WORKING PAPER

DEPARTMENT OF AGRICULTURE AND JAPAN INTERNATIONAL COOPERATION AGENCY

Formulation Team on the Drafting of the Strategic Agribusiness Development Plan

COMMODITY SITUATION REPORT: PINEAPPLE

Prepared by

JOSE ULYSSES J. LUSTRIA

November 2009

____________________ Mr. Lustria is OIC-Chief, Public Investment Program Division (PIPD), Planning Service, Department of Agriculture. He would like to acknowledge the assistance of Ms. Acquilyn Morillo and Mr. Aldrin G. Nacional (Technical Assistants, PIPD) in preparing this report. .

TABLE OF CONTENTS I. A. B. II. A. 1. 2. B. 1. 2. a) b) C. 1. 2. 3. 4. 5. D. 1. 2. E. F. OVERVIEW ...................................................................................................................... 1 Background ..................................................................................................................... 1 Contribution to the Economy ........................................................................................... 1 SITUATIONAL ANALYSIS ............................................................................................. 2 Production ....................................................................................................................... 2 World Production ........................................................................................................ 2 Domestic Production ................................................................................................... 4 Supply and Demand ......................................................................................................... 7 Supply.......................................................................................................................... 7 Demand ....................................................................................................................... 8 World demand (exports) .......................................................................................... 8 Domestic demand. ................................................................................................. 11

Value Chain of System ................................................................................................... 11 Input Subsystem ......................................................................................................... 11 Production Subsystem ................................................................................................ 12 Marketing Subsystem ................................................................................................. 13 Processing Subsystem ................................................................................................ 15 Support Subsystem.. 16 Prices ............................................................................................................................ 16 World prices. ............................................................................................................. 16 Domestic prices.. ....................................................................................................... 17 SWOT Analysis .............................................................................................................. 18 Problem Tree Analysis ................................................................................................... 19

III. SUMMARY, ISSUES AND RECOMMENDATIONS .................................................... 22 IV. REFERENCES .............................................................................................................. 277 V. ANNEXES .................................................................................................................... 279

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LIST OF FIGURES Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure 1 2 3 4 5 6 7 8 9 . . . . . . . . . Percentage share of top producing countries in pineapple production, 2007 Annual percentage share of top producing countries in pineapple production (in 000 MT), 1998-2007. .. Percentage share of top producing provinces in pineapple production (in MT), 2008.. Annual percentage share of top producing provinces in pineapple production . Production, area, and yield of pineapple, 1998-2008.... Value of pineapple production (in Million Pesos), 1998-2008.. ... Export value of pineapple (in %) by Product, 1998-2007. Top markets of Philippines fresh pineapple (in MT), 1998-2008. Top markets of Philippines prepared/preserved pineapple (in MT), 1998-2008.. .. On farm major costs in pineapple production (in %), 1998-2008 ........ Pineapple agribusiness system... Value chain of the pineapple industry... Geographic flow and marketing channels of Queen pineapple in Camarines Norte, 1994. Various prices of Hawaiian pineapple (in Php /kg), 1998-2008....... Farmgate price of Formosa and Native pineapple, 1998-2008. ... Price ratios of Hawaiian pineapple (in %), 1998-2008. Problem tree of the pineapple industry.

2 3 4 5 6 7 9

10 10 12 14 14 15 17 17 18 21

10 . 11 . 12 . 13 . 14 . 15 . 16 . 17 .

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LIST OF TABLES

Table Table Table Table Table Table

1 2 3 4 5 6

. . . . . .

Countries with highest pineapple yield, (in hg/ha) 1998-2007. Supply and utilization account of pineapple (in MT), 1998-2008. Philippine share in world export quantity of pineapple (in 000 MT), 1998-2007. Philippine share in world export value of pineapple (in 000 MT), 1998-2007. Countries with lowest producer price of pineapple (in US$/MT), 1998-2007. Issues and recommendations in the pineapple industry.

3 8 8 9 16 24

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LIST OF ANNEXES

Annex Annex

1 2

. .

Gross value output of selected fruits (At constant prices), 1998-2008. Updated average costs and returns of pineapple production (in PhP/Ha), 1998-2008....

29 30

I. OVERVIEW A. Background World production of pineapple continues to expand from 13 million metric tons in 1998 to over 21 million metric tons in 2007, an increase of 61 percent. In 1998 to 2007, Thailand has become the largest producer of pineapple followed by Brazil and the Philippines (FAO, 2009). The growth of the Philippines fresh and processed export industry is increasing. Also, the country is the top exporter of juice concentrates and pineapple juice. Output of large plantations in Mindanao is mainly exported, either fresh or processed while those in Luzon and Visayas are consumed locally. Forty seven (47) percent of the total national production is processed and 53% is directly consumed or exported fresh (Digal, 2005). The major pineapple (Ananas comosus Merr.) varieties in the Philippines are Smooth Cayenne or Hawaiian, Formosa or Queen or African Queen, Native Philippine Red or Red Spanish and Cabezona. Hawaiian variety is the most well known and is the most exported. It also has the biggest size. The variety of pineapple that is traditionally grown in Camarines Norte is the Queen or Formosa variety. It is mainly grown under coconut trees and in isolated cases, the open field. Native Philippine Red or Spanish Red is an excellent source of pia fiber. Pineapple is eaten fresh, dried, canned in slices, chunks, and tidbits. Also, it is processed into concentrates, jam, marmalade, juice, vinegar, wine, candy or nata de pia. It is interesting to note that until the mid-1960's, when the pineapple industry in the Philippines was already flourishing, the fruit was just a minor crop in Thailand. But today, around 85 percent of the pineapple area in Thailand is managed by small landowners, while multinational companies manage 85 percent of the pineapple farms in the Philippines (Digal, 2005). There are three major producers and processors of pineapple for export in the island. Their large production area requires contract arrangements with landowners or farmers to sustain the large fresh pineapple requirements. These are Del Monte, Dole and Tiboli Agricultural Development Corporation (TADI). At present, there are 28 processing plants in the Philippines (GMA-HVCC, 2008). With its 20,000-hectare contiguous pineapple plantation in the Philippines, 700,000ton processing capacity and a port beside the Cannery, Del Monte Pacific operates the worlds largest fully-integrated pineapple operation (Del Monte Pacific, 2008).

B. Contribution to the Economy Pineapple's economic contribution is gradually increasing. For the period 1998 to 2008, pineapple recorded an average contribution of 2.41 percent to total value of agricultural crop production (increasing from 2.49 to 2.58%). Also, an average contribution of 1.17 percent to total value of agricultural sector output, increasing from PhP 2,754 million to PhP 4,065 million (see Annex 1).

II. SITUATIONAL ANALYSIS A. Production 1. World Production a) Major producing countries (by volume of production). In 2007, world pineapple production accounts to 20,911,077 Metric Tons (MT) from a production area of 846,475 hectares (Ha). The largest producer of pineapple in the world is Thailand accounting to 13% of world production from 1998 to 2007 followed by Brazil (13%) and Indonesia (10%). Leading producers also include Philippines, Costa Rica, China, India, Nigeria, Mexico and Vietnam (see Figure 1).

Figure 1. Percentage share of top producing countries in pineapple production, 2007. (Source: FAO, 2009) On the average, from 1998 to 2007, pineapple production has been increasing at a growth rate of 5.49 percent. Most of this growth is attributed to Indonesias production with average growth rate of 25.25 percent, Costa Rica (14.19%) and Vietnam (8.00%). In 2007, the Philippines ranked fourth among the top pineapple producing countries in the world with share of 10 percent. For the period 1998-2007, the average percentage share of Thailand in production accounted to 13 percent (Figure 2). Indonesia and Costa Rica have evident increase in share to total production from 2007 to 2008 among other top producers.

Figure 2. Annual percentage share of top producing countries in pineapple production (in 000 MT), 1998-2007. (Source: FAO, 2009) b) Productivity. The Philippines has been consistently among the top producers of pineapple in the world. The Philippines, among Asian countries, is second to Indonesia with the highest yield. Average production (Hg) with respect to total area (Ha), accounted to 372,426 Hg/Ha, from 1998 to 2007. The level of productivity is relatively higher than the world average of 193,939 Hg/Ha (see Table 1). Table 1. Countries with highest pineapple yield, (in hg/ha)1998-2007

(Source: FAO, 2009)

According to the Philippine Agriculture 2020 report (NAST, 2008), pineapple is also price competitive under export trade scenario because export parity price ratio is greater than 1. It is also cost competitive because resource cost ratio for export is less than 1.

2. Domestic Production a) Major producing provinces by volume of production. Pineapple production in the Philippines is dominated by provinces from Mindanao. In 2008, production accounted to 2,029,973 MT (87%) of the total production. Followed by Camarines Norte - Bicol Region (5%) and Cavite - Southern Tagalog Region (3%), this scenario can be attributed to the continuous expansion of the cultivating area and the presence of Dole Philippines and Del Monte Philippines, two large processing plants in Mindanao, as shown in Figure 3.

Figure 3. Percentage share of top producing provinces in pineapple production (in MT), 2008. (Source: BAS, 2009)

For the period 1998 to 2008, the average percentage share of Bukidnon in production accounts to 48.53 percent (Figure 4). The production share of the top producing provinces has been consistent throughout the years. The average growth in pineapple production (1998-2008) accounted to 3.50 percent. On the average, the top producing provinces are consistently increasing production for the past years. In the case of Sarangani, there was a notable average production growth of 116.19 percent in the same period.

Figure 4. Annual percentage share of top producing provinces in pineapple production (in MT), 1998-2008. (Source: BAS, 2009) b) Volume, area planted and productivity. The domestic production of pineapple is increasing due to gradual increase in the area for cultivation. The average growth rate of production and area from 1998 to 2008 translated to 3.50 and 3.14 percent respectively, showing no significant increase in yield with only 0.34 percent growth rate Before 2006, . yield levels have been fluctuating and may suggest production-related causes such as price increase of planting materials. See Figure 5.

Figure 5. Production, area, and yield of pineapple, 1998-2008. (Source: BAS, 2009)

c) Value of pineapple production. The value of production is increasing with an annual average growth of 4.01 percent, brought by the increasing level of production. From 1998 to 2008, contribution of pineapple production to the economy was gradually increasing, with an average annual value of PhP 3,258 million, see Figure 6.

Figure 6. Value of pineapple production (in Million Pesos), 1998-2008. (Source: BAS, 2009) B. Supply and Demand 1. Supply For the past years, there is a slow growth in Pineapple production, with an average growth rate of 3.50 percent. At a minimal volume, imports also add to the national gross supply. The 9.70 percent average growth rate of exports for fresh fruit is higher than the rate of production. The gap shows that there exists a market potential for the Philippine pineapple brought by the increasing export demand. The country must be able to address this demand, otherwise, it may result to under supply in either or both domestic and export market. Apparently this scenario is already evident with the very low growth (0.71%) of the net food disposable (per capita), see Table 2.

Table 2. Supply and utilization account of pineapple (in MT), 1998-2008.

Supply
YEAR PRODN
Imports

Utilization
Gross Supply Exports Seeds Feeds & Waste Processing Total Net Food Disposable Per Capita Grams Kg./Yr. /Day

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008P

1,575,145 1,565,878 1,559,563 1,617,906 1,639,161 1,697,952 1,759,813 1,788,218 1,833,908 2,016,462 2,209,337

1 0 1 0 0 1 3 0 0 0 0

P - Preliminary data

1,575,1 46 1,565,8 1,559,5 78 1,617,9 64 1,639,1 06 1,697,9 61 1,759,8 53 1,788,2 16 1,833,9 18 2,016,4 08 2,209,3 62 37

117,384 127,600 135,424 153,149 178,639 194,595 203,998 210,754 262,133 276,400 291,676

87,466 86,297 85,448 87,885 87,631 90,201 93,349 94,648 94,307 104,404 115,060

641,41 5 632,84 626,62 2 644,49 1 642,63 3 661,47 0 684,56 8 694,08 0 691,58 4 765,62 1 843,77 7 1

728,881 719,139 712,070 732,379 730,261 751,679 777,909 788,732 785,887 870,031 958,830

9.96 9.62 9.31 9.40 9.19 9.27 9.41 9.25 9.04 9.82 10.60

27.30 26.36 25.50 25.75 25.17 25.40 25.78 25.34 24.77 26.90 29.04

(Source: BAS, 2009) 2. Demand a) World demand (exports). As reported by FAO (2009), the Philippines contribute 11.67 percent to the export quantity and 6.43 percent to export value from 1998 to 2007 (in the world market,. The quantity of world exports are consistently increasing, which shows the increasing demand for pineapple and can be seen as an opportunity. Evidently, the country have not been concurrently meeting this demand, the Philippines share to the world export quantity is declining. The Philippine share in world export of fresh pineapples is shrinking because of its lower growth compared to global growth. An average increase of 9.77 percent from 1998 to 2007 appears high but relatively low compared to global growth of 14.39 percent in the same period. Thus, despite an increase in value and quantity of exports, the share in the world market declined, see Table 3 and 4. Opportunity abounds the pineapple export industry and must be addressed to continually develop the industry thus benefiting the country in the long run. Table 3. Philippine share in world export quantity of pineapple (in 000 MT), 1998-2007.

(Source: FAO, 2009)

Table 4. Philippine share in world export value of pineapple (in 000 MT), 1998-2007.

(Source: FAO, 2009) The countrys top exports are preserved/prepared pineapple, followed by its fresh form, see Figure 7.

Figure 7. Export value of pineapple (in %) by Product, 1998-2007. (Source: NSO, 2008) In 2008, the fresh export market volume was 291,676 MT with the value of US$ 61 M. As shown in figure 8, the top fresh fruit export destinations includes; Japan (207,223 MT); Republic of South Korea (40, 802 MT), and Singapore (14,995 MT).

Figure 8. Top markets of Philippines fresh pineapple (in MT), 1998-2008. (Source: BAS, 2009) Philippines is second to Thailand in terms of processing. Products include pineapple juice, pia fiber, jellies, jams, candied, dried & processed pineapples, pineapple vinegar and fruit cocktail. The top market for preserved and prepared pineapple is the USA, see Figure 9.

Figure 9. Top markets of Philippines prepared/preserved pineapple (in MT), 1998-2008. (Source: BAS, 2009)

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b) Domestic demand. Produce from pineapple farms in Luzon and Visayas are mainly consumed locally, which primarily constitutes the Formosa or Queen variety. In 2008, almost half (43.40%) of the gross supply is for local consumption in both fresh and processed forms. C. Value Chain of System Below is a description of the pineapple value chain. 1. Input Subsystem The major cost drivers in pineapple production are presented in Figure 10. a) Seeds and seedlings. Many fruit seedlings are provided from BPI crop station as subsidized price to ordinary farmers. Fruit seedlings are also provided by accredited nurseries. Multinational companies produce seedlings by themselves through modernized laboratories without contamination of virus disease. Planting materials are major cost drivers, it accounted to 26 percent of production costs for pineapple from 1998 to 2008. b) Fertilizer and pesticide. The increasing prices of fertilizer and pesticides are a major concern. Both are major cost drivers. From 1998 to 2008, the average share of fertilizer and pesticides to pineapple production cost is 24 percent (BAS, 2009). Digal (2005) gives a higher figure for fertilizer and pesticides (38%). c) Agricultural Machinery. In non-plantation farms, agricultural machinery and equipment used are simple such as plow and harrow and simple harvesting implements. Thus, these are not major cost items. Harvesting implements include, protective clothing (long-sleeved shirt, hand gloves and boots) and baskets (bamboo or rattan-made with a capacity of 30 to 40 fruits (BPRE, 2008). In addition, manual harvesting and handling makes use of simple implements such as sacador (bamboo poles with hook and net), ladder, kaing (basket) and rope (BPRE, 2008).Multinational companies have fully integrated operations. These companies implement cost-reduction and productivity-enhancement programs, and invest in new technology and equipment for mechanization in order to maintain their leadership position in the industry (Digal, 2005). d) Labor. Labor is considered a major cost driver, it accounted to 24 percent of pineapple production cost, from 1998 to 2008. Labor is employed from planting to harvesting.

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Figure 10. On farm major costs in pineapple production( in %), 1998-2008 See Annex 2 for detailed data. (Source: BAS, 2009) 2. Production Subsystem Two production systems are utilized for fruits the plantation and the small to medium-scale farms. Hawaiian variety is grown in plantation scale in Mindanao. The Queen or Formosa variety in Camarines Norte is mainly grown under coconut trees and in isolated cases, the open field. (GMA-HVCC, 2008). NSO (2002) data show the number of farms in the country accounts to 124,940. The major producing regions are Northern Mindanao (top producer), followed by Southern Mindanao ,Southern Tagalog and Bicol region with an average yield of 33 tons per hectare. From 1975-2000, Northern Mindanao contributed 52% while Southern Mindanao had 38%.Forty seven (47) percent of the total national production is processed and 53% is directly consumed or exported fresh (Digal, 2007). There are three major producers and processors of pineapple. Their large production area requires contract arrangements with landowners or farmers to sustain the large fresh pineapple requirements. These are Del Monte, Dole and Tiboli Agricultural Development Corporation (TADI).Moreover, cooperatives engaged in contractual arrangements account for over 82% of the total area utilized for pineapple production. The Del Monte Employees and Agrarian Reform Beneficiaries Cooperatives covers 46% or 14,000 hectares, the Dole Agrarian Reform Beneficiaries Cooperatives accounts for 29% or 8,937 hectares, and the partner cooperative of the Tiboli Agricultural Development Inc. utilizes 16% or 5000 hectares. Only 3,000 hectares are planted through contract growing with independent growers (Digal, 2005).

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Production system in Multi-national Companies (MNCs) is characterized as follows (Digal, 2005): Del Monte Pacific Resources Ltd (DMPRL) owns the Del Monte trademark in the Philippines and manages Del Monte Phils., Inc. (DMPI) which operates the worlds largest contiguous pineapple plantation. It covers over 14,000 hectares (1,600 feet above sea level and a plateau) in Bukidnon (Northern Mindanao) and produces in excess of 600,000 metric tons of pineapple per annum. This plantation is located in Manolo Fortich, Libona, Impasugong and Sumilao. DMPI is considered to be the biggest pineapple plantation in the Far East, and one of the oldest in the Philippines, having started in 1926. It now produces pineapples under leaseback agreement contract with the Del Monte Philippines Inc (DMPI) Employees Agrarian Reform Beneficiaries Cooperative (DEARBC). Dole Philippines, Inc. (Dolefil) operates around 9,000 hectares of pineapple plantation and a processing plant at the foot of Mt. Matutum, covering the municipalities of Polomolok, Tupi and Tampakan. Pineapples are produced from the plantation under lease contract with DoleFil Agrarian Reform Beneficiaries Cooperative and a portion from contract growers under an expansion project. Dolefil basically has three types of contract arrangements to interested landowners; Growership Agreement, Self-financed Farms and Farm Management Contract (FMC). 3. Marketing Subsystem The marketing of fruits from non-plantation farms is complicated because of many middlemen, characterizing several layers. Multi-national companies engaged in contracts with farmer-growers, serves as supplier of inputs likewise the recipient of the produce, see Figures 11 and 12. Output of large plantations in Mindanao is mainly exported, either fresh or processed while those in Luzon and Visayas are consumed locally (Digal, 2007). Several intermediaries are involved in the marketing of pineapple. From the growers, the fruits are either sold to wholesalers, wholesalers-retailers, viajeros or travelers, and retailers or directly sold to processors before they reach the consumers. Contract growers, however, sell directly to big company processors. Pineapple is sold in fruit stalls and supermarkets in many different forms: dried, processed in chunks, tidbits, juice, etc. (Digal, 2005).

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Figure 11. Pineapple agribusiness system. (Source: ILRF, 2008)

Figure 12. Value chain of the pineapple industry. (Source: Digal, 2005)

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Figure 13 shows a more detailed flow and channel for pineapple (Queen variety).

Figure 13. Geographic flow and marketing channels of Queen pineapple in Camarines Norte, 1994. (Source: Lustria, 1994) 4. Processing Subsystem Food processing is one activity that strengthens the linkage between agriculture and industry. It enhances both upstream and downstream activities in the production-marketing chain. With agro-processed products, the value-added contribution of agricultural fresh produce is increased. At the same time, downstream activities are enhanced to more efficient utilization of agricultural inputs and machineries (Elazegui, 1998). Forty seven (47) percent of the total national production is processed and 53% is directly consumed or exported fresh (Digal, 2007). Philippines is 2nd to Thailand in terms of processing, wherein, 85% of processing belongs to multinational companies like Del Monte and DOLE. At present, there are 28 pineapple processing plants in the Philippines. Dole, for example markets 20% of production as fresh fruits and the rest are processed. Pineapple is processed into puree, dried, juice concentrates, canned products and fruit cocktail in syrup that is intended for export. Native Philippine Red or Spanish Red when processed is an excellent source of pia fiber (GMAHVCC, 2008).

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5. Support Subsystem Support for the fruit industry comes from, government and non-government / private institutions. The DA through its GMA-HVCC banner program provides a comprehensive package which includes: a) b) c) d) e) f) g) h) i) j) Production Support Services; Market Development Services; Credit Facilitation Services; Irrigation Development Services; Other Infrastructure/ Post-Harvest Development Services; Extension Support, Education and Training Services; Research and Development; Regulatory Services; Information Support Services; and Policy Formulation, Planning and Advocacy Services.

Various donor countries or agencies have also provided support both technical and capital assistance. D. Prices 1. World prices On the average, from 1998 to 2007, the Philippines has been one of the pineapple exporting country with a low producer price, at an 10-year average value of 104.78 US$/MT. In general, 2007 pineapple producer price increased in the world. In the case of the Philippines, even with the increase, it recorded the lowest producer price for that year, see table 5.

Table 5. Countries with lowest producer price of pineapple (in US$/MT), 1998-2007.

(Source: FAO, 2009)

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2. Domestic prices In 2008 various prices on Hawaiian pineapple increased at a minimal level. On the average, for the period 1998 to 2007, retail price of pineapple is consistently increasing at a gradual rate. It is interesting to note, however, that farm gate price have been decreasing with a negative average growth of 1.30 percent and wholesale price had no significant change, almost stagnant at 0.46 percent growth rate, see Figure 14.

Figure 14. Various prices of Hawaiian pineapple (in Php /kg), 1998-2008. (Source: BAS, 2009) In contrast, despite the fluctuations the farm gate prices of Formosa and Native pineapples have been generally increasing at 3.92 and 2.57 percent growth rate, respectively (Figure 15).

Figure 15. Farmgate price of Formosa and Native pineapple, 1998-2008. (Source: BAS, 2009) 17

The price scenario in Figure 16 reflects that the Hawaiian pineapple wholesalers are the gainers in the industry. Farmgate prices showed sluggish growth, reflecting that through the years (1998-2008) farmers are not gaining at the same rate of retailers and wholesalers.

Figure 16. Price ratios of Hawaiian pineapple (in %), 1998-2008. (Source: BAS, 2009)

E. SWOT Analysis As identified by GMA-HVCC, the following strengths are exemplified by the pineapple industry; the countrys suitable climate and soil condition, the relatively lower labor cost and the availability of experienced farmers with harmonious relationship. On the other hand, the weakness of the industry is insufficient supply of quality fruits, with losses of 40 percent of total production due to hauling, rat infestation and damage, pests and diseases such as mealy bugs, root grubs and Phytopthora. Also, there is a high barrier to entry, lack of post harvest facilities/techniques, low plant density, limited reach of domestic market and the unavailability of affordable financing scheme. In addition, for pineapple fiber, there is inadequate supply of planting materials and pia leaves which resulted to low fiber supply, lack of capital needed for the establishment of pia plantation for fiber production, the tedious process of fiber extraction and knotting, inconsistent quality of hand woven fabrics and uneven embroidery, embroiderers sometimes resort to cut-throat competition which adversely affects the industry and expensive price of pia cloth which is limiting the market to the upper class only. The opportunities that are bound to the pineapple industry are having greater access to markets, the presence of information and communication technology (ICT) facilities, heightened global consciousness for health foods, high employment and investment generator. In addition, there is an increasing productivity of area with availability of area for

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expansion, potential fiber production from leaves, wide marketing opportunities, increasing local government support, potential for processing and commercializing pineapple products, product development in terms of packaging and labeling and industry development in the province will result to increase demand for agricultural equipment as well. The impending threats are unparalleled population growth, and ineffective cultural practices. F. Problem Tree Analysis Despite the slight increase in pineapple production from 1997 to 2004, its share of world production declined from 13% to 11% during this period (FAOSTAT, 2005). This implies that the other producers expanded faster than the Philippines. Hence, there is a need to tap the industry to become more competent and efficient in the pineapple business. Increasing the competitive edge and efficiency of the industry will encourage new aspirants to participate efficiently in pineapple business, improve the income of small growers and realize the potential of the processing industry. However, widespread issues in the industry hamper the advancement of pineapple business. High cost of production is among the issues that have to be addressed to improve the growers profitability. Pineapple industry has shown promising market of its processed food such as juice, puree and canned pineapple; however, manufacturing expenses hinders the industry to expand its production. For instance, sugar, packaging materials, and food equipment highly contribute in the production cost of processing industry. In the case of fresh pineapple, labor and agricultural chemicals are the major cost drivers of the production. For most of small players, expanding their production is an unworkable option since this would require them to put more money on the business. Whereas credit facilities are inadequate and unavailable, small growers cannot step forward to increase their production and compete with large producers. Large companies, on the other hand, can integrate some input materials to reduce the production cost. While large producers enjoy this benefit, expansion of their production emphasizes the sporadic production of pineapple since ownership of large land is prohibited under the Comprehensive Agrarian Reform Program. Integrating vast tracts of land, therefore, will necessitate large companies substantial financial backing, which eventually drives up the cost of their production as well. On the contrary, development of the industry should not be overstressed in reducing the cost of its production. Improving the quality of the fruit will also sharpen the competitive edge of the industry in the international market. Sustaining the supply of quality produce in the market starts at the farm production level. It is imperative to note that pineapple plant is also susceptible to pests and diseases, which are also accountable to 40 percent, lost of its total production. Inasmuch as sporadic planting of pineapple is prevalent in the industry; most growers are cultivating their farm based on their own practices without the proper technical skills needed to have a good grown plant. Lack of uniform grade standards further aggravates this situation. Alongside with these issues, inefficiencies in handling and shipping also affect the quality of the produce. To maintain freshness and quality upon reaching the market, fresh pineapples require appropriate temperature. Small growers, however, are deficient in post harvest facilities such as cold storage, which make it more difficult for them to meet the quality requirements.

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Despite of the existing farm-to-market road network, there are still notable inadequacies in the sectors infrastructure. Some of the plantations are located near in the areas that are not easily accessible, making the transfer of the products more costly. In the case of small integrators, poor market infrastructures compounded the cost and risk entail in shipping fresh products. There are cases where small shippers are often forced to bribe the loading crew, which drives up shipment cost, to ensure that their cargoes are prioritized or given favorable spaces in the ship to maintain its quality. Note that importing countries are implementing stringent quality requirements. Unfortunately, small growers are always at a significant disadvantage in the export field because only large companies can sufficiently meet these conditions. Figure 17 shows a graphical analysis of the problems in the pineapple industry.

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Difficult for new aspirants to participate efficiently in pineapple business Low income of small growers

Unrealized Unrealized potential of processing potential of industry processing industry

Inconsistent supply of quality fruits High cost of production for small players

Lost 40% of total production due to hauling, rat infestation and damage Lack of uniform grade standards High freight/ shipping cost Sporadic production

Inefficiencies in handling and shipping

Substantial financial backing to integrate vast tracts of land

High cost of inputs

Susceptible to pests and diseases Poor infrastructure facilities

Lack of postharvest facilities Lack of technical-knowhow of small growers

High labor cost

Inadequate access to credit

Agrarian Reform Law

High cost of agricultural chemicals

High cost and low quality of sugar High cost of packaging materials Expensive food equipment

High cost of sugar/ liquidation of sugar

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Figure 17. Problem tree of the pineapple industry.

III.

SUMMARY, ISSUES AND RECOMMENDATIONS

Growth opportunities abound the pineapple industry, as the world market increases its demand for pineapples, both for fresh and processed. Along with banana and mango as major fruits, pineapple has a relatively high growth potential. Besides the increasing demand of fresh fruit, various processed forms of pineapple are also in demand, as food and as fiber. Both export and local demand is increasing, an opportunity that must be addressed accordingly. In production, the number of farms in the country accounts to 124,940 farms (NSO, 2002). The major producing regions are Northern Mindanao, Southern Mindanao, Southern Tagalog, and the Bicol region with an average yield of 33 MT per hectare. From 1975 to 2000, Northern Mindanao contributed 52 percent while Southern Mindanao shared 38 percent. Forty-seven percent of the total national production is processed and 53 percent is directly consumed or exported fresh (Digal, 2007). Hawaiian variety is grown in plantation scale in Mindanao. The Queen or Formosa variety in Camarines Norte is mainly grown under coconut trees and in isolated cases, the open field. There are three major producers and processors of pineapple. Their large production area requires contract arrangements with landowners or farmers to sustain the large fresh pineapple requirements. These are Del Monte, Dole, and Tiboli Agricultural Development Corporation (TADI). Moreover, cooperatives engaged in contractual arrangements account for over 82 percent of the total area utilized for pineapple production. The Del Monte Employees and Agrarian Reform Beneficiaries Cooperatives covers 46 percent or 14,000 ha, the Dole Agrarian Reform Beneficiaries Cooperatives accounts for 29 percent or 8,937 ha, and the partner cooperative of the Tiboli Agricultural Development Inc. utilizes 16 percent or 5,000 ha. Only 3,000 ha are planted through contract growing with independent growers (Digal, 2005). Output of large plantations in Mindanao is mainly exported, either fresh or processed, while those in Luzon and Visayas are consumed locally (Digal, 2007). Several intermediaries are involved in the marketing of pineapple. From the growers, the fruits are either sold to wholesalers, wholesalers-retailers, viajeros or travelers, and retailers, or directly sold to processors before they reach the consumers. Contract growers, however, sell directly to big company processors. Pineapple is sold in fruit stalls and supermarkets in many different forms: dried, processed in chunks, tidbits, juice, and the like (Digal, 2005). Forty-seven percent of the total pineapple production is processed and 53 percent is directly consumed or exported fresh (Digal, 2007). The Philippines is 2 nd to Thailand in terms of processing, wherein 85 percent of processing belongs to multinational companies like Del Monte and Dole. At present, there are 28 pineapple processing plants in the Philippines. Dole, for example markets 20 percent of total production as fresh fruits and the rest are processed. Pineapple is processed into puree, dried, juice concentrates, canned products, and fruit cocktail in syrup that is intended for export. Native Philippine Red or Spanish Red, when processed, is an excellent source of pia fiber (GMA-HVCC, 2008). A major key player in the pineapple industry is the multinational companies, which greatly influenced the countrys fruit sector in terms of exports, investment, and employment. Enhancing the linkages of these firms with small farmers and enterprises are considered necessary. There are also issues that need to be addressed to improve these linkages so that

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small farmers and enterprises may be able to tap higher value chains and improve quality, production, and competitiveness of their produce (Digal, 2005). Increasing the competitive edge and efficiency of the industry will encourage new aspirants to participate efficiently in pineapple business, improve the income of small growers and realize the potential of the processing industry. However, widespread issues in the industry hamper the advancement of pineapple business. Among these issues are the high cost of production and inconsistent supply of quality fruit. In the pineapple processing industry, cost of inputs such as sugar, packaging material and food equipment is the main cost driver of production. Labor, agricultural chemicals and quality planting materials are the major cost skeleton of fresh pineapple production. Integrating vast tract of land also contributes to the production cost of fresh pineapple. Advancement of the industry, on the other hand, should not be solely drawn in reducing the cost of its production. Supply of the quality produce considerably affects the competitiveness of the industry in the world market. Factors that significantly influence the supply of quality fruit are technical-know-how skill of the farmers, uniform grade standards, and infrastructure and post harvest facilities. Handling and shipping the product is also as significant as maintaining the quality of the fruit at the farm production level. In addition, keeping the plant resistant to pests and diseases has a say on increasing the yield and quality of the fruit. Opportunities abound the pineapple industry, among the investment opportunities identified were growership for fresh and processed pineapple, individual production of fresh pineapple (MD-2, Queen) for local and export markets, organic production of fresh and processed pineapple. For production inputs, opportunity arises for organic fertilizers and tissue culture plantlets. Also for logistics which includes cold chain facilities. Moreover, investment opportunities in the supply chain includes farm mechanization, post harvest facilities (Input subsystem), total area expansion and credit (Production subsystem), increase processing plants, peeling and cutting machines (Processing), trading from farm to market (Marketing) and transport facilities from the farm to Metro Manila (Logistics). Among the stakeholders who participated in the conducted stakeholders consultation (DA, 2008) was Mr. Michael Lao (Executive Vice President KLT Fruits- exporter of mango and other tropical fruit products). Accordingly, he recommends that for the success of the fruit industry, in general, focus must be set to lower the production cost and to improve and provide technology needed by the industry. Importance of government and private sector partnership was also stressed. Mr. Lao stated that the countrys competitiveness has become less and less and one way to reduce cost is to find client that will cover the overheads or infrastructures. He also encouraged farmers to form a cooperative that will lead to organize production. He suggested that Cooperative Development Agency should conduct more training on cooperative management.

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Table 6 illustrates the issues and gaps in the pineapple industry, accordingly, recommendations were also provided. Table 6. Issues and recommendations in the pineapple industry. Supply chain I. Input Supply Subsystem Seeds and Seedlings, etc. Issue/Gap Recommendation

Insufficient planting materials with high quality

Development of new varieties, varietal improvement through biotechnology, accreditation of nurseries, and intensification of R & D through SUCs and other agrobased research and development institutions Improvement of logistics; utilization of organic fertilizers

Fertilizer and Pesticide Agricultural Machinery/equipment Labor II. Production Subsystem

Increasing costs

Need for standards in Establishment of agricultural farm equipment machinery and equipment standards Increasing cost of labor Inconsistent supply; fragmented production Prevalence/existence of pests and diseases Maximum utilization of family labor Expansion of production areas; integration of supply; policy/legislative work on issues such as public land access Strict quarantine regulation to prevent spread of pest and diseases and intensified information campaign about the threat of disease R, D and extension program aimed at developing an effective and efficient Integrated Pest Management (IPM) Strategies

III.

Marketing Subsystem

Inefficient marketing system

Improvement of logistics (to address high postharvest losses); establishment of trans-shipment facilities; revisit of the Food Terminal approach; improvement of market intelligence and information systems, particularly on price monitoring, supply and demand forecasting and analysis of the different fruits

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IV. Processing Subsystem

Inadequate postharvest and processing facilities; need for standards in equipment Low awareness on proper postharvest handling

Increase and improvement in processing and postharvest facilities (e.g., processing and packaging plants, peeling and cutting machines); utilization of biotechnology Establishment of postharvest clinic to address postharvest related concerns in the area Conduct of capability building

Lack of awareness of Compilation/updating of importing importing countries countries standards and standards dissemination of these information to processors Limited access to product testing and quality/safety system certification services Supplementing of Food Development Center testing services available only in Manila; upgrading of DOST regional testing laboratories to conform with the Codex guidelines for the assessment of the competencies of food testing laboratories Provision of more support facilities such as ports, farm-to-market roads, cold chain systems, irrigation facilities; also regulatory and food safety system (e.g., traceability, database/s); promotion of GAP and monitoring of compliance; credit and crop insurance facilities; strengthening of the Research and Development-Extension system in the different levels of government, from national to local government level

V.

Support Subsystem

Inadequate support systems

Note: Issues and Recommendations were identified from (through) key informant interviews, secondary data, workshops, consultations and field visits.

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Moreover, reviews on the existing programs formulated by the government to solve the concerns of the industry - from access to agricultural resources and services to market information- is imperative in strengthening its competence in dealing with the prevailing issues of the fruit industry. One good example is the Food Terminal Concept which is developed by DA. This concept is especially designed to develop market infrastructure of the industry by establishing chain of marketing facilities from farm to consumers and developing distribution centers (food terminal hubs) which are designated regional or provincial agroindustrial centers for proximity to value-adding and processing activities. Active involvement of LGUs, NGOs, private sector, GOCCs, and joint-venture between any of the parties above is highly encouraged to operate the hubs so that trading system will be more efficient and transparent and market information will be more accessible to the agents of the market.

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IV. REFERENCES

Del Monte Pacific. Del Monte Pacific Corporate Profile. Retrieved on October 2008 from <http://www.delmontepacific.com> Department of Agriculture - Bureau of Agricultural Statistics, DA-BAS. (2008). Countrystat. Retrieved on December 2008 from <http://www.countrystat.bas.gov.ph> Department of Agriculture - Bureau of Postharvest Research and Extension, DA-BPRE. (2008) Philippine Postharvest industry profile: Pineapple. Retrieved on October 2008 from <http://www.bpre.gov.ph/phindustry/pineapple.htm>. Department of Agriculture. (2008). Proceedings of the Agribusiness Situation Analysis Stakeholders Consultation Meeting. Quezon City. December 9-10, 2008. Department of Agriculture-Ginintuang Masaganang Ani High Value Commercial Crops (DA GMA-HVCC) Banner Program. Commodity Profiles. Retrieved on October 2008 from <http://www.hvcc.da.gov.ph> Digal, L.N. (2005). Benefit Diffusion and Linkage Development in the Philippine Tropical Fruits Sector. Retrieved on October 2008 from <http://siteresources.worldbank.org/ INTPHILIPPINES/ Resources/Digal-word.pdf> Digal, L.N. (2007). Agricultural Contracts in Mindanao: The Case of Banana and Pineapple. Discussion Paper Series No, 2007-24. Philippine Institute for Development Studies. Philippines. Elazegui, D.D. (1998). Food processing in the Philippines: Issues and Challenges. Working paper no. 98-03. ISPPS, CPAF, UPLB. FAOSTAT. (2005). Food and Agriculture Organization of the United Nations, 2005. Retrieved on October 2008 from < http://faostat.fao.org/default.aspx/ > FAOSTAT. (2008). Food and Agriculture Organization of the United Nations, 2008. Retrieved on October 2008 from < http://faostat.fao.org/default.aspx/ >I International Labor Rights Forum. (2008). The Sour Taste Of Pineapple: How An Expanding Export Industry Undermines Workers And Their Communities. October 2008. Retrieved on November 2008 from http://www.laborrights.org/files/ILRF_pineapplereport.pdf > Lustria, J. U. et al. (1994). Marketing and Information Needs Assessment Report. Camarines Norte. A Technical Report. Published by the Department of Agriculture - Bureau of Agricultural Statistics. August 1994.

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National Academy of Science and Technology, Department of Science and Technology. (2008). Philippine Agriculture 2020: A Strategy for Poverty Reduction, Food Security, Competitiveness, Sustainability, Justice and Peace. Main report. January 2008. National Statistics Office. (2002). Census of Agriculture and Fisheries. National Statistics Office. (2008). Quantity and Value of Exports and Import, 1994-2007.

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V. ANNEXES Annex 1. Gross value output of selected fruits (At constant prices), 1998-2008.
1998 TOTAL AGRI OUTPUT TOTAL AGRI CROP OUTPUT 224,172 1999 245,874 2000 242,318 2001 253,131 2002 262,788 2003 272,011 2004 286,245 2005 292,581 2006 304,000 2007 318,068 2008 330,396
AVERAGE

275,599

110,733

129,268

120,249

124,046

126,035

129,250

136,181

137,305

143,699

151,559

157,543

133,261

VALUE OF PRODUCTION IN AGRICULTURE AT CONSTANT PRICES, 1998 - 2008, (IN MILLION PESOS) BANANA 6,252 8,181 8,824 9,056 9,442 9,610 10,080 11,274 PINEAPPLE 2,754 2,831 2,885 2,993 3,032 3,141 3,256 3,290 MANGO 6,307 6,297 6,167 6,392 6,950 7,244 6,947 7,058 CALAMANSI 216 908 922 927 923 923 913 1,024 PAPAYA 144 151 163 171 171 175 179 196 POMELO 66 68 65 61 64 61 58 57 DURIAN 593 545 526 552 646 813 835 966 MANGOSTEEN 17 16 15 16 16 16 16 17

12,162 3,374 6,589 1,003 211 55 990 15

13,396 3,710 7,341 1,028 220 54 1,496 15

15,551 4,065 6,338 1,018 245 52 1,050 3

10,348 3,212 6,694 891 184 60 819 15

SHARE TO TOTAL AGRI OUTPUT, 1998 - 2008, (IN %) BANANA 2.79 3.33 3.64 PINEAPPLE 1.23 1.15 1.19 MANGO 2.81 2.56 2.55 CALAMANSI 0.10 0.37 0.38 PAPAYA 0.06 0.06 0.07 POMELO 0.03 0.03 0.03 DURIAN 0.26 0.22 0.22 MANGOSTEEN 0.01 0.01 0.01 SHARE TO TOTAL AGRI CROPS, 1998 - 2008, (IN %) BANANA 5.65 6.33 7.34 PINEAPPLE 2.49 2.19 2.40 MANGO 5.70 4.87 5.13 CALAMANSI 0.20 0.70 0.77 PAPAYA 0.13 0.12 0.14 POMELO 0.06 0.05 0.05 DURIAN 0.54 0.42 0.44 MANGOSTEEN 0.02 0.01 0.01

3.58 1.18 2.53 0.37 0.07 0.02 0.22 0.01

3.59 1.15 2.64 0.35 0.07 0.02 0.25 0.01

3.53 1.15 2.66 0.34 0.06 0.02 0.30 0.01

3.52 1.14 2.43 0.32 0.06 0.02 0.29 0.01

3.85 1.12 2.41 0.35 0.07 0.02 0.33 0.01

4.00 1.11 2.17 0.33 0.07 0.02 0.33 0.00

4.21 1.17 2.31 0.32 0.07 0.02 0.47 0.00

4.71 1.23 1.92 0.31 0.07 0.02 0.32 0.00

3.71 1.17 2.45 0.32 0.07 0.02 0.29 0.01

7.30 2.41 5.15 0.75 0.14 0.05 0.45 0.01

7.49 2.41 5.51 0.73 0.14 0.05 0.51 0.01

7.44 2.43 5.61 0.71 0.14 0.05 0.63 0.01

7.40 2.39 5.10 0.67 0.13 0.04 0.61 0.01

8.21 2.40 5.14 0.75 0.14 0.04 0.70 0.01

8.46 2.35 4.59 0.70 0.15 0.04 0.69 0.01

8.84 2.45 4.84 0.68 0.15 0.04 0.99 0.01

9.87 2.58 4.02 0.65 0.16 0.03 0.67 0.00

7.67 2.41 5.06 0.66 0.14 0.05 0.60 0.01

(Source: BAS, 2009.)

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Annex 2. Updated average costs and returns of pineapple production (in PhP/Ha), 1998-2008.

(Source: BAS, 2009)

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