WORKING PAPER

DEPARTMENT OF AGRICULTUREJAPAN INTERNATIONAL COOPERATION AGENCY

Formulation Team on the Drafting of the Strategic Agribusiness Development Plan

COMMODITY SITUATION REPORT: MANGO

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 Mr. Aldrin Nacional and Ms. Acquilyn Morillo (Technical Assistants, PIPD) in preparing this report.

TABLE OF CONTENTS I. OVERVIEW..... 1 A. Background....... B. Contribution to the Economy........ SITUATIONAL ANALYSIS.......... A. Production......... 1 . World Production......... a. Major Producing Provinces...... b. Productivity and Competitiveness....... Domestic Production.... a. Major Producing Provinces.......... b. c. Volume, Area planted and Productivity........ Value of Production....... 1 1 1 1 1 1 3 3 3

II.

B. 1 2

3 4 Supply and demand....... 5 . Supply .......... 5 . Demand......... 6 a. World Demand (Exports) .......... 6 b. Domestic Demand......... 9 Value-Chain System.......... . Agribusiness System......... . . . On-Farm Costs..... Logistics....... Processing........ 9 9 14 14 14 21 21

C. 1 2 3 4 D. 1 2 3 E. F. III. IV. V.

Prices..... . World Prices......... . . Domestic Prices........ Price Formation / Differentiation....

21 23 SWOT Analysis.. 23 Problem Tree Analysis... 25 27

SUMMARY, ISSUES AND RECOMMENDATIONS.........

REFERENCES......... 31 ANNEXES......... 32

ii

LIST OF FIGURES Figure 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Mango Top Producing Countries (MT), 2005... Mango World Production, 1996-2005... Mango Top Producing Provinces (MT), 2008. ..... Production (MT), Area (Ha) and Yield (MT/Ha) of Mango, Philippines, 1998-2008.. Mango Value of Production (in pesos),at Constant Prices, 1998-2008................................ Top Exporters of Mango Based on Value, 2004.... Exported Value of Mango (in Percent), by Product, 1998-2007.. Philippines Top Markets for Fresh Mango (MMT), 1998-2007...... Philippines Top Markets for Dried Mango (MMT), 1998-2007.. Mango Stakeholders Map... Agribusiness System of Fresh Mango... Major Activities and Linkages in the Mango Industry.. Geographic Flow and Marketing Channels for Mango in Pangasinan, 2001.. Geographic Flow and Marketing Channels for Mango in Guimaras, 2001... Geographic Flow and Marketing Channels for Mango in Iloilo, 2001.... Geographic Flow and Marketing Channels for Mango in Davao City, 2001.. Geographic Flow and Marketing Channels for Mango in Davao del Sur, 2001.. On-farm Cost of Mango Production (in Percent), 1998-2008.. Processed Mango Agribusiness System. Distribution of Mango Processors by Area, as of June 2004.. General Process Flow... The Processed Mango Sector Value Chain Diagram.. Problem Tree of Processed Mango.... Various Prices of Carabao Mango, 1998-2008.... Price Ratios of Carabao Mango, 1998-2008.... Problem Tree of Fresh Mango... Page 2 2 3 4 5 7 7 8 8 9 10 11 11 12 12 13 13 14 15 16 18 19 21 22 22 25

iii

LIST OF TABLES Table 1 2 Mango Supply and Utilization (MT), 1998-2008...... Issues and Recommendations in the Mango Industry... Page 6 28

iv

LIST OF ANNEXES Annex 1 2 3 Gross Value Output of Selected Fruits, at Constant Prices .... Issues and Recommendations in the Mango Industry... Logistics Practices in the Mango Industry.... Page 32 33 36

I. OVERVIEW A. Background Mango (Mangifera indica L.), the countrys national fruit is considered as one of the finest in the world (specifically the Carabao variety). It is the third most important fruit crop of the country based on export volume and value next to banana and pineapple. It has an established domestic market and has bright opportunities for the international market both in fresh or processed form (DA GMA-HVCC, 2008). As reported by DA-GMA-HVCC, about 73 percent of the total area planted to mango is owned by small farmers while 24 percent operate farm sizes between 3 to 9.99 ha. Those operating 10 ha and above constitute only about three percent. Majority of the mango processors are small and medium enterprises. Mango industry supports about 2.5 M farmers with 1,327,312 farms (NSO, 2002). Among the many varieties in the Philippines, the 'Carabao' constitutes 66 percent of the crop and Pico, 26 percent (Mango, 2008).

B. Contribution to the Economy Mango's economic contribution is gradually increasing. For the period 1998 to 2008, mango recorded an average contribution of 5 percent to total value of agricultural crop production and 2 percent to total value of agricultural sector output (Annex 1).

II. SITUATIONAL ANALYSIS A. Production 1. World production a) Major producing countries. Volume and value of mango production is aggregated with some other fruits in FAO data. However, according to the Mango Strat Plan and Updates (2006), the Philippines is the seventh major producer of mango in 2005. In the same year, the country contributed 3 percent in world production.

Figure 1. Mango top producing countries (MT), 2005. (Source: Mango Strat Plan and Updates, 2006)

Figure 2. Mango world production, 1996-2005. (Source: Mango Strat Plan and Updates, 2006)

b) Productivity and competitiveness. As mentioned earlier, FAO aggregated mango data with some other fruits. Thus, comparison of productivity and competitiveness among top producing countries cannot be done using such data. According to the Philippine Agriculture 2020 report (NAST, 2008), mango 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. In 2008, Pangasinan is the largest producer of mango in the country (BAS, 2008). While Pangasinan has contributed 38 percent, other major producing provinces had 3 to 6 percent shares in the domestic production (Figure 3). These provinces are Isabela (49,545 MT), Cebu (36,775 MT), Ilocos Norte (31,649 MT), and Batangas (26, 731 MT).

Figure 3. Mango top producing provinces (MT), 2008. (Source: BAS, 2009) b) Volume, area planted, and productivity. Despite of continuous area expansion, mango production is fluctuating from 1998 to 2008. In the same period, the highest volume of mango production (1,023,906 MT) that the country has recorded was in 2007. Strong winds, heavy rains, and diseases have greatly affected the production, particularly in the flowering stage (DA-BAS, 2008; Mango Strat Plan and Updates, 2006). Effects of these phenomena were reflected in the dramatic decline of production in 2008 (884,011 MT). Apparently, area expansion accompanied by unstable production has also resulted in the decreasing trend of the countrys mango productivity.

Figure 4. Production (MT), area (Ha) and yield (MT/Ha) of mango, 1998-2008. (Source: BAS, 2009)

c) Value of production. While volume of production has recorded a negative average growth (- 0.8 percent from 1998 to 2008), value of mango production is increasing at an average of 0.3 percent. (Figure 5). This shows that the country must be able to increase its productivity to maximize the opportunities and potentials in mango industry.

Figure 5. Mango value of production (in pesos), at constant prices, 1998-2008. (Source: BAS, 2009)

B. Supply and Demand 1. Supply In the Supply and Utilization Account (SUA) for mango, production and gross supply are the same since there are no imports. Based on the supply and utilization account (Table 1), the total production makes up the gross domestic supply of mango. Further, no imports were recorded from 1998 to 2008.

Table 1. Supply and utilization of mango (MT), 1998-2008.

(Source: BAS, 2009)

2.

Demand

a) World Demand (Exports). Based on FAO data, in 2004, the Philippines is 6th among exporting countries in terms of export value (Figure 6). Generally, the countrys export of fresh mango (1998-2008) has recorded a negative growth at an average of 8 percent. In some particular years, exports have shown a negligible increase. For instance, in 2007, the exported fresh mango increased from 26,170 MT (2006) to 26,338 MT. However, the country was not able to sustain such increase in 2008. Note that in the same year, mango industry has also experienced a dramatic decline in its production (Table 1).

Figure 6. Top exporters of mango based on value, 2004. (Source: Mango Strat Plan and Updates, 2006)

In terms of value, the biggest export is fresh mangoes followed by dried. Other products are mango puree, mango juice, mango concentrate, mango glaze, in brine, and preserves (Figure 7). According to NSO (2008), Hongkong is the major market of fresh mango. However, Hongkong is probably just a transshipment point. On the other hand, the biggest market for dried mangoes is the USA (NSO, 2008).

Figure 7. Exported value of mango (in percent), by product, 1998-2007. (Source: NSO, 2008) 7

Figure 8. Philippines top markets for fresh mango (MMT), 1998-2007. (Source: NSO, 2008)

Figure 9. Philippines top markets for dried mango (MMT), 1998-2007. (Source: NSO, 2008)

b) Domestic Demand. Based on SUA, from 1998 to 2008, net food disposable have posted a negative growth at an average of 0.54 percent. It is also noticeable that food disposable is quite responsive to volume of production. For instance, a sudden decrease of mango production in 2008 may have greatly influence the cut in net food disposable in the same year. Further, per capita consumption is decreasing at an average of 3 percent. This is probably due to lower supply and increasing prices.

C. Value Chain System 1. Agribusiness systems The mango industry has many players and activities as depicted in the following figures.

Figure 10. Mango stakeholders map. (Source: DA- Mango Strategic Action Plan,2003)

The mango industry in the Philippines involves many key players and intermediaries, namely; propagators, growers, sprayers, traders, cooperatives, transporters, exporters, brokers/freight forwarders, processors, institutional buyers, and end consumers. Mango production in the country is concentrated in numerous but noncontiguous farms. The common production arrangement is for farm owners to contract out mango trees to traders who in turn induce the trees to flower. Middlemen in marketing are contract buyers, agents, assemblerwholesalers, wholesaler-exporters, and wholesaler-retailers (PCARRD, 2003).

Figure 11. Agribusiness system of fresh mango. (Source: DA - Mango Strategic Action Plan, 2003)

10

Figure 12. Major activities and linkages in the mango industry. (Source: Davao Region Industry Cluster Plan 2005-2010, March 2008)

The supply chain of the mango industry has been characterized by production-marketing arrangements between growers and sprayers-contractors who also act as traders. These growers and traders sell to wholesale markets, processors, wet retail markets, supermarkets, and exporters. The major cities such as Manila, Cebu, and Davao City are the key trading centers for mangoes that are sold in the local market (GMA-HVCC, 2008). Figures 13 16 present the geographic flows and market channels for mango in different provinces.

Figure 13. Geographic flow and marketing channels for mango in Pangasinan, 2001. (Source: BAS, 2002) 11

Figure 14. Geographic flow and marketing channels for mango in Guimaras, 2001. (Source: BAS, 2002)

Figure 15. Geographic flow and marketing channels for mango in Iloilo, 2001. (Source: BAS, 2002)

12

Figure 16. Geographic flow and marketing channels for mango in Davao City, 2001. (Source: BAS, 2002)

Figure 17. Geographic flow and marketing channels for mango in Davao del Sur, 2001. (Source: BAS, 2002)

13

2. On-farm Costs In 2008, fertilizer is the major cost driver in mango production. It contributed 23 percent to the total production cost. It is also remarkable that fertilizer has shown an increasing share (1998-2008). This is probably due to its increasing cost. On the other hand, share of other major cost drivers, such as pesticides and hired labor, is declining. Digal (2005) also gave higher figures for fertilizers and pesticides sharing 40 percent and 53 percent, respectively.

Figure 18. On-farm cost of mango production (in percent), 1998-2008. (Source: BAS, 2009)

3. Logistics The logistics practices in the mango sector cover: packaging, sorting and grading, transport, storage and warehousing. Detailed descriptions of logistics practices are presented in Annex 2. (CRC, 1999.)

4. Processing As mentioned earlier, data on processed mango for domestic market is not available and would require survey. Data on processed mango for domestic market is not available; hence, this would require survey. 14

From 1998 to 2007, the average growth rate of exported processed mango was 31 percent, which is much higher to that of pineapple, banana and others. Data on processed mango for domestic market are not available and would require survey. Production is not generally driven by demand but more by the availability of fresh mangoes for processing. Product preparation is primarily manual. The basic production equipment includes dryers, depulpers, mixing vats, conveyor belts, and sealing machines (Pearl 2 Project, 2004). Based on key informant interview and field visit in Cebu conducted in 2009, Profood International Corporation was identified as the biggest mango processor in the Philippines. It has mango drying facilities which can process 100 150 tons/ day. One facility can process 200 300 tons/ day. Further, Profoods has other plants in Luzon and Mindanao. However, majority of the mango processors are small and medium enterprises. Figure 19 describes the processed mango industry.

Figure 19. Processed mango agribusiness system. (Source: DA - Mango Strategic Action Plan, 2003)

15

A detailed analysis of the mango processing industry is given below (Pearl2 Project, 2004).

Industry Coverage Based on actual count from the listings of the DTI and industry associations, there are about 85 mango-processing firms nationwide. Majority (56 processors, or 66%) produce puree and juice, and are concentrated in Metro Manila. Thirteen firms, mostly processors of dried mango, are in Cebu. Small processors venturing in other mango-based products such as sauces and preserves operate in provinces near Metro Manila and Cebu. The chart below details the distribution of the mango processors in the country by area.

Figure 20. Distribution of mango processors by area, as of June 2004. (Source: DTI, Trade Event Listings, 2003 Sector Report)

Structure of the Sector Majority of the processors in the industry are small to medium in size. Production is not generally driven by demand but more by the availability of fresh mangoes for processing. Product specifications are adjusted based on buyers preferences. Two major products dominate the sector, dried mango and mango puree. Juices and nectar are derivatives of puree. Dried mangoes maybe sliced, diced or chopped. The primary support sector is the fresh mango growers. Majority of them are informal backyard growers, hence the difficulty in getting supply of 16

mangoes of uniform quality. Consolidation is likewise a primary concern for both farmers and processors. Mangoes may be grown anywhere but the ideal growing condition is one with a distinct dry and wet climate or areas with long dry periods as these bring out the fruits best flavor. The supply chain for processed mango consists of the sourcing of mangoes, sugar, preservatives and packaging materials, processing, packing and shipping. The critical points in the chain start with material sourcing, the demand for good quality mangoes and lower prices, being shared concern of processors. Proper sorting and handling at the inbound portion and during operation are also important to increase recovery rates and achieve best efficiencies. Product preparation is primarily manual. The basic production equipment includes dryers, depulpers, mixing vats, conveyor belts and sealing machines. Because processors turn out food products, safety and hygiene are also important issues, particularly for the export markets. International markets have stringent requirements including compliance with food safety guidelines, labeling and documentation requirements. Targeted markets for processed mangoes are the mid-range to high-end segments, both for the domestic and international markets. Retail markets include supermarkets, groceries and specialty stores.

Processed Mango Flow As with other fruits, mangoes are processed when the amount of produce cannot be absorbed by the fresh fruit market as a result of excess supply or because the standards of the fresh-fruit market cannot be met. Processed products are thus developed. Part of the negotiation between processors and buyers involves product adjustments to suit the buyers specifications and comply with importing country standards. Other product forms are eventually requested by the buyers in response to the growing market for processed mango. The value chain of processed mango is the sequence of events from the farm gate to the consolidator, then to the processor, and finally to the consumer. The main input of the industry is fresh mangoes. Other inputs include sugar (which is imported if local supply is short), chemicals (preservatives, food colors) and packaging materials. The main output is dried mangoes and puree. Mango slices in syrup are supplied mainly to institutional buyers such as ice cream makers and fast-food chains; they have no substantial retail market. The sectors value chain uses intensive labor. Prior to processing, mangoes are washed thoroughly in water treated with 50 to 100 ppm of chlorine solution. For the production of dried mangoes, the fruit is peeled and sliced lengthwise. Syrup is prepared by mixing water, sugar and sodium metabisulfite. The mangoes are then mixed into the syrup and boiled at a certain temperature. As practiced by some processors, the mango slices are soaked for three days. After three days, these are drained from the syrup and dried in mechanical dryers at set temperature and humidity levels, and for a specified duration. The mangoes are then cooled at room temperature or allowed to sweat so that the residual heat dissipates. The sugar solids are removed from the lot, which is thereafter sorted and packed. 17

In puree production, the mangoes are peeled after thorough washing. The flesh is sliced, cut into small pieces and then fed into a (de)pulper or homogenized in a blender for a smooth consistency. The puree is heated in a stainless steel pot in a citric acid mixture with constant stirring. Then it is packed in bottles which are subsequently submerged in a water bath for 30 minutes. The bottles are then cooled rapidly to 38 degrees Celsius. The excess water is wiped from the containers and stocked in a cool and dry place. Production subcontracting is not practiced within the sector although additional labor is employed during harvest season from March to June. Processors of puree have been known to purchase puree from other suppliers in order to fill orders. At the final stage, the products are packaged and distributed to the market. The process flow diagram below indicates the vertical links between fresh fruit suppliers and processors. Some processors have ventured into their own production of mango or contractto-buy arrangements to ensure supply of their raw materials. Most, however, set up their own buying stations and packing houses.

Figure 21. General process flow. The most critical parts of the value chain for the industry are the inbound logistics (particularly raw material sourcing), operations, and marketing and sales. Raw material sourcing is a concern because of the seasonality of the fruit. The industrys major issues include finding alternative preservation technologies acceptable in the destination countries as well as the search for additional markets, both for the mango-based products and the others processed from other fruits. The value chain diagram (Figure 22), developed based on research and interviews with key industry players, encapsulates all the industrys activities.

18

Figure 22. The processed mango sector value chain diagram.

19

Key Findings The common concern among processors is that there are not enough mangoes they can use available at affordable prices. Although supplies may be enough during peak season, the quality of the fruit may not be good enough for processing. Other than the quality, price is a concern for both the supplier and processor. Mangoes are raised primarily for the fresh fruit market because of the better prices this offers. Processors will buy only at a much lower price. The mangoes for processing are those that cannot be sold on the fresh fruit market because of excess supply or because of the poor external qualities of the fruit. The availability and affordability of raw materials for processed mango production, therefore, depend on the swing of demand, both local and international, of the fresh-fruit market. The prices will be much softer in such times of excess supply or when demand from the fresh-fruit market has been saturated. This situation, while beneficial for the processor, is a disincentive for the farmer to invest in increased production and quality improvements. Another common problem among processors is the inability to distinguish mangoes with internal defects such as darkened flesh, white particles (riceness) and acrid taste. The occurrence of these defects has reduced recoveries and increased costs among processors. The sector likewise faces a need to benchmark and improve the efficiencies of their factory workers. Product standards need to be set and monitored for compliance. Other than the shortage of mango supply, one of the factors that inhibit processors from expanding is the lack of financing to purchase new equipment that will expand or upgrade production or introduce new products. Established processors with secure markets and mango supply cite this problem. They consider assistance in the preparation of business plans and other bank requirements a need. Other processors also experience cash flow problems, especially during the peak mango season when processing operations are 24 hours a day. Mango buying may be hampered due to lack of funds. Processors are unsure if they are implementing GMP correctly. Other than the technical uncertainty, processors lack funds to fully implement GMP which is a prerequisite for HACCP accreditation. HACCP has become a major concern among processors because of a requirement that will soon be imposed by the European Union and the United States that processed products should have passed new safety and hygiene standards. Processors are looking specifically for an alternative to sulfite-based preservatives. The current label designs of locally made mango products are generally uninteresting and unappealing, in contrast to the sophisticated, attractive packaging of consumer products in the United States. The labels on processed mango products were created without the benefit of a carefully thought out marketing strategy that zooms in on a specific market segment. The present packaging of processed mango products, for example, could be improved with the use of resealable packages and thicker plastic. Other packaging designs should be made available so handling the product will be easier for consumers. On finance, for almost all respondents, 50 percent or more of operational expenses are spent on production. On the average, 67 percent of mango processors total expense goes to 20

production costs. Marketing and administrative/overhead costs are 11% and 10% respectively. The firms spend less than 10 percent on R&D. To give us a deeper understanding of the mango processing industry, a problem tree analysis was formulated.

Unrealized potentials of mango processing industry

High cost of production

L ack of food safety and hygiene standards

S low expansion of mango processors

L imited market for the processed produce

High price of fresh mango (offseason) High cost of sugar Increasing production cost due to defects

E rratic supply of quality fresh mango

L ack of new technology to expand production

C ash flow problems

P oor marketing strategy

L ack of quality standards Weak link between farmers and processors P redominance of backyard growers

P oor packaging L imited access to credit L ack of technical knowledge on G ood management P ractices (G MP )

L ack of technicalknow-how skills of factory workers

Inability to distinguish mangoes with internal defects

Figure 23. Problem tree of processed mango.

D. Prices

1. World Prices Comparison of mango prices among different countries cannot be done since FAO aggregated mango data with some other fruits.

2. Domestic Prices The domestic prices of mango are generally increasing although there are fluctuations. Farmgate and wholesale prices of green carabao mango is increasing at an average of 0.05 percent and 4 percent, respectively. Likewise, wholesale and retail prices of ripe carabao mango are increasing at an average of 4 percent.

21

Figure 24. Various prices of carabao mango, 1998-2008. (Source: BAS, 2009)

A cursory look at price ratios shows that carabao mango farmers are gainers while wholesalers are losers.

Figure 25. Price ratios of carabao mango, 1998-2008. (Source: BAS, 2009) 22

3. Price Formation/Differentiation Price of mango is based on quality, among others - fresh fruits get premium prices. Other price determinants are seasonality, production and marketing costs, and distance to markets. Mango is produced mainly for the fresh-fruit market, both export and local consumption. Producers target mainly the fresh fruit market because this commands better prices than raising the fruit for processing. Food processing in commercial scale is borne out of the need to find higher value for excess production produce that would have otherwise ended up as waste or would have pulled down prices. (Pearl2 Project, 2004) Buyers usually set the farmgate and wholesale prices through contract arrangements with the farmers. Exporters set their buying prices based on world prices. A study Agribusiness System for Statistical Information Services and Technology (ASSIST, 1994) on price formation in major mango areas supports these statements.(Annex 3)

E. SWOT Analysis Below is the SWOT analysis for mango. (Sources: DA GMA-HVCC, 2008; Mango Industry Strat Plan and Updates, November 2006; DA Mango Strategic Action Plan, March 2003; Davao Region Industry Cluster Plan, March 2008.) The strengths are: carabao mango is considered one of the best varieties; year-round production possible; typhoon-free area (Mindanao); suitably grown in different agro-climate regions with available areas for expansion; availability of production and processing technologies; 5th most consumed fruit in the world (after citrus, grapes, banana and apple) peak ; season coincides with the most favorable market in Hongkong/China; priority fruit crop supported by major programs of DA, DTI and DOST; and PCAARRD has been in the forefront of setting up the Mango Information Network (MIN), which provides information and updates on all aspects of the mango. The weaknesses are many: absence of transshipment facilities for fresh mango in the region; lack of postharvest facilities; lack of forward and backward linkage between growers/suppliers and buyers/exporters, which has affected the mangos market potential; inconsistent quality and quantity of supply due mainly to the predominance of backyard farms; highly perishable (short storage life and susceptible to diseases) lack of quality (certified) ; planting materials; predominance of backyard farms hence the problem on inconsistent supply of quality fruits; disaggregated sector and multilayered resulting in marketing inefficiencies; long gestation period; erratic and relatively low yield; susceptible to range of insect pests, diseases and disorders; dependence on imported chemicals; absence of regulations for quality control; pesticide residue analysis function is very weak; lack of traceability system; lack of awareness on food safety; prohibition/regulation of additives in processed products; high freight cost and inadequate transport facilities; Inefficient dissemination of technologies/information; Inadequate marketing and other critical information to support decision-making of industry players; and difficulty in accessing financial assistance from financing institutions However, the opportunities abound: opportunity of controlled atmosphere (CA) to prolong shelf-life making shipment possible to distant markets; high demand for selected product 23

lines in intl. markets; lower tariff imposed by other countries under GATT; international trade is 2 percent of world production; EU is still a developing market (2nd world mango importer); presence of large domestic market; strategic geographical location in ASEAN and Asian markets; expansion of markets (USA, Australia, South Korea, China); and expansion of new plantings in other regions of the country for off-season production. The threats are: strong competition from imported fruits; price fluctuation; high interest rates; investors reluctance to fund establishment of new business opportunities; stiff competition from other producers (Mexico, Australia, Thailand, Vietnam, Indonesia); trade protectionism of the worlds importers (e.g., China); high transportation costs in exporting mangoes to alternative markets such as US, Canada, and the EU; predominance of Florida types in the world market; potential alternative markets (Taiwan/ China are new members of WTO hence will implement sanitary protocol); unmet demand during offseason hence the danger of losing export market through export substitution from other mango-producing countries; agrarian reform law - may cause further division of farms into smaller units thereby affecting economies of scale; and export market lowered the maximum residue level (MRL) of chlorpyrifos (toxic substance found in some pesticides) for Philippine fresh mangoes from 0.5 ppm to 0.05ppm.

24

F. Problem Tree Analysis Figure 26 illustrates the problem tree analysis for fresh mango.

Difficulty in meeting standards required by export market

S ME S cannot meet volume and quality requirements

L ow income of growers

Inconsistent quality and quantity of supply

L ack of market access

L ack of traceability s ystem

E rratic and relatively low yield

L ow quality of products

High freight/shipping cost

L ack of market information (price, volume, buyers, quality requirements) Inefficient diss emination of information/ technology L ack of forward and backward linkage between growers/s uppliers and buyers/exporters

Differences in handling practices at each stage

Improper pos tharvest control

S usceptible to range of ins ect pests, dis eas es and dis orders

L ack of quality planting materials (certified s eeds)

Abs ence of transs hipment facilities for fresh mango in the region

Predominance of backyard farm

L ack of technicalknow-how skill of growers L ack of implementation of product grades and standards

L ack of post-harvest facilities

L ong gestation period

High cos t of agricultural chemicals

Inadequate access to credit C omprehensive Agrarian R eform L aw

Figure 26. Problem tree of fresh mango.

The supply chain of mango industry involves many layers of middlemen/traders which results in an inefficient marketing system. Digal (2005) has noted that one of the concerns in the industry is the weak forward and backward linkages between growers/suppliers and buyers/exporters. This set-up has affected the efficient flow of market information among the participants in the chain. Thus, the development of mangos potential market is hindered.. With limited market information, the growers are unaware of the requirements on size and quality of the exporters and processors because most of their produce is coursed through contract buyers, 25

wholesalers, wholesaler-retailer and buying stations. This is further aggravated by the lack of implementation of product grades and standards, which leave the growers with negligible command over the price of their commodity. The predominance of backyard growers, which is highly affected by the implementation of agrarian reform law, also contributes to the significant variation on the quality of the produce. This can be explained by the differences in growing conditions and agricultural practices among the small scale growers which are often backyard growers. Further, some of the good agricultural practices such as proper growing of fruit and access to production technology and resources are only shared among few farmers. This hinders the enhancement of fruit yield and improving the quality of the commodity. In some cases, growers usually engage contractors/sprayers for seasonal production of mango to avoid production risks. However, contractors do not fertilize trees and control pest only during flowering and fruiting stage of mango. This results in low yield and poor quality of fruit. Also, regardless of changes in the market prices, this set-up between growers and traders/middlemen assures the small growers a net income. Under this scheme, however, the grower is unable to improve neither his income nor his productivity. Other factors that affect the quality of mango fruit are inadequate support facilities, improper post-harvest control and differences in handling practices at each stage in the postharvest and marketing chain. Issues that affect linkage development in the sector are also notable in shipping the fruit from farm to the market destination. Transportation expenses in shipping the commodity to the market are relatively high due to the archipelagic nature of the countrys geography. Mango is not considered priority cargo, hence, the highly perishable nature of the commodity have a say on the losses of traders and exporters whenever fresh commodity is not handled properly and not transported on time. At the farm production level, choice of quality planting materials is as significant as the appropriate knowledge about the proper techniques in growing mango to produce quality fruits. NSIC-registered mango varieties are available at BPI-Guimaras National Mango Research and Development Center (BPI-GNMRDC), San Miguel, Jordan, Guimaras and in accredited nurseries. Therefore, farmers have no assurance on the quality of the planting materials they are purchasing. However, an issue on quality planting materials is just one of the many problems encounter by the growers at the farm production level. It is also imperative in producing quality fruits to know the appropriate techniques in growing the mango. Failure of the growers to properly implement the technical requirements is mainly attributed to lack of knowledge and resources which has also been an obstruction in achieving higher quality yield. Resources such as technology and access to credit have played a significant role in increasing productivity, improving the quality of fresh produce and improving the income of the growers. In most cases, banks do not accept collateral land under the Comprehensive Agrarian Reform Program (CARP). In addition, some of the available loans offered by banks have stringent requirements, which are difficult for the farmers to meet. This leaves the farmers with very limited capital to sustain their production. Likewise, resources such as technology are as important as access to credit. For instance during the off-season production, suppliers of the chemicals especially potassium nitrates are only limited. Growers, especially those with backyard farm would purchase the chemicals in retail due to financial constraint. Hence, growers couldnt meet the required amount of chemicals 26

to maintain and produce quality fruits. The lack of proper technology to assure consistent quality and supply has also hindered the advancement of mango industry. Since backyard growers are predominant supplier of the commodity, there is no assurance of uniform and consistent supply of fresh mangoes. Hence, there is an apparent lack of information and dissemination of production and post production facilities. Another problem that is prevalent in the industry is the lack of traceability system. Large exporters source their fruits from growers or through wholesaler. These exporters manage their businesses in a corporate manner where all transactions are recorded and formal contracts are drawn with buyers/partners within and outside the country to provide basis for action and decision-making. The organizational structure of large exporters allow for separate functions and responsibilities particularly in sourcing, post-harvest handling, packaging, marketing and distribution of their produce. However, it is still notable that there is still high incidence of low recovery for exportable quality mangoes. Despite of this statistics, there has still been no tracking or monitoring system to trace the sources and causes of rejection. Apparently, incomes of the growers are highly affected with the issues prevailing in the mango industry. Growers are also unable to meet the volume and quality standards set by the export market. Note however that the Philippine mango industry is fairly competitive despite the increasing number of competitors in the foreign market. Hence, addressing these issues would probably keep the Philippine mango industry more competent in the international market.

III.

SUMMARY, POLICY IMPLICATIONS AND RECOMMENDATIONS

The mango industry remains globally competitive already but big improvements could still be done in terms of production and yield, and in the supply chain. Production is increasing due to area expansion. However, yield has been decreasing. Generally, the countrys export of fresh mango (1998-2008) has recorded a negative growth at an average of 8 percent. In some particular years, exports have shown a negligible increase. However, the country was not able to sustain such increase. Thus, this observation calls for a greater attention to advance the productivity and competitiveness of the countrys mango industry. Some investment opportunities identified by GMA-HVCC were fertilizers (including organic fertilizers), pesticides, bio pesticides, dryers, sealing and packaging equipment, blast freezers, processing equipment for mango puree, juice, dried and powdered mangoes, mango pulp processing machine, vapor heat treatment facilities, and extended hot water treatment facilities. Apparently, more investments would come in if the gaps are addressed.

27

Table 2. Issues and recommendations in the mango industry Supply chain I. Input Supply Subsystem Seeds and Seedlings, etc. Insufficient planting materials with high quality Development of new varieties, varietal improvement through biotechnology, accreditation of nurseries, and intensification of R & D through SUCs. Improvement of logistics; utilization of organic fertilizers Establishment of standards Issue/Gap Recommendation

Fertilizer and Pesticide Agricultural Machinery/equipment Labor

Increasing costs Need for standards in farm equipment Increasing cost of labor

Maximization of family labor

II.

Production Subsystem

Inconsistent supply; fragmented production Inefficient marketing system

Expansion of production areas; integration of supply Improvement of logistics (to address high postharvest losses); establishment of trans-shipment facilities; revisit the Food Terminal approach; improve market information systems Increase and improvement in processing and postharvest facilities; utilization of biotechnology 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; credit and crop insurance facilities; strengthen RDE system

III.

Marketing Subsystem

IV.

Processing Subsystem

Inadequate postharvest and processing facilities; need for standards in equipment Inadequate support systems

V.

Support Subsystem

28

The abovementioned issues and recommendations were reinforced by industry players during an agribusiness stakeholder consultation (DA, 2008). Some of their insights are as follows: 1. Mr. Roberto Bobby Amores: in terms of policy, there was no specific policy attending the issues of MRL. If we could properly address this, then market is just a question of pricing and quality of Philippine mango. He felt the importance of close interaction or collaboration of private sector and the government. He suggested treating government as a business partner. The following areas should be given attention of the government: (1) farm to market roads to improve post harvest, (2) good agricultural practices e.g. quality under national and international standards, timing of pesticide application which are the more important concerns; (3) adaptation to climate change globally agriculture is affected by climate change; (4) and; continued support to help reduce the cost of production in mango by way of reducing inputs in fertilizers, taxes, tariffs and others. He also encouraged farmers to adapt GAP not only for export but also for local market since more and more people are becoming health conscious nowadays. 2. Mr. Rovie de los Santos (Robina- Agri Partners): encourage pruning of old mango trees as it can help increase production. Grafted mango has also longer life span. He encourages the government as well as the LGUs to focus in terms of production and intensive technology. 3. Mr. Michael Lao (Executive Vice President KLT Fruits- exporter of mango and other tropical fruit products): for the success of the industry we should start with the basic on how to improve the production cost and how to have a technology needed by the parties. He also stressed the importance of government and private sector partnership. There is a lot that can be done with the technology to improve production cost. Through the help of technology we can produce quality products and then we can choose our own market at a very competitive price. Our competitiveness has become less and less; 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. He also emphasized that MRL issue should also be addressed. 4. Mr. Reynaldo Mangilit (General Manager, Diamond Star Agro ProductsExporter of Mango): the reason why we have a low production in mango is that we are not practicing the proper cultivation. He stressed that GAP must be adapted by growers. DA should have monitoring on GAP if it is really being practiced by farmers. 5. Mr. Guillermo Escalante (Provincial HVCC Coordinator in Cavite): their problem is over supply of mango during mango season. Usually mangoes in excess are sold at very cheap price. He requested that farmers should be provided with information on where are the possible markets of their produce where they could sell the excess produce of mango. 29

6. Mr. Domingo Mamasig (Quezon): DA should provide information where mango could be best grown. In a SADP workshop (2009) held in Davao, Mr. Antonio Teh, President of the Southern Mindanao Mango Industry Development Council (SMMIDC) recommended that production and harvesting should be programmed among producers so that supply could be made more stable and at the same time minimizing price fluctuations (i.e., low prices due to oversupply). The DA also continues to support the mango industry through a nine-point program comprised of the following (DA, 2009): Provision of chemicals for flower induction; Conduct of training and training-related events on pest management; Maintenance of existing nurseries and scion groves to ensure the availability of high quality planting materials; Building of additional postharvest facilities (e.g. packinghouse, extended hot water treatment facilities, etc.) Making credit more affordable and easier to obtain in support of farmers expansion plans and other initiatives; Bringing Filipino fruit farmers timely market information, and facilitate all the linkages they require to make fruit farming profitable, productive, and globally competitive; Enhancing national regulatory services, including our certification systems, and our pest risk analysis and food safety services; Developing and promoting better mango farming technologies nationwide by enhancing our Research, Development and Extension services; and Ensuring that an integrated approach is taken at the farm level so that our farmers at all times have the necessary requisites to produce higher yields of the best possible quality.

The Philippine Mango Industry Federation (PMIF) and other stakeholders can complement this program through the production and provision of inputs (organic fertilizers, pesticides and other bio-pesticides); construction of a packinghouse per area as common service facility to ensure the supply of quality mango fruits; and creation of a marketing arm that will seek newand expand existingmarkets, trading partnerships and investments, here and abroad. (DA, 2009) 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 agro-industrial 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.

30

IV.

REFERENCES

Agribusiness System for Statistical Information Services and Technology. ASSIST. (1994). Mango Marketing in Nine Selected Areas in the Philippines. September 1994. Center for Research and Communication. (1999). Enhancing the Global Competitiveness of Agribusiness through a Strategic and Integrated Transportation Action Program. Davao Region Industry Cluster Plan, 2005-2010. March 2008. Department of Agriculture. 2009. D.A. has 9-Pt Plan to Sharpen Global Competitiveness Of Mango Industry. July 1, 2009. Department of Agriculture - Bureau of Agricultural Statistics, DA-BAS. (2002). Marketing Costs Structure for Mango. September 2002. 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-Ginintuang Masaganang Ani High Value Commercial Crops (DA - GMAHVCC) Banner Program. Commodity Profiles. Retrieved on October 2008 from <http://www.hvcc.da.gov.ph> Department of Agriculture. (2003). Mango Strategic Action Plan. March 2003. Department of Agriculture. (2008). Proceedings of the Agribusiness Situation Analysis Stakeholders Consultation Meeting. Quezon City. December 9-10, 2008. FAOSTAT. Food and Agriculture Organization of the United Nations, 2008. Retrieved on October 2008 from < http://faostat.fao.org/default.aspx/> Mango. (2008). Retrieved on December 2008 from <http://www.hort.purdue.edu/newcrop/morton/mango_ars.html> Mango Strat Plan and Updates. November 2006. 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 Imports, 1994-2007. PCARRD. (2003). Banana and Mango. R & D Status (2000 and Beyond). Pearl2 Project. (2004). State of the Sector Report on Philippine Processed Mango. SADP Region XI Consultative Workshop. Davao City. 2009. SADP Key Informant Interview with Mr. Joselito Yap, MIS Officer, Profoods International Corporation. Cebu City. 2009. 31

V. ANNEXES

Annex 1. Gross value output of selected fruits, at constant prices, 1998-2008.

(Source: BAS, 2009)

32

Annex 2. Logistics practices in the mango industry.

Extracted from Center for Research and Communication. Enhancing the Global Competitiveness of Agribusiness through a Strategic and Integrated Transportation Action Program. 1999.

Packaging The packaging practices by growers - After harvest, the only activity usually done is packing so that they will know how much kaings are to be given to the buyers. The rest do not do any other activity after harvest since they practice the Pakyaw system. Since mangoes are directly sold after harvest, post production activities are now passed on to the viajeros and traders. This practice of direct buying or buying from the tree eliminates the need for storage facilities. Mangoes are usually placed in kaings made of bamboo. This is a very popular packaging material due to its affordability and availability. Each kaing contains 18-21 kilos of mangoes. One grower uses rectangular cartons as packaging material with each weighing around 18 kilos each. This type of packaging is geared towards the export market. The packaging practices of Wholesalers/Retailers/Traders/Viajeros/Exporters/Buying Agents - Among the many mango varieties, the most common varieties bought and sold are Carabao, Pico and Indian mango. Activities done by this group are mixed. Majority do sorting-repacking while the rest just do sorting, packing, grading, cleaning-grading and sorting-packing. Cleaning is done mainly to remove sap and improve the appearance of mangoes for selling. Sorting is mainly to classify the mangoes by size/class to determine the selling price. This is also done to see which mangoes are due to ripen early than the rest. Bad mangoes or rejects are likewise, segregated at this stage. Grading is done to arrange the mangoes by sizes and classes. Packing is done to protect the mangoes during transport. Packing materials used are basket, kaing, box, carton and crate with each weighing from 20 to 25 kilos. Some mangoes are also packed using the bilao which weighs 40 kilos. Repackaging in preparation for selling to the buyers who buy the mangoes by kaing. Also done to make the mangoes breathe (pasingawin), or arranged ready to put kalburo. Best Practices. Prior to packaging, disinfection/disinfestations are done on mangoes. A best practice in this stage is the use of hot water treatment/vapor heat treatment. Hot Water Treatment aims to control the stem-end rot or anthracnose infection that is very common and widespread among mangoes. In order to obtain maximum benefits, fruits must be treated immediately after harvest. The treatments are carried out by dipping the fruits in water at 5255 degrees centigrade for about 10 minutes, followed by hydrocooling with tap water and air drying. Because this activity is only seen as an additional cost, this is generally not practices by mango growers. On the other hand Vapor Heat Treatment (VHT) is a step being required by Japanese importers. Korean importers have also agreed to VHT mangoes. There are 4 VHT machines - 4 at FTI and 1 in Davao. Packaging is usually done in the farm after harvest. The main purpose of packing is to protect and hold the fruits in the best possible condition. For the domestic market, kaing, wooden crates and carton boxes are the most popular because they are cheap and are available locally. Where a returnable system is feasible, returnable rectangular stackable, plastic crates 33

may be worth it in the long run, because they are reusable, and they maximize the use of vehicle space. A nestable type is also available where there are no backloads. Kain, while cheap at present, will become expensive as bamboo become scarcer. Where kaings are still used, avoid overfilling with fruits, wooden planks should be placed at the bottom of each kaing to protect against compression damage during stacking. Containers are usually lined with newspapers in order to protect the fruits from being bruised and dented while transported. Materials like dried banana leaves, rice straws, etc. are avoided as these are often contaminated with fruit rot fungus. US newspapers are said to be preferred to local newspapers because of the quality of the ink used. Lining the containers with newspapers reduces the bruising and dentation of mangoes during transport. Exports. Carton boxes or corrugated fiberboards with dividers are used to pack the mangoes that are intended for the export market. Packaging must have no sharp corners that may puncture the mangoes, must have holes for ventilation, must be stackable to maximize space and provide protection. Fruits intended for export are labeled singly and wrapped with tissue paper. Fruits are placed upside down in cell type cartons of 5 kgs. Capacity. Sorting and Grading This is essential in determining the marketability of the product. Marketable fruits are sorted to different sizes with the aid of a balance. Extra large mangoes weigh 357 g or more, large 290-356, medium 190-240 small and 160-189 super-small. Undersized fruits and those with evident bruises should be separated in order not to damage the other fruits and to minimize further handling of the fruit before packing. Sorting is seldom practiced however by growers. Because straight buying is the prevailing agreement, this is usually performed at the exporters local traders packinghouse. Transport Most mangoes are transported by land, with jeeps as the most common means. Mangoes are generally placed in kaings for transport of which 20-25 kaings can be loaded in a jeepney. An average of 77.5 kaings per week with each kaing weighing an average of 23 kilos each of a total of 1,782.5 kilos is shipped every week. Destinations of the mangoes are the local market in Zambales and Metro Manila. All produce are transported in the morning with a majority as far as Divisoria. Air transport is hardly used, except for export, because of the high cost involved. Fruits intended for the local market are typically shipped by land or sea. New packaging technology may soon allow long shelf life and make feasible the shipment of exports by sea to far destinations. For sea transport, fruit vans should be used; chiller bans are best buy more expensive. For land, refrigerated trucks are best, but for short distances, insulated bans may be sufficient. Storage and Warehousing Cutting, storage, chilling and freezing activities are not done based on the survey. However, among the best practices that can be practiced is the use of low temperature storage to extend the green life of a mango. Carabao mangoes mature about 10 days after harvest. Those exposed to hot water treatment ripen much earlier. At 10 degrees centigrade, mango can be stored safely for two weeks and can be extended for one more week if placed in sealed 34

polyethylene bag. However, chilling injury becomes a problem during prolonged chilled storage. Unfortunately, the perishability of mangoes makes this process seldom practiced by growers. Fruits are sold immediately after harvest because farmers are afraid of incurring losses. Transport Cost In transporting the mangoes, only two farmers/growers deliver the fruits to their buyers in the morning by use of their own jeeps. The quantity transported per week ranges from 20 to 10 kaings. Destinations of the mangoes are the local market in Zambales and Metro Manila. The fee charged per load is P30 to P50. In most cases, no transport cost is incurred by the grower because transport is provided by the buyer. Transporting once or twice a week, every load would cost around P100-P3000.

Logistics Related Problems in the Mango Sector The following are among the logistics related problems in the mango sector: (1) poor handling during packaging and transportation; (2) inadequate handling equipment; (3) lacks of appropriate storage facilities; (4) packaging material should be appropriate to avoid quality deterioration. It is not strong enough to hold the fruits thus causing it to spill out of its packaging; (5) lack of post harvest facilities; (6) poor farm-to-market roads as well as the implementation of the truck ban; (7) inadequate technical information dissemination program on post production technologies (i.e., all the farmers/growers included in the survey are totally not aware of new technologies in cold chain, controlled atmosphere, storage and transport. One farmer has heard about new packaging technologies but has not adopted the technology.); (8) collection of barangay fees (i.e., some mention the need for a business permit in order to operate which entails a yearly fee of P700) and tongs. In addition, a permit from the Bureau of Plant Industry has to be secured before mangoes can be transported by air or sea.; (9) Lack of working capital and high interest rates; (10) fruits from the local market pass through layers of middlemen before finally reaching the consumers. First, the fruits pass through the hands of local assemblers, then to viajeros, wholesalers and finally, the retailer. This system makes the marketing cost invariably high, thus needs streamlining. Other problems are: (11) high freight by the local shipping industry; (12) the short shelf-life of mangoes limits our exports to nearby markets; (13) main concerns besetting the marketing of mango: seasonality of production, high perishability, inadequate financing, and poor distribution channel. In terms of technology, farmers are totally not aware of new technologies in cold chain, controlled atmosphere, and storage transport. One farmer has heard about new packaging technologies buy the remaining 5 farmers interviewed are not aware.

35

Annex 3. Price formation for the mango industry. (Source: ASSIST. Mango Marketing in Nine Selected Areas in the Philippines, 1994). This study shows that price formation is area- and mango type-specific and affected by many other factors. Buyers set the prices as well as the grading standards at each buyer-seller chain. For example, barangay assemblers set the price based on standards used by large distributors or assemblers/large distributors, who, in turn, follow the standards (which maybe different from what the barangay assemblers use) and prices set by exporters and exporters/processors. The industrys price-setters are the exporters and exporter/processor. Prices of mango differ across sizes and seasons. At the farm level, mangoes may be bought by barangay assemblers, assemblers/large distributors, and large distributors either on straight pricing (locally called corrida) or on per size basis. Wholesale buying prices range from P8.00 to P12.00 per kilogram during the peak season for corrida. If mangoes are sold on per size basis, the price difference across sizes ranges from P2.00 to P3.00 per kilogram as illustrated below: Size Extra large Large, medium Small, very small Left-over (LO) Whole sale buying price (P per kilogram) 18.00 to 20.00 15.00 to 16.00 12.00 to 14.00 7.00 to 10.00

During lean months, there traders either buy on a straight pricing basis, or offer two prices: one for export-grade mangoes, and the other, for LO mangoes. The straight prices applied during lean months range from P40.00 to P60.00 per kilogram. For the other pricing scheme, wholesale buying prices for export range from P45.00 to P50.00 per kilogram and LO mangos, P20.00 per kilogram. Large distributors normally add P30.00 per kilogram to the wholesale buying price to arrive at the selling price. The wholesale buying prices paid by the processors/exporters are shown below: Size Wholesale buying price Highest Lowest (P per kilogram) 32.00 30.00 14.00 16.00 14.00 8.00

Extra large Large, medium and small L.O.

36

Iloilo The price of mango for domestic consumption depends on the following factors: demand and supply levels, size, quality and class. There is a price difference of P5.00-P7.00 per kilogram between classes for wholesale buying and wholesale selling. For retail selling, the price difference between classes is P1.00 per kilogram. During lean months when demand for mangoes is strong, the price is higher by P20.00 per kilogram. In the same manner, if supply is abundant the price plunges by P20.00 per kilogram. Exporters, on the other hand, are highly dependent on world market prices. The head offices of mango exporters, usually located in Manila, are in constant touch with export markets to monitor prevailing prices. Satellite centers, such as the plantations in Iloilo and Guimaras, also monitor prices quoted by the head office. Farmers or farmers/sprayers, commission agents and the various types of traders need the wholesale buying price of the RA/LD located at the ITM. It is at this level where price formation takes place. Mango traders in Iloilo in general expressed interest to receive wholesale buying price of green mangoes in Manila. In the mango commodity system, Cebu and Manila buyers usually set the prices. Sorting is done at the farm level based primarily on the specifications set by buyers. In Iligan, mangoes are classified according to size: extra large (XL), first class, second class, third class and fourth class. The XL and first class mangoes are bought by traders at the same price while other sizes have an average of P1.00 per kilogram price difference. Among the five classifications, XL and first class are considered fro export and the others for local consumption. For Cagayan de Oro buyers, pricing is based on the weight of the fruit. Those for export weigh 200 grams or more per piece on the average. For both centers, the condition of the fruit, whether t is bruised or smooth, is also considered. Mangoes produced without the application of chemicals are likewise sold in the local markets and are sold at lower prices. The price of mangoes fluctuates significantly during peak procurement months. Davao Davao City traders who have contract buyers in Cebu base their buying price on Cebu prices. If Cebu buys at P13.00 per kilogram they buy the fruits from the farms at P10.00 per kilogram. The P3.00 difference covers the operating expenses, shrinkage allowance and the P1.00 profit. Other traders base their buying price on the supply and demand situation, price of other traders and the size and quality of fruits. For pakyaw, buyers pay a lower price since they consider the expenses that they would incur in the maintenance of the trees from the start of the contract until harvesting. Payment is made at the start of the contract. In prenda arriendo, farmers receive an even much lower price since fruits are bought years or months before actual harvest. 37

South Cotabato In South Cotabato, big traders base their selling prices on the prices quoted by assemblers and large distributors in Cebu and on the supply demand situation. Lean months are marked by higher prices than peak months. Small distributors and retailers form their prices by factoring in current market prices, quality and fruit maturity. Green, mature mangoes command higher prices than ripe ones. Metro Manila Wholesale buying prices of mangoes are influenced by Metro Manila traders, particularly during peak seasons. During lean months, farmers/sprayers attempt to set their selling price but the traders always negotiate. Exporters dictate the price of mangoes supplied by authorized dealers. It is not certain if exporters, in turn, are dictated by importers from other countries. Wholesale buying prices of exporters are higher than the buying prices of local traders. Moreover, mangoes for processing are priced lower than the prevailing price in the local market, particularly overripe fruits. Across varieties, carabao mangoes command a better price. Pico follows with an average price difference of P5.00 per kilogram. Indian mango has the lowest price and is sold by piece. Across sizes of same variety, large mangoes are the most expensive. A price difference of P5.00 per kilogram exists between sizes. The smallest carabao mangoes command the highest retail in the Chinese community. Called bioco, they are noted for their sweetness and are practically seedless. They are more expensive by P10.00-P15.00 per kilogram.

38