 240389

Vertical Coordinatio

n 18170 30 545100 11.97 217495 327605

Pre-harvest contract Pre- harvest sale

18170 14.27 259286 7.82 142089 117197

Source:

This could be a potential output in Pakistan by elimination yield gap exists as compare with

world highest yield. This scenario can generate gross income of Rs.494224, Rs.545100 and

Rs.259286 under horizontal, vertical and pre-harvest contract system. Total cost which is the

combination of production and marketing costs were Rs.253835, Rs.217495 and Rs.142089

respectively will leave a profit of Rs.240389, Rs.327605 and Rs.117197 per acre. This scenario

is a possible outcome for small holder in Pakistan if mango farming is taken as business and

productivity should reaches to the world highest level as achieved by Cape Verde.

6.5.2 Citrus on small farms: A potential not well utilized in Pakistan

In this case the profitability of the small farmer’s increase also considering their own cost and

prices for horizontal and pre-harvest contract system while for vertical coordination the net profit

is higher based on the sample data mainly due to difference in prices and cost (Table 6.15).

Table 6.15: Potential output based on large farmers' output of citrus

 Market System

  Sale (Kg/Acre)

Price(Rs./Kg)

Sales(Rs./acre)

Cost(Rs./Kg)

Cost(Rs./acre)

Net profit

Self Marketing Horizontal 7580 15.38 116580 11.79 89368 27212

98

Coordination Vertical

Coordination 7658 9.95 76197 5.74 43957 32240

Pre harvest sale Pre- harvest sale 7515 6.4 48096 4.4 33066 15030Source: Authors calculation by using Survey data, 2009

The gap between potential and actual yields is high in a majority of farming systems in Pakistan.

Citrus is not an exception. Table 6.16 demonstrated the scenario of small holder profitability

under potential productivity with regard to Rs.14335 kg per acre the yield level. This could be a

potential output in Pakistan by elimination yield gap exists as compare with world highest yield

(Indonesia). This scenario can generate gross income of Rs.220472, Rs.142633 and Rs.91744

under Horizontal, vertical and pre-harvest contract system respectively. Total cost which is the

combination of production and marketing costs were Rs.169010; Rs.82283 and Rs.63074

respectively will leave a profit of Rs.51463, Rs.60350 and Rs.28670 per acre respectively. This

scenario is a possible outcome for small holder in Pakistan if citrus farming is taken as business

and productivity should reaches to the level of yield achieved by Indonesia highest yield in

world.

Table 6.16: Small farmers profitability analysis of citrus – potential output based on yield gap exist as compare to the world highest yield (Indonesia) Smallholder Marketing System

  Sale (Kg/Acre

)

Price(Rs./Kg)

Sales(Rs./acre)

Cost(Rs./Kg)

cost(Rs./acre)

Net profit

Self Marketing Horizontal Coordination

14335 15.38 220472 11.79 169010 51463

Vertical Coordination

14335 9.95 142633 5.74 82283 60350

Pre harvest sale Pre- harvest sale 14335 6.4 91744 4.4 63074 28670

Source: Authors calculation by using Survey data and FAO STAT, 2012

6.5.3 Tomato on small farms: A potential not well utilized in Pakistan

In our sample showed that about 24 percent farmer fall in large farm category average yields per

acre was 9370 kg. These yields are a result well managed tomato farms and more inputs use as

compare to small farmers in the sample area (Table 6.17).

This could be a potential output for small holder and they can generate gross income Rs.159009

and Rs.147369 under horizontal and vertical coordination respectively. Total cost which is the

99

combination of production and marketing costs would be Rs.106068 in case of horizontal

coordination and Rs.75368 in case of sell to processing factory (vertical coordination) remains a

net profit per acre of Rs.52941 and Rs.71884 for horizontal and vertical coordination

respectively.

Table 6.17: Small farmer’s profitability analysis of tomato based on potential output

 Market Production/Sale (Kg/acre)

Sale Price(Rs./Kg)

Gross Income

(Rs/acre)

Cost(Rs./Kg)

cost(Rs./acre)

Profit(Rs/acre)

Horizontal coordination 9370 16.97 159009 11.32 106068 52941Vertical coordination 11613 12.68 147253 6.49 75368 71884

The gap between potential and actual yields is high in a majority of farming systems in Pakistan.

Table 6.18 demonstrated the scenario of small holder profitability under potential productivity

with regard to 212011 kg per acre the yield level. This could be a potential output in Pakistan by

elimination yield gap exists as compare with world highest yield achieved by Belgium. This

scenario can generate gross income of Rs.3597824, and Rs.2688298 under Horizontal, vertical

system respectively. Total cost which is the combination of production and marketing costs were

Rs.2399263 and Rs.1375950 respectively will leave a profit of Rs.1197861 and Rs.1312347 per

acre respectively.

Table 6.18: Small farmer’s profitability analysis of tomato based on potential output

 Market Production/Sale (Kg/acre)

Sale Price(Rs./Kg)

Gross Income

(Rs/acre)

Cost(Rs./Kg)

cost(Rs./acre)

Profit(Rs/acre)

 Whole sale market 212011 16.97 3597824 11.32 2399963 1197861Vertical coordination 212011 12.68 2688298 6.49 1375950 1312347

6.5.4 Yield gaps and ranking of mango, citrus and tomato: A potential not well utilized in

Pakistan

The horticultural crops are of major importance in some areas of Pakistan, while remain

neglected in other parts and people grow these crops to fulfill the local fruit and vegetable

requirements only rather than producing for export markets, hence crop yield but not quality

100

remain a priority. Further, poor post-harvest handling and marketing system leads to the lower

net profit in the overall supply chain, while consumer prices both in local and international

markets are rising. Local horticulture industry is currently facing a number of challenges,

however, three main aspects are very important: (1) Large yield gap: farm to farm as well as

compared to other countries; (2) High post-harvest losses; (3) Lower export market prices/Export

price gap. The information on yield gap, post-harvest losses and less export prices of mango,

citrus and tomato is presented in the Table 6.19 respectively.

Table 6.19: Yield gap and ranking of mango, citrus and tomato

Crops Max. yield in world(tonnes/ha)

Yield of Pakistan(tonnes/ha) and Ranking

Yield gap(tonnes/ha)

Mango 44.9 (Cape Verde) 10.2 (29th) 34.7Citrus 35.4 (Indonesia) 10.7 (60th) 24.7Tomato 523.9 (Belgium) 10.5 (129st) 513.4Source: FAO Stat, 2012

6.5.5 Post-harvest losses of mango, citrus and tomato: A potential not achieved in

Pakistan

Horticultural produce are perishable and needs special care to reduce the post-harvest losses.

Often, the post-harvest losses of mango, citrus and tomato produce are estimated from 25-40%.

However, the estimated losses with value of mango, citrus and tomato is given in Table 6.20.

Table 6.20: Post-harvest losses in mango, citrus and tomato

Crops Production(000 tonnes)

Post harvest losses(000 tonnes)

Post harvest losses(Rs. million)

Total value(Rs. million)

Post harvest losses(%)

Mango 1728 432 14526 58104 25

Citrus 2132 320 2335 15565 15

Tomato 562 225 4495 11238 40

Source: Agricultural Statistics of Pakistan, 2009-10 Percent Post harvest losses PHDEB, 2007

6.5.6 Export prices of mango, citrus and tomato: A potential not achieved in Pakistan

Table 6.21 provides a comparison of the average export prices of selected horticultural produce

compared with world export prices. It is very clear that all of our commodities are being sold in

101

international markets at far cheaper prices compared to world average prices. The export price

difference is maximum for tomatoes ($954), followed by citrus ($595), and ($410) per metric

ton.

Table 6.21: Comparison of export prices of mango, citrus and tomato

Crop World Average Pakistan Price gap($/tonnes)Quantity

(tonnes)Value

($000 )Price($/t)

Quantity(tonnes)

Value($000 )

Price($/

tonnes)Mango 1255712 997771 795 73575 28305 385 410* Citrus 4146265 3499781 844 178039 44321 249 595Tomato 6331960 6823767 1078 40907 5051 123 954Source: FAO Stat 2012 * Tangerine, Mandarin Clem

6.5.7 Mango, citrus and tomato: Real investors or weakened growers

During the survey and dialogue with group of mango, citrus and tomato farmers, the farm

business management practices’ are generally poor. The full requirement of the farm investment

to make it economically viable is often ignored and farm record keeping is neglected. It was also

observed that business acumen and cooperation with other producers are limited. Survey

revealed that small farmers have poor and limited access to agricultural credit which prohibits

them to undertake necessary farm investments. Many surveyed horticulture producers as well as

organizations outside mango and citrus are expecting to request investment financing from Zari

Tarqiati Bank, Pakistan. These observations revealed that horticultural surveyed farmers in

general and small farmers in particular are weekend growers.

6.5.8 Diverse origins for regular supply

The leading mango producing districts are Multan, Rahim Yar Khan and Muzaffargarh in Punjab

but an increasing number of mangos are coming from Sindh province. Leading citrus producing

districts are Sargodha, Mandi Bahauddin and Toba Tek Singh but an increasing number of citrus

are coming from Jhang, Sahiwal and other provinces like Khaber Pakhtoonkaha. Prices and

volumes are normally fluctuating strongly throughout the year, namely low prices and high

volumes in the peak months (June – July in case of mango and November – December in case of

102

citrus) and high prices / lower volumes in the remaining months in case of mango and citrus

respectively. The highest concentration of improved mango is from Multan, Khanewal and

Muzaffargarh districts. Hence there is a huge challenge but also a development opportunity for

the sub sector to coordinate and enhance efficiency of different supply chains from the remaining

districts growing both mango and citrus.

6.5.9 Gender issues

Some women with the laborer of contractor of mango and citrus orchards play a role in

harvesting of these commodities and sometimes the whole family plays a role in mango, citrus

and tomato growing in case of leasing in land. Generally men still dominate in mango, citrus and

tomato production and their marketing. In Pakistan all the traders are men and no women

involvement as small traders/retailers on local markets is observed.

6.5.10 Marketing: Dominated by spot transactions

Contract enforcement is an essential precondition for horticultural supply chain development

which is strengthened by mutual trust and by the successful demonstration of business benefits

resulting from long-term business interactions (MMALtd, 2011). He further stated that several

traders and wholesalers have succeeded in demonstrating the benefits, which can result from

mutually supportive activities built around long-term trusting relationships. These findings

support the result of value chain mapping of mango, citrus and tomato in Pakistan’s Punjab. A

trader can buy from larger producers on credit (at farm gate) and pay back after they sold their

produce. For a trader to buy from the same larger producer on credit, he has to make sure the

previous payment has been paid. Although there is limited structured trade in the sub-sector,

there are interests expressed among players to engage in market linkages between chain actors.

6.6 Value Addition in Horticultural Value Chains: Understanding who Gains Most

The following figures 6.1 to 6.16 depicts two percentages one on cost which shows percent of

total cost of the chain bear by different actors of the value chain and other percentage depicts the

percent profit of the total profit of the chain earned by the different actors.

6.6.1 Value addition for smallholder mango growers

In channel 1 the farmer sold their mango by self marketing to the traditional wholesale market

after grading, packing and transporting, called horizontal coordination. The mango selling price

at farmer level was Rs.27.20 per kg (Figure 6.1). Some interesting matters to note are as follows:

103

This chain produced a total value added of Rs.36.45 per kg, which was lowest as compare to

other two chains. In this value chain the value-added process occurred at high degree at the farm

level 36% followed by Retailers 42 % wholesaler 19% and commission agent 3 % lowest value

added in the value chain, at a value of Rs.27.20 per kg.

Figure 6.1: Small farmer chain 1 (Horizontal coordination): Farmer » Commission Agents » Wholesalers » Retailers

CostVale added

In channel 2 the farmer sold their mangoes directly to exporters/ Processor. Mango selling price

at farmer level was Rs.30 per kg (Figure 6.2). In this value chain the value-added process

occurred at high degree at the exporter 86 % and farmer 14 %. . The value added at farmer level

was produced from the process of mango cultivation and value added at export level is result of

mango export under vertical coordination between farmer and exporter. This chain produced a

total value added of Rs.129.03 per kg. According to survey data the total volume of this chain is

less than one percent of marketed mango. There is dare need to increase the volume of this chain

as this chain is more beneficial to the small holders and generate more value-added for them and

exporters as well .

Figure 6.2: Small farmer chain 2 (Vertical coordination): Farmer » Exporter » International Retailers

CostVale added

81 % Small grower 36 %

4% C. Agents

3%

6% Whole seller 19 %

9 % Retailer

42 %

Rs./Kg 27.20

Total value added

RS 36.45/Kg

8 % Small grower 14 %

92 % Exporter 86 %

Rs./Kg 30

Total value added

RS 129.03/Kg

104

In channel 3 (pre harvest system) the farmer sold their mangoes to the traditional contractor at

pre-harvest. The selling price was generally stipulated on the basis of price negotiations with the

traditional contractor. According to the contractor survey about 4.0 percent produce of this chain

was sold out in local markets i.e. Multan and Rahim Yar Khan and 96 % quantity sold to

interprovincial markets.

The mango selling price at farmer level was Rs.14.27 per kg (Figure 6.3). The contractors

harvest the fruit sorting, grading, and packing and transport it to the wholesale market of country.

The farmer produced the lowest value added in the value chain 9 percent, at a value of Rs.14.27

per kg. This chain produced a total value added of Rs.36.67 per kg, which was the second lowest

value added as compared to other two chains discussed earlier.

Figure 6.3: Small farmer chain 3 (Pre- Harvest contract): Farmer » Contractors » Commission Agents » Wholesalers » Retailers

CostValue added

45% Small growers 18%

35% Contractor 21%

4% C. Agents

02%

6% Wholesaler 19%

10% Retailer 40%

Fertilizer inputs 30% land rent 26%Markup 9%

Other production cost 35%

Rs./Kg 14.27 Total value added Rs. 36.67/Kg

105

Table 6.22: Small farmer mango value chain summaryS.No. Chain actors and activities Unit Chain 1 Chain 2 Chain 3

HorizontalCoordination

VerticalCoordination

Pre harvestContract

1 Total cost to Farmer Rs./Kg 13.97 11.97 7.8%   81 8 45Value added   13.23 18.03 6.47%   36 14 18Sell price   27.20 30 14.27

2 Total cost to Contractor Rs./Kg - - 6%   - - 35Value added   - - 7.73%   - - 21Sell price   - - 28

3 Total cost Commission Agent Rs/ Kg 0.75 - 0.75%   4 - 4Value added   1.02 - 1.07%   3 - 2.92Sell price   27.2 - 28

4 Total cost Wholesaler Rs/ Kg 1.1 - 1.1%   6 - 6Value added   6.9 - 6.9%   19 - 19Sell price   35.2 - 36

5 Total cost Retailer Rs/ Kg 1.5 - 1.5%   9 - 9Value added   15.3 - 14.5%   42 - 40Sell price   52 - 52

6 Total cost Exporter Rs/ Kg - 134 -  %   - 92 -  Value added   - 111 -  %   - 86 -  Sell price   - 245 -  Total Cost   17.32 145.97 17.15  % cost   100 100 100  Total value added Rs./Kg   36.45 129.03 36.67  % value added   100 100 100

6.6.2 Value addition for large mango growers

In channel 1 the farmer sold their mangoes by self marketing to the traditional wholesale market

after grading and packing and transporting called horizontal coordination. The mango selling

price at farmer level was Rs.29.5 per kg (Figure 6.4). Some interesting matters to note are as

follows: In this value chain the value-added process occurred at high degree at the retailer level

44% followed by farmer 39% wholesaler 14 % and commission 3%.

106

Figure 6.4: Large farmer chain 1 (Horizontal coordination): Farmer » Commission Agents » Wholesalers » Retailers

CostVale added

In channel 2 the large farmer sold their mangoes directly to exporters/ Processor. Mango selling

price at farmer level was Rs.31.50 per kg (Figure 6.5). Some interesting matters to note are as

follows: In this value chain the value-added process occurred at high degree at the exporter 84

% and farmer 16 %. The farmer produced the highest value added as compare to other four

chains at a value of Rs.31.50 per kg. The value added at farmer level was produced from the

process of mango cultivation vertical coordination of farmer to exporter. This chain produced a

total value added of Rs.131.47 per kg. According to survey data the total volume of this chain is

less than one percent of total purchase of exporters. There is dare need to increase the volume of

this chain as this chain is more beneficial to the small holders and generate more value-added for

them.

Figure 6.5: Large farmer chain 2 (Vertical coordination): Farmer » Exporter » International Retailers

CostVale added

84% Small grower 39%

4% C. Agents

3%

6% Whole seller 14%

8% Retailer

44%

Rs./Kg 29.50

Total value added

RS 28.41/Kg

8 % Small grower 16%

92% Exporter 84%

Rs./Kg 31.5

Total value added

RS 131.47/Kg

Fertilizer inputs 16% land rent 14%Markup 5%

Other production cost 21%Marketing cost 44%

Fertilizer inputs 21% land rent 17%Markup 6%

Other production cost 23%Marketing cost 33%

107

In channel 3 (pre harvest contract system) the farmer sold their mangoes to the traditional

contractor at pre-harvest. The selling price was generally stipulated on the basis of price

negotiations with the traditional contractor. According to the contractor survey about 4.0 percent

produce of this chain was sold out in local markets i.e. Multan and Rahim Yar Khan.

The mango selling price at farmer level was Rs.14.70 per kg (Figure 6.6). The contractors

harvest the fruit sorting, grading, and packing and transport it to the local wholesale market. The

expenses incurred by the contractors by doing harvesting procurement and distribution activities.

.In this traditional value chain the value-added process occurred to any large degree at the retailer

level followed by commission level agent wholesale, contractor (Figure 6.6). The farmer

produced value added in the value chain 18 percent, at a value of Rs.15.20 per kg. This chain

produced a total value added of Rs.39.59 per kg.

Figure 6.6: Large farmer chain 3(Pre- Harvest contract): Farmer » Contractors » Commission Agents » Wholesalers » Retailers

CostValue added

39 % Small growers 18 %

45% Contractor 19%

4% C. Agents

3 %

5 % Wholesaler 10%

7% Retailer 50%

Fertilizer inputs 30% land rent 26%Markup 9%

Other production cost 35%

Rs./Kg 15.20Total value

added Rs. 51.31/Kg

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Table 6.23: Large farmer mango value chain summaryS.No. Chain actors and activities Unit Chain 1 Chain 2 Chain 3

HorizontalCoordination

VerticalCoordination

Pre harvestContract

1 Total cost to Farmer Rs./Kg 16.2 11.03 7.52%   81 8 45Value added   13.3 20.47 7.18%   39 16 18Sell price   29.50 31.5 14.7

2 Total cost to Contractor Rs./Kg - - 8.6%   - - 45Value added   - - 7.7%   - - 19Sell price   - - 31

3 Total cost Commission Agent Rs/ Kg 0.75 - 0.75%   4 - 4Value added   1.02 - 1.11%   3 - 3Sell price   29.5 - 31

4 Total cost Wholesaler Rs/ Kg 1.1 - 1.1%   6 - 6Value added   4.8 - 3.9%   14 - 10Sell price   35.4 - 36

5 Total cost Retailer Rs/ Kg 1.3 - 1.3%   7 - 7Value added   15.3 - 19.7%   44 - 50Sell price   52 - 52

6 Total cost Exporter Rs/ Kg - 134%   - 92 -Value added   - 111 -%   - 84 -Sell price   - 245 -Total Cost   19.35 145.03 19.27% cost   100 100 100

  Total value added   34.42 131.47 39.59  % value added   100 100 100Source: Authors Calculation based on survey data, 2009

6.6.3 Value addition for smallholder citrus growers

Value Chain 1: About 6 percent small farmers used self marketing value chain (Figure 6.7) as

the marketing channel for their citrus after harvesting, grading, packing and transporting to local

wholesale market and sell out the produce through commission agent.

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In this channel the farmer sold their citrus after harvesting to commission agent under horizontal

coordination. In this value chain the value-added process occurred at high degree at the retail

level 50% followed by farmer 22%, wholesaler 23% and commission agent 5% at the farmer

price of Rs.15.38 per kg. The value added was produced from the process of citrus cultivation.

Figure 6.7: Small farmer chain 1 (Horizontal coordination) (a): Farmer » Commission Agents » Wholesalers » Retailers

CostVale added

In channel 2 run by the farmer under self marketing is vertical coordination between farmer and

exporter/processor. In this value chain the value-added process occurred at high degree at the

exporter 96% and grower 4% at a value of Rs.9.95 per kg. The value added was produced from

the process of citrus cultivation and exports under this value chain. This chain produced a total

value added of Rs.115.21 per kg, which was the highest value added compared to other two

citrus value chains.

Figure 6.8: Small farmer chain 2 (Vertical coordination): Farmer » Exporter » International Retailers

CostVale added

84% Small grower 22%

2% C. Agents

5%

7% Whole seller 23%

7 % Retailer 50%

Rs./Kg 15.38Total value

added RS 16.55/Kg

14% Small grower 4%

86% Exporter 96%

Rs./Kg 9.95Total value added

RS 115.21/Kg

110

Value chain 3: The majority of the small farmers, i.e., 177 persons (94%), used this traditional

supply chain through pre-harvest contract system. Contractor harvest the produce, did sorting,

grading, packing and transported to local and national markets and also deliver the produce to

exporter/processors commission Agents etc.

In channel 3 the farmer sold their citrus to the traditional contractor at pre-harvest stage. The

selling price was generally stipulated on the basis of price negotiations with the contractor. The

citrus selling price at farmer level was Rs.6.40/kg. The contractors harvest the fruit sorting,

grading, and packing and transport it to the local wholesale market. The expenses incurred by the

contractors by doing harvesting procurement and distribution activities. In this channel farmer

get only 12% of total value added, contractor 15% commission agent 5% wholesaler 19% and

retailer 49% of total value added. In term of cost of this channel contractor bear 52 % followed

by farmer 32% retailer 12 % wholesaler 6% and commission agent 3% (Table 6.24).

Figure 6.9: Channel 3(Pre harvest contract): Farmer » Contractors » Commission Agents » Wholesalers » Retailers

CostVale added

32% Small grower 12%

52% Contractor 15 %

3% C. Agents

05%

6% Whole seller 19%

7% Retailer

49%

Rs./Kg 6.40 Total value added

Rs.16.82Kg

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Table 6.24: Small farmer citrus value chain summary

S.No. Chain actors and activities Unit Chain 1 Chain 2 Chain 3Horizontal

CoordinationVertical

CoordinationPre harvest

Contract1 Total cost to farmer Rs./Kg 11.79 5.74 4.4

%   84 14 32Value added   3.59 4.21 2%   22 4 12Sell price   15.38 9.95 6.4

2 Total cost to contractor Rs./Kg - - 7.1%   - - 52Value added   - - 2.5%   - - 15Sell price   - - 16

3 Total cost Commission Agent Rs/ Kg 0.35 - 0.35%   2 - 3Value added   0.88 - 0.85%   5 - 5Sell price   15.38 - 16

4 Total cost WS Rs/ Kg 0.96 - 0.95%   7 - 7Value added   3.86 - 3.25%   23 - 19Sell price   20.2 - 20.2

5 Total cost Retailers Rs/ Kg 0.93 - 0.93%   7 - 7Value added   8 - 8%   50 - 49Sell price   29.35 - 29.35

. Total cost exporter Rs/ Kg - 36.15%   86 -Value added   - 111 -%   - 96 -Sell price   - 51.14 -Total Cost   14.03 41.89 13.73% cost   100 100 100Total value added   16.55 115.21 16.82

  % value added   100 100 100Source: Authors calculation Survey data, 2009

6.6.4 Value addition for large citrus growers

In this channel the farmer sold their citrus after harvesting to commission agent under horizontal

coordination. In this value chain the value-added process occurred at high degree at the retail

level 46 % followed by farmer 27%, wholesaler 22% and commission agent 5% at the farmer

price of Rs.15.45 per kg. The value added was produced from the process of citrus cultivation

and marketing in the local market.

112

Figure 6.10: Large farmer chain 1(Horizontal coordination) (a): Farmer » Commission Agents » Wholesalers » Retailers

CostVale added

In channel 2 run by the farmer under self marketing is vertical coordination between farmer and

exporter/processor. In this value chain the value-added process occurred at high degree at the

exporter 73% and grower 27 % at a value of Rs.11.20 per kg. The value added was produced

from the process of citrus cultivation. This chain produced a total value added of Rs.20.40 per

kg, which was the highest value added compared to other two value chains.

Figure 6.11: Large farmer chain (Vertical coordination): Farmer » Exporter » International Retailers

CostVale added

Value chain 3: The majority of the large farmers , i.e., (96%), used this traditional supply chain

through pre-harvest contract system. Contractor harvest the produce, did sorting, grading,

packing and transported to local and national markets and also deliver the produce to

exporter/processors commission Agents etc. The selling price was generally settled on the basis

of price negotiations with the contractor. The citrus selling price at farmer level was Rs.7.30/kg.

The contractors harvest the fruit sorting, grading, and packing and transport it to the wholesale

market. The expenses incurred by the contractors by doing harvesting procurement and

distribution activities. In this channel farmer get only 15% of total value added, contractor 17 %

commission agent 4 % wholesaler 18 % and retailer 46 % of total value added. In term of cost of

this channel contractor bear 44 % followed by farmer 37% (Table 6.25).

82% Small grower 27%

3 % C. Agents

5%

7% Whole seller 22%

8% Retailer 46%

Rs./Kg 15.45Total value

added RS 17.44/Kg

14% Small grower 27%

86% Exporter

73%

Rs./Kg 11.20Total value added

RS.20.40/Kg

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Figure 6.12: Channel 3 (Pre harvest contract): Farmer » Contractors » Commission Agents » Wholesalers » Retailers

CostVale added

Table 6.25: Large farmer citrus value chain summary

S.No. Chain actors and activities Unit Chain 1 Chain 2 Chain 3Horizontal

CoordinationVertical

CoordinationPre harvest

Contract1 Total cost to Farmer Rs./Kg 10.66 5.79 4.71

%   82 14 37Value added   4.79 5.41 2.59%   27 27 15Sell price   15.45 11.2 7.3

2 Total cost to Contractor Rs./Kg 0   5.7%   0 0 44Value added   0 0 3%   0 0 17Sell price   15.45   16

3 Total cost Commission Agent Rs/ Kg 0.35   0.35%   3 0 3Value added   0.81   0.77%   5 0 4Sell price   15.45   16

4 Total cost Wholesaler Rs/ Kg 0.96   0.96%   7 0 7Value added   3.79   3.24%   22 0 18Sell price   20.2   20.2

5 Total cost Retailer Rs/ Kg 1.1   1.1%   8 0 9Value added   8.05 0 8.05%   46 0 46Sell price   29.35   29.35

6 Total cost Exporter Rs/ Kg   36.15    %   0 86 0  Value added     14.99    %   0 73 0  Sell price     51.14    Total Cost   13.07 41.94 12.82  % cost   100 100 100  Total value added   17.44 20.40 17.65  % value added   100 100 100Source: Authors calculation Survey data, 2009

20% Small grower 4%

49 % Contractor 20%

8 % C. Agents

34 %

11% Whole seller 12 %

12 % Retailer

30%

Rs./Kg 6.40

Total value added

Rs.67.13Kg

114

6.6.5 Value addition for small tomato growers

Value Chain 1: The majority of the small farmers used this traditional supply chain as the

marketing channel for their tomato to the wholesale market to retail market. Several

characteristics of this marketing channel are given below

Small farmer Chain 1(a): Farmer » Commission Agents »Wholesalers »Retailers

In channel 1 the farmer sold their tomato to the traditional wholesale market .The tomato selling

price at farmer level was Rs.16.97 per kg. In this traditional value chain the value-added process

occurred to any large degree at the farmer level followed by retailer level followed by wholesale,

and commission agent . This chain produced a total value added of Rs.12.40 per kg, which was

the lower value added compared to other chain.

Figure 6.13: Small farmer chain 1 (Horizontal coordination): Farmer » Commission Agents » Wholesalers » Retailers

CostValue added

The tomato selling price at farmer level was Rs.12.68 per kg (Figure 6.14). The grower harvest

tomato and transport to factory. The expenses incurred by the farmers were production activities,

harvesting, however farmers save packing and commission charges. The value added was

produced from the process of tomato cultivation. This chain produced a total value added of

Rs.47.73 per kg, which was the highest value added compared to other value chains. In this chain

farmers save marketing cost and earn more income per acre. The value-added process occurred

to any large degree at the processor level followed by product wholesaler retailer and farmer

respectively (Table 6.26).

87 %Small growers 46%

2 % Commission Agents

06 %

3%Wholesaler18 %

8 % Retailer 30 %

Rs./Kg 16.97Total value

added RS 12.40 /Kg

Fertilizer inputs 16%, Productiom cost 53 %land rent 23% Marketing cost 47%Markup 4%

115

Figure 6.14: Small farmer chain (Vertical coordination): Farmer » Processing factory »

Product Wholesalers » Retailers

CostValue added

Table 6.26: Small farmer tomato value chain analysis summary

 S. No. Chain actors and activities Unit Horizontal Coordination Vertical coordination1 Total cost to Farmer Rs./Kg 11.32 6.49

  %   87 24  Value added   5.65 6.19  %   46 13  Sell price   16.97 12.68

2 Total cost Processor Rs./Kg   17  %   0 62  Value added   0 25.32  %   0 53  Sell price     55

3 Total cost Commission Agent Rs./Kg 0.22 0  %   2 0  Value added   0.80    %   6 0  Sell price   16.97  

4 Total cost Wholesaler Rs./Kg 0.4 1.59  %   3 6  Value added   2.21 8.41  %   18 18  Sell price   19.58 65

5 Total cost Retailer Rs./Kg 1.1 2.19  %   8 8  Value added   3.72 7.81  %   30 16  Sell price   24.4 75  Total cost   13.04 27.27  % cost   100 100  Total value added   12.4 47.7  % value added   100 100

Production cost 76 %Marketing cost 24 %

24 %Small growers 13%

62 % Factory

53 %

6%Product Wholesaler

18 %

8 % Retailer 16 %

Rs./Kg 12.68

Total value added

RS 47.73/Kg

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6.6.6 Value addition for large tomato growers

Large farmer Chain 1(a): Farmer » Commission Agents » Wholesalers » Retailers

In channel 1 the farmer sold their tomato to the traditional wholesale market .The tomato selling

price at farmer level was 17.95 per kg. In this traditional value chain the value-added process

occurred to any large degree at the farmer level followed by retailer, commission agent and

wholesaler .The farmer bear 87 % cost of this chain. The chain produced a total value added of

Rs.14.04 per kg, which was the lower value added compared to other value chains (Figure 6.15).

Figure 6.15: Large farmer chain 1(a): Farmer » Commission Agents » Wholesalers » Retailers

CostValue added

Under Chain 2, the tomato selling price at farmer level was Rs.12.72 per kg (Figure 6.16). The

grower harvest tomato and transport to factory. The expenses incurred by the farmers were

production activities, harvesting, however farmers save packing and commission charges. In this

chain farmer produced the lower value added in the value chain per cent, at a value of Rs.12.72

per kg. The value added was produced from the process of tomato cultivation. This chain

produced a total value added of Rs.47.73 per kg, which was the higher value added compared to

other horizontal value chain. In this chain farmers save marketing cost and earn more income per

acre (Table 6.27).

Fertilizer inputs 16% , Productiom cost 53 %land rent 23% Marketing cost 47%Markup 4%

87 %large growers 44%

2 % Commission Agents

13 %

3%Wholesaler11 %

8 % Retailer 32 %

Rs./Kg 17.95

Total value added

Rs.14.04/Kg

117

Figure 6.16: Large farmer chain 1 (b): Farmer » Processing factory » Product Wholesalers » Retailers

CostValue added

Vertical coordination between large farmers and processors gave significant reduction in

transaction/marketing cost and ensure more profit as compare to horizontal coordination

Table 6.27: Large farmer tomato value chain analysis summary

 S. No. Chain actors and activities Unit Horizontal Coordination

Vertical coordination

1 Total cost to Farmer Rs./Kg 11.28 6.49%   87 24Value added   6.67 6.23%   48 13Sell price   17.95 12.72

2 Total cost Processor Rs./Kg   17%   0 62Value added   0 25.28%   0 53Sell price     55

3 Total cost Commission Agent Rs./Kg 0.22  %   2 0Value added   0.82  %   6 0Sell price   17.95  

4 Total cost Wholesaler Rs./Kg 0.4 1.59%   3 6Value added   1.75 8.41%   12 18Sell price   20.1 65

5 Total cost Retailer Rs./Kg 1.1 2.19%   8 8

  Value added   4.8 7.81  %   34 16  Sell price   26 75  Total cost   13 27.27  % cost   100 100  Total value added   14.04 47.73  % value added   100 100

Production cost 76 %Marketing cost 24 %

24 %Large growers 13%

62 % Factory

53 %

6%Product Wholesaler

18 %

8 % Retailer 16 %

Rs./Kg 12.72 Total value added RS 47.73/Kg

118

6.7 Price Structure and Cost Drivers for Horizontal, Vertical and Pre-harvest Contract

System

The price structure of the fruits and vegetables depends not only upon the system of supply chain

through which the commodity moves but also a lot of price variability is observed during the

production cycle particularly for the vegetables. In case of horizontal coordination in mango the

price depends upon the target market and upon the stage of the season. The price of the product

varies considerably during the season for the same whole sale market. The price structure in case

of vertical coordination is more constant with little variation but are not unexpected as in case of

horizontal coordination. Similarly in case of pre-harvest contact system the price of the output

(per weight) basis remain almost similar in a production domain. The price determination

depends upon the stage of the orchard, amount of advance payment, expected output determined

by the condition of the orchard and bargaining between the producers and the contractor. In

addition to it the price structure also depend upon the scale of production and business. Hence

the price offered to large mango growers is little high as compared to small farmer of almost

similar other conditions and factors. This means that the traditional system of the wet market also

favors the large farmers due to more bargaining power and scale of the business.

In case of citrus the similar system of price structure prevails along different supply chain

systems as observed in case of mango. In case of horizontal coordination the price fluctuation is

less due to more established processing and vertical coordination through selling direct to the

processing/export factories. The price structure also depends upon the volume of export and

supply orders particularly from the neighbouring countries like Iran and Afghanistan. The price

in the whole sale markets with in the country are highly integrated with the export market for

citrus. Same price structure in the wholesale market is followed for small and large farmer except

that the advances from commission agents. In case of vertical coordination the price structure

remain almost similar with less price fluctuation in the short run. Over the season price variation

was observed in early, middle and late season. High price was observed in case of horizontal

coordination but less operational/observable cost in case of vertical coordination resulting in

higher returns in this case. As for as the pre-harvest contract system is concerned the price

structure depends more on the first sale out in a vicinity and the fellow farmers price becomes a

119

reference point. The important factors like mango considered by the contractors are condition of

orchard and the expected fruit bearing/production along with adjustments for the expected risks

and advances paid to the farmers.

Little different supply chain arrangements prevailed in the selected tomato value chain. Mainly

self marketing in the horizontal and vertical coordination was found. The prices were determined

by the target market, production stage and tomato production cycles of the other regions. The

price of the Punjab tomato decreased if there is supply from the other regions also. In case of

vertical coordination little price differences between small and large farmers were reported due

to scale of production whereas the prices were low as compared to horizontal coordination which

was mainly covered through higher production and supply of more ripened tomato to the

industry.

The cost drivers are more complex than the price structure of the horticultural commodities for

different systems of the supply chain. The production cost is the main element in all commodities

under discussion for all the systems. There is little variation in production cost depending upon

the scale of business and the characteristics of the farmers. In the production cost the cost of

production inputs like fertilizer, pesticides and irrigation water (40-45%) followed by machinery

(tractor) involved and the labor cost are the main drivers at production stage for all the

commodities under discussion.

In the horizontal coordination of mango value chain all post harvesting cost are born by the

farmer. Under this system packing cost is the main cost (45%) followed by the commission

(27%) transportation (6%). Under the vertical coordination system the labor charges in

harvesting, sorting, packing and loading are the main costs as the other cost of packing material

and commission are not paid by the farmer.

Main drivers of transaction cost in case of fruits depend upon the system of the product disposal.

The information, negotiation and monitoring were the main drivers. However it was highest in

case of horizontal coordination in the fruits (mango and citrus) followed by the vertical

120

coordination. With the advancement in communication technology mainly visiting for

negotiation was the main cost.

In tomato under horizontal coordination among the post harvest costs, packing cost share was

around 49% followed by the transportation cost (20%) and commission (12%). Under vertical

coordination is the transportation cost is the main cost. Among the production fertilizer (15%)

pesticide (12%), seed (12%) land preparation (8%) and irrigation (10%) were the major cost

drivers. The labor cost was one of the important factors as compared to fruits as in case of

tomato there was around 20 percent.

6.8 Systemic Constraints with Underlying Systemic Causes and Related Markets

This sub-section deals with the framework for analysis, and draws up a number of key

considerations for identifying the deeper systemic constraints behind the symptoms identified in

the value chain research. It is in the evaluation of value chain research findings that we need to

find the link between symptoms and causes in the market system and appropriate answers for

addressing systemic constraints (Herr & Muzira, 2009). Horticulture sub-sector constraints and

opportunities are categorized into eight headings: (i) input supply (ii) production management

(iii) market access (iv) infrastructure/technology (v) finance and risk (vi) enabling environment

(vii) policy (viii) organization and management and presented in Tables 6.28, 6.29 & 6.30.

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Table 6.28: Constraints and their underlying systemic causes of mango value chain

Deeper systemic constraints Causes MarketPoor quality of mango and low productivity

Lack of information and knowledge for cultivation resulting in poor quality and low productivity

Service & information markets

Low labor productivity Poor working conditions of small producers resulting in low labor productivity

Labor market

Loss of opportunities for income and employment creations

Low income of small producers resulting in loss of opportunities for income and employment creation

Core market between buyers and suppliers

Lack of investment in new productive technologies

Insufficient access to financial resources resulting in lack of investment in new productive technologies

Capital market

Low family income Discrimination against women working in the field resulting in low family income level

Labor market

Supply shortages on product markets

Lack of skilled labor and recruitment of youth resulting in supply shortages on product markets

Labor market

High post harvest losses Lack of skilled harvesters, collectors, packers and transporters resulted in high post harvest losses

Labor market

Low share of processing (7%) Low mango productivity and cheep mango pulp from other countries resulted in low share of mango processing

Processing market

Low export prices Poor product quality and poor packaging resulted in low export prices

Labor market

Table 6.29: Constraints and their underlying systemic causes of citrus

value chain

Problems Causes MarketPoor quality of citrus and low productivity

Lack of information and knowledge for cultivation resulting in poor quality and low productivity

Service & information markets

Low labor productivity Poor working conditions of small producers resulting in low labor productivity

Labor market

Loss of opportunities for income and employment creations

Low income of small producers resulting in loss of opportunities for income and employment creation

Core market between buyers and suppliers

Lack of investment in new productive technologies

Insufficient access to financial resources resulting in lack of investment in new productive technologies

Capital market

Low family income Discrimination against women working in the field resulting in low family income level

Labor market

Supply shortages on product markets

Lack of skilled labor and recruitment of youth resulting in supply shortages on product markets

Labor market

High post harvest losses Lack of skilled harvesters, collectors, packers and transporters resulted in high post harvest losses

Labor market

Low export prices Poor product quality and poor packaging resulted in low export prices

Labor market

Low share of processing (7%) Low citrus productivity resulted in low share of citrus processing

Processing market

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Table 6.30: Constraints and their underlying systemic causes of tomato

value chain

Problems Causes MarketPoor quality of tomato and low productivity

Lack of information and knowledge for cultivation resulting in poor quality and low productivity

Service & information markets

Low labor productivity Poor working conditions of small producers resulting in low labor productivity

Labor market

Loss of opportunities for income and employment creations

Low income of small producers resulting in loss of opportunities for income and employment creation

Core market between buyers and suppliers

Lack of investment in new productive technologies

Insufficient access to financial resources resulting in lack of investment in new productive technologies

Capital market

Low family income Discrimination against women working in the field resulting in low family income level

Labor market

Supply shortages on product markets

Lack of skilled labor and recruitment of youth resulting in supply shortages on product markets

Labor market

High post harvest losses Lack of skilled harvesters, collectors, packers and transporters resulted in high post harvest losses

Labor market

Low export prices Poor product quality and poor packaging resulted in low export prices

Labor market

Low share of processing (7%) Low tomato productivity and cheep tomato paste from China and Iran resulted in low share of tomato processing

Processing market

Only 5 tomato varieties are released and registered so far in Pakistan

(Only 20 vegetable breeders in the country (Punjab 11, Sindh 3, KPK 4, NARC 2 (Pathetic situation regarding HRD for vegetable breeding in general and tomato in particular)

R&D institutions

6.9 Effects of Vertical Coordination on Transaction Cost and Farm Profitability of

Smallholders in Horticultural Value Chain

Overall positive effect of vertical coordination on farm profitability was observed for the three

commodities under consideration through lower transaction cost and observable post harvesting

cost along with little higher productivity as compared to the horizontal coordination (Table 6.31).

When compared with all the three systems in fruits and two in tomato the net benefits were

found higher to the farmers vertically coordinated with the processing/export market. The

increase profitability with better production was resulting with little higher production cost for

quality product for the processors in vertical coordination. Quality production also require better

management which ultimately is translated into better productivity. The transaction cost was also

lower in this case as compared to horizontal coordination due to smaller chain of intermediaries.

However it was observed little bit higher than the pre-harvest contract system in addition to other

benefits little price fluctuations resulted in less risk as compared to horizontal coordination. The

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only draw back in the system reported by the small farmers was that some preferential treatments

were given to the large farmers and contractors due to large quantity of the produce as compared

to small farmers in terms of prices offered. Hence there is need to develop a collective system of

marketing for increasing bargaining power of the small farmers. The results in table 6.31

revealed that vertical coordination has less transaction cost and more profitability than horizontal

in case of mango, citrus and tomato in the study. Due to small volume of mango, citrus and

tomato small farmers are bearing relatively higher transaction cost than large farmers with more

volume of their produce.

Table 6.31: Profitability of horticultural sub-sector

Characteristics Mango Citrus TomatoSmall Large Small Large Small Large

Farm Size owned (Acres) 6.03 52.33 6.42 25.47 3.37 13.13Farm Size operational (Acres) 5.74 50.34 7.48 24.57 7.27 33.41Mean commodity area(Acres) 3.27 21.49 3.99 12.10 1.58 5.76Commodity area of oper. farm size (%) 57 43 53 49 22 17Horizontal CoordinationYield (Kg/Ac) 4065 4828 7256 7580 8730.0 9370Gross Revenue(Rs/Ac) 110568 142426 111597.3 117111 148148.1 168191.5Cost of production(Rs/Ac) 56788.1 61025.9 85548.24 80802.8 98823.6 105693.6Transaction Cost(Rs/Acre) 25142.03 24844.89 53505.74 46071.24 55348.2 45725.6Profit (Rs/Acre) 53780 81400.08 26049.04 36308.2 49324.5 62497.9Vertical CoordinationYield (Kg/Ac) 4239 4964 7411 7658 10820.0 11613Gross Revenue(Rs/Ac) 127170 156366 73739.45 85769 137197.6 147717.36Cost of production(Rs/Ac) 50740.8 54752.9 42539.14 44340 70221.8 75368.37Transaction Cost(Rs/Acre) 16621.12 14400.56 10412.46 9817.556 15797.2 16142.07Profit (Rs/Acre) 76429.2 101613.1 31200.31 41430.0 66975.8 72348.99Pre harvest contractYield (Kg/Ac) 3994 4792 7189 7515 - -Gross Revenue(Rs/Ac) 56994.4 70442 46009.6 54859.5 - -Cost of production(Rs/Ac) 31213.1 36035.8 31631.6 35395.65 - -Transaction Cost(Rs/Acre) 139.79 186.89 158.158 165.33 - -Profit (Rs/Acre) 25781.3 34406.56 14378 19463.85 - -

6.10 Identification of Stronger Forms of Integration that could Sustainable Improve

Wellbeing of Smallholder Farmers in Horticultural Value Chains

Based on the results of the analysis of the three major commodities it could be concluded that the

objectives of higher profitability along with lower cost were achieved in the vertical

coordination. Similarly the purpose of higher productivity for achieving the self sufficiency and

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surplus for foreign exchange earning is also achievable under vertical coordination as yield was

reported high, reported in the section of profitability. The vertical coordination also develops

competition for the other systems resulting in higher prices for the farmers. Keeping in view the

above discussion and the results presented in this chapter it could be concluded that developing

vertical coordination could sustainably improve the wellbeing of the smallholders in horticultural

value chains. However the underdeveloped system of processing and less opportunities due to

lower share in the global trade of horticultural commodities is hindering back the industry to

develop vertical coordination in the study area.

6.11 Implications for Smallholders, Agri-business, Public Policy and Investment Priority

The analysis of the economic viability helps to draw important implications for the smallholders

and agribusiness along with policy maker. Higher returns with lower cost imply that the small

farmers could be benefited through vertical coordination that would help to increase rural income

and reduce poverty. There is strong indication for the public policy to promote processing and

international trade and develop policies for promoting investment in the local processing and

export industry. This also implies that the priorities for investment should also be focused for

promotion of vertical integration.

6.12 Conclusion

This chapter dealt with the value chain research for horticulture sub-sector to identify the

underlying reasons for market failure of service market, to understand incentives of private and

public market players to engage in transactions and contribute to solutions for addressing the

failure of service market; and to highlights pathways to sustainable change for improving

services market by focusing on market opportunities and relationships.

The analysis of the economic viability of mango, citrus and tomato revealed that smallholders

mango growers incurred highest cost through self marketing, while pre-harvest contract system

was cost efficient. In case of large holders mango growers highest cost was realized in case of

self-marketing, in case of vertical coordination selling directly to the processors/exporters,

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operational cost was less than the whole sale marketing system but production cost was highest

than the farmers working with the horizontal chain and pre-harvest contract system. Profitability

analysis revealed that small holders did not manage their mango farms optimally and get low

average yield and hence low returns. Large farmers have been investing more intensively and

spending more money on their farms and get more outputs per acre.

Cost analysis both at small and large holder citrus growers revealed that transaction cost was

highest in case of horizontal coordination in the traditional chain of commission agent in the

whole sale market mainly due to the high operational cost while transaction cost was less due to

few actors along the vertical coordination. Farm level profitability analysis for smallholders

citrus growers revealed that 76 percent of the sampled growers didn’t manage their citrus farms

optimally and get low average yield and low returns. Large farmers have been investing more

intensively and spending more money on their farms and get more output per acre. Horizontal

coordination in citrus generates gross revenue of Rs.111597 with total cost of Rs.85548 and net

profit of Rs.26049 per acre. Under vertical coordination per acre yield is slightly high and

generate Rs.31200 per acre as net profit. In case of large holder citrus growers horizontal

coordination generates gross revenue of Rs.117111 with total cost of Rs.80803 and net profit of

Rs.36308. Large holders fetched more profitability and competitiveness as compared with small

holders.

Similarly in tomato, the cost of production was low under horizontal coordination with more

operational cost as compared to vertical coordination. The transaction cost was also low in

vertical tomato coordination resulting in low cost to the tomato farmers selling their commodity

directly to the processors. For large holder tomato growers to the cost of production was low

under horizontal coordination with more operational cost as compared to vertical coordination.

The transaction cost was also low in vertical coordination. The profitability result revealed that

small holders tomato growers did not mange their tomato farms optimally and get low average

yield and low returns. Large farmers have been investing more intensively and got more outputs

per acre.

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Analysis of value addition through different channels and different actors it was revealed that

high degree was observed at retailer level (35%), in horizontal coordination, while at exporter

level (86%) in vertical coordination for small holders mango growers. In case of large holders

mango growers the highest degree of value added was realized at 72% at retail level and 84

percent at exporter in vertical coordination. Similarly for small holders citrus growers again it

was highest at retail level (56%) in horizontal coordination and 96 percent by exported in vertical

coordination. In case of large holders citrus growers, highest value addition at the level of 52

percent was observed at retail level under horizontal coordination and at the level of 96% by

exporters under vertical coordination. Analysis for tomato value chain revealed that highest

degree of value addition was observed at farmers level at the degree of 42 % and 44 percent

under horizontal coordination for smallholders and large holders tomato growers respectively

and 53 percent by processors under vertical coordination both for smallholders and large holders

tomato growers.

The price structure analysis revealed that mango price depends upon the target market and upon

the stage of the season under horizontal coordination, while in case of vertical coordination price

is more constant with little variation but are not unexpected as in case of horizontal coordination.

Similar price structure prevails along different supply chain systems as observed in case of citrus

as in case of mango. Little different supply chain arrangements prevailed in the selected tomato

value chain. Mainly self-marketing in the horizontal and vertical coordination was found. The

prices were determined by the target market, production stage and tomato production cycles of

the other regions.

Constraints analysis revealed that smallholder face a number of constraints, which increase risk

and uncertainty and act as disincentives for increased production, consequently preventing

smallholders from accessing agricultural markets. Major challenges faced by smallholders such

as poor access to land; lack of on-farm and off-farm infrastructure; lack of access to finance for

production inputs; lack of access to mechanization, transport logistics, extension and research

support services; and limited access to high-value markets. However, positive effect of vertical

coordination on farm profitability was observed for the three commodities under consideration

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through lower transaction cost and observable post harvesting cost along with little higher

productivity as compared to the horizontal coordination.

The analysis of the economic viability helps to draw important implications for the smallholders

and agribusiness along with policy maker. Higher returns with lower cost imply that the small

farmers could be benefited through vertical coordination that would help to increase rural income

and reduce poverty. There is strong indication for the public policy to promote processing and

international trade and develop policies for promoting investment in the local processing and

export industry. This also implies that the priorities for investment should also be focused for

promotion of vertical integration.

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VALUE CHAIN ANALYSIS OF

HORTICULTURAL SUB-SECTOR

The chapter is about translating value chain

research into the development of a vision for

change and intervention strategies after analyzing

and understanding the value chain research

findings. On the basis of evaluation of findings of

value chain research a proposed strategy

(solutions/interventions) for value chain

development of horticulture sub-sector

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Chapter – VII

VALUE CHAIN ANALYSIS OF HORTICULTURAL SUB-SECTOR

7.1 Introduction

The framework for finding sustainable upgrading solutions in horticultural (mango, citrus and

tomato) value chains consist of four steps namely; (i) identifying constraints and their underlying

systemic causes (ii) identifying incentives of market players and agents of change

(iii) formulating a vision and strategy for sustainable systemic change: The interventions are

proposed.

7.2 Constraints Analysis of Smallholder Dominated Horticulture Sub-Sector

Smallholder farmers face a number of constraints, which increase risk and uncertainty and act as

disincentives for increased production, consequently preventing them from accessing agricultural

markets. This chapter discusses some general constraints facing smallholder farmers. Small

farmers are facing both internal and external constraints. Generally, smallholder farmers in

Pakistan face major challenges such as poor access to land; lack of on-farm and off-farm

infrastructure; lack of access to finance for production inputs; lack of access to mechanization,

transport logistics, extension and research support services; and limited access to high-value

markets. External constraints emanate from the broader agricultural environment and are largely

beyond the control of the individual farmer which include natural risks typical to agricultural

activity; limited availability of inputs, credit, mechanization, and marketing services; poor

institutional and infrastructural support; inappropriate policies and legislation; restrictive

administrative and social structures; and problems associated with land tenure and the acquisition

of agricultural resources (Baloyi, 2010). He further stated that internal constraints are those

constraints that affect the farmer’s ability to operate efficiently, despite any innate potential the

farmer might have to allocate resources in an economically efficient manner. Normally the

farmer has some control over such constraints which include liquidity problems; shortage of

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labour; lack of skills, knowledge and education; and a range of cultural factors that in some

instances prevent more effective management of resources.

Sharif (2011) argued that some of the challenges facing Pakistani smallholders are lack of

markets and high transaction costs due to poor access to markets and high transaction costs,

poorer farmers are excluded from participating in potentially remunerative commodities like

mango, citrus and tomato. Alternative avenues for smallholder market participation include

vertical integration with processors and marketers of agricultural products (Baloyi, 2010).

However, lack of assets, market information and access to services again hinders smallholder

participation in these potentially lucrative markets like supermarket, Metro, Macro, Best Prices

and other markets in Islamabad, Lahore, Faisalabad and Karachi. The constraints were expressed

by the various actors of the mango, citrus and tomato value chains (input suppliers, producers,

traders, wholesalers, retailers) key informants (related government officials, agriculture

researchers, academicians, NGOs, practitioners. The constraints were categorized into the

following eight groups which are: (i) Smallness (ii) Management/Organization (iii) Input Supply

(iv) Technology & Product Development (v) Market Access (vi) Finance (vii) Enabling

Environment and (viii) Policy. The brief description of these constraints with their features is

presented in Table 7.1.

Table 7.1: Constraints analysis of smallholder dominated horticulture sub-

sector

Groups

Symptoms /Constraints Causes Outcomes of constraints

Who is/are affected

Inp

ut

Su

pp

ly

Limited availability and access to quality inputs (particularly seed /seedlings) results in poor yield consequently per unit production costs increase dramatically making production less profitable.

Dependent on supply from Pakistan

Erratic supply due to poor market projection

Lack of financial capacity of the farmers to purchase quality seed

Lack of knowledge of farmers about seed quality.

Reduces yield Small farmers

Increased price of primary inputs (seed/seedlings, fertilizer) pushes the cost of production higher making it less competitive against inexpensive resulting in loss and discouragement for production.

Dependent on supply from Pakistan

Erratic supply due to poor market projection

High transaction cost (tax, toll, blockage of working capital, Increased transportation cost)

Increases cost of production

Small farmers

131

Limited knowledge of seed/seedlings production and preservation by the farmers reduces production yield consequently per unit production costs increase dramatically making production less profitable.

Inadequate knowledge about seed collection and preservation

Reduces yield Small farmers

Limited availability and access to cultivation technology (tractor, irrigation equipments, weeder, spray machine, etc.) increases the rental fees or requires more manual labor thus increasing the cost of production and reduces profit of the producers.

Requires substantial investment Demand and supply of service is

not known

Increases cost of production

Small farmers

Sm

alln

ess

Mango small farmers (70%); Citrus (67%); Tomato (76%)

Low quantity and poor quality Inconsistency in production Poor collective bargaining to safe guard

their interest Lower sharing of knowledge, information

and experience resulting in poor productivity and profitability.

Inheritance Low endowment in production

factors Increases demand of consumer

and their concerns about food safety Lack consistency in terms of

supplying products to markets Lack of consistency in terms of

producing products Lack of adequate farmer

association Lack of functional farmers’

association

Lack of bargaining power due to little marketing surplus

Reduce productivity and profitability

“Supermarkets would rather not deal with smallholder farmers – they don’t deliver (start/stop), don’t invest (invest just one time and don’t keep up), and are a major hassle to work with”.

Small farmers

Man

agem

ent

/ Org

aniz

atio

n

Limited knowledge and skills of commercial farming resulting in poor productivity and poor profitability

Practice of subsistence agriculture Lack of market Poor profitability

Reduce productivity

Large farmers

Limited knowledge on appropriate record keeping (particularly cost of various inputs, farming harvesting, post harvesting activities, etc. as well as production, wastage figures) to determine profitability and competitive advantage resulting in poor satisfaction or higher expectation from production of tomatoes.

Practice of subsistence agriculture Illiteracy Lack of awareness

Increases dissatisfaction of mango, citrus and tomato growers

All farmers

Limited knowledge about mango, citrus and tomato varieties result in poor yield and less profit

Practice of subsistence agriculture Poor knowledge of input suppliers Poor extension activities

Reduces yield Small farmers

Lack of knowledge of mango, citrus and tomato disease and its protection results in poor yield and less profit

Poor knowledge of input suppliers Poor extension activities

Reduces yield All farmers

Lack of bargaining power (Since they have poor access to market information and limited access to financial markets, which prevents them from selling their products at the most profitable time).

Unorganized groups Poor cooperation among them

Reduce profitability

Reduce share of added value in the value chain

Small farmers

Limited knowledge about improved cultivation practices (soil testing, crop rotation, orchard management, water management, weed management, plant spacing, etc.,) resulting in low productivity and poor quality thus making production less attractive.

Lack of effort towards continual development of technology.

Limited capacity of the extension department

Poor resource allocation for agricultural research.

Lack of service providers

Increases cost of production

Reduces yield

All farmers

Limited knowledge and information on new and improved production technologies (planters, harvesters, etc.) reduces productivity (yield) and quality resulting higher cost of production and lower profit thus making production less attractive to producers.

Poor coordination among Research Institute, Agriculture University, and Extension Department

Absence of large Ag machinery suppliers

Reduces productivity

Increases cost of production

All farmers

132

Tec

hn

olog

y &

Pro

du

ct

Dev

elop

men

t Limited knowledge on high yielding, pest

resistant, early/late/off season varieties of tomatoes, seedlings of mango and citrus by the growers results in lower productivity and profitability

Poor coordination among Research Institute, Agriculture University, and extension department

Resource limitation of extension department

Reduces profitability

All farmers

Limited knowledge of appropriate application and dosage of fertilizer and pesticide use reduces productivity resulting in poor profit.

Poor coordination among Research Institute, Agriculture University, and extension department

Resource limitation of extension department

Reduces yield Reduces

profitability

All farmers

Limited adequate local expertise and skills on storage and processing technology is retarding the market growth consequently the farmers are deprived from high income opportunities from production and are discouraged

No available facilities Services are outsourced from

Pakistan No technical institutions

Reduces profitability

All farmers

Mar

ket

acc

ess

Lack of human capital Illiteracy Poor technological skills

Reduces yield and profitability

Small farmers

High transaction cost Lack of markets in rural area Lack of poor transportation

system

Reduces profitability

Small farmers

Lack of adequate market information results in poor decision of the farmers to harvest and select right market consequently lower market price.

Poor information sharing facilities No intermediate market Poor supply channel

Price reduction Poor decision

of farmers regarding harvesting time and selecting the right market

Small farmers

Lack of markets in rural areas Limited public and private investment in rural area

Price reduction Higher

transaction costs

Small farmers

Lack of cold storage facilities forcing the farmers to sell their produce even the price is lower thus in increases the financial loss of farmers

Lack of local technical knowledge High investment cost

Reduction in early season price

Selling at below cost price

All farmers

Inadequate backward (for seed, fertilizer, pesticide, equipments, knowledge) and forward (traders, wholesalers, retailers) linkage with farmers results in poor productivity and profitability thus discourages the farmers to grow horticultural crops.

No intermediate market Poor supply channel

Increases prices of inputs

Reduces profitability

Small farmers

Poor market mechanism (lack of information, single market, poor negotiation power of the farmers, etc.) encourages exploitative tendency of the traders thus discourages the farmers to produce horticultural crops.

Strong Market regime Farmers are not united

Reduction in early season price

Sold at below the cost price

Small farmers

Lack of availability of quality inexpensive packaging materials (wooden crates) increases cost and wastages during transportation resulting in lower profit.

Poor sources of raw materials Crates are outsourced from

Pakistan Easy availability of recycled

crates but are generally poor quality

Poor sources of raw material

Small farmers

Fin

ance

Lack of access to finance for purchasing quality seed/seedlings, adequate fertilization and appropriate dose of pesticide application results in lower yield and poor profitability.

Non availability of formal financial institutes.

Lack of owners’ equity.

Reduces yield Small farmers

Lack of access to finance result in production in smaller land thus reducing the scope for attaining economy of scale and competitive advantage for more profit.

Non availability of formal financial institutes.

Lack of owners’ equity.

Reduces productivity

Small farmers

Lack of access to finance force the producers to sell their products in advance to traders at a lower price thus making production less profitable

Non availability of formal financial institutes.

Lack of owners’ equity.

Reduces profitability

Small farmers

Lack of access to finance forces the producers to depend on money lenders and pay higher interest rate/profit-sharing ratio thus making the cost of capital high which reduces

Non availability of formal financial institutes.

Lack of owners’ equity.

Increases cost of production

Small farmers

133

En

abli

ng

En

viro

nm

ent

Lack of adequate feeder road linking farms with markets resulting in high cost, wastage resulting in low profitability.

Absence of government priority Frequent flooding

Increases post-harvest losses

All farmers

Lack of adequate supply and access to electricity hinders value addition plants

Poor government resources Poor private investment incentives

Low share in processing

Low share in export

All farmers

Lack of adequate and appropriate transportation facilities results in higher cost, high wastage thus reducing profitability

Lack of improved road communication system

Increases post-harvest losses

Higher transaction cost

All farmers

Lack of cold storage facilities results in compelling the producers to sell their products even at a lower price.

Lack of local technical knowledge High investment cost

Reduction of prices

All farmers

Lack of processing facilities results in lower capacity to absorb excess supply thus reducing the price and poor profitability.

Lack of local technical knowledge High investment cost

Low share in processing

Low share in export

All farmers

Pol

icy

Lack of appropriate enforcement of policy for seed/seedling, fertilizer and pesticide quality testing and standard resulting in increased supply of non-quality inputs in market

Lack of good governance Limited resources of seed testing

lab

Reduces profitability

Small farmers

Lack of adequate policy for regulating the trade of mango, citrus and tomatoes with neighboring countries

Lack of high quality, knowledge of Good Agricultural Practices (GAP), Sanitary and Phytosanitary (SPS) measures, capacity to comply with market and regulatory requirements, new issues of conformity assessment, and traceability.

Absence of farmers’ Association participation in policy making

Poor representation of trade association in policy making

Low share in export of mango, citrus and tomato

All farmers

Lack of adequate policy guidelines for coordination between agricultural research and extension results in slow adoption of research results at the field level consequently the producers can not take advantage of the research results for profitable production process

Poor policy formulating structure Absence of farmers’ Association

participation in policy making

Rate of research adoption and diffusion is very slow

All farmers

Lack of policy for encouraging value addition of agricultural products through processing, storage, etc. resulting in poor private sector investment in this area consequently the farmers’ profitability reduces.

Poor representation of trade association in policy making

Poor policy formulating structure

Reduces profitability

All farmers

Lack of policy for tax incentives on import of modern appropriate agricultural machineries to increase productivity resulting in low competitiveness advantage in agriculture

Poor representation of trade association in policy making

Poor policy formulating structure

Poor competitive advantage

All farmers

Lack of appropriate policy for suitable agricultural credit facilities for increasing farm production resulting in poor productivity and low profitability

Poor policy formulating structure Absence of farmers’ Association

participation in policy making

Reduces profitability

Small farmers

7.3 Identifying Incentives of Market Players and Agents of Change

The success and sustainability of upgrading solutions depend on whether they sufficiently

address the interests and incentives of market players. This section gives an introduction to a

rapid stakeholder/incentive analysis. Capacity building of chain stakeholders especially

producers and contractors for the skill transfer of their unskilled labor for harvesting, collecting,

grading, packing, transporting, loading and unloading. Bad working environment and changing

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consumer awareness and demand are major factors creating hindrance for upholding the

horticultural sub-sectors. The role of these factors is briefly discussed in the following sub-

section:

7.3.1 Bad working environment in horticulture value chains

Herr and Muzira (2009) stated that poor and disadvantaged people are part of horticulture value

chain systems at various levels: as producers, service providers, laborers and consumers. They

further argued that a symptom of poverty is poor working and living conditions affecting not

only the health of people (producers, services providers, laborers and consumers) but also their

social and economic status and recognition, their commitment to work and – most importantly –

their productivity and loyalty to their employer, buyers or suppliers. The working environment of

horticulture producers are not only a symptom of poverty but are often also a cause of system

inefficiency and lack of horticultural product quality, resulting in the inability to compete on

markets as well as such working environment is therefore not only a social condition but become

a serious economic factor determining income and employment opportunities for horticulture

producers in general and small producers in particular (Herr and Muzira, 2009). The small

horticultural producers always remain in vicious circle because harsh working environment lead

to low horticultural productivity and lack of quality which make them unable to meat market

requirement demanded by the consumer preference. Thus horticultural demand shifts towards

large and commercial horticultural producers which lead to lack of investment, capital and

demand which ultimately provide the platform of poor working condition of small horticultural

producers. Poor working environment conditions also undermine the ability of large

farmers/processors/exporters to compete

7.3.2 Bad working conditions affect output and performance

Productivity and/or quality weaknesses of suppliers/buyers also mean that processors/exporters

face serious competitive pressure in terms of costs and quality structures (Herr and Muzira,

135

2009). They further stated that weak supply also means that the buyers will have problems

meeting its own customers’ demand as well as instead of cutting back on investments in more

work-friendly production facilities, improving working conditions can enhance the

competitiveness of processors/exporters/traders on the market. This can be reflected the

productivity and quality weakness of small horticulture producers profitability analysis.

Profitability Analysis: The profitability analysis is done considering cost analysis described

above. The economic viability of different farmer groups along different chains is determined

based on the profitability analysis.

7.3.3 Changing consumer awareness and demand

Consumer associations, media and policy-makers are increasingly urging (multinational)

companies to improve social and environmental standards in their supply/marketing chains, a

fact that is underlined by the emergence and increasing popularity of fair trade standards and

certifications (Herr and Muzira, 2009). They further stated that unless processors/exporters are

able to respond to this demand, they will lose markets to competitors who already have

implemented good working conditions and control mechanisms.

7.4 Formulating a Vision and Strategy for Sustainable Systemic Change

The information on SWOT Analysis of horticulture sub-sector is presented in sub-section 7.4.1.

Following SWOT Analysis the constraints, opportunities, solutions and interventions for

horticulture sub-sector is presented in sub-section 7.4.2.

7.4.1 SWOT analysis of horticulture sub-sector

Strengths, Weaknesses, Opportunities & Threats (SWOT) a powerful tool is used in developing

strategies for intervention. The tool provides a framework for understanding controllable and

non-controllable factors that any interventions should address if they are to benefit the entire value

chain of horticulture sub-sector. Critical issues of the SWOT analysis come under the 4

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categories namely strength, weakness, opportunities and threats. Horticulture sub-sector is

confine to mango, citrus and tomato in this report. The brief description of strengths, weaknesses

opportunities and threats of horticulture sub-sector is briefly narrated in the following sub-

sections:

Strengths of Horticulture Sub-sector

Diversity of produce - highly suitable climatic condition for fruits (mango and citrus) and

vegetables (tomato) cultivation

Low cost labour

Large domestic market

Department of agricultural marketing Punjab is in place

Pakistan horticulture development and export company is in place

Weaknesses of Horticulture Sub-sector

Poor quality and low productivity

Loss of opportunities for income and employment condition

Lack of investment in new productive technology

Supply shortages on product markets

High product losses

Low export prices

Low share of processing/little value addition

Lack of on-farm infrastructure

Limited capacity building of horticulture growers and other chain stakeholders to address the

issue of low productivity, poor quality, high post harvest losses, low share in processing, low

export prices and limited or no knowledge on regulatory framework (GAP, SPS, WTO

requirements etc.).

Opportunities of Horticulture Sub-sector

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Availability of certified/quality seed and seedlings

Availability of cheaper and quality farm inputs (fertilizer, herbicide, pesticide)

Use of farm machinery enable intensive farming

Establishment of farmer organization/association/groups/cluster

Commercial orientation

Proximity Middle East and Far East markets

Increasing international demand

Excellent business

Capacity building of horticulture growers, women, children and other chain stakeholders

National policy of horticulture sector in line with food security and trade promotion

Public private partnership

Threats of Horticulture Sub-sector

Competition

Diseases and pests

Quarantine/SPS compliance/WTO requirement

7.4.2 Constraints, opportunities, solutions and interventions of horticultural sub-Sector

The findings of value chain research given in Chapter 6 are translated into solutions and interventions.

The brief description of major constraints, opportunities, possible solutions and proposed interventions

for the horticultural sub-sector in Pakistan’s Punjab are briefly presented in Table 7.2.

Table 7.2: Constraints, opportunities, solutions and interventions of the

horticultural sub-sector

Gro-ups

Constraints Opportunities Solutions Interventions

Limited availability and access to quality inputs (particularly seed/seedlings).

Certified/quality seed/seedlings will ensure higher yields and reduce the incidence of insect pest and disease

Improved quality seeds and establishment of clean nurseries

Research and development need to focus to ensure availability and access of certified quality seed/seedlings; and awareness campaign for their use

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Inp

ut

Su

pp

ly Expensive and poor

quality other inputs (fertilizer, herbicide and pesticides)

Cheaper and quality other inputs (fertilizer, herbicide and pesticides) will ensure higher productivity and reduce the incidence of weeds, insects/pest and diseases

Cheaper quality fertilizer, herbicide and pesticide

Establishment of rural business hubs for input provision at union council level will facilitate cheaper and quality chemical fertilizer at farmer door steps

Capacity building other chain stakeholders for addressing the issue of post harvest handling and logistic

Unbalance and untimely use of inputs

Timely application of balance use of fertilizer, herbicide and pesticide according to requirement of the critical stages will ensure higher productivity and increase input use efficiency

Knowledge and skill sharing

Promotion of participatory research and development through farmer field school approach (FFSA)

Inefficient water utilization and high cost of irrigation

High crop intensity will result in higher yields

Better irrigation methods and techniques

Promotion of crop specific high efficiency irrigation (drip, trickle etc.)

High credit cost Cheap credit availability will promote balance input use needing to increase productivity

Cheap credit facilities Pro-small holder subsidized credit scheme

Low level of mechanization

Farm mechanization will enable intensive farming that enable increase farm profitability

Assess to cultivation technology and promotion from rental market

Establishment of competitive rental service market of farm machinery at rural business hubs/farm service hubs

Sm

alln

ess

Dominance of small farmers (absolute smallness)

Formation of farm organization/associations will ensure better access to input, higher productivity and more return

Collective action/collective voice for bargaining power

Establishment of farmer organization/ association through farmer field school approach and linking them rural business hubs and farm service centers

capacity building of growers for addressing the need of productivity, quality of improvement, reducing post harvest losses and value addition of value addition

Low quantity, inconsistent production and poor quality

Specialized farming for consistent supply of quality product

Commodity specific and enabling environment

Development of functional farmers association linked under rural business hubs (cluster approach)

Man

agem

ent/

Prevalence of subsistence farming resulting in low productivity and profitability

Commercial orientations for optimum production to maximize profitability

Market link and awareness

Vertical coordination with marketing and processing industries

Limited knowledge and traditional practices

Farmers that are trained at latest techniques and methods will be able to do farming and scientific lines

Dissemination of updated knowledge and skill

Farmer networking with agricultural science and technology innovation system

Mar

ket

acc

ess

Inadequate backward and forwarded linkage with farmers

Linkages with input and output market will increase productivity and profitability

Development of linkages through buy back guarantee with market chains

Promotion of contract farming through contract farming

Poor market mechanism and traditional marketing methods

Improved market mechanism with access to marketing information and development of cold chains and improved cold harvest process will result in value addition

Improved marketing system (rules regulation system) and product handling in compliance with WTO standards

Promotion of GAP and development of cold storage improved packaging and transportation.

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Exploitation of the farmers by the middle man

Decrease the number of marketing intermediary for the commodities movement from farm to fork

Increase the awareness of the farmers to linking them with processing industries/modern retail chains

Establishment of vertical coordination where farmer association/organization will sell their product to the alliance of processors/exporters

En

abli

ng

envi

ron

men

t

Lack of farm to market road (poor infrastructure)

Improved infrastructure will increase marketing efficiency

Infrastructure development

Development of links roads to production areas

Shortage and high cost of electricity/energy

Regular supply of cheap energy will reduce cost and enhance profitability

Increase supply of energy through diversified sources

Promotion of alternative energy sources i.e. biogas, solar and biofuel

Under develop processing of horticultural products

Improved processing facilities will help to absorb excess supply and reduce price variability

Farm based semi processing

Small scale processing facilities (small enterprise development) i.e. kinnow and mango processing and tomato pulping process

Establishment of model on farm pack house

Lim

ited

cap

acit

y b

uil

din

g of

hor

ticu

ltu

ral c

hai

n s

tak

ehol

der

s

Poor capacity building of horticultural growers, women and children for addressing the need of productivity, quality improvement, reducing post harvest losses and value addition

Capacity building of horticultural growers, women and children will ensure to enhance the productivity, quality improvement, reduction in post harvest losses and value addition

Knowledge and skill transfer to farmers, women and children on enhancing productivity, improving quality, reducing post harvesting losses and enhancing value addition

Establishment of male farmer field school, women open school and children ecological clubs

Poor capacity building of other horticultural chain stakeholders for addressing the issue of post harvest handling, logistic and marketing

Capacity building of other horticultural chain stakeholders will ensure to reduce post harvest losses, logistic issues and marketing problems

Knowledge and skill transfer to other chain stakeholders for reducing post harvest losses, packing, transportation and storage

Establishment of business field schools

No specialized capacity building to all stakeholders of horticultural value chain (training on GAP, food safety and quality grades, establishing proper procedure of packing, IPM philosophy)

specialized capacity building to all chain stakeholders will ensure the better knowledge and information on GAP, food safety and quality grades, establishing proper procedure of packing, IPM philosophy

Knowledge and skill transfer to all chain stakeholders will improve information on GAP, SPS, food standards and WTO requirements

Organized special training course on GAP, post harvest handlings, high quality and education on food safety and quality grades and standard, proper procedure for packing facilities as well as standard training curricula on GHPs, GMPs and HACCP.

Pol

icy

Weak policy enforcement/ implementation

Policy implementation will help in availability of quality/standard inputs/outputs

Improved/good governance

Arrangement of resources for quality testing field lab facilities and management

Inadequate policy and regulatory framework

National level policy and regulatory framework line with food security and trade promotion will develop vibrant horticulture sector

National policy with holistic regulatory framework

Formulation of national horticultural policy

Formulation of regulatory framework for fulfilling the SPS requirements, food safety and standard as well as WTO requirements

Lack of public/private partnership in formulating policy structure

Encouragement and involvement of private sector in policy decision will help to promote investment value addition and processing

Participation of concerned stakeholders in policy making

Representation of processing and trade association and policy dialogue

7.5 Value Chain Promotion Strategy for Mango and Citrus

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Value Chain (VC) promotion strategy basically focuses on two areas: 1) market orientation,

which aims at greater volume sold and/or a better end price gained and 2) income distribution,

the poor small holder benefit at least equally or more from the income generated by a chain.

Value chain Promotion Strategy is a set of activities to achieve common objectives, around

which one or more business organizations and/or interest groups are linked. The activities are

planned and carried out to increase the competitiveness of the subsector, with the active

participation of a value chain’s diverse actors.

A VC promotion strategy for the mango and citrus has been proposed based on mapping and a

detailed analysis of the most pressing bottlenecks that are hindering growth. A review of the

literature and GOP, statistics, and discussions with various key informants has shown that

Pakistan’s fruit sector has both great potential and significant challenges. To tap into the

opportunities and to address the challenges in a systematic manner it is essential to work jointly

with various stakeholders including government departments, the private sector and the operators

of this particular value chain.

Vision: To increase production volume and yield and maintain the position of the mango and

citrus sub-sector at the top of Pakistan’s export commodities

Goal: To reduce the cost of production and improve market linkages through better provision

and use of business development services, to increase the margins and share of distributed

income of small holders.

Strategies: In order to achieve the goal described above, strong collaboration between the public

sector, development agencies and the private sector (business associations) is a precondition.

From the public side, investments in transport and other basic infrastructure (irrigation, cold

stores etc), regulation of trade and support for technology development are required. From the

private sector, greater linkages are needed to structure value chains, create scale effects, and

explore post-harvest processing and marketing opportunities. VC operators performing different

functions (vertical relation) and the firms and companies engaged in a particular level of value

chain (horizontal relation) need to put collective efforts into upgrading the value chain.

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Small producers could benefit through co-operatives or links directly with large companies as

suppliers/exporters. Particularly with regard to delivery of the produce from farm to the

wholesale market, export depots, the amounts grown by farmers are often too small to meet the

needs of big traders. Therefore, small producers need to join hands and form a group/co-

operative to be able to supply the required quantity to big traders/bulk buyers. Farmers capacity

(financial and management) need to be strengthened so that they can improve their management

practices and adopt new technologies to increase production volume and improve the quality of

fruits.

Increased financial capacity of small holder can increase the share of self marketing of their

produce which insured more profit as compare to pre harvest contract. It is obvious that no one

single organization can overcome all the problems, nor it is advisable to have a huge crowd of

actors at a particular level of the value chain when there is no-one working at another level.

The first pre-requisite is therefore to clarify roles among the support service providers as to which

organization can best provide which services. Based on the analysis of functional flow, mapping

of actors and supporters and market analysis, we suggest the following model (Figure 7.1).

As depicted in the figure, various efforts are needed at different levels of the value chain to

improve the competitiveness of the mango sub-sector which insures small holder better gain

from their produce.

At input supply level, private agro-input firms need to be attracted into the business to

enhance farmers’ access to quality seedlings, fertilizers and chemicals. Improvement in

planting materials and timely availability are the crucial areas that need support services

from various organizations.

At production level, there is a need to provide training and on-the-spot advice on how to

manage orchards properly and how to control diseases and pests.

As for the delivery of fruits from the farm to the auction yard/export depots, there is a

need to develop and strengthen farmer’s groups/co-operatives on the one hand and

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improve post-harvest handling facilities on the other.

For export of the fruits, there is a need to improve the inspection and certification

process, LC procedures and transportation.

There is urgent need to develop financial capacity of the small holders for the purchase

of inputs that can save small holder from the exploitation of market intermediaries

(contractors and commission agents).

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Figure 7.1: Supporting agencies and services for VC analysis

Consumers

Fruits Traders in Middle East, USA, Europe

Processors

Local market

Exporters Commiss

ion Agent Farmers group Cooperatives

Contractors/Middle men

Farmers

Pvt. Agri input Supply Firms/companies

Local tree nurseries,inputs dealers, CAs

Min. com, TDAP

NAPHIS

Mango research Dep

PHDEC

RAMCOBDFCL

Highway, PHDEC

Ext.Dep. PHDEBC

F&V research

Inspection of quality at field depots &issuance of certificate

Development of depots new export exit point in the East

Improvement in post harvest handling &storage facility facilities at wholesale market

Strengthening of FGs/Coop for collective marketing Access to finance & technology

Improvement in roads

access &storage facilities

Support to control diseases & pest to reduce fruits drops/sudden death

Training & technical support for proper management of orchard

Improvement in planting material & increasing grower’s access to seedling, fertilizers & chemicals

VC Link presently exist VC link needed to expanded/ established Action presently involved in Horticulture Value chain Action needed to get involved in Horticulture Value chain Support services needed for VC promotion Organization that may tangible play lead role

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7.6 Conclusions

This chapter presented the various constraints faced by mango, citrus and tomato industry and their

systematic causes. Further it explored the potential of the industry as well as strategy for value

chain development of mango, citrus and tomato.

Poor quality and low productivity, low labor productivity, loss of opportunities for income and

employment creations, lack of investment in new productive technologies, low family income,

supply shortages on product markets, high post harvest losses, low share of processing, and low

export prices were the plausible constraints identified for value chain development of mango,

citrus and tomato. The underlying causes identified behind these constraints were lack of

information and knowledge for cultivation, poor working conditions of small producers, low

income of small producers, insufficient access to financial resources, discrimination against

women working in the field, lack of skilled labor and recruitment of youth, lack of skilled

harvesters, collectors, packers and transporters, and poor product quality and poor packaging.

There were some positive initiatives and opportunities identified for the value chain

development, like: clusters of farmers in strategic areas are emerging in mango and citrus

growing areas through farmer field school approach; some institutions like, NARC, UAF, AUT,

UAP, and some NGOs have started initiatives to increase regulations and certification systems;

the government subsidies-inputs program gives a window to bring this program to the

horticulture sub-sector; under ASLP some districts have prioritized horticulture and mango and

citrus in particular and are allocating funds and expertise to the sub-sector for this purpose;

availability of commercially attractive and relative resistant mango, citrus and tomato varieties; a

practical training center to improve the approach and capacity of horticulture in general and

mango, citrus and tomato in particular; success stories using GAP in some country exist and can

be replicated for mango, citrus and tomato; fast-track researches on technology transfers for

mango, citrus and tomato; many actors of the sub-sector are keen to sponsor experts for

improving mango, citrus and tomato growers skill for production management; SMEs has

already feasibility studies (processing and pack house) for horticulture sub-sector; increasing

financial institutions are tailoring their products and services to specific agricultural sub sector;

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the Ministry of National Food Security and Research has identified horticultural sub-sector as

one of the high potential sector to be promoted; and PHDEC is promoting clusters for fresh and

processed mango, citrus and tomato.

Strong collaboration between the public sector, development agencies and the private sector

(business associations), farmers capacity (financial and management) need to be strengthened so

that they can improve their management practices and adopt new technologies to increase

production volume and improve the quality of fruits, and clear identification of roles among the

support service providers as to which organization can best provide which services are the main

strategies for value chain development of mango, citrus and tomato. 

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VALUE CHAIN DEVELOPMENT SCHEMES

FOR HORTICULTURAL SUB-SECTOR

The main focus of this chapter is to prepare pilot

mango, citrus and tomato value chain

development schemes under which their growers

and other chain stakeholders should ensure their

participation in modern value chains, thereby

increasing their production improving their

incomes and livelihood.

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Chapter – VIII

VALUE CHAIN DEVELOPMENT SCHEMES FOR HORTICULTURAL

SUB-SECTOR

8.1 Introduction

Notwithstanding its declining share in GDP, agriculture is still the single largest sector,

contributing 21 percent to GDP and employing 44 percent of the workforce (GOP, 2008). The

sector is even more vital from perspective of creating employment opportunities, particularly in

the rural communities, where an estimated 95% of the total employed population is attached

directly or indirectly to agriculture (ADB, 2004). Like in other developing countries, poverty in

Pakistan is largely a rural phenomenon; therefore, government has declared agriculture as main

engine for development i.e. alleviating rural poverty and it is expected to contribute significantly

to the overall growth of the economy (GOP, 2008). With in agriculture sector , government

plans to provide support to smallholders as they could reduce their own poverty by improving

their income through participation in modern agriculture value chain while at the same time

contributing in to increase agriculture production through adoption of modern technology, hence

to the national economy and food security . According to Government plan, the current poverty

level of 32.1% is to be reduced to 15% by 2011 and to achieve this target, development of

agriculture sector in general and horticulture in particular is very important for ensuring food

security, increasing incomes, generating employment and its contribution to poverty reduction

(GOP, 2001 and PHDEB, 2007).

Chain stakeholders especially traders and exporters are currently struggling with in domestic and

global market places (Proustica, 2006). Horticulture sub-sector in general and mango, citrus and

tomato industries in particular have been subject to increasing centralization and consolidation of

markets and the value chains which serve them. Value chains comprise the full range of the

activities required to bring a product from consumption to end and use and beyond including

input provision, production, post harvest handling, marketing and logistics and support to buyers

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and consumers. Mango, citrus and tomato value chains today are dominated by the buying power

and contractual success of the processors and retailers in form of super market, hyper markets

like Metro in Pakistan as well as wholesale business. Supporters of food system develop mentors

believe that a dedicated investment strategy is required to develop shorter and more dedicated

horticultural sub-sector/mango, citrus and tomato value chains (Proustica, 2006). Mango, citrus

and tomato industries are one where there is much innovations, energy and large growth

potential, held back by several factors including financial constraints. This chapter is devoted to

pilot a mango, citrus and tomato value chain investment schemes for their growers and other

chain stakeholders in Pakistan.

The main focus of this chapter is to prepare pilot mango, citrus and tomato value chain

development schemes under which their growers and other chain stakeholders should ensure

their participation in modern value chains, thereby increasing their production improving their

incomes. This chapter is based on the findings of this study.

8.2 Rationale for Pilot Mango, Citrus and Tomato Value Chains Schemes

8.2.1 Rational for pilot mango value chain development scheme

Mangos are second important fruit crop of Pakistan. The production of mango is 1.72 million

tons (4 percent of world production) with a value of Rs.35.23 billion during 2006-07. The mango

yield in Pakistan is 10.7 tons per hectare as compared to 26.7 tons per hectare mango yield in

Guatemala putting Pakistan on 13th position in the global ranking with a yield gap of 16 tons per

hectare. After a decade of steadily increasing production, there is now concern in Pakistan that

mango production is static or declining (ASLP, 2007). Key production issues that affect mango

yield and its quality are inadequate orchard and irrigation management, incidence of major

diseases and pests and non-adoption of modern orchard management practices. The estimated

post-harvest losses of mango are 40 percent which implies the losses of 0.58 million tones of

mango with a value of US$ 204 million in the supply chain from over-ripe, immature, damaged

and diseased fruit. These losses are related to the high perishability of the mango, sub-standard

production, harvesting, and postharvest practices, compounded by lack of grading, handling and

storage infrastructure (ASLP, 2007). If postharvest losses could be reduced, the ensuing gains

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would provide more and better quality fruit for local and export markets. Pakistan exported 0.062

million tons (5% of production) with a value of US$ 19.9 million. Pakistan receives the lowest

average price per kilogram (US$0.30) of any major mango exporting country in the world and

resulted price gap of global and Pakistan amounting to US$ 546 per ton or US$ 0.546 per kg.

The translation of this price gap of US$ 546 per ton for mango export of 0.062 million ton during

2006-07 will add US$ 33.85 million in mango economy resulting addition to the overall

economy of the country which is largely due to the poor quality of its fruit combined with poor

marketing practices. Mango industry is facing these critical issues due to inefficient and

inequitable mango value chain. The efficient mango value chain operating more effectively

would generate more value, share it more equitably and create more jobs in the rural economy of

Pakistan.

Following Proustica (2006 ), this proposal is to pilot a value chain investment programme for

mango value chain development in a defined sub districts of Punjab and Sindh provinces of

Pakistan. The objective is to develop a programme for support interventions with mango value

chain from production to end consumer. The proposed “interventions would address specific

constraints holding back mango industry and help reduce value chain risks and thereby create a

more conducive environment for investment. The pilot would act as an example of how an

integrated programme of value chain support can safeguard existing rural businesses and

encourage growth, create multiple local economic benefits and meet other sustainable

development objectives, and act as a catalyst for the introduction of mainstream finance into

local food value chain development” --- (Proustica, 2006). He further stated that the specific

aims will involve working closely with all stakeholders within an identified mango value chain

to define where investment and other forms of support are needed, identify constraints, design

investment vehicles, offer support to donors and enterprises, and integrate the investment

programme with other initiatives of horticulture sector.

8.2.2 Rational for pilot citrus value chain development scheme

Pakistan is the 13th producer of Kinnow (mandarin) in the world (FAO STAT, 2011). Due to the

inherent good quality of taste, foreign fruit vendors generally prefer Kinnow from Pakistan. It

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has become an important variety in the Punjab province occupying a major part of the area under

cultivation for fruit crops i.e. 190 thousand hectares. Its production has increased overtime.

Overall production of citrus in Pakistan was 1898 thousand tons in 2001 and has increased to

2150 thousand tons in 2010 (Agricultural Statistics of Pakistan 2009-10). According to an

estimate proximately 95 percent of the total Kinow produced all over the world is grown in

Pakistan. At this point Sargodha is the main citrus producing district, with about 23 per cent of

Pakistan’s total citrus plantings. Citrus value chain is conducted to address the issues of

efficiency and equitability of citrus value chains with respect to competitiveness, inclusiveness,

scalability and sustainability. Citrus is second major fruit export commodities of Pakistan in

terms of volume and value of exports. An improved understanding of the system from grower to

domestic and export markets would boost utilization and prevent waste. The present research

sought to identify the constraints and associated impediments in representative value chains and

would help Pakistani citrus growers to receive increased value from their produce and to provide

recommendations for future research. Following are the main objectives of the study.

8.2.3 Rational for pilot tomato value chain development scheme

Tomato industry, in general, is showing signs of healthy growth with expanding product range

and increased acceptability in the local market. Favorable natural environment, increasing

population, rising demand for processed vegetables and fruits, and relatively lower labour cost

are some of the factors that can contribute towards sustained growth rate in this particular sector.

Tomato is one of the most popular vegetables in the world. The derivatives of tomato like paste,

juice, ketchup, etc. are widely used in kitchens all around the world. With the increasing

affluence of the world, its demand has increased very rapidly resulting in wide scale

development of tomato industry for production of tomato paste/puree. Rise of the fast food

industry in the country is also having a significant impact on the demand for tomato and fruit

products. It is expected that this trend will continue in the near future and the consumption of

tomato will increase. Tomato ketchup industry is just another example of the success for the

Pakistani companies which grew from its very humble beginning to the position of a player in

the league. The future also looks very bright with developing local and export markets around.

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The producers and all chain stakeholders along with exporters community in Pakistan needs to

realize the importance of compliance of international quality requirements in order to not only

increase the quality production and export but also to sustain even the existing level of

production and exports. The focus of project is Value addition of tomato in Pakistan as the

additional value created at a particular stage of production or through image and marketing.

Value added agriculture is a process of increasing the economic value and consumer appeal of an

agricultural commodity. It is an alternative production and marketing strategy that requires a

better understanding of the rapidly changing e.g; food industry and food safety issues, consumer

preference and effective management. (Walia, 2007).

8.3 Geographical Targeting, Partnerships and Beneficiary Categories

8.3.1 Geographical targeting

Mango: National ranking reveals that mango is predominantly grown in Punjab province. The

concentration of mango plantation is in Multan, Rahim Yar Khan and Muzaffargarh districts

contributing 58 percent production. However, since mango crop in Sindh province is almost one

month early, the importance of Matari (earlier part of Hyderabad) and Mirpur Khas mango

concentrating districts will remain significant both for domestic and export markets (PHDEB,

2008). Keeping in view mango concentration, two districts in each province will be chosen for

implementing this pilot scheme. Multan and Rahim Yar Khan from Punjab and Matari and

Mirpur Khas from Sindh provinces will be target districts. Then one mango concentrating tehsil

(sub-district) from each district will be selected i.e. four tehsils as a target sub-districts. One

mango concentrating union council from each tehsil will be chosen as a project site.

Citrus: National ranking reveals that citrus is predominantly grown in Punjab province. The

concentration of citrus plantation is in Sargodha, Mandi Bahauddin and Toba Tek Singh districts

contributing 80 percent production. Keeping in view citrus concentration, two districts (Namely

Sargodha and Mandi Bahauddin) in Punjab province will be chosen for implementing this pilot

scheme. Then one citrus concentrating tehsil (sub-district) from each district will be selected i.e.

four tehsils as a target sub-districts. One citrus concentrating union council from each tehsil will

be chosen as a project site.

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Tomato: National ranking reveals that tomato is predominantly grown in Punjab province. The

concentration of tomato plantation is in Nankana Sahib, Muzaffargarh, Rahim Yar Khan, and

Sheikhupura districts contributing 34 percent production. Keeping in view tomato concentration,

four districts will be chosen for implementing this pilot scheme. Nankana Sahib, Muzaffargarh,

Rahim Yar khan and Sheikhupura are four districts from Punjab province will be target districts.

Then one tomato concentrating tehsil (sub-district) from each district will be selected i.e. four

tehsils as a target sub-districts. One tomato concentrating union council from each tehsil will be

chosen as a project site.

8.3.2 Partnerships

Mango: The mango value chain development scheme will be implemented by National IPM

Programme (Nat-IPM) at National Agricultural Research Centre (NARC) in consultation with

the provincial & local government administration and IPM farmers organizations namely the

Kissan Foundation (KF) in Punjab, Farmer Agriculture Innovative Development Organization

(FAIDO) in Mirpur Khas, and Sustainable Agriculture and Friendly Environment (SAFE),

Nawab Shah, Sindh. It is proposed that KF in Punjab and FAIDO and SAFE in Sindh will

facilitate coordination and linkages among all the stakeholders of value chain development.

Public institutions like NARC; PHDEC; University of Agriculture, Faisalabad; Bahauddin

Zakria University, Multan; Mango Research Institute, Shujabad;); officials of ASLP project;

private sectors and NGOs will be proposed partners of this pilot scheme. The focus of the project

is the development of efficient and equitable mango value chain.

Citrus: The citrus value chain development scheme will be implemented by National IPM

Programme (Nat-IPM) at National Agricultural Research Centre (NARC) in consultation with

the provincial & local government administration and IPM farmers organizations namely the

Kissan Foundation (KF) in Punjab. It is proposed that KF in Punjab will facilitate coordination

and linkages among all the stakeholders of value chain development. Public institutions like

NARC; PHDEB; University of Agriculture, Faisalabad; Bahauddin Zakria University, Multan;

Citrus Research Station, Bhalwal, Sargodha); officials of ASLP project; private sectors and

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NGOs will be proposed partners of this pilot scheme. The focus of the project is the development

of efficient and equitable citrus value chain in Punjab province.

Tomato: The tomato value chain development scheme will be implemented by Horticulture

Directorate, NARC and growers association of Punjab. The focus of the project is the

development of efficient and equitable tomato value chain in Pakistan’s Punjab.

8.3.3 Beneficiary categories

Mango: All stakeholders (growers, contractors, commission agents, wholesalers, retailers,

processors, exporters and consumers) of mango value chain will be beneficiaries of this pilot

scheme. The total number of these stakeholders would be about 8000 at each site time four sites

will result into 3200 stakeholders. However, the major beneficiaries will be growers who will be

benefited through their capacity building in the form of transfer of knowledge and skill regarding

modern orchard husbandry, good orchards practices, harvesting techniques and tools and

assistance in obtaining quality farm inputs, services and assistance in selling out their mango

orchards/produced. Mango contractors, pickers, packers and transporters will be benefited

through their capacity building on proper harvesting/picking techniques/tools, harvesting

machine, de-sapping and de-stemming techniques, proper handling and care of harvested fruit

can help them achieve the targets. Wholesaler, retailers, processors and exporters will also

benefited through capacity building on processing techniques/methods, processing machinery,

processed products, price and trade information for wholesalers, retailers and enhanced self life

and quality of mango for exporters.

Citrus: All stakeholders (growers, contractors, commission agents, wholesalers, retailers,

processors, exporters and consumers) of citrus value chain will be beneficiaries of this pilot

scheme. The total number of these stakeholders would be about 4000 at each site time four sites

will result into 1600 stakeholders. However, the major beneficiaries will be growers who will be

benefited through their capacity building in the form of transfer of knowledge and skill regarding

modern orchard husbandry, good orchards practices, harvesting techniques and tools and

assistance in obtaining quality farm inputs, services and assistance in selling out their citrus

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orchards/produced. Citrus contractors, pickers, packers and transporters will be benefited

through their capacity building on proper harvesting/picking techniques/tools, harvesting

machine, de-sapping and de-stemming techniques, proper handling and care of harvested fruit

can help them achieve the targets. Wholesaler, retailers, processors and exporters will also

benefited through capacity building on processing techniques/methods, processing machinery,

processed products, price and trade information for wholesalers, retailers and enhanced self life

and quality of mango for exporters.

Tomato: All stakeholders (growers, contractors, commission agents, wholesalers, retailers,

processors, exporters and consumers) of tomato value chain will be beneficiaries of this scheme.

The total number of these stakeholders would be about 800 at each site time four sites will result

into 3200 stakeholders (Sharif, 2008). However, the major beneficiaries will be growers who will

be benefited through their capacity building in the form of transfer of knowledge and skill

regarding modern field practices, harvesting techniques and tools and assistance in obtaining

quality farm inputs, services and assistance in selling out their tomato produced. Tomato

contractors, pickers, packers and transporters will be benefited through their capacity building on

proper harvesting/picking techniques/tools, harvesting machine, proper handling and care of

harvested vegetable can help them achieve the targets (Sharif, 2008). Wholesaler, retailers,

processors and exporters will also benefited through capacity building on processing

techniques/methods, processing machinery, processed products, price and trade information for

wholesalers, retailers and enhanced self life and quality of tomato for exporters.

8.4 Project Component Description

This project will support the implementation of growth strategy for the development of

agriculture sector in general and horticulture sector (mango, citrus and tomato) in particular for

ensuring food security increasing income, generating employment and reducing poverty through

a pilot mango value chain development schemes in Punjab and Sindh provinces of Pakistan,

citrus and tomato value chains development schemes in Punjab province only.

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The project will addressed the constraints and inefficiency of mango, citrus and tomato industries

in Pakistan and provide feedback to policy makers, planners and development practitioners. The

major component of the project are: (1) selection of sites, identification of partners and situation

value chain analysis, (2) Establishment of rural business hubs (RBHs) for input provision (3)

capacity building of mango, citrus and tomato growers and other chain stakeholders including

gender main streaming along with children through male farmers field school (MFFS), female

farmers field school (FFFS), business field school (BFS) and Children Ecological Club (CEC)

approach respectively (4) specialized capacity building through trainings, (5) research for chain

development, (6) communication with beneficiaries through workshops, seminars, conferences

and displays, (7) monitoring and evaluation of all pilot schemes.

8.5 Selection/Identification and Situation Value Chain Analysis of Sites and Potential

Partners

Under first component of the project, following activities are proposed for the implementing

mango pilot scheme in four districts of two provinces of Pakistan, citrus and tomato pilot

schemes in two districts of Punjab for each commodity.

8.5.1 Selection of exact locations at different sites of proposed pilot schemes

This requires technical, administrative and economic analysis for its acceptability and viability.

This activity will be carried out for selection of exact location of four project sites from where

project activities (capacity building through MFFS, BFS, WOS, CEC, training input provision,

demonstration, seminars, workshops, conference etc.) will implemented. This activity will

provide the exact locations of proposed mango schemes. The programme needs resources for

local consultancy for a period of 30 man days (assuming one week of one specialist for each

site). This activity will cost Rs. 0.250 millions. (This will include travel by air and road, DSA,

POL etc.). The same activity for citrus will cost Rs.0.125 million. Likewise Rs.0.100 million will

cost to carry the same activity for tomato value chain.

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8.5.2 Selection of target growers, other chain stakeholders in each site and potential

project partners

Mango: This activity will generate information on the target mango growers and other chain

stakeholders. This will be done through conducting censes of selected villages, markets,

contractors, commission agents, wholesalers, retailers, consumers, service providers, pickers and

packers, processors, transporters and exporters. Identification of exact key project partners

(research, development and financial institutions/specialists, service providers and support

agencies such as business links and processors/retailers --- supermarkets, hyper markets will be

selected after detailed dialogues and in-depth discussions on the strategies for the development

mango value chain. This activity will provide the list of target mango growers, markets,

contractors, commission agents, wholesalers, retailers, consumers, service providers, pickers and

packers, processors, transporters and exporters etc. A census of 100 villages of four sites will be

carried out for final selection of 4000 target mango growers with inclusiveness of small mango

growers. The programme needs resources for local consultancy for a period of 120 man days

(assuming four weeks of one specialist covering 25 villages and 1000 mango growers for each

site). This activity will cost Rs. 1.00 million.

Citrus: A census of 100 villages of four sites will be carried out for final selection of 4000 target

mango growers with inclusiveness of small citrus growers. The programme needs resources for

local consultancy for a period of 120 man days (assuming four weeks of one specialist covering

25 villages and 1000 citrus growers for each site). This activity will cost Rs. 1.00 million.

Tomato: A census of 50 villages of four sites will be carried out for final selection of 3000 target

tomato growers with inclusiveness of small growers. The programme needs resources for local

consultancy for a period of 60 man days (assuming four weeks of one specialist covering 25

villages and 500 citrus growers for each site). This activity will cost Rs. 1.00 million.

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8.5.3 Situation value chain analysis/bench mark survey for each site

Mango: Situation analysis/baseline survey will provide the information on the existing cropping

pattern, access to and use of inputs, institutional services i.e. credit and extension – knowledge

level, production practices, harvesting techniques, output produce, post-harvest handling,

processing, transportation and marketing. It will also generate information on current post-

harvest losses and prices received by mango growers from domestic markets. Information on

market volume at domestic market and export market and export prices will also be generated.

This situation analysis/bench mark level will be used for evaluation of the project or impact

assessment of the project. This activity will be carried out using RRA or PRA techniques. This

activity will provide bench mark information prior to project implementation. The programme

needs resources for local consultancy for a period of 800 man days. This activity will cost Rs.

6.50 millions.

Citrus: This activity will provide bench mark information prior to project implementation of

citrus value chain development scheme. The programme needs resources for local consultancy

for a period of 800 man days. This activity will cost Rs. 6.50 millions.

Tomato: The programme needs resources for local consultancy for a period of 400 man days.

This activity will cost Rs. 3.25 millions.

8.6 Establishment of RBHS for Input Provision as a First Segment for Chain

Development

8.6.1 Input provision

Mango: Introducing service delivery and support mechanism for enhancing timely access to

quality input through establishment of rural business hubs (RBHS) is proposed first segment of

pilot mango chain development scheme. These could be a big stride in this direction as a

replication of success story in Indian Punjab. RBHS is “one stop shop” encompassing solutions

to the farmers under one roof which will links farmers to markets via backward as well as

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forward linkages as an private sector initiatives/public private partnership initiatives. They are

aimed at providing end to end ground level support to the mango growers and his “profitability”

and “productivity”. These RBHS will be operated by KF in Punjab and FAIDO and SAFE in

Sindh respectively. Each RBHS at one site will cater to agriculture land of about 12000 – 15000

acres with 5000 acres under mango. This will generate impact on the life of about 10000 growers

in general and 1000 mango growers in particular. In total agriculture land 48000 – 60000 acres

with 20000 acres under mango and this will impact on the life of about 40000 growers in general

and 4000 mango growers in particular. These RBHS will provide quality and certified inputs like

nursery seedlings, fertilizer, pesticide, farm implements and tools, fuel, veterinary products,

animal feed, financial services, buyback opportunities and membership card to mango growers.

This activity will ensure timely availability of quality inputs for 4000 mango growers. The

programme needs resources of 5 millions as a revolving fund for its establishment and

functioning from pilot project for each site. This activity will cost Rs. 20 millions. (This will

include storage, procurements of inputs, and functioning of RBH’s etc.).

Citrus: This activity will ensure timely availability of quality inputs for 4000 citrus growers. The

programme needs resources of 5 millions as a revolving fund for its establishment and

functioning from pilot project for each site. This activity will cost Rs. 20 millions. (This will

include storage, procurements of inputs, and functioning of RBH’s etc.).

Tomato: This activity will ensure timely availability of quality inputs for 3000 tomato growers.

The programme needs resources of 5 millions as a revolving fund for its establishment and

functioning from pilot project for each site. This activity will cost Rs. 15 millions. (This will

include storage, procurements of inputs, and functioning of RBH’s etc.).

8.6.2 Establishment of clean nursery

Mango: Establishment of 4 clean certified mango nurseries (one at each site) capable of offering

sufficient certified plants to all farming community of their respective districts will be part of

RBHS. The programme needs resources of 1.5 million for its establishment and functioning from

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pilot project for each site. This activity will cost Rs. 6 millions. (This will include land, labor,

nursery material, green houses, travel and technical assistance of 15 days etc.).

Citrus: Establishment of 4 clean certified citrus nurseries (one at each site) capable of offering

sufficient certified plants to all farming community of their respective districts will be part of

RBHS. The programme needs resources of 1.5 million for its establishment and functioning from

pilot project for each site. This activity will cost Rs. 6 millions. (This will include land, labor,

nursery material, green houses, travel and technical assistance of 15 days etc.).

Tomato: Procurement of quality seed for raising tomato seedlings. The programme needs

resources of 0.5 million for its establishment and functioning from pilot project for each site.

This activity will cost Rs. 2 millions. (This will include land, labor, nursery material, green

houses, travel and technical assistance of 15 days etc.).

8.6.3 Establishment of model on farm pack house

Mango: Four models on farm pack house will be established in each proposed project sites for

demonstrating the popularization of this technology. The objective of establishing Model on

Farm Pack House are: (i) Income diversification through setting up small scale processing of

mango, (ii) reducing the post harvest losses through processing and value addition, (iii) and

promoting the local mango product in the national and international market. The programme

needs resources of 20 million for its establishment and functioning for each site. (This will

include Cost of Customized Structures to serve as pack house Pre-fabricated, low cost 40x20 m)

3 million, De-sap machine (locally developed) 0.70 million, Weight grader (Imported from

Australia) 10.0 million, Washer and dryer (local) 1.00 million, Hot water treatment unit (SPS

Compliance for Iran, China) 2.0 million, Mobile Chiller (Combo type including blast chiller and

cold room) 3.0 million, Ethylene Generator 0.50 million) etc.). This activity will cost Rs. 20

millions for each site and total cost will be Rs. 20 millions.

Citrus: Likewise, this activity will cost Rs. 10 millions for each site and total cost will be Rs. 20

millions.

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8.6.4 Financial services

Improving access to financial services will be ensured through development of formal linkage

between growers and financial institutions that facilitate the design of appropriate financial

products for mango growers.

8.7 Capacity Building of Chain Stakeholders

8.7.1 Capacity building of mango growers, women and children for addressing the need

for productivity, quality of improvement of mango, reducing post harvest losses

and value addition

Sustainable implementation of best mango orchard production and management practices will be

ensured through already assessed farmer field school (FFS) approach. 4 Training of Facilitators

(ToF) for capacity building of 100 master facilitators/trainers along with 300 Mango Farmer

Field School (MFFS), 80 Women Open School (WOS) and 80 Children Ecological Club (CEC)

covering 8000 (4000 mango growers & 4000 women and children) will be used for the capacity

building of mango growers, women and children in the defined area. The master facilitators will

impart training, and transfer knowledge and skill to 4000 mango growers on best mango

production practices. Holding of 300 Mango Farmer Field Schools (MFFS) (75 at one site)

following one village one facilitator concept in 100 villages of four union councils (25 villages in

each union Council) in Multan (Nawabpur), Rahim Yar Khan (Hajipur), Matari and Mirpur Khas

in Punjab and Sindh provinces (see annexure 2). The requirement of a ToF includes (holding of

ToF, training plots, resource persons, mobility of ToF, DSA and material etc.) is amounting to

Rs.10.00 million. The total cost of four ToF for a period of one year is Rs.40.00 million.

Facilitators of MFFS will transfer knowledge and skills on the modern orchard management to

growers throughout the mango production season (appropriate selection of variety, optimal

methods of plantation propagation, fertilization, irrigation and pruning). They will also provide

knowledge to mango growers on allowable inputs (pesticide, fungicide and fertilizer).

Knowledge on EUREPGAP pre and post harvest food safety certification scheme for fresh

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mango will also be disseminated. Mango growers will be updated on GAP, harvesting techniques

by following maturity indices, proper harvesting tools/harvesting machine. The requirement of a

MFFS includes equipments (5 steel double side stairs, 25 pruning knife-long, 25 hand pruning

knife, 5 newly designed harvesting sticks etc. ) amounting to Rs. 0.065 million, crop

management (fruit fly pheromones, traps, wooden logs, pesticides, consumables and

entertainment) amounting to Rs. 0.11 million, Salary and travel of one facilitator per month is

Rs. 18000/month. The total cost of one MFFS including follow-up for the period of three years

(36 months) is 0.25 million and total cost of 460 MFFS (300), WOS (80), and CEC (80) is Rs.

115 million for 36 months.

8.7.2 Capacity building of citrus growers, women and children for addressing the need

for productivity, quality of improvement of citrus, reducing post harvest losses and

value addition

Sustainable implementation of best citrus orchard production and management practices will be

ensured through already assessed farmer field school (FFS) approach. 4 Training of Facilitators

(ToF) for capacity building of 100 master facilitators/trainers along with 300 citrus Farmer Field

School (MFFS), 80 Women Open School (WOS) and 80 Children Ecological Club (CEC)

covering 8000 (4000 citrus growers & 4000 women and children) will be used for the capacity

building of citrus growers, women and children in the defined area. The master facilitators will

impart training, and transfer knowledge and skill to 4000 citrus growers on best citrus production

practices. Holding of 300 citrus Farmer Field Schools (MFFS) (75 at one site) following one

village one facilitator concept in 100 villages of four union councils (25 villages in each union

Council). The requirement of a ToF includes (holding of ToF, training plots, resource persons,

mobility of ToF, DSA and material etc.) is amounting to Rs.10.00 million. The total cost of four

ToF for a period of one year is Rs.40.00 million.

Facilitators of MFFS will transfer knowledge and skills on the modern orchard management to

growers throughout the citrus production season (appropriate selection of variety, optimal

methods of plantation propagation, fertilization, irrigation and pruning). They will also provide

knowledge to citrus growers on allowable inputs (pesticide, fungicide and fertilizer). Knowledge

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on EUREPGAP pre and post harvest food safety certification scheme for fresh citrus will also be

disseminated. Citrus growers will be updated on GAP, harvesting techniques by following

maturity indices, proper harvesting tools/harvesting machine. The requirement of a MFFS

includes equipments (5 steel double side stairs, 25 pruning knife-long, 25 hand pruning knife, 5

newly designed harvesting sticks etc. ) amounting to Rs. 0.065 million, crop management (fruit

fly pheromones, traps, wooden logs, pesticides, consumables and entertainment) amounting to

Rs. 0.11 million, Salary and travel of one facilitator per month is Rs. 18000/month. The total cost

of one MFFS including follow-up for the period of three years (36 months) is 0.25 million and

total cost of 460 MFFS (300), WOS (80), and CEC (80) is Rs. 115 million for 36 months.

8.7.3 Capacity building of tomato growers, women and children for addressing the need

for productivity, quality of improvement of tomato, reducing post harvest losses

and value addition

Like mango and citrus, the same activity will be carried out in proposed growing areas of tomato.

The total cost of this activity will be Rs.60 million for 36 months.

8.7.4 Capacity building of other chain stakeholders for addressing the issue of post-

harvest handing, logistic and marketing segments of value chains

Mango: Facilitators of business field school (BFS) will transfer knowledge and skills to

harvesters/mango pickers, packers and transporters on best post-harvest handling

techniques/tools, methods/harvesting machine, de-sapping and de-stemming techniques and

proper handling and care of harvested mango. Facilitators of BFS will also impart

knowledge/information/skills to transporter and packers on EUREPGAP or equivalent food

safety certification standard to improve acceptability of fresh mango for export. Knowledge and

skill transfer on modern processing, grading and packing techniques will be ensured by

facilitators of BFS. Information on effective plan to comply with international standards for

hygiene in packing facilities with particular emphasis on facility design, water quality, worker

health and hygiene and training of workers will also be disseminated to mango packers in

processing sector. Facilitators of BFS will also transfer knowledge/information on market

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development areas to the marketers. They will facilitate partnership (e.g. contract farming)

among producers, packers and collectors, retailers (supermarkets, hyper markets and big bazars)

for distribution and marketing of fresh mango.

The requirement of a BFS includes equipments (harvesting tools/machines, packing material,

processing facilities, etc.) amounting to Rs. 0.2 million, Salary and travel of one facilitator per

month is Rs. 25000/month. The total cost of one BFS including follow-up for the period of three

years (36 months) is 0.40 million and total cost of 60 BFS is Rs. 24.00 million for 36 months.

Citrus: The requirement of a BFS for citrus includes equipments (harvesting tools/machines,

packing material, processing facilities, etc.) amounting to Rs. 0.2 million, Salary and travel of

one facilitator per month is Rs. 25000/month. The total cost of one BFS including follow-up for

the period of three years (36 months) is 0.40 million and total cost of 60 BFS is Rs. 24.00 million

for 36 months.

Tomato: The requirement of a BFS for tomato includes equipments (harvesting tools/machines,

packing material, processing facilities, etc.) amounting to Rs. 0.2 million, Salary and travel of

one facilitator per month is Rs. 25000/month. The total cost of one BFS including follow-up for

the period of three years (36 months) is 0.40 million and total cost of 60 BFS is Rs. 24.00 million

for 36 months.

8.7.5 Specialized capacity building

Under this activity, following specialized capacity building will be organized through trainings

of chain stakeholders:

Mango:

(i) 15 days training course on GAP for 50 (facilitators and key informant mango growers

and women) participants from international consultant. The international consultancy

charges for the period of 15 days will be Rs.0.75 million. The travelling, DSA, meals,

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hall charges, banners, stationary for 50 participants will be Rs. 1.2 million. The total

cost of this event will be Rs. 1.95 million.

(ii) 15 days training course on post harvest handling for 50 (facilitators, key mango growers,

harvestors/pickers, transporters) participants. The international consultancy charges for

the period of 15 days will be Rs.0.75 million. The travelling, DSA, meals, hall charges,

banners, stationary for 50 participants will be Rs. 1.2 million. The total cost of this event

will be Rs. 1.95 million.

(iii) 15 days High quality training and education on food safety and quality grades and

standards for 50 participants. The international consultancy charges for the period of 15

days will be Rs.0.75 million. The travelling, DSA, meals, hall charges, banners,

stationary for 50 participants will be Rs. 1.2 million. The total cost of this event will be

Rs. 1.95 million.

(iv) 15 days training for establishing proper procedures for proper packing facilities for 50

participants. The international consultancy charges for the period of 15 days will be

Rs.0.75 million. The travelling, DSA, meals, hall charges, banners, stationary for 50

participants will be Rs. 1.2 million. The total cost of this event will be Rs. 1.95 million.

(v) 15 days training/refresher of 50 field staff/worker farmers’ organization representatives,

Agriculture Extension and Plant Protection in best mango production technologies

following the IPM philosophy. The international consultancy charges for the period of

15 days will be Rs.0.75 million. The travelling, DSA, meals, hall charges, banners,

stationary for 50 participants will be Rs. 1.2 million. The total cost of this event will be

Rs. 1.95 million.

(vi) 15 days training of 50 food safety managers and supervisor at processing facilities using

standard training curricula on GHPs, GMPs and HACCP through BFS by hiring

international consultant/specialists. The international consultancy charges for the period

of 15 days will be Rs.0.75 million. The travelling, DSA, meals, hall charges, banners,

stationary for 50 participants will be Rs. 1.2 million. The total cost of this event will be

Rs. 1.95 million.

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Citrus:

(i) 15 days training course on GAP for 50 (facilitators and key informant citrus growers and

women) participants from international consultant. The international consultancy charges

for the period of 15 days will be Rs.0.75 million. The travelling, DSA, meals, hall

charges, banners, stationary for 50 participants will be Rs. 1.2 million. The total cost of

this event will be Rs. 1.95 million.

(ii) 15 days training course on post harvest handling for 50 (facilitators, key citrus growers,

harvestors/pickers, transporters) participants. The international consultancy charges for

the period of 15 days will be Rs.0.75 million. The travelling, DSA, meals, hall charges,

banners, stationary for 50 participants will be Rs. 1.2 million. The total cost of this event

will be Rs. 1.95 million.

(iii) 15 days High quality training and education on food safety and quality grades and

standards for 50 participants. The international consultancy charges for the period of 15

days will be Rs.0.75 million. The travelling, DSA, meals, hall charges, banners,

stationary for 50 participants will be Rs. 1.2 million. The total cost of this event will be

Rs. 1.95 million.

(iv) 15 days training for establishing proper procedures for proper packing facilities for 50

participants. The international consultancy charges for the period of 15 days will be

Rs.0.75 million. The travelling, DSA, meals, hall charges, banners, stationary for 50

participants will be Rs. 1.2 million. The total cost of this event will be Rs. 1.95 million.

(v) 15 days training/refresher of 50 field staff/worker farmers’ organization representatives,

Agriculture Extension and Plant Protection in best mango production technologies

following the IPM philosophy. The international consultancy charges for the period of

15 days will be Rs.0.75 million. The travelling, DSA, meals, hall charges, banners,

stationary for 50 participants will be Rs. 1.2 million. The total cost of this event will be

Rs. 1.95 million.

(vi) 15 days training of 50 food safety managers and supervisor at processing facilities using

standard training curricula on GHPs, GMPs and HACCP through BFS by hiring

international consultant/specialists. The international consultancy charges for the period

of 15 days will be Rs.0.75 million. The travelling, DSA, meals, hall charges, banners,

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stationary for 50 participants will be Rs. 1.2 million. The total cost of this event will be

Rs. 1.95 million.

Tomato:

(i) 15 days training course on GAP for 50 (facilitators and key informant tomato growers

and women) participants from international consultant. The international consultancy

charges for the period of 15 days will be Rs.0.75 million. The travelling, DSA, meals,

hall charges, banners, stationary for 50 participants will be Rs. 1.2 million. The total

cost of this event will be Rs. 1.95 million.

(ii) 15 days training course on post harvest handling for 50 (facilitators, key tomato growers,

harvestors/pickers, transporters) participants. The international consultancy charges for

the period of 15 days will be Rs.0.75 million. The travelling, DSA, meals, hall charges,

banners, stationary for 50 participants will be Rs. 1.2 million. The total cost of this event

will be Rs. 1.95 million.

(iii) 15 days High quality training and education on food safety and quality grades and

standards for 50 participants. The international consultancy charges for the period of 15

days will be Rs.0.75 million. The travelling, DSA, meals, hall charges, banners,

stationary for 50 participants will be Rs. 1.2 million. The total cost of this event will be

Rs. 1.95 million.

(iv) 15 days training for establishing proper procedures for proper packing facilities for 50

participants. The international consultancy charges for the period of 15 days will be

Rs.0.75 million. The travelling, DSA, meals, hall charges, banners, stationary for 50

participants will be Rs. 1.2 million. The total cost of this event will be Rs. 1.95 million.

(v) 15 days training/refresher of 50 field staff/worker farmers’ organization representatives,

Agriculture Extension and Plant Protection in best mango production technologies

following the IPM philosophy. The international consultancy charges for the period of

15 days will be Rs.0.75 million. The travelling, DSA, meals, hall charges, banners,

stationary for 50 participants will be Rs. 1.2 million. The total cost of this event will be

Rs. 1.95 million.

(vi) 15 days training of 50 food safety managers and supervisor at processing facilities using

standard training curricula on GHPs, GMPs and HACCP through BFS by hiring

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international consultant/specialists. The international consultancy charges for the period

of 15 days will be Rs.0.75 million. The travelling, DSA, meals, hall charges, banners,

stationary for 50 participants will be Rs. 1.2 million. The total cost of this event will be

Rs. 1.95 million.

8.8 Research for Chain Development

Mango: Under this component, following research studies for mango chain development are

proposed:

(i) Feasibility of developing fresh cut mango products for export in association with

established industry leaders from international consultant. The international consultancy

charges for the period of 30 days will be Rs.1.5 million.

(ii) Developing value added processed mango products for the domestic retail market in

partnership with established processor in Pakistan from international consultant. The

international consultancy charges for the period of 15 days will be Rs.0.75 million.

(iii) Establishment of proper procedures for packing facilities to deliver mangos of

uniform quality and physiological maturity to buyers for domestic retail and export

markets from international consultant. The international consultancy charges for the

period of 15 days will be Rs.0.75 million.

(iv)Establish a common brand position and product mango for “Pakistani Mango” in

establish with national and international organizations from international consultant. The

international consultancy charges for the period of 15 days will be Rs.0.75 million.

(v) Exploring strategies to capture more of the value added markets for processed mango

products within Pakistan and for the export market from international consultant. The

international consultancy charges for the period of 15 days will be Rs.0.75 million.

Citrus: Under this component, following research studies for citrus chain development are

proposed:

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(i) Feasibility of developing fresh cut citrus products for export in association with

established industry leaders from international consultant. The international consultancy

charges for the period of 30 days will be Rs.1.5 million.

(ii) Developing value added processed citrus products for the domestic retail market in

partnership with established processor in Pakistan from international consultant. The

international consultancy charges for the period of 15 days will be Rs.0.75 million.

(iii) Establishment of proper procedures for packing facilities to deliver citrus of

uniform quality and physiological maturity to buyers for domestic retail and export

markets from international consultant. The international consultancy charges for the

period of 15 days will be Rs.0.75 million.

(iv)Establish a common brand position and product citrus for “Pakistani Citrus” in establish

with national and international organizations from international consultant. The

international consultancy charges for the period of 15 days will be Rs.0.75 million.

(v) Exploring strategies to capture more of the value added markets for processed citrus

products within Pakistan and for the export market from international consultant. The

international consultancy charges for the period of 15 days will be Rs.0.75 million.

Tomato: Under this component, following research studies for tomato chain development are

proposed:

(i) Feasibility of developing fresh tomato pulp for export in association with established

industry leaders from international consultant. The international consultancy charges for

the period of 30 days will be Rs.1.5 million.

(ii) Developing value added processed tomato products for the domestic retail market in

partnership with established processor in Pakistan from international consultant. The

international consultancy charges for the period of 15 days will be Rs.0.75 million.

(iii) Establishment of proper procedures for packing facilities to deliver tomato of

uniform quality and export markets from international consultant. The international

consultancy charges for the period of 15 days will be Rs.0.75 million.

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(iv)Establish a common brand position and tomato paste for “Pakistani Tomato” in establish

with national and international organizations from international consultant. The

international consultancy charges for the period of 15 days will be Rs.0.75 million.

(v) Exploring strategies to capture more of the value added markets for processed tomato

products within Pakistan and for the export market from international consultant. The

international consultancy charges for the period of 15 days will be Rs.0.75 million.

8.9 Workshops / Seminars / Conference / Display

Under this component, following activities are proposed for functioning of the project for

mango, citrus and tomato:

Mango:

(i) Chain stakeholder’s consultation workshop for 50 participants for 7 days from

international consultant. The international consultancy charges for the period of 7

days will be Rs.0.37 million. The other cost on refreshment, publicity, catering/hall

charges, transportation etc. will be Rs. 1.0 million. The total cost will be Rs. 1.37

million.

(ii) 12 Awareness Seminars on Chain Development for three years. The participants of

each seminar would 100-150 including growers and other chain stakeholders. The

cost one seminar (resource person, refreshment, publicity, catering/hall charges,

transportation etc.) will be Rs. 0.1 million and the total cost for 12 seminar for three

years will be Rs.1.2 millions.

(iii) 9 Mango tasting displays in super markets of Islamabad, Lahore and Karachi. The

cost one tasting display will be Rs.0.1 million and the total cost of 9 displays will be

Rs.0.9 millions.

(iv) 4 mango Mela/Exhibitions will be arranged. The cost of one Mela/Exhibition will be

Rs.0.3 million (includes publicity, transportation, catering/tenting, entertainment,

opening and closing ceremony etc).

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(v) One day Project findings Communication Workshop for 50 participants at national

level. The cost of DSA, travel, meal, publicity/banners, stationary etc. will be Rs. 1

million.

(vi) Publication of print media literature, videos and audio material regarding best mango

production technology. The lump sum cost of Rs. 6.0 million for three years for all

sites including PMU at Islamabad.

Citrus:

(i) Chain stakeholder’s consultation workshop for 50 participants for 7 days from

international consultant. The international consultancy charges for the period of 7

days will be Rs.0.37 million. The other cost on refreshment, publicity, catering/hall

charges, transportation etc. will be Rs. 1.0 million. The total cost will be Rs. 1.37

million.

(ii) 12 Awareness Seminars on Chain Development for three years. The participants of

each seminar would 100-150 including growers and other chain stakeholders. The

cost one seminar (resource person, refreshment, publicity, catering/hall charges,

transportation etc.) will be Rs. 0.1 million and the total cost for 12 seminar for three

years will be Rs.1.2 millions.

(iii) 9 citrus displays in super markets of Islamabad, Lahore and Karachi. The cost one

tasting display will be Rs.0.1 million and the total cost of 9 displays will be Rs.0.9

millions.

(iv) One day Project findings Communication Workshop for 50 participants at national

level. The cost of DSA, travel, meal, publicity/banners, stationary etc. will be Rs. 1

million.

(v) Publication of print media literature, videos and audio material regarding best citrus

production technology. The lump sum cost of Rs. 6.0 million for three years for all

sites including PMU at Islamabad.

Tomato:

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(i) Chain stakeholder’s consultation workshop for 50 participants for 7 days from

international consultant. The international consultancy charges for the period of 7

days will be Rs.0.37 million. The other cost on refreshment, publicity, catering/hall

charges, transportation etc. will be Rs. 1.0 million. The total cost will be Rs. 1.37

million.

(ii) 12 Awareness Seminars on Chain Development for three years. The participants of

each seminar would 100-150 including growers and other chain stakeholders. The

cost one seminar (resource person, refreshment, publicity, catering/hall charges,

transportation etc.) will be Rs. 0.1 million and the total cost for 12 seminar for three

years will be Rs.1.2 millions.

(iii) 9 tomato fast displays in super markets of Islamabad, Lahore and Karachi. The cost

one tasting display will be Rs.0.1 million and the total cost of 9 displays will be

Rs.0.9 millions.

(iv) One day Project findings Communication Workshop for 50 participants at national

level. The cost of DSA, travel, meal, publicity/banners, stationary etc. will be Rs. 1

million.

(v) Publication of print media literature, videos and audio material regarding best tomato

production technology. The lump sum cost of Rs. 6.0 million for three years for all

sites.

8.10 Costs

The tentative cost of the project is estimated at Rs. 550 millions.

8.11 Investment and Financing Assumptions

Investment plan and estimating finances are estimated on the bases of proposed staff and

proposed project activities.

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8.12 Institutional Framework for Programme/Project Implementation Organization and

Management

This is a multi-partner project under the aegis of Pakistan Agricultural Research Council (PARC)

- Ministry of National Food Security and Research which will be the project’s primary partner.

The premier research establishment of PARC namely National Agricultural Research Centre

(NARC) is expected to play a major role in the implementation of this project at national level as

it has already National IPM Programme (Nat-IPM) with relevant expertise and subject

specialists for the implementation of the project. The NARC of PARC – MoNFS&R will also

facilitating access to selected districts for mango, citrus and tomato and ensuring that experience

gained and lessons learned and feedback to national policy level, donors and its replications to

other districts.

Provincial components of National IPM Programme (Nat-IPM) in collaboration with provincial

department of agriculture and IPM farmer organizations (like KF in Punjab, FAIDO and SAFE

in Sindh) will be direct partner of this project in the selected districts for mango, citrus and

tomato. Provincial components of Nat-IPM in collaboration with local government can play a

vital role in district development planning, bring together authorities operating at district level in

the district. It could be argued that the private sector well established KF in Punjab, FAIDO and

SAFE in Sindh could be more suitable home for the project at the local level. However, the main

strategy of ensuring dialogue between public, private sector partner and establish NGO and

importance of enhancing the policy and regulatory environment for mango chain development,

make provincial components of Nat-IPM a more appropriate focal point. Nat-IPM, IPM Farmer

Organizations and chain stakeholders involvement in planning and decision making is crucial for

the successful outcome of the project and representative of growers and other chain stakeholder

will constitute project steering committee.

National steering committee will be headed by Chairman, PARC and will include Director

General, NARC, a representative from MoNFS&R, Programme Leader (Nat-IPM), Project

Coordinator, Deputy Coordinators, representative of KF, FAIDO, SAFE, Site Coordinators and

representative of FAO.

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National steering committee (NSC) will set-up overall strategic direction and coordinate between

national and district level governments for exchanging ideas and experiences for better

implantation of the project. NSC will meet twice a year for assessing the project performance

and provide guidelines for its improvement.

The technical assistance will be organized in such a way that Project Coordinators will serve as a

Manager of the project and coordinate the timely arrangement of technical assistance required

for smooth functioning of the project. Project Coordinator will be assisted by the selected Site

Coordinators for mango, citrus and tomato. At the national level will be supported by the

national experts. Funds are kept for international and national short-term experts for the

specialized expertise required for the development of the chain.

8.13 Monitoring and Evaluation

Activities of the project are prepared for each year which can be used for monitoring of the

project. The development of a monitoring system is much more than the establishment and

measurement of overall key performance indicators. It is now recognized all over the world, and

especially in developing country environments, that the usefulness of such a system to primary

stakeholders is of the utmost importance. Therefore a bottom up approach will be used to

developed work plan along with time frame for each activity to be done starting form farm i.e.

gross root level during the initial phase. The achievements in relation to the plan will be

monitored according to these plans. Information generated from situation analysis / bench mark

survey will be used for conducting project evaluation or project impact assessment. Proposed

project activities and baseline information can be used for conducting monitoring and evaluation

of the pilot mango value chain development scheme in Punjab and Sindh provinces of Pakistan.

To measure the short term effect and long term impact on-going assessment, evaluation and

impact assessment methodologies will be used.

8.13.1 Key performance indicators

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The primary project outcome would be increased producer’s share in consumer rupees and a shift

towards export led mango production. The other associated outcomes would be increase in

export earnings, farm household incomes of farmers participating in mango, citrus and tomato

value chains, and employment in agro-processing and agro-business enterprises. The outcome

indicators are linked directly to millennium development goals of sustainable, diversified and

export oriented economy that responds to market demands, particularly: (a) positive contribution

of sectors to GDP growth and (b) growth of exports. The outcome indicators are:

8.13.2 Outcome indicators for mango, citrus and tomato

Increase in production volumes through enhanced productivity and reduction in post harvest

losses;

Safe and hygienic quality mango handling and marketing to the end users

Increase in value of mango produce;

Increase in average income of small farmers linked to value chain project activities.

Increase in export volume at higher export price by meeting the SPS standards

8.13.3 Output indicators for mango, citrus and tomato

Output indicators are linked to the intermediate results described in the results framework and

comprise mainly the following:

Increase in mango, citrus and tomato productivity of small farmers linked to mango,

citrus and tomato value chain project;

Number of mango, citrus and tomato farms who adopted GAP

Number of villages and farmers linked to the mango, citrus and tomato value chains

Number of mango, citrus and tomato farmers associations developed and sustained by

decreasing the project support;

Change in effectiveness and efficiency of services provided by mango, citrus and tomato

processing industry and its related public and private institutes to stakeholders;

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Volume of quality mango, citrus and tomato produced and reached to the consumers

through vertical coordination in the value chain.

8.14 Expected Benefits

Pilot mango, citrus and tomato value chain development schemes will ensure timely availability

of quality input to mango, citrus and tomato growers at their doorstep which will provide

opportunities for the adoption of recommended input use. Capacity building and training on

knowledge and skill transfer will be empower growers for the adoption of modern mango

production, management and harvesting and handling technologies. These interventions will

enhance mango, citrus and tomato productivity and its quality and resultantly will generate more

income with higher yield and better mango, citrus and tomato quality. The capacity building and

training on knowledge, skill, post-harvesting techniques, handlings, food safety and standard,

packing, processing to other chain stakeholders will improve their capacity for reducing huge

post-harvest losses and getting higher prices from export markets. So, other chain stakeholders

will also be benefited in the farm of more knowledge, skill, techniques and more income from

better prices from the export markets.

8.15 Issues and Risks and Follow-Up Activities

The security situation in Pakistan is unstable. Any deterioration would harm both domestic and

foreign investment in the mango, citrus and tomato value chain development schemes.

8.16 Conclusions

Based on the analysis of first hand information and after developing an empirical evidence of

value chain analysis of citrus mango and tomato, development schemes for each commodity are

developed.  These schemes ensure inclusiveness of the large number of small farmers while

developing a competitive value chain scheme for each of the commodity of interest by up-scaling

on the existing strengths and opportunities with providing solutions for sustainability through

incentives for chain partners. Ensuring the participation of growers in modern value chains is the

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key to success. The cost and operation framework including design criteria, geographical

targeting, partnership and beneficiaries’ categories for these schemes is also suggested besides

enlisting possible options and approaches including project components description, selection of

sites and partners for implementing laid down activities for each segment of the value chain to

achieve the objectives. 

Chapter - IX

SUMMARY, CONSTRAINTS AND STRATEGIES

This chapter covers summary of findings followed by horticultural development constraints and

horticultural development strategies. The first section is devoted to salient findings on vertical

coordination towards horticulture sub-sector in Pakistan’s Punjab. The horticultural development

constraints are discussed in section 2. The policy implications of horticultural development

constraints are outline in section 3. The information on the opportunities, solutions and proposed

intervention for addressing the identified constraints of horticulture sub-sector is given in section

4. The proposed horticultural development strategies are presented in section 5. The suggestions

for further research for the promotion of horticulture sector of Pakistan’s Punjab in section 6

complete this chapter.

9.1 Summary of Findings

Chapter wise summary of the salient findings of the study are briefly presented in the following

sub-sections.

9.1.1 Objectives and methodology

The purpose of this study was to assess the effects of vertical coordination on transaction costs

and farm profitability of smallholders in horticulture sub-sector; to identify stronger or different

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forms of integration that could sustainably improve wellbeing of small holder farmers in

horticultural value chains and to determine the policy implications for smallholders,

agribusiness, public policy and investment priorities.

As this study focuses on value chain analysis of mango, citrus and tomato in Punjab province of

Pakistan, therefore, Multan, Rahim Yar Khan and Muzaffargarh districts were selected for

mango as these districts comprised 80 percent of mango area in Pakistan’s Punjab. Sargodha,

MandiBahauddin and Toba Take Singh were selected for conducting the citrus value chain

analysis. Muzaffargarh, Nankana Sahib, Gujranwala and Sheikhupura districts were selected for

tomato, as these districts contribute 40 percent in tomato production to Punjab. For this purpose a

sample of 702 producers, 57contractors, 18 exporters, 73 commission agents, 69 wholesalers, 95

retailers and 1300 consumers of mango, citrus and tomato was selected.

Agriculture is becoming increasingly integrated and smallholders are often disadvantaged, and

therefore action must be taken to help them in drawing profit from their integration into the

markets. International experience has shown that an important strategy for increasing the

incomes of smallholders in developing countries is to help them diversify from low-value staple

food commodities into higher value agriculture such as livestock, dairy products, fish, fruits,

vegetables, and spices. In order to provide some feasible measures and suggestions about how

smallholder can switch to high value food commodities with minimum transaction cost and

market risks in Punjab, Pakistan, agricultural value chain approach/framework was adapted.

Transaction economics, profitability analysis and SWOT analysis were used to study the policy

environment and horticulture sector overview, structure conduct and performance of horticultural

value chain, effects of horticultural value chain on small farmers and strategic options to

integrate the small farmer into horticultural value chain.

9.1.2 Profile of horticultural value chain operators

Looking at the profile of the Primary VC operators it could be stated that the land tenure

arrangements indicated that the tomato growers mostly rent-inland while fruit growers rent-out

land resulting in almost similar level of operational holding for all the sample growers of fruits

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and vegetables. The operation land holding of the small farmers was 5.74, 7.48 and 7.27 acre for

mango, citrus and tomato growers respectively. The sample growers were of middle age group

having low education and with farming experience of almost 20 years.

The sampled contractors were educated and had business experience of more than ten years.

Majority of the sampled contractors were doing business as a sole proprietor while one third

were operating in partnership. Contractors do business with the commission agents and their

selection criteria are mainly the honesty of the CA while good reputes and working relation in

the past were also equally important. Similarly the sample commission agents were of middle

and old age with an average education of 9 years of schooling and 18-23 years of business

experience. They were doing business mostly in partnership, while one-fourth were doing

business as sole entrepreneurs.

All the commission agents were having good communication facilities both mobile and landline

telephone and they were well connected with other markets. As for as the wholesalers are

concerned, wholesaler operates exclusively in the market and works closely with commission

agents. The mean age of the sampled wholesalers was ranged from 38-46 years with 16 to 23

years of business experience. About 90% of the sampled wholesalers were working as sole

proprietor dealt more than 100 crates of tomato to 400 crates of mango per day.

All of the sampled wholesalers had own telephone for communication. The sampled retailers on

the other hand had an average age of 38 years with business experience of 11 years. Most of the

sampled retailers purchase the selected produce from wholesalers. Lastly the sampled consumers

of citrus, mango, and tomato were government servants and business community. Three-fourth

of the sampled consumers purchase these commodities from retailers.

Looking at the activities functions of different Primary Value Chain Operators (PVCO), all

operators are engaged at their own level in facilitating the quantity and quality of selected

produce enough to the consumers’ level of satisfaction at national and international level. In

support to PVCO, Secondary Value Chain Operators (SVCO) play important role on their part in

provision of supplementary services and creating conducive business environment. A long list of

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SVCO including government organizations, statutory bodies, development institutes, civil

society and financial institutions are operating at their part in research, transportation,

information and regulations, which offer a wide range of support in developing chain capabilities

and chain management competencies.

9.1.3 Market analysis of horticulture sub-sector

Horticulture is an important sub sector contributes about 12% to the national agricultural GDP of

Pakistan. Pakistan is ranked fifth in respect of mango production of nearly 2 millions tons

annually after, India, China, Thailand, and Indonesia. Though Pakistan do not fall in top ten

citrus producing countries with production of 2.1 millions tones annually but ranked fifth in

citrus export. Pakistan produces nearly 0.7 millions tones of tomato annually with negligible

share in world tomato production. Reviewing the global import and export scenario of these

selected commodities, USA is top ranked in mango and tomato import while Russian Federation

is top ranked in citrus import. Similarly India is top ranked in mango export followed by Mexico,

Spain in citrus followed by China, and Mexico is top ranked in tomato export followed by

Netherlands.

Sindhri and Chuansa are the most popular varieties of mango grown in Pakistan, kinnow,

Feutrell and blood red are the most common citrus varieties while Lyallpur Selection-I, Peshawar

Long, T-10, Money Maker, Roma, Red Top etc. are the common tomato varieties grown in

Pakistan.

Mango is marketed through two different channels in Pakistan: channel 1involves pre-harvest

contracts in between growers and Commission agents/exporters, processors, and/or wholesalers

followed by 71 percent farmers, channel 2is followed by 29 percent farmers where farmers

directly market their produce. Citrus too is marketed through two different channels in Pakistan:

channel 1involves pre-harvest contracts in between growers and commission agents/exporters

and/or processors followed by 94 percent citrus farmers, through channel 2farmers directly

market their produce and this channel is followed by only 06 percent citrus farmers. Similar

channels were observed in tomato marketing in the research area. Ninety nine percent tomato is

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marketed through channel 1is where growers sell their produce to commission agents and/or

wholesalers while only one percent farmers opted channel 2where growers themselves sell their

produce after harvesting with loose packing and delivered to tomato processing factory.

A number of services have been identified used by different actors of mango, citrus and tomato

value chain. Some of large farmers offer their facilities (tractors, sprayers, and tubewell water) to

the small farmers in exchange of price. These services become available primarily because of the

close clustered and intense internal harmony of the horticulture producers in the study area.

Some of the common services were pre-cultivation and cultivation services, harvesting services,

post harvesting and marketing services.

9.1.4 Value chain mapping of horticulture sub-sector

Value chain mapping are established using flow and grid charts. The flow chart looked at the

different function in horticultural value chain and illustrates them as process leading from raw

material to final consumption, while grid chart illustrates the different market channels within

horticulture sector. The mapping of smallholder mango growers, mapping of large holder mango

growers, mapping of small holders citrus growers, mapping of large holders citrus growers,

mapping of small holders farmer tomato growers and mapping of large holders tomato growers

through flow chart were presented. Beside this an inventory of market players of mango, citrus

and tomato were also presented.

Horticulture Sub-Sector Dynamics were also captured and it was witnessed that stallholders

mango growers were not well utilized their potential as large holders got 4861 kg yield per

hectare due to well managed orchards and more inputs use as compare to small holders mango

growers. The potential output for smallholder mango growers could generate gross income of

Rs.131322, Rs.148920 and Rs.68382 and total cost of Rs.77447, Rs.59419and Rs.37449 under

horizontal, vertical and pre-harvest contract marketing system respectively. Under vertical

coordination farmers can earn more profit and high return. Also smallholders citrus growers did

not well utilize their potential and smallholder profitability under potential productivity could get

yield of 14335 kg per acre. This scenario could generate gross income of Rs.220472, Rs.142633

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and Rs.91744 with total cost of Rs.169010; Rs.82283 and Rs.63074 under horizontal, vertical

and pre-harvest contract system respectively. Similarly smallholders tomato growers could

generate gross income of Rs.159009 and Rs.147369 under horizontal and vertical coordination

respectively. Total cost in this regards would be Rs.106068 in case of horizontal coordination

and Rs.75368 in case of vertical coordination.

Yield gap and ranking of mango, citrus and tomato were also analyzed in this chapter. Though

horticultural crops/industry facing a number of challenges, however, large yield gap: farm-to-

farm as well as compared to other countries; high post-harvest losses; and lower market

prices/export price gap were assessed. Post-harvest losses of mango, citrus and tomato produce

were estimated from 20-40%, export price differences were found to be $954 for tomato,

followed by citrus ($595 ), and ($410 ) per metric ton.

It was revealed that smallholders have poor and limited access to agricultural credit, which

prohibits them to undertake necessary farm investments. Also men still dominate in mango,

citrus and tomato production and their marketing and no women involvement as small

traders/retailers on local markets were observed. There was limited structured trade in the sub-

sector, there are interests expressed among players to engage in market linkages between chain

actors.

9.1.5 Value chain research of horticulture sub-sector

The analysis of the economic viability of mango, citrus and tomato revealed that smallholders

mango growers incurred highest cost through self marketing, while pre-harvest contract system

was cost efficient. In case of large holders mango growers highest cost was realized in case of

self-marketing, in case of vertical coordination selling directly to the processors/exporters,

operational cost was less than the whole sale marketing system but production cost was highest

than the farmers working with the horizontal chain and pre-harvest contract system. Profitability

analysis revealed that small holders did not manage their mango farms optimally and get low

average yield and hence low returns. Large farmers have been investing more intensively and

spending more money on their farms and get more outputs per acre.

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Cost analysis both at small and large holder citrus growers revealed that transaction cost was

highest in case of horizontal coordination in the traditional chain of commission agent in the

whole sale market mainly due to the high operational cost while transaction cost was less due to

few actors along the vertical coordination. Farm level profitability analysis for smallholders

citrus growers revealed that 76 percent of the sampled growers didn’t manage their citrus farms

optimally and get low average yield and low returns. Large farmers have been investing more

intensively and spending more money on their farms and get more output per acre. Horizontal

coordination in citrus generates gross revenue of Rs.111597 with total cost of Rs.85548 and net

profit of Rs.26049 per acre. Under vertical coordination per acre yield is slightly high and

generate Rs.31200 per acre as net profit. In case of large holder citrus growers horizontal

coordination generates gross revenue of Rs.117111 with total cost of Rs.80803 and net profit of

Rs.36308. Large holders fetched more profitability and competitiveness as compared with small

holders.

Similarly in tomato, the cost of production was low under horizontal coordination with more

operational cost as compared to vertical coordination. The transaction cost was also low in

vertical tomato coordination resulting in low cost to the tomato farmers selling their commodity

directly to the processors. For large holder tomato growers to the cost of production was low

under horizontal coordination with more operational cost as compared to vertical coordination.

The transaction cost was also low in vertical coordination. The profitability result revealed that

small holders tomato growers did not mange their tomato farms optimally and get low average

yield and low returns. Large farmers have been investing more intensively and got more outputs

per acre.

Analysis of value addition through different channels and different actors it was revealed that

high degree was observed at retailer level (42%), in horizontal coordination, while at exporter

level (86%) in vertical coordination for small holders mango growers. In case of large holders

mango growers the highest degree of value added was realized at 44% at retail level and 84

percent at exporter in vertical coordination. Similarly for small holders citrus growers again it

was highest at retail level (50%) in horizontal coordination and 96 percent by exported in vertical

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coordination. In case of large holders citrus growers, highest value addition at the level of 46

percent was observed at retail level under horizontal coordination and at the level of 73% by

exporters under vertical coordination. Analysis for tomato value chain revealed that highest

degree of value addition was observed at farmers level at the degree of 46 % and 48 percent

under horizontal coordination for smallholders and large holders tomato growers respectively

and 53 percent by processors under vertical coordination both for smallholders and large holders

tomato growers.

The price structure analysis revealed that mango price depends upon the target market and upon

the stage of the season under horizontal coordination, while in case of vertical coordination price

is more constant with little variation but are not unexpected as in case of horizontal coordination.

Similar price structure prevails along different supply chain systems as observed in case of citrus

as in case of mango. Little different supply chain arrangements prevailed in the selected tomato

value chain. Mainly self-marketing in the horizontal and vertical coordination was found. The

prices were determined by the target market, production stage and tomato production cycles of

the other regions.

Constraints analysis revealed that smallholder face a number of constraints, which increase risk

and uncertainty and act as disincentives for increased production, consequently preventing

smallholders from accessing agricultural markets. Major challenges faced by smallholders such

as poor access to land; lack of on-farm and off-farm infrastructure; lack of access to finance for

production inputs; lack of access to mechanization, transport logistics, extension and research

support services; and limited access to high-value markets. However, positive effect of vertical

coordination on farm profitability was observed for the three commodities under consideration

through lower transaction cost and observable post harvesting cost along with little higher

productivity as compared to the horizontal coordination.

The analysis of the economic viability helps to draw important implications for the smallholders

and agribusiness along with policy maker. Higher returns with lower cost imply that the small

farmers could be benefited through vertical coordination that would help to increase rural income

and reduce poverty. There is strong indication for the public policy to promote processing and

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international trade and develop policies for promoting investment in the local processing and

export industry. This also implies that the priorities for investment should also be focused for

promotion of vertical integration.

9.1.6 Value chain analysis of horticulture sub-sector

Poor quality and low productivity, low labor productivity, loss of opportunities for income and

employment creations, lack of investment in new productive technologies, low family income,

supply shortages on product markets, high post harvest losses, low share of processing, and low

export prices were the plausible constraints identified for value chain development of mango,

citrus and tomato. The underlying causes identified behind these constraints were lack of

information and knowledge for cultivation, poor working conditions of small producers, low

income of small producers, insufficient access to financial resources, discrimination against

women working in the field, lack of skilled labor and recruitment of youth, lack of skilled

harvesters, collectors, packers and transporters, and poor product quality and poor packaging.

There were some positive initiatives and opportunities identified for the value chain

development, like: clusters of farmers in strategic areas are emerging in mango and citrus

growing areas through farmer field school approach; some institutions like, NARC, UAF, AUT,

UAP, and some NGOs have started initiatives to increase regulations and certification systems;

the government subsidies-inputs program gives a window to bring this program to the

horticulture sub-sector; under ASLP some districts have prioritized horticulture and mango and

citrus in particular and are allocating funds and expertise to the sub-sector for this purpose;

availability of commercially attractive and relative resistant mango, citrus and tomato varieties; a

practical training center to improve the approach and capacity of horticulture in general and

mango, citrus and tomato in particular; success stories using GAP in some country exist and can

be replicated for mango, citrus and tomato; fast-track researches on technology transfers for

mango, citrus and tomato; many actors of the sub-sector are keen to sponsor experts for

improving mango, citrus and tomato growers skill for production management; SMEs has

already feasibility studies (processing and pack house) for horticulture sub-sector; increasing

financial institutions are tailoring their products and services to specific agricultural sub sector;

the Ministry of National Food Security and Research has identified horticultural sub-sector as

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one of the high potential sector to be promoted; and PHDEC is promoting clusters for fresh and

processed mango, citrus and tomato.

Strong collaboration between the public sector, development agencies and the private sector

(business associations), farmers capacity (financial and management) need to be strengthened so

that they can improve their management practices and adopt new technologies to increase

production volume and improve the quality of fruits, and clear identification of roles among the

support service providers as to which organization can best provide which services are the main

strategies for value chain development of mango, citrus and tomato.

9.1.7 Value chain development schemes of horticulture sub-sector

Based on the analysis of first hand information and after developing an empirical evidence of

value chain analysis of citrus, mango and tomato, development schemes for each commodity are

developed.  These schemes ensure inclusiveness of the large number of small farmers while

developing a competitive value chain scheme for each of the commodity of interest by up-scaling

on the existing strengths and opportunities with providing solutions for sustainability through

incentives for chain partners. Ensuring the participation of growers in modern value chains is the

key to success. The cost and operation framework including design criteria, geographical

targeting, partnership and beneficiaries’ categories for these schemes is also suggested beside

enlisting possible options and approaches including project components description, selection of

sites and partners for implementing laid down activities for each segment of the value chain to

achieve the objectives.

9.2 Horticultural Development Constraints

On the findings of value chain research of horticulture sub-sector in the study area, the

horticultural development constraints can be classified into seven categories. These constraints

are related to input supply, smallness, management of organization, market access, enabling

environment, limited capacity building of horticultural chain stakeholders and policy. The brief

description of each category of constraint is presented in the following sub sections.

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9.2.1 Input supply

Value chain research revealed that limited availability and access to quality inputs (particularly

seed/seedlings), expensive and poor quality other inputs (fertilizer, herbicide and pesticides),

unbalance and untimely use of inputs, inefficient water utilization and high cost of irrigation,

high credit cost and low level of mechanization were major constraints faced by mango, citrus

and tomato growers in the study area. In other words, technical constraints include non-

availability of healthy, disease free, true-to-type fruit plants, limited availability of certified

vegetable seed, non-availability of quality chemicals, and weak capacity in orchard management

which converge at low productivity than the potential outputs of these commodities in the study

area. The lack of capital, limited access to institutional credit and non timely availability of

quality input lead growers to limit the use of fertilizers, pesticides and labor inputs in fruit

orchard and vegetables fields.

9.2.2 Smallness

Value chain research revealed that the resources are not optimally allocated in the horticulture

sub-sector of study area which is reflected by the fact that horticulture growers obtain low yields

of fruit and vegetables as compared to the potential yield. The absolute smallness of farmers

generates socio-economic and technical constraints. The small farm sizes with limited financial

resources are obstacles to improve the productivity and profitability of horticulture sub sector.

The dominance of small farmers (absolute smallness) resulted in low quantity, inconsistent

production and poor quality of horticulture sub-sector.

9.2.3 Management of organization

Value chain research revealed that prevalence of subsistence farming resulted in low productivity

and profitability, limited knowledge and use of traditional practices are major constraints

management of organization of horticultural growers in the study area.

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9.2.4 Market access

Value chain research revealed that inadequate backward and forwarded linkage with farmers,

poor market mechanism and traditional marketing methods and exploitation of the farmers by the

middle man are major constraints hindering market access to horticultural growers in the study

area. In assembly and wholesale markets, these growers are treated as temporary client without

access to the credit and other facility extended to the contractors of the orchards and beoparies of

the vegetables fields. Without adequate access to market information, growers also face price

uncertainty. Due to institutional constraints, growers depend on high cost informal credit sources

and advances from fruit contractors and vegetables beoparies. In this process by not marketing

their own produce, the growers do not benefit from seasonal price variation particularly in the

early and late season.

9.2.5 Enabling environment

It is evident from the findings of value chain research that post-harvest handling issues include

contracting out fruit orchard and vegetables, out-dated harvesting techniques, un skilled, non-

technical harvester and handlers, lack of cool chains, high post-harvest losses, costly packing

materials and absence of processing facilities at farm level, lack of farm to market road (poor

infrastructure), shortage and high cost of electricity/energy and under develop processing of

horticultural products are main constraints of enabling environment of horticultural sub-sector in

the study area.

9.2.6 Limited capacity building of horticultural chain stakeholders

It is evident from the findings of value chain research that Poor capacity building of horticultural

growers, women and children for addressing the need of productivity, quality improvement,

reducing post harvest losses and value addition, Poor capacity building of other horticultural

chain stakeholders for addressing the issue of post harvest handling, logistic and marketing are

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major constraints of limited capacity building of horticultural chain stakeholders of horticultural

growers in the study area.

9.2.7 Policy

It is evident from the findings of value chain research that weak policy enforcement/

implementation, inadequate policy and regulatory framework and lack of public/private

partnership in formulating policy structure are main constraints of policy for horticulture sub-

sector. There is no research and development facility for conducting research on controlled

atmosphere storage and shipping of fruit and vegetables in the study area. Further the research on

fruit and vegetables is not demand driven, and is often replicated time and again. The extension

system in the study area remains ineffective, and whatever limited research and development

work done is not properly transferred to end-users. Survey findings revealed that the constraints

related to policy and regulatory framework create more hurdles in horticultural development

strategy in the country.

9.2.8 Research and development constraints

Analysis of study revealed that the issues related to research and development, processing and

refrigeration, transportation and marketing & communication in the study area are limited and

poorly-functioning of these institutions creates problems for all stakeholders of market chain of

fruit and vegetables in the study area.

9.3 Policy Implications of the Salient Findings/Constraints

The Government has a major role in setting quality standards, policies, creating a pro-business

environment and creating a strategic direction for the horticulture sub-sector that can benefit all

actors in the value chain. Currently government policy is defined by the imperative of the former

while working towards the long-term goal of achieving the latter. This creates a policy

environment that is part socially driven and part market driven.

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Most value chain studies to date focus on market relations and pay little attention to the business

environment in which chain actors operate. Yet, this environment may both enable and constrain

value chain upgrading processes. For a balanced analysis of value chains we proposed three key

elements: network structure, of horizontal and (vertical) market channel relationships; value

added, as related to the key competitive aim of any business chain; and governance, covering

organizational arrangements between value chain actors. These elements should always be

studied as embedded in the value chain’s business environment, where we focus on markets,

resources and infrastructures and institutions. Moreover, they form the basis for our

categorization of value chain upgrading options. Value chain actors may be motivated to

improve their position in the chain by changing their production of value added, their

relationships (governance) with other actors in the value chain and by choosing different market

channels for their products. Finally, the role of non-value chain actors, such as development

organizations and interest groups, in upgrading value chains has not been widely examined.

However, with recent developments such as corporate social responsibility and pro-poor market

development, these actors are likely to play a pivotal role in value chain upgrading.

At the global level, agricultural sector has seen increasing vertical coordination and emergence

of agri-food supply chains to meet consumers’ demand for quality and food safety. There are

empirical evidences establishing that successful coordination in the value chain has a significant

impact on cost reduction and farm-income enhancement as well as resulting in positive

externalities. But, the overarching question is whether the agricultural sector has the necessary

and sufficient conditions for the development of successful value chains. Government policies

not at par with the promotion of value chain development and promotion. Special institutional

and policy reforms needed to ensure inclusiveness of the resource-poor farmers in agricultural

value chains. Great opportunities exists for strengthening value chains in agricultural sector that

address the issue of food security and help reduce poverty for those dependents on agriculture for

their livelihood.

9.4 Opportunities Solutions and Proposed Interventions for Identified Constraints

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On the basis of identifies constraints and policy implications, the opportunities, possible

solutions and proposed interventions for addressing these constraints are briefly narrated in table

9.1

Table 9.1: Opportunities, solutions and interventions of the horticultural sub-sector

Gro-ups

Opportunities Solutions Interventions

Inp

ut

Su

pp

ly

Certified/quality seed/seedlings will ensure higher yields and reduce the incidence of insect pest and disease

Improved quality seeds and establishment of clean nurseries

Research and development need to focus to ensure availability and access of certified quality seed/seedlings; and awareness campaign for their use

Cheaper and quality other inputs (fertilizer, herbicide and pesticides) will ensure higher productivity and reduce the incidence of weeds, insects/pest and diseases

Cheaper quality fertilizer, herbicide and pesticide

Establishment of rural business hubs for input provision at union council level will facilitate cheaper and quality chemical fertilizer at farmer door steps

Capacity building other chain stakeholders for addressing the issue of post harvest handling and logistic

Timely application of balance use of fertilizer, herbicide and pesticide according to requirement of the critical stages will ensure higher productivity and increase input use efficiency

Knowledge and skill sharing

Promotion of participatory research and development through farmer field school approach (FFSA)

High crop intensity will result in higher yields

Better irrigation methods and techniques

Promotion of crop specific high efficiency irrigation (drip, trickle etc.)

Cheap credit availability will promote balance input use needing to increase productivity

Cheap credit facilities Pro-small holder subsidized credit scheme

Farm mechanization will enable intensive farming that enable increase farm profitability

Assess to cultivation technology and promotion from rental market

Establishment of competitive rental service market of farm machinery at rural business hubs/farm service hubs

Sm

alln

ess

Formation of farm organization/associations will ensure better access to input, higher productivity and more return

Collective action/collective voice for bargaining power

Establishment of farmer organization/ association through farmer field school approach and linking them rural business hubs and farm service centers

capacity building of growers for addressing the need of productivity, quality of improvement, reducing post harvest losses and value addition of value addition

Specialized farming for consistent supply of quality product

Commodity specific and enabling environment

Development of functional farmers association linked under rural business hubs (cluster approach)

Man

agem

ent/

orga

niz

atio

n

Commercial orientations for optimum production to maximize profitability

Market link and awareness

Vertical coordination with marketing and processing industries

Farmers that are trained at latest techniques and methods will be able to do farming and scientific lines

Dissemination of updated knowledge and skill

Farmer networking with agricultural science and technology innovation system

Mar

ket

acc

ess

Linkages with input and output market will increase productivity and profitability

Development of linkages through buy back guarantee with market chains

Promotion of contract farming through contract farming

Improved market mechanism with access to marketing information and development of cold chains and improved cold harvest process will result in value addition

Improved marketing system (rules regulation system) and product handling in compliance with WTO standards

Promotion of GAP and development of cold storage improved packaging and transportation.

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Decrease the number of marketing intermediary for the commodities movement from farm to fork

Increase the awareness of the farmers to linking them with processing industries/modern retail chains

Establishment of vertical coordination where farmer association/organization will sell their product to the alliance of processors/exporters

En

abli

ng

envi

ron

men

t

Improved infrastructure will increase marketing efficiency

Infrastructure development

Development of links roads to production areas

Regular supply of cheap energy will reduce cost and enhance profitability

Increase supply of energy through diversified sources

Promotion of alternative energy sources i.e. biogas, solar and biofuel

Improved processing facilities will help to absorb excess supply and reduce price variability

Farm based semi processing

Small scale processing facilities (small enterprise development) i.e. kinnow and mango processing and tomato pulping process

Establishment of model on farm pack house

Lim

ited

cap

acit

y b

uil

din

g of

hor

ticu

ltu

ral c

hai

n

stak

ehol

der

s

Capacity building of horticultural growers, women and children will ensure to enhance the productivity, quality improvement, reduction in post harvest losses and value addition

Knowledge and skill transfer to farmers, women and children on enhancing productivity, improving quality, reducing post harvesting losses and enhancing value addition

Establishment of male farmer field school, women open school and children ecological clubs

Capacity building of other horticultural chain stakeholders will ensure to reduce post harvest losses, logistic issues and marketing problems

Knowledge and skill transfer to other chain stakeholders for reducing post harvest losses, packing, transportation and storage

Establishment of business field schools

specialized capacity building to all chain stakeholders will ensure the better knowledge and information on GAP, food safety and quality grades, establishing proper procedure of packing, IPM philosophy

Knowledge and skill transfer to all chain stakeholders will improve information on GAP, SPS, food standards and WTO requirements

Organized special training course on GAP, post harvest handlings, high quality and education on food safety and quality grades and standard, proper procedure for packing facilities as well as standard training curricula on GHPs, GMPs and HACCP.

Pol

icy

Policy implementation will help in availability of quality/standard inputs/outputs

Improved/good governance

Arrangement of resources for quality testing field lab facilities and management

National level policy and regulatory framework line with food security and trade promotion will develop vibrant horticulture sector

National policy with holistic regulatory framework

Formulation of national horticultural policy Formulation of regulatory framework for fulfilling

the SPS requirements, food safety and standard as well as WTO requirements

Encouragement and involvement of private sector in policy decision will help to promote investment value addition and processing

Participation of concerned stakeholders in policy making

Representation of processing and trade association and policy dialogue

9.5 Horticultural Development Strategies

It is general perception that producers are exploited in the marketing chain as other middlemen in

the consumer price fetch more shares. But this is generalized statement, there are other

arguments too that leads to producers/growers exploitation. More efforts are made for consumer

satisfaction and less attention being paid towards producers’ satisfaction. On the basis of this

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study following recommendations are extended for making the marketing system friendlier and

facilitating for all marketing actors in the study area.

9.5.1 Reorientation of subsistence horticulture to sustainable commercial horticultural

farming

The average farm size and area allocated to fruit and vegetables at majority of our farms is quite

low and overtime, their farm size shall further decline. These farmers have very small quantities

of marketable surpluses. Organization of farmers into clusters for economies of scale is the need

of the day. Promote the adoption of GAP through improved extension services, demonstration

farms. Promote a system for certification of seedlings and improve the availability of improved

planting material. Facilitate the acquisition of expertise and promote the corresponding

technology for quality and productivity. Promote awareness about the dynamics and challenges

of the sub-sector- wherever possible, collaborate with the institutions to tap in the potential

growth of mango, citrus and tomato. It is need of the time to make their small farmers viable for

staying in high value agriculture business by transforming them from subsistence agriculture to

sustainable commercial horticultural farms in the study area through; a) promotion of

cooperative business and value creation enterprises which are more appropriate options for the

economic viability of small farmers; b) review the regulatory framework for developing market

for land and infrastructure; c) developing and strengthening market linkages; d) establishing rural

business hubs for inputs provision to enhance timely access to quality inputs at competitive

prices. e) training of entrepreneurs in the market dynamics; f) development of market

information services.

9.5.2 Establishment of rural business hubs for input provision as a first segment for chain

development

Mango: Introducing service delivery and support mechanism for enhancing timely access to

quality input through establishment of rural business hubs (RBHS) is proposed first segment of

pilot mango chain development scheme. These could be a big stride in this direction as a

replication of success story in Indian Punjab. RBHS is “one stop shop” encompassing solutions

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to the farmers under one roof which will links farmers to markets via backward as well as

forward linkages as an private sector initiatives/public private partnership initiatives. They are

aimed at providing end to end ground level support to the mango growers and his “profitability”

and “productivity”. These RBHS will be operated by KF in Punjab and FAIDO and SAFE in

Sindh respectively. Each RBHS at one site will cater to agriculture land of about 12000 – 15000

acres with 5000 acres under mango. This will generate impact on the life of about 10000 growers

in general and 1000 mango growers in particular. In total agriculture land 48000 – 60000 acres

with 20000 acres under mango and this will impact on the life of about 40000 growers in general

and 4000 mango growers in particular. These RBHS will provide quality and certified inputs like

nursery seedlings, fertilizer, pesticide, farm implements and tools, fuel, veterinary products,

animal feed, financial services, buyback opportunities and membership card to mango growers.

This activity will ensure timely availability of quality inputs for 4000 mango growers.

Establishment of clean certified mango nurseries capable of offering sufficient certified plants to

all farming community of their respective districts will be part of RBHS.

Citrus: This activity will ensure timely availability of quality inputs for 4000 citrus growers. The

programme needs resources of 5 millions as a revolving fund for its establishment and

functioning from pilot project for each site. Establishment of clean certified citrus nurseries

capable of offering sufficient certified plants to all farming community of their respective

districts will be part of RBHS.

Tomato: This activity will ensure timely availability of quality inputs for 3000 tomato growers.

The programme needs resources of 5 millions as a revolving fund for its establishment and

functioning from pilot project for each site. Procurement of quality seed for raising tomato

seedlings.

9.5.3 Establishment of model on farm pack house

Mango: Four models on farm pack house will be established in each proposed project sites for

demonstrating the popularization of this technology. The objective of establishing Model on

Farm Pack House are: (i) Income diversification through setting up small scale processing of

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mango, (ii) reducing the post harvest losses through processing and value addition, (iii) and

promoting the local mango product in the national and international market. The programme

needs resources of 20 million for its establishment and functioning for each site. (This will

include Cost of Customized Structures to serve as pack house Pre-fabricated, low cost 40x20 m)

3 million, De-sap machine (locally developed) 0.70 million, Weight grader (Imported from

Australia) 10.0 million, Washer and dryer (local) 1.00 million, Hot water treatment unit (SPS

Compliance for Iran, China) 2.0 million, Mobile Chiller (Combo type including blast chiller and

cold room) 3.0 million, Ethylene Generator 0.50 million) etc.). Likewise for citrus, this activity

will cost Rs. 10 millions for each site and total cost will be Rs. 20 millions.

9.5.4 Arrangement of contract farming

Productivity gains are probably the most important link for cost savings along the value chain.

Proven technological and institutional innovations provide an incentive for private and public

sector investments in agricultural research and development. For such innovations to benefit

farmers, they have to be made accessible to farmers in a cost-effective way. Contract farming

arrangements have proven to be effective in bringing technology to farmers while at the same

time providing better incentives for continued investments. In order to improve and sustain the

competitive edge, there is need for more rapid technology transformation targeting productivity

growth. More efficient farming practices should also be promoted through agriculture extension

services, educating farmers about good husbandry, optimal planting timing and crop distribution,

etc. Cost of fertilizer, seed and other agricultural inputs could be reduced through interventions

aimed at reducing the transport costs, such as for example, rationalization of levies on fuel,

reduction in domestic taxes and duties. It is also important to consider implementing some

innovative approaches in the management of fertilizer and inputs supply chains such as timely

procurement and bulk-buying arrangements with other countries in the region so as to be able to

get lower prices at the origin.

9.5.5 Re-orientation of research and development services

Research and development in fruit and vegetables should be directed towards repositioning the

horticulture sub-sector vis-à-vis international and national market requirements in the study area

through: a) introduction of GAP to bring the horticultural production in the area at par with WTO

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compliance; b) the production methods need to be changed to make it in line with both domestic

and international market demands in order to achieve best prices of the farmers’ produce; c)

facilitating faster adoption of high efficiency irrigation systems for sustainable natural resource

conservation and it is now a vital input for growing high value agricultural commodities; d) it is

suggested to integrate farmers with processors, value addition sectors and exporters in order to

accrue maximum returns.

9.5.6 Reform of agricultural education, research and extension

There is a need of reforms in agricultural education, research and extension in the study area

through; a) re-aligning research programs to be demand driven, cost effective and replicable

under farmers’ condition by focusing on control of post-harvest losses, value creation and value

addition; b) crop diversification in order to enhance producers’ profitability and sustainability;

and c) integration of research, teaching and extension under one umbrella at the pattern of Land

Grant Institution (LGI) of USA and is successfully replicated in some of the provinces of India.

9.5.7 Improving efficiency, productivity and competitiveness

In order to compliance with the changing demand of consumers, WTO requirements and

Sanitary and Phyto-sanitary measures, horticultural growers need to be more efficient,

productive and competitive both in domestic and international market. This can be achieved in

study areas through; a) promoting value addition through improved agro-processing and market

access through innovations; b) promoting the adoption of GAP through improved extension

services and demonstration farms; c) providing incentive-based introduction of quality standards

and certification schemes for domestic and international markets; d) Promotion of products for

niche markets based on comparative and competitive advantage; e) establishing business center

for timely supply of quality inputs at affordable prices; and f) promote awareness about the

dynamics and challenges of horticulture sector.

9.5.8 Promotion of regional trade

Pakistan has maintained a surplus for mango and citrus so there is a growing need to access

potential export markets quickly and efficiently. Stimulating exports of mango and citrus must

first address the quantity of produced in locally and in particular the productivity of smallholders

who are the dominant producers. Industry infrastructure such as power supply and roads need to

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be improved to reduce the costs of the processing and trading industry and make Pakistani

products competitive versus other regional producers. Harmonization of quality standards and

trade documentation will encourage freer movement of these commodities within the region.

Other issues in this respect are:

- Clarification at borders with respect to duties and charges with up to date information on

changes to be available more quickly

- Increase regional information regarding production, demand and price

- Increase credibility of international organizations involved in quality control

- Increase accessibility of Government services involved in documentation

- Faster decision making by the Government to grant export permission

9.5.9 Encouraging public and private partnership and private sector investment

For coping the WTO requirement and SPS measurements, there is need to encourage the public

private partnership and private sector investment in study areas through: a) provide incentives

and regulatory framework for establishment of private sector wholesale markets; b)

establishment of commission agents’ storage, cool chain and other logistic facilities; c) stimulate

investment in horde business sector by encouraging public-private and private-private

partnerships; and d) launch special schemes for promoting direct and indirect foreign/private

investment

9.5.10 Capacity building of chain stakeholders of horticulture sub-sector

Sustainable implementation of best horticultural production and management practices will be

ensured through Farmer Field Schools (FFS) approach, which can provide capacity building to

growers, women and children for addressing the need of productivity, quality improvement of

commodities, reducing post harvest losses and value addition. By holding horticultural farmers

field schools, following one village one facilitator concept in the study area can enhance capacity

building of chain stakeholders. Facilitators will transfer knowledge and skills on the modern

management to horticultural growers throughout the production season (appropriate selection of

variety, optimal methods of plantation propagation, fertilization, irrigation and pruning). They

will also provide knowledge to growers on allowable inputs (pesticide, fungicide and fertilizer).

Knowledge on EUREPGAP pre- and post-harvest food safety certification scheme for fresh

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horticultural produce will also be disseminated. Horticultural growers will be updated on GAP,

harvesting techniques by following maturity indices, proper harvesting tools/harvesting machine.

Facilitators of Business Field Schools (BFS) will transfer knowledge and skills to harvesters,

pickers and packers and transporters on best post-harvest handling techniques/tools,

methods/harvesting machine, de-sapping and de-stemming techniques and proper handling and

care of harvested produce. They will also impart knowledge/information/skills to transporter and

packers on EUREPGAP or equivalent food safety certification standard to improve acceptability

of fresh fruit and vegetables for export. Knowledge and skill transfer on modern processing,

grading and packing techniques will be ensured by facilitators of BFS. Information on effective

plan to comply with international standards for hygiene in packing facilities with particular

emphasis on facility design, water quality, worker health and hygiene and training of workers

will also be disseminated to packers in processing sector. Facilitators of BFS will also transfer

knowledge/information on market development areas to the marketers. They will facilitate

partnership (e.g. contract farming) among producers, packers and collectors, retailers

(supermarkets, hyper markets and big bazaars) for distribution and marketing of fresh fruit and

vegetables.

The specialized capacity buildings are required in the field of GAP, post harvest handling, high

quality training and education on food safety and quality grade and standards, procedures for

proper packing facilities and IPM philosophy for relevant horticulture chain stakeholders key

informant of horticulture sub-sector.

9.5.11 Policy and regulatory framework for the promotion of horticulture sector

Federal, provincial and district governments should play their due role in performing their

responsibility for the development of horticulture sector in the study area. Federal government

should formulate national import-export policy to comply WTO requirements. Seed certification

and registration of nurseries and vegetables seed production farms, formulation of quarantine

rules and regulations and setting the standards and grades for the horticultural produce fall under

the responsibility of the federal government. Provincial governments are responsible for the

implementation of federal policies in their respective provinces and if required, they can develop

their own policies, standards and grades for the promotion of horticultural production and export

in the compliance of WTO requirements.

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District governments are responsible for managing extension activities, local marketing systems,

monitoring of inputs and coordinating with provincial and federal governments in developing

agricultural projects in general and horticultural projects in particular. Government is also

required to facilitate the engaged stakeholders in horticulture business in getting credit from the

banks and other financial institutions to easy terms and conditions as quickly as possible. The

public sector institutions should also generate accurate and reliable data on post harvest losses of

horticulture commodities to ascertain the causes of losses at pre- and post-harvest stages. In

order to facilitate faster changes in production, storage and marketing techniques, government is

requested to award complete exemption of duties and surcharge on imported machinery like

grading units, cold storage chambers, greenhouses, trickle irrigation accessories (like micro-

tubes, mini sprinklers and bubblers) for interested businesses. Horticulture should be accorded to

the status of an industry in Pakistan.

Regulatory Policy Measures: The proposed regulatory policy measures for the study area are

briefly described below: a) registration of fruit plant nurseries and vegetables seed production

fields will be ensured by the provincial government. b) government will ensure through

legislation the quality and liability fruit plant and seeds from nurseries and fields and the

truthfulness of labels on inputs like seeds, fertilizers and pesticides; c) government should

provide incentives (grants, study tours and trainings) to the registered nursery men and input

suppliers.

Production and Marketing Policy Measures: The proposed production and marketing of

horticulture policy measures for the study area are as under: a) promotion of environmentally

safe production practices and packing material; b) facilitate stakeholders involved in horticulture

business in getting credit from banks, other institutions on easy terms and conditions and as

quickly as possible; c) establishment and development of modern wholesale markets, cold

storage facilities, grading facilities in the production areas; and d) availability of technical

expertise to the private sector for the preparation of feasibility of any business related activities

of horticulture sector

Institutional Policy Measures: The proposed institutional policy measures for the study area are

as under: a) re-organize the present horticulture research program from conventional to demand

driven in view of the requirements of domestic and foreign markets; b) availability of resources

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like land, budget, trained man power and other facilities for the establishment of full-fledged

Ornamental Horticulture Research Section/Division in the existing research organizations; c)

ensure the collection of accurate and reliable data on post-harvest losses for horticultural

commodities and to ascertain the causes during pre-harvest stages which lead to post-harvest

losses; and d) Minimize import and export regulations but not at the cost of quality and

conditions set by WTO.

9.5.12 To improve quality

Improving quality of mango, citrus and tomato is value addition in its simplest form. A focus on

quality should involve farmers earning a premium for high quality crop. For this purpose farmers

need to be empowered with the correct grading mechanisms. Currently private traders pay for the

lowest grade in the carat and make the money from the quality after sorting. In some

commodities the requirements for improving quality are quite high, but the return on investment

can also be high. Improving the quality requires awareness campaigns on pre and post harvest

stages.

9.5.13 To upgrade vertical coordination

Encourage collaborative contract farming arrangements. It is a waste of time, funds and

extension effort to encourage farmers to grow any crop until a guaranteed market chain exists.

Too much effort has been put into getting farmers to increase production of existing crops or new

ones without firstly ensuring entrepreneurs, processors or businesses exist to competitively

purchase the crop with a market guaranteed through a contract. More simply a commodity

exchange forum that provides a venue at which buyers and sellers are brought together to

conduct business, normally through a group of registered brokers must be created. A properly

run exchange should accommodate people active in the production, trade, processing and

consumption of commodities, and reduce their costs of doing business.

9.5.14 To improve horizontal coordination

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Capacity buildings of farmers in strengthening farmer organizations that can promote value chain

in mango, citrus and tomato with respect to marketing. Farmers must also be encouraged to

organize themselves in order to receive inputs at a more competitive price and consolidate loads

for transport. This will give smallholders the chance to make better returns and make marketable

surpluses available. Due to distrust or lack of information, farmers often operate in isolation

without being aware of new developments within the local setting, but also at a global level.

Understanding the market advancements in the sector and their implications can arm a

commodity trader to take advantage of positive changes and strategize in the case of negative

developments. To increase the effectiveness of mango, citrus and tomato value chains through

marketing these strategies are suggested:

i. Producing a higher quality grain and charging a price premium for it;

ii. Storing and selling later in the year to benefit from the seasonal price increase;

iii. Selling (and purchasing) bulk quantities of outputs and buying inputs in bulk to

increase negotiating power; and

iv. Selling to premium markets that are willing to pay more like food processors; and

9.6 Suggestions for Further Research

Some areas are hereby delineated where further research is still required.

9.6.1 Investment appraisal analysis of fruit and vegetables products industries

A number of products can be produced from fruit and vegetables that are consumed throughout

the year both in domestic market as well as abroad. There is a great demand of these products in

European markets and in Middle East. However producers and exporters are unaware of

processing of these products. Therefore, there is a need to undertake an investment appraisal

analysis of fruit and vegetables’ processing industries and this information should be

disseminated among all stakeholders. This will help boosting export of the country in value

added products of fruit and vegetables.

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9.6.2 How efficient and equitable fruit and vegetables value chains are with respect to

competitiveness, inclusiveness, scalability and sustainability

Value chains for fruit and vegetables are different from food grains. These are highly perishable

commodities and there are issues of food safety both for domestic and international markets.

There is a need to envision a complete agri-food system. Agricultural processors and retailers are

scaling up very fast while farmers continue to be small and fragmented. The question of

economic viability of small farmers arises. Under such scenario, whether small farmers (84%)

will be competitive domestically and globally or will leave farming. For this it is important to

study how efficient and equitable fruit and vegetables chains are with respect to competitiveness,

inclusiveness, scalability and sustainability in the study area.

9.6.3 Impact of WTO on fruit and vegetables export

The WTO measures and policies have created great concerns among developing countries. The

policies and rules of WTO cover various subjects including environment, labor standards (e.g.

Child labor), human rights etc. It is general perception that these rules and polices favor

industrialized countries. Developing countries are unable to comply with these rules and policies

which make WTO a controversial according to poor and developing countries. The economies of

developing countries like Pakistan are generally not technology driven, therefore, all issues need

to be discussed and evaluated in a holistic manner before laying down uniform policies for all

economies. Agricultural exports of the country will be adversely affected if the country follows

the WTO rules in holistic manner.

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