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Improving the value chain of fruits and vegetables

SA Sabur
Malnutrition is a widespread phenomenon in Bangladesh, partly driven by people's imbalanced diets. Indeed, the per capita consumption of fruits and vegetables barely reaches half of the recommended minimum requirement of 400g per day. As a result, only about 2 percent of dietary energy comes from fruits and vegetables, compared to 78 percent stemming from cereals.
Evidence suggests that the low level of consumption of horticulture products is linked to inefficiencies in the value chain that are driving up the retail prices of these fruits and vegetables by 83 percent and 63 percent of farm prices, respectively. Among the main obstacles for better performance are food losses, market distortions through intermediaries, and the absence of modern market infrastructure.
For example, studies find that about a third of fruits and vegetables are lost during transport from producers to consumers, negatively affecting prices. Another reason for higher prices at the retail level are profits earned by middlemen, who play an important role in Bangladesh in bringing fruits and vegetables from producers to markets. Finally, prices increase due to the absence of modern storage and transportation facilities such as cold stores and refrigerated vans. As a result, retailers of fruits and vegetables have much larger profit margins than in the case of cereals. In Dhaka city, for example, retailers capture 43 percent and 31 percent of total profits for eggplant and banana compared to only 18 percent for rice.
Prices also surge because growers cannot sell their produce directly to local buyers due to informal agreements between local commission agents and buyers. What is more, local buyers frequently delay their purchase orders in order to force farmers to sell their produce at a lower price. As a result, growers on average receive only 71 percent and 48 percent of retail prices for fruits and vegetables, compared to 79 percent in the case of rice.
Without proper marketing infrastructure, horticulture products are also subject to sharp seasonal price variation. For example, prices of brinjal and bananas fluctuated by 35 percent and 26 percent throughout the year, compared to only 3 percent in the case of rice. This high
price variability has two main effects. For one, it lowers the consumption of horticulture products in the off-season when prices tend to be high. Conversely, it discourages producers to grow horticulture products because of the lower prices during harvest.
Several measures could be adopted for improving the value chain of fruits and vegetables. In order to encourage small and medium scale farmers to grow fruits and vegetables, the government through different projects and nongovernmental organisations could promote the formation of marketing groups and cooperatives. These will strengthen the bargaining power of growers and help them achieve better prices for their produce. Cooperatives would also improve market access as farmers could send their produce jointly to distant markets.
Contract farming constitutes another option to increase market access of small and medium scale farmers. By facilitating the development of supermarkets and other large-scale retail centres that could have direct agreements with local producers, small farmers could be better integrated into the value chain while the influence of market intermediaries would be effectively reduced.
Another necessary improvement needs to tackle food losses and deterioration during transport. Strengthening the packaging sector and introducing cold transport facilities constitute essential steps in order to reduce the loss of perishable goods. For the same reason, modern post-harvest technologies like low temperature storage facilities need to be promoted, while improved marketing facilities such as forklifts for loading and unloading and weighing machine would further reduce loss.
In order to address the seasonal price variation of fruits and vegetables, new varieties would need to be developed by research institutes like BARI and BINA so that they can be harvested in the off/slack seasons. In addition, improved market information systems, including public displays of current price levels of agricultural commodities, would increase market transparency and reduce the mismatch between producer decisions and consumer demand.
The author is a professor of the Department of Agribusiness and Marketing at Bangladesh Agricultural University, Mymensingh, and former adviser to FAO, Bangladesh.