Veg­eta­bles: The need for sup­ply di­ver­si­fi­ca­tion

Agriculture - - Contents -

Veg­eta­bles com­prise only 2.6 per­cent of the con­sumer price in­dex but contributed a sig­nif­i­cant share to food in­fla­tion in 2018. Re­tail price in­creases of se­lected veg­eta­bles in NCR ranged from 14 per­cent to 100 per­cent, or a sim­ple av­er­age of 42 per­cent!

Where are the sup­ply lines? Is there ra­tio­nale to diver­sify sources?

Depen­den­cies. Metro Manila is highly de­pen­dent on the north­ern re­gions for vegetable sup­ply. CAR sup­plies high­land veg­eta­bles for chop­suey (e.g. cab­bage, car­rots, and potato). Other re­gions sup­ply the pinakbet types (e.g., eggplant, ampalaya, pechay, and sitao). Over 90 per­cent of the high­land veg­eta­bles (cab­bage, car­rots, and potato) are grown in CAR. Mean­while, sourc­ing of low­land veg­eta­bles is more di­ver­si­fied but still dom­i­nated by re­gions north of Manila.

Re­tail prices of se­lected veg­eta­bles, Metro Manila ( R per kilo), typ­i­cal prices

WHEN­EVER CALAMI­TIES hit the ar­eas north of Manila, veg­eta­bles prices in the NCR go up. Events of 2018 bear this out. Veg­eta­bles prices grew fastest among the food groups. In­fla­tion over­tops its tar­gets.

Price For­ma­tion. How are prices formed? Lat­est data showed that there ap­pear to be in­ef­fi­cien­cies in the sup­ply chain. The ra­tios be­tween re­tail and farm prices range from 2.2 to 3.3. These could be at­trib­uted in part to sup­ply chain con­straints such as low yield, post-har­vest losses, assem­bly costs from small farm­ers, and lo­gis­tics costs from farm to re­tail.

There are also weather dis­tur­bances (e.g. frost, rains, drought, floods) which af­fect sup­ply and prices. For ex­am­ple, if there are ty­phoons, land­slides oc­cur which lead to road clo­sures. When roads are closed, traders stop buy­ing veg­eta­bles from farm­ers as they can­not trans­port them any­way. Farm­ers, on the other hand, re­frain from har­vest­ing their veg­eta­bles as they can­not bring them to the trad­ing post or traders are not there to buy.

Where to? Vegetable con­sump­tion in the Philip­pines is low at about 40 ki­los per capita, ac­cord­ing to a vegetable ex­pert Arse­nio Barcelona. Data from the Food and Agri­cul­ture Or­ga­ni­za­tion in­di­cate, it is half of Thai­land’s and a third of Viet­nam’s. In Novem­ber 2017, the re­tail prices of cab­bage and eggplant in NCR were about twice that of Bangkok. Is high cost a fac­tor in low con­sump­tion?

Fi­nally, many con­straints bur­den the vegetable sup­ply chains. But there are po­ten­tial so­lu­tions that can be ex­plored by in­vestors.

For the long, cli­mate change-im­pacted sup­ply chain, the route is ge­o­graphic di­ver­si­fi­ca­tion. Vegetable pro­duc­tion can be fur­ther de­vel­oped in Cal­abar­zon and Mindoro. There are idle and un­pro­duc­tive lands for lease or for sale. Mod­ern farm­ing (e.g., green house and drip nu­tri­ga­tion) will gen­er­ate high yields, more grow­ing cy­cles and less cli­mate risks.

If the sup­ply base is di­ver­si­fied, price fluc­tu­a­tions can be min­i­mized. Sup­ply risks will be lower. Sup­ply will not be com­pletely com­pro­mised if one source is af­fected as there are al­ter­na­tive sources. Con­sumers will not suf­fer from price surges.

The shorter sup­ply lines will also re­duce lo­gis­tics costs. Fresh pro­duce will be of bet­ter qual­ity. This strat­egy is good for both the in­vestors and con­sumers.

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