List of Speakers

Perspective on the role of agricultural cooperatives in response to changing food consumption trend in Indonesia Erma Suryani Maslichan (INDONESAI) ......................................................................... 3

Food consumption trends and implications in Korea Sanghyo Kim (KOREA) ................................................................................................ 19

Technical empowerment of agricultural cooperatives in Malaysia Ahmad Safuan Bin Bujang (MALAYSIA) ...................................................................... 21

Analysis of multi-sectoral business development and roles of Japan’s agricultural cooperatives Noriaki Kawasaki (JAPAN) ........................................................................................... 33

Enhancing the role of the farmers’ association in response to changes in food consumption – Taiwan’s experiences Zou Nan Chou (TAIWAN) ............................................................................................. 47

A Vietnamese agricultural cooperative's involvement in food safety value chain: perspective and policies Anh The Dao (VIETNAM) ............................................................................................. 54

The roles of agricultural cooperatives in certification and production of geographical indication (GI) rice in Thailand Orachos Napasintuwong (THAILAND) ......................................................................... 71

Greening opportunities and prospects for Philippine agri-based cooperatives toward a more sustainable food marketing Karen Quilloy (PHILIPPINE) ......................................................................................... 81

Agricultural development through cooperation between agricultural cooperatives and consumers’ cooperatives in Japan: focusing on direct marketing of agricultural products Yukihisa Yamada (JAPAN) .......................................................................................... 98

Establishment of a sustainable food system and the role of Hansalim for agriculture and rural areas HyungGeun Yoon (KOREA) ....................................................................................... 116

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PERSPECTIVE ON THE ROLE OF AGRICULTURAL COOPERATIVES IN RESPONSE TO THE CHANGING FOOD CONSUMPTION PATTERN

IN INDONESIA

Erma Suryani, Ening Ariningsih, and Handewi P. Saliem

Indonesian Center for Agricultural Socio Economics and Policy Studies Jln. Tentara Pelajar No.3B Bogor, Indonesia

E-mail : erma_pse@yahoo.com

ABSTRACT Indonesia has experienced significant changes during the last 10 years, primarily driven by increasing population, household’s income, and food supply, which ultimately shifted food consumption patterns. Changes in food consumption patterns that are increasingly diversified affect the government's policy in developing programs to increase food production, especially staple food, leading to fostering food sufficiency. To this end, active roles of farmer’s groups and cooperatives in the production process and marketing of the food products are crucial. The study aims to analyze the roles of cooperatives in responding changes in food consumption patterns in Indonesia. The study was based on reviews of relevant research results. The findings show that during the period of 2002-2014 a significant change in food consumption patterns has occurred, that lead to more diversified food consumption patterns. The roles of cooperatives in supporting such changes remain vital not only in providing production inputs and technology for farmers/producers, but also in marketing and distribution of food products. Strengthening cooperatives is important to ensure adequacy and availability of food products in the future.

Keywords: Cooperative, Diversification of staple food, Food consumption pattern

INTRODUCTION One of the challenges of a country nowadays is to provide sufficient food and nutrition for its inhabitant, in terms of quantity, quality and timely supply. A proper understanding of the dynamics of food consumption patterns at household level is important for policy making process. Households’ food consumption relates to the food availability and affordability, both physically and economically. In the food supply chain system, the roles of rural institution are quite crucial in the production process and marketing of the products. Farmer cooperatives are expected to serve as agent in the delivery of production inputs, food processing, marketing and distribution, which could support adequate and timely supply of foods at household level. An example of well-functioning cooperative is found in dairy cattle in West Java. This model could also be applied in the food crops sub-sector. Indeed, cooperatives have been established in several areas in Indonesia, and play important roles in the delivery of for production inputs, marketing of food production, and serving various needs its members. Based on this background, this study aims to analyze the roles of cooperatives in responding to changes in food consumption pattern.

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METHODOLOGY This study analyzes changes in household food consumption and the role of agricultural cooperatives in responding to these changes. The data source for the analysis of changes in household consumption patterns is derived from the National Socio-Economic Survey (Susenas) by the Indonesian Central Bureau of Statistics (CBS) in 2002 and 2014. Susenas is one of the major surveys conducted by CBS as a monitoring tool of socio-economic programs development. Consumption data is one of data collected in the survey. Consumption data is published every three years and covering 300 000 households.

Analysis of changes in household food consumption patterns is undertaken by aggregate, by region (rural-urban), and by income groups (low income, middle income, and high income). Grouping by income level referring to the classification of income groups used by the World Bank, namely (1) 40 percent of low income groups, (2) 40 percent of middle income groups, and (3) 20 percent of high income groups. To respond to changes in household food consumption patterns, the role of cooperatives is important in supporting the production process and distribution of food commodities. The role of cooperatives will be analyzed based on the results of previous research.

RESULT AND DISCUSSION

Demography and Agricullture Sector in Indonesia

Indonesia is one of the countries with a large population. In 2015, total population is 255.5 million, and is estimated to increase to 271.1 million in 2020 (CBS, 2017). During 2015-2020, the population grows by 6.1 percent. Based on the population structure, Indonesia will have a demographic bonus, in which the number of productive population is greater than the number of children-age and elderly population. This demographic bonus will open-up opportunities for economic growth and welfare improvement, and at the same time also change the food expenditure and consumption pattern. The proportion of urban population increased from 49.8 percent in 2010 to 53.3 percent in 2015, and is predicted to be 56.7 percent in 2020. This will impact on changes in the food consumption pattern and level of food supply. According to Satterthwaite et al. (2010), the urbanization affects the direction of changes in aggregate food demand through increasing urban population and changes in food consumption patterns.

Over the past decade, change has not only occurred in the demographic aspect, but other aspects such as income levels, urbanization, employment opportunities, and technology changes in various sectors. According to Regmi (2001), increasing income, urbanization, demographic change, transportation, and consumer perception about quality and food safety affect the changing of world food consumption pattern.

The increase in population prompted the government to increase food production, especially rice as the staple food of the Indonesian population. According to CBS (2016), paddy production in Indonesia reached 75.4 million tons in 2015, equivalent to 47.3 million tons of rice. Total rice production is projected to increase by 3.4%/year during the 2001-2015 period. This increase in production can be achieved through the increasing of harvested area by 1.79% and productivity by 1.61%. Indonesia's rice consumption participation rate is close to 100% (Hermanto et al., 2016).

Efforts to increase food production, particularly rice, face considerable challenges, among other by the followings: (1) the status and size of smallholdings, where 9.55 million household

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own only less than 0.5 ha; (2) insufficient infrastructure such as roads, clean water and irrigation scheme, and energy; (3) limited access of farmers to capital and high banking interest rates; (4) weak capability and institutional capacity of farmers and agricultural extension workers; (5) limited managerial capability of farmers in agribusiness; and (6) extreme global climate change phenomena, natural disasters, and increased environmental damage. Among these problems, the availability of agricultural land is increasing due to the conversion of functions to non-agricultural purpose. During 2007-2010, the area of paddy field ownership per household decreased by 20.85 percent. In 2007, an average of 0.609 hectares became 0.482 hectares in 2010 (Suryani, 2015). The conversion of paddy field in Java reached 429.7 thousand hectares with a conversion rate of 2.34 percent/year (Irawan, 2012). Effort in increasing rice production is also hindered by the damage of irrigation schemes (Ministry of Agriculture, 2017).

Change in Household Expenditure Pattern

In aggregate, the share of household expenditure for food in 2014 was slightly smaller than in 2002. In 2002, the shares of food expenditure was still higher (above 50 percent) than non-food expenditure. Over a 12-year period, the allocation of household expenditures for non-food needs increased (Table 1). According to Soekirman (2000), households with a proportion of food expenditure ≥60 percent can be categorized as food insecurity, but on the contrary, a proportion of food expenditure <60 percent are categorized as food resistant. Based on this concept, households in Indonesia are categorized as food resistant in aggregate. By region, rural households were vulnerable to food in 2002 because the share of food expenditure was more than 60 percent. However, in 2014 there was a decrease in the share of food expenditure to 58.1 percent, in the category of food-resistant.

Table 1 Share of household expenditure by region, 2002 – 2014

Expenditure

Share of expenditure by region (%)

Agregat Urban Rural

2002 2014 Change 2002 2014 Change 2002 2014 Change

Food 52.6 51.0 -1.6 46.5 45.3 -1.2 62.7 58.1 -4.6

Non food 47.4 49.0 1.6 53.5 54.7 1.2 37.3 41.9 4.6

Total expenditure 100 100 0 100 100 0 100 100 0

Source: CBS, Susenas 2002 and 2014 (calculate)

The analysis by region (rural-urban) indicates the share of household expenditure for food in 2002 in urban areas averaged less than 50 percent, whereas in rural areas it reached 62.7 percent. During 12 years (2002-2014), there was a decrease in the share of food expenditure in both urban and rural areas. The increase of nonfood expenditure share in rural areas is almost four times greater than urban areas, at 4.6 percent. The share of food expenditure in rural areas in 2014 is relatively still high, at 58.1 percent, while the share of food expenditure in urban areas is less than 50 percent.

On the other hand, non-food expenditure has increased both in aggregate and by region (rural-urban). The change in non-food expenditure share in rural areas is relatively higher than urban areas. The development of information technology during the last decade, encouraging changes in people's lifestyles, where the need for non-food household consumption is increasing.

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The share of food expenditure at household level by income group shows that the highest share of food expenditure is in low income group, followed by middle income group, and high income group (Table 2). In aggregate, the share of food expenditure at household level tend to decline in every income class, while and at the same time its non-food expenditure share tends to increase. The largest decreased of food expenditure share and increased of non-food expenditure share occurred in middle income class. Table 2 Structure of household food expenditure by expenditure and income class, 2002 – 2014

Expenditure

Share of expenditure by income group (%)

Low income Medium income High income

2002 2014 Change 2002 2014 Change 2002 2014 Change

Food 67.3 66.3 -1.0 60.2 58.0 -2.2 40.9 40.2 -0.7

Non food 32.7 33.7 1.0 39.8 42.0 2.2 59.1 59.8 0.7

Total expenditure 100 100 - 100 100 - 100 100 -

Source: CBS, Susenas 2002 and 2014 (calculate)

Change in Food Consumption at Household Level

In 1999, both for the city and the village population in Indonesia, the largest share of household expenditure is grains. It was found that the spending for grains in the village population reached 22.1%. This is reasonable because the component of grains are staple foods consumed by most of the households such as rice, corn and wheat. Most people consume rice as the main staple food and rice is generally prepared and consumed in the household. After 14 years later, there was a fundamental change in spending patterns. The share of expenditure in processed food has been increasing significantly. This implies that the expenditure for rice consumed away from home has also been increasing accordingly (Ariani and Hermanto, 2015).

Based on the previous research, Suryani, et al. (2016) found that the shares of food expenditure in aggregate by food group is almost entirely decreased except for other consumption, processed food and beverages, tobacco and betel (Table 3). By region, the change is higher in rural areas. For example, the decline in the share of household expenditures for grains groups in urban areas is only 2.5 percent or less than the aggregate, while in rural areas it is 7.2 percent much larger than the aggregate figure (4.2 %).

The share of food expenditure tends to increase in foods such as fish / shrimp, milk, vegetables, fruits, miscellaneous food, processed food, and tobacco. The highest increase in expenditure was the consumption of processed food, in aggregate by 4.4 percent, while the highest decrease occurred in grain consumption of 4.2 percent. The change of cooking pattern might closely associate with the fact that the number of working women had been increasing from year to year. The CBS (2007) stated that the increase in female labor force participation during February 2006-February 2007 reached 2.12 million persons. They were mainly working in agriculture and trade sectors. At the same time, increasing participation for men only 287 thousand. The increasing number of women workers would consequently reduce the time available to prepare food at home.

Table 3 Structure of household food expenditure by food groups and region, 2002 – 2014

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Food Groups Share of expenditure by region (%)

Agregat Urban Rural 2002 2014 Change 2002 2014 Change 2002 2014 Change

Cereals 19.4 15.2 -4.2 14.3 11.8 -2.5 25.7 18.5 -7.2 Tubers 1.1 1.8 0.7 0.8 0.7 -0.1 1.4 2.8 1.4 Fish/Shrimp 9.0 9.9 0.9 8.3 8.9 0.6 9.9 10.9 1 Meat 4.8 3.6 -1.2 5.9 4.0 -1.9 3.6 3.2 -0.4 Egg 3.1 2.4 -0.7 3.2 2.4 -0.8 3.0 2.3 -0.7 Milk 2.4 2.9 0.5 3.3 3.9 0.6 1.2 2.0 0.8 Vegetables 8.1 8.4 0.3 7.3 7.0 -0.3 9.0 9.8 0.8 Legumes 3.1 2.2 -0.9 3.0 2.3 -0.7 3.4 2.2 -1.2 Fruits 5.0 5.1 0.1 5.5 5.6 0.1 4.4 4.6 0.2 Oil + fat 3.8 3.5 -0.3 3.3 2.9 -0.4 4.5 4.0 -0.5 Beverages 4.7 3.8 -0.9 4.1 3.2 -0.9 5.4 4.5 -0.9 Spices 2.6 2.0 -0.6 2.4 1.8 -0.6 2.9 2.2 -0.7 Misellinous food 5.5 6.1 0.6 6.7 7.3 0.6 3.9 4.9 1 Processed food/ beverages

16.1 20.5 4.4 21.4 26.9 5.5 9.5 14.3 4.8

Tobacco + betel 11.4 12.6 1.2 10.5 11.4 0.9 12.4 13.9 1.5 Total 100 100 - 100 100 - 100 100 -

Source: CBS, Susenas 2002 and 2014 (calculate) in Suryani, et al. (2016)

The share of food expenditure at household level for the grain group was the largest decrease in low income group, followed by middle and high income group (Table 4). Households with low income group tend to change grain purchases from better quality to lower because the price is cheaper. The share of household expenditure for food/beverage categories tends to increase for all income groups. The share of household expenditures for tuber, fish/shrimp and milk food groups increased in all income groups and the largest increase occurred in low income groups.

The largest decrease in expenditure was in grains category for all income groups and the largest decrease in the low-income group, followed by the middle-income group, and the smallest in the high-income group. For all income groups, the share of processed food expenditures showed an increase ranging from 3.5 to 4.7 percent during 12 years (2002-2014). The consumption of processed foods appears to be the choice of households, especially for households where female work outside the home or small households. For small households, consumption of processed food is more efficient than cooking meals at home.

In the low-income group, the share of food expenditure is still dominated for the purchase of staple food, followed by tobacco and betel group, processed food, vegetables and fish. As for the middle-income group, the consumption pattern is almost the same as the low-income group, only the share of the grains expenditure is lower, while the consumption of tobacco and betel food group is higher. The share of expenditure for consumption of processed food in the middle-income group is higher than low income group. In the high-income group, the share of

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grain food expenditure is relatively small, about 10 percent, while the share of expenditure for consumption of tobacco and betel, and processed food/beverages is relatively high, about twice of the middle income group. Table 4 Structure of Household Food Expenditure by Food Groups and Income Class, 2002 –

2014

Food Groups Share of expenditure by income group (%)

Low income Medium income High income

2002 2014 Change 2002 2014 Change 2002 2014 Change Cereals 31.8 23.3 -8.5 20.3 16.3 -4 10.1 9.2 -0.9 Tubers 1.5 2.8 1.3 1.1 1.7 0.6 0.8 1.2 0.4 Fish/Shrimp 8.9 10.3 1.4 10.0 10.6 0.6 8.0 9.0 1 Meat 2.1 2.2 0.1 4.7 3.5 -1.2 6.9 4.7 -2.2 Egg 2.8 2.3 -0.5 3.4 2.5 -0.9 3.0 2.2 -0.8 Milk 0.8 1.4 0.6 2.0 2.6 0.6 3.9 4.3 0.4 Vegetables 9.5 10.6 1.1 8.7 9.0 0.3 6.4 6.4 0 Legumes 3.8 2.7 -1.1 3.4 2.4 -1 2.4 1.7 -0.7 Fruits 3.4 3.7 0.3 4.7 4.8 0.1 6.4 6.2 -0.2 Oil + fat 4.8 4.7 -0.1 4.1 3.8 -0.3 2.8 2.5 -0.3 Beverages 5.8 4.7 -1.1 5.0 4.1 -0.9 3.7 3.0 -0.7 Spices 2.9 2.4 -0.5 2.8 2.2 -0.6 2.2 1.6 -0.6 Misellinous food 3.4 4.5 1.1 4.7 5.6 0.9 7.7 7.6 -0.1 Processed food/ beverages

8.0 12.7 4.7 13.0 17.4 4.4 25.0 28.5 3.5

Tobacco + betel 10.5 11.7 1.2 12.1 13.5 1.4 10.7 11.9 1.2 Total 100 100 - 100 100 - 100 100 -

Source: CBS, Susenas 2002 and 2014 (calculate)

The variety of food consumed by households does not guarantee that household food consumption meets the minimum requirement of energy and protein. The Energy Sufficiency Standard (ESS) refers to the recommendations of the National Food and Nutrition VIII 2004, namely 2000 calories/capita/day for energy and 52 grams/capita/day for protein (FSA, 2015). Based on the ESS, there is still a shortage of energy consumption of about 20 kcal/capita/day in 2014, while the adequacy of protein has been met (Table 5).

Changes in household food consumption patterns is not only seen from the changes in the quantity of food consumed, but can also be analyzed from the level its diversification. The level of diversification of food consumption is generally measured from the value of the Entropy index (Erwidodo, 1999). The value of Entropy index of some food groups shown in Table 6. Table 5 The Change in energy and protein consumption and share of animal protein by region,

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2002 - 2014

Expenditure

Energy and animal protein Consumption

Agregat Urban Rural

2002 2014 Change 2002 2014 Change 2002 2014 Change

Energy (kcal/cap/day) 2.089 1.980 -109 2.052 1.966 -86 2.118 1.990 -128 Protein (gr/cap/day) 57,6 57,0 -0,6 59,3 60,0 0,7 56,2 54,8 -1,4 Share of animal protein (%) 21,3 26,0 4,7 24,0 27,1 3,1 19,1 25,2 6,1

Source: CBS, Susenas 2002 and 2014 (calculate)

Table 6 Diversification of household food consumption (Entropy index) by food groups and region, 2002 – 2014

Food Groups Value of Entropy Index

Agregat Urban Rural 2002 2014 2002 2014 2002 2014

Total of food 1.69 1.72 1.82 1.79 1.59 1.66 Carbohydrate source 0.24 0.23 0.24 0.21 0.25 0.24 Animal protein 0.79 0.78 0.95 0.89 0.66 0.71 Vegetable protein 0.31 0.26 0.36 0.30 0.26 0.23 Vegetables 1.10 1.13 1.12 1.14 1.08 1.12 Fruits 0.23 0.25 0.25 0.29 0.21 0.21 Other food 0.85 0.86 0.89 0.88 0.82 0.84 Processed food 0.76 0.85 0.91 1.00 0.62 0.71

Source: CBS, Susenas 2002 and 2014 (calculate)

Based on Table 6, the Entropy index for total food increased at the period of 2002-2014, indicated that in general the average household in Indonesia has reallocated expenditures for food consumption toward more diverse consumption among rice food groups -grains, tubers, fish, meat, fruit, vegetables, and so on (there are 17 food groups). For the food group of carbohydrate sources, the rate of diversification decreased in the same period, both in aggregate and by region (urban-rural). This was due to the consumption pattern of staple food in some areas that originally varied rice-tubers or rice-tubers-maize exactly change and lead to a single pattern of rice. Similarly, for food sources of animal protein in the period 2002-2014, the level of diversification of consumption also decreased. The high price of beef and the availability of fish affected by the seasons (the direction of the sea breeze) and the tastes, prompted some consumers to switch to the consumption of protein sources derived from poultry, especially chicken and eggs that are relatively cheaper and available all the time. This is supported by the declining consumption participation rate for beef and the participation of chicken, egg and fish consumption in both urban and rural and urban and aggregate.

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It is interesting to note that diversification is increasing for food groups, namely vegetables, fruits, other foods, and processed foods. This is consistent in agregate and by region (urban-rural). A relatively high increase (relative to other food groups) is diversification for food groups of vegetable protein and processed food sources.

During 2002-2014, the diversification for processed foods increased significantly as compared to other food groups. This is in line with the results of studies conducted by Random House (2010), American Heritage (2009) and Collins (2003) as referred by Ariani and Haryono (2014), which concluded that in the modern era, lifestyle changes the consumption of food and beverages, in which consumers demand more processed food industry/factory that is readily consumed or easily cooked with little or no other preparation. Increasing the diversity of consumption of processed foods needs to be accompanied by efforts to improve food safety. It is important to avoid or at least reduce cases of food poisoning, gastrointestinal infections and/or other diseases caused by the consumption of unhealthy foods.

Increased diversification of processed food consumption is in line with the household food expenditure structure as shown in Table 1. The development of food and culinary industry and limited time for some women who work to prepare food at home encourage households to choose the consumption of processed food.

Analysis by region shows that consumption of vegetables, fruits, other food and processed foods by urban population increased significantly. While in rural areas increased diversification of food occurs in all foods, vegetables, animal food, other food and processed food. For food sources of carbohydrates and vegetables, diversification of their consumption decreased, while for the fruits consumption it did not change during the period 2002-2014.

The pattern of food consumption diversification is different between rural and urban areas, in line with lifestyle differences, consumer knowledge about food and nutrition, availability and access to food and nutrition information, tastes, income levels, and other social/cultural factors. The development of processed food industry and the ease of obtaining processed food and the development of main culinary centers in urban areas would be a driving force for urban consumers to consume processed food. This is evident from the diversified level of food consumption for processed food by urban households that is higher than the average household in rural areas.

Table 7 presents the level of food consumption diversification during 2002-2014 by income group. It shows that for all food groups, the higher the income level, the higher the level of food consumption diversification. However, the diversification rate for some food groups differs between income groups, except for food as sources of carbohydrates, vegetables, and processed foods. In this case, the level of diversification of food consumption of carbohydrate sources decreased in all three groups of income, while for food and vegetable and food consumption diversification level increased in the three income groups.

At the period of 2002-2014, the diversification of consumption for all foods increased only in low income group households, this is in line with the previous analysis that the diversification of total food consumption only occurs in rural households. At the same time, the diversification of total food consumption in households with middle income group did not change, whereas in the high income group households actually decreased the level of diversification. These findings can serve as an indication of the emergence of multiple nutritional problems (i.e malnutrition and excess nutrients). In this case the decrease of diversification of food consumption for the total food group can be the trigger of excessive nutrition/obesity or imbalance of food consumption.

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Table 7 Diversification of household food consumption (Entropy index) by food groups and

income class, 2002 – 2014

Food Groups Value of Entropy Index

Low income Middle income High income

2002 2014 2002 2014 2002 2014 Total of food 1.50 1.61 1.78 1.78 1.91 1.80 Carbohydrate source 0.23 0.22 0.23 0.22 0.30 0.26 Animal protein 0.57 0.66 0.86 0.84 1.08 0.93 Vegetable protein 0.23 0.22 0.32 0.27 0.42 0.32 Vegetables 1.08 1.11 1.11 1.15 1.11 1.12 Fruits 0.18 0.18 0.24 0.25 0.31 0.34 Other food 0.80 0.84 0.87 0.88 0.91 0.85 Processed food 0.59 0.71 0.78 0.87 1.00 1.03 Source: CBS, Susenas 2002 and 2014 (calculate)

Profile of Cooperatives in Indonesia

Before discussing the role of cooperatives in responding to changes in food consumption patterns, it is necessary to describe in advance the profile of cooperatives in Indonesia. The establishment of cooperatives in Indonesia began in the 20th century. The main purpose of the establishment of cooperatives is to promote the economy on the basis of a collaborative efforts that can ultimately improve the welfare of the people. The legal basis for the implementation of cooperatives refers to the 1945 Constitution article 33 paragraph 1 which states that the economy is organized as a joint effort based on the principle of kinship. Although the cooperatives has a long history in the world, but in Indonesia the milestone of the founding of the cooperative began on July 12, 1947 when it was held the first cooperative congress, held in Tasikmalaya, West Java - the date is now defined as the day of Indonesian Cooperatives. Now the cooperative continues to grow as important pillars of the economy in various fields. Based on its function, cooperative is divided into four groups, namely (1) Cooperative purchasing/procurement/consumption, is a cooperative that organizes the function of purchasing or procurement of goods and services to meet the needs of members as the final consumer. Here members serve as owners and buyers or consumers for their cooperatives; (2) Sales / marketing cooperative is a cooperative which organizes the distribution function of goods or services produced by its members to reach the consumers' hands. In the form of sales cooperatives, members serve as owners and suppliers of goods or services to their cooperatives; (3) Production cooperative, is a cooperative that produce goods and services, where their members work as employees or employees of the cooperative. In this cooperative, members act as owners and cooperative workers; and (4) Cooperative service is a cooperative that provides services needed by members, for example: savings and loans, insurance, transportation, and so forth. In this cooperative, members act as owners and users of cooperative services. In practice, cooperatives may perform several functions or a combination of 1-4. Therefore, if the cooperative performs a function is called a single cooperative (single-purpose cooperative), while the cooperative that organizes more than one business function is called multi-cooperative business (multi-purpose

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cooperative). Based on the level and working area, cooperative can be categorized as: (1) Primary cooperative, is a cooperative which has at least a membership of 20 individuals; (2) Secondary Cooperative is a cooperative consisting of a combination of cooperative bodies and has a wide scope of work area compared with primary cooperatives. Secondary cooperative can be divided into (1) Cooperative center that is cooperative consisting of at least 5 primary cooperatives, (2) Combined cooperative that is member of cooperatives of at least 3 central cooperatives, and (3) Parent cooperative is cooperative with minimum membership of 3 joint of cooperative. In its development, the number of cooperatives increased over time. During the period 2009-2014 there was an increase in the number of cooperatives as many as 39 thousand units of cooperatives or an increase of 18.7 percent. The number of cooperatives in 2014 reached 209.5 thousand units. Of the total units of Cooperatives, 147.2 thousand units are active cooperatives, while the remaining 62.2 thousand units (30%) are inactive cooperatives (Ministry of Cooperatives, 2015). The development of number of cooperatives during the period 2009-2014 is presented in Figure 1. As the number of cooperatives increased during the 2009-2014 period, the number of cooperative members also increased (Figure 2). The addition of cooperative members during the period of 2009-2014 was 7.2 million people or 19.8 percent. If it is assumed that the percentage of inactive cooperative members is equal to 30%, then the number of active cooperative members in 2014 is 25.5 million people. If the population in Indonesia in 2014 is 250 million people, then the number of active people joined in the cooperative is only 10 percent. That is, the potential for the development of cooperatives in the future is still promising.

According to Susilo (2013), the future development of cooperatives is still constrained by various problems, among others, the trust of cooperatives. This decline is in line with inconsistent government policies and because of the weaknesses of the cooperative management itself. Therefore, the cooperative needs consolidate to improve its business management (Corporate Governance). The results of the Tambunan (2007) study also stated that many Indonesian, especially the "modern" people view cooperatives as less positive. Cooperatives are considered an institution that aims to help the poor. However, it can not be denied that there are still many cooperatives that perform well so it still survive until now, for example of South Bandung Farmers

Figure 1 Number of cooperative in Indonesia, 2009-2014

Figure 2 Number of cooperative members in Indonesia, 2009-2014

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Cooperative (KPBS) that manage dairy cows from farmers of South Bandung region in West Java Province.

The Role of Cooperatives in Agricultural Development

Indonesia is one of the countries that still rely on agriculture sector in national economic development. The contribution of agriculture sector is the second largest in national income. One of the priority programs in the agricultural sector is to produce food commodities to meet the food needs of all Indonesians in accordance with Law No.7 / 1996 on Food and renewed in Food Law No.18 / 2012. Therefore, the government's efforts in increasing food production programs must involve all business actors, including rural cooperatives known as Village Unit Cooperatives (KUD). The results of the Susilo study (2013) reveals that KUD has been actively involved not only in the procurement of grain / rice to support national rice stock but also involved in the provision of rice production facilities (production), processing and marketing for more than 30 years. The potential of cooperatives (in this case KUD) in the supply of grain and rice in the past few decades is quite large, whether viewed from the availability of facilities, as well as the availability of personnel. KUD has a very strong business attachment with farmers, although the success of KUD at that time was not optimal. The substantial role of KUDs is involved in the supply of grain / rice, this has a positive impact on the government's efforts to achieve rice self-sufficiency achieved in 1984. Full government support to KUD through various policies to provide production inputs, production management and marketing has embarked KUD as reliable partners for farmers. In the reform era, there have been many regulatory changes, and the role of cooperative in supporting food stability is decreasing, due to limited government’s support in terms of credit (soft loan) for input production and purchase of rice grains from farmers. This policy change encourages cooperatives to innovate, among others, by building models of services in the field of food such as rice banks, food barns, and rice processing centers. Policy changes that are less supportive of cooperatives, especially KUDs in rural areas have an impact on the decline in the number of active cooperatives. As an illustration, before the 1997 crisis there were more than 8000 cooperatives that participated in supporting the national food procurement program, but in the reform era (after 2003) the number of cooperatives decreased to less than 2000 cooperatives. However, if seen from the development of the number of cooperatives until 2014 shows an increase (Figure 1). The increasing number of cooperatives is the sum of all types of cooperatives, both directly and indirectly involved in the national food procurement program.

Perspective on the Role of Cooperatives in Responding to Changes in Consumption Patterns

It has been explained in the previous discussion that during the period of 2002-2014, there have been various changes in household food consumption patterns in Indonesia. The development of information technology through the ease of internet access, encouraging many changes, among others, the increasing employment opportunities in urban areas accessed by rural communities, both male and female labor, increasing women working outside the home, there are changes in lifestyle including the pattern of food consumption . Limited time for women breadwinners outside the home, encouraging them tend to choose the consumption of finished food because it is considered more cheap and practical. The existence of online technology, enabling the purchase

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of food including fast food can be ordered without having to leave the house. Changes in lifestyles in food consumption along with technological changes that are all practical and inexpensive, this should be responded by business actors including cooperative institutions. Cooperatives as an institution that aims to improve the welfare of its members should be able to see emerging market opportunities in the community. Cooperatives should be able to make breakthroughs and create innovation in responding to the development of household food consumption patterns. Cooperative business patterns that rely heavily on financial support and various facilities from the government, it seems difficult to continue to survive. Cooperatives should be able to develop themselves by utilizing modern technology and establish cooperation with other related institutions. One example of a modern cooperative that can be used as a model of cooperative management in the future is the Arrohmah Cooperative in Sukabumi, West Java. The concept of farmers' corporations in the cooperative is successfully carried out thoroughly, starting the process of production, processing results, until the sale of products into the retail industry. Marketing of products in addition to cooperation with the retail industry, also conducted through online media. Product packaging is also pursued in a modern way to provide a view that attracts consumers and is able to compete with the private sector. In terms of funding, cooperatives are already working with banking institutions. Profit results obtained, then distributed to all members of the cooperative. The success of Arrohmah Cooperative to become a modern cooperative capable of handling products from upstream to downstream has attracted the government replicate Cooperative Arrohmah in other regions. Based on several studies on the performance of cooperatives, and the development of consumers and markets that are growing, cooperative should change to adjust the market or consumer demand. Cooperative perspectives forward, especially in responding to changes in household food consumption patterns, as follows: (1) Management and organization

Cooperatives need to be directed to the principles of modern management and adaptive to the development of an increasingly advanced era and increasingly global challenges. Cooperatives in Indonesia need to imitate the implementation of Good Corporate Governance (GCG) that has been applied to companies incorporated company law. For regulators (Ministry of Cooperatives) need to introduce maximally a GCG concept or good cooperative governance. According to Fajri (2007), in the implementation of GCG, cooperatives need to ensure that the goal of establishing a cooperative is really to prosper its members. Ministry of Cooperatives and SMEs need to prepare cooperative blueprint management effectively and planned. In addition, it is also necessary to improve the internal conditions of the cooperative.

(2) Market oriented To obtain maximum product sales results, the cooperative must be able to read the market signal, not only on the type of product, but also in the form of services needed by consumers. The cooperative must be keen to capture the market potential that can make a profit.

(3) Standards of service Cooperatives should improve service standards and conduct regular audits, so that the role of cooperatives in improving the economy is more vital.

(4) Funding System

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Cooperatives should not only rely on government assistance, but also must be able to move its members to participate actively and if necessary can cooperate with other business institutions, such as banking institutions to strengthen capital.

(5) Diversification of products and business For cooperatives engaged in the food sector, in the future the cooperative should be able to diversify products and businesses. Cooperative activities that initially focus only on the process of production and sales of grain to Logistic Agency (Bulog), in the future should be able to develop new businesses that support the main business, such as processing business results and packaging with a customized measure of market tastes. Thus the products are marketed not only in the form of primary products, but able to sell processed products. Marketing is not only in the form of grain to Bulog, but is able to market various varieties of rice products to retail stores or through social media.

CONCLUSION During the period 2002-2014, there has been a shift in the share of food and non-food consumption expenditure at the household level in Indonesia. The pattern of household food consumption leads to a decrease in food consumption of the grain group, whereas the consumption of processed food is likely to increase. This condition occurs in aggregate, by region, and income group. Based on the level of energy and protein adequacy, there is still a shortage of energy consumption in 2014, while protein consumption has met the standard of protein adequacy.

Increasing in consumption of processed food during the period 2002-2014 indicates the availability more diversified food products. However, the facts show that the increase in total food diversification occurs only in rural households and generally in low-income groups. For the high income groups the level of diversification tended to decrease. Changes in food consumption patterns to processed food are expected to increase steadily, triggered by an increase in the rate of urbanization and the number of women working outside the home. To respond the changes in household food consumption patterns, the role of cooperatives is important in supporting the availability of food. Agricultural cooperatives are expected not only to assist the supply of inputs in the production process, but also to play a role in the distribution of farmers' products. The more diverse food products consumed by households, cooperatives are required to be more creative in selling products produced by farmers. Agricultural cooperatives can provide higher benefits to their members, when cooperatives are able to process primary products into processed products ready for consumption. Thus the cooperative and all its members will get the added value of the products.

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[FSA] Food Security Agency. 2015. Direktori perkembangan konsumsi pangan (Directory of food consumption development) . Ministry of Agriculture, Jakarta.

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Malian, H., R. Sayuti, M. Ariani, and S. Mardianto. 2003. Impacts of Paddy/Rice Price Change on Production, Consumption and Inflation. Research Report. Indonesian Agriculture Social Economic and Policy Studies, Bogor.

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FOOD CONSUMPTION TRENDS AND IMPLICATIONS IN KOREA

Sanghyo Kim

Department of Food and Marketing Research, Korea Rural Economic Institute (KREI) 601 Bitgaram-ro, Naju-si, Jeollanam-do, Republic of Korea, 58217

Email Address: skim@krei.re.kr

ABSTRACT

The food consumption behavior and dietary life of consumers are changing rapidly in Korea due to the changes in economic, social and demographic circumstances and the effects of the advanced science and technology, climate change, and the expansion of agricultural market opening. Such significant changes include rapid aging, expansion of single-person households, slow economic growth, and increased women’s economic participation.

The rate of increase in food consumption expenditure in Korea is measured at about half the increase rate of the entire consumer expenditures, meaning that food consumption has entered a stable phase in the long term. However, changes in consumption of foods away from home increased greatly, although the growth began to slightly stagnate from the early 2000s. By food type, the expenditures on eating-out (at regular restaurants), eating-out (group meals), eating-out (at pubs/coffee shops), and bread and rice-cakes had relatively high percentage of the entire food expenditures, and the percentages for these categories are rapidly increasing. On the other hand, the consumption of meats, sugar and snacks, grains, fruits, and processed fruits has stagnated.

In 1990, food consumption trends in Korea changed from a stage of pursuing satisfactory supply to the stage of pursuing quality. And around 2000, the food consumption trends moved from the quality pursuit stage to the diversification stage that placed the highest priority on food safety/health followed by pursuit of convenience in food consumption and intake, pursuit of rationality in food purchase, and consumption of diverse foods.

Daily energy consumption per person is increasing slightly, but fat consumption is increasing rapidly. There has been a rise in the percentage of people consuming less than recommended standard portions of various nutrients, proving prevalence of nutritional imbalance in Korea. In terms of percentage of people with imbalance in nutrition, adolescents posted the highest imbalance ratio at 15.2%, followed by those in their 20s (12.8%), and those over the age of 65 (8.4%).

Households suffering from food insecurity accounted for approximately 10% of all households in Korea, and food insecurity among households with low income levels and those over the age of 60 has expanded. Compared to households with two people or more, single-person households showed almost twice as high food insecurity.

In the most optimistic scenario, it is analyzed using GIS that 9.2% (4.7 million people) of total population was vulnerable in access to foods in Korea as of the end of 2015. More serious problem is found for the population aged 65 or more. About 20% (1.4 million people) of this age group was vulnerable in access to foods even when the most optimistic scenario was applied.

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TECHNICAL EMPOWERMENT OF AGRICULTURAL COOPERATIVES IN MALAYSIA

Ahmad Safuan Bujang

Promotion and Business Development Center, MARDI Persiaran MARDI-UPM, 43400 SERDANG, MALAYSIA

asafuan@mardi.gov.my

ABSTRACT

A delicate balance must be achieved between socio-economic development and protection of the environment. Under the SDG, a set of 17 goals were introduced to achieve this triple bottom line of economic, social and environmental objectives. Food production cannot continue in its “business as usual” setting and requires intervention in the form of technological advancements in agriculture to spur a second green revolution towards creating a sustainable and nutrition-centric value chain. Within this framework, lies the importance of molding agricultural cooperatives to adhere to these needs as well as taking advantage of changing trends in food consumption. With its role as the third engine of growth, cooperatives or agricultural cooperative in particular, is strategically poised to aid initiatives and efforts in modernizing the Agrofood sector. PPK Kuala Langat serves as an interesting example of a dynamic and efficient cooperative model that bridges the gap of low skill and knowledge among smallholder members, with necessary technological empowerment. This is done through a collective mechanism that allows effective dissemination of knowledge and information, marketing and networking to ensure inclusivity of all member is assured.

Keywords: Food security, Sustainability, Agro-food, Food trend, Cooperative

INTRODUCTION

Food, socio-economic development and its interlinked relationship with the environment

“Irreversible”, “unequivocal” and “Anthropocene” are terms often used as grim reminders for progress made in the name of development. The guise of development has always shadowed the uneasy truth that although the ceiling of progress is limitless, resources it requires are finite and the sphere it influences is fragile. The latest IPCC report (IPCC 2014) spells out the irreversible and unequivocal human influence on global climate, marking a clear geological epoch or Anthropocene, that requires immediate implementation of adaptation and mitigation strategies to reduce and manage risks of climate change. As we endeavor to address challenges of food security, its necessities and its changing trends, a delicate balance must be achieved for socio-economic development to end poverty and concurrently protecting the planet and ensuring prosperity to all.

This challenge is further exacerbated by climate change induced impacts to our physical, biological, and human and managed systems (Figure 1), necessitating a global effort to adapt and mitigate. Across the world, indirect pressures on food productions such as impacts on terrestrial and marine ecosystems, as well as uncertainties related to water supply from droughts or adverse impact of floods. It is obvious that current practices or policies governing it cannot proceed in its business-as-usual course. Through a multi-country effort, a set of 17 Sustainable Development

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Goals (SDG) were specified under the 2030 Agenda for Sustainable Development Plan (United Nations General Assembly 2015), that specifies a synergistic and collaborative partnership between all countries and stakeholders towards shifting the world on to a sustainable and resilient path.

All 17 SDGs are cross-linked and heavily intertwined. Sustainable food and agriculture is the fundamental nexus between people and the planet. Achieving SDG#2 or to “End hunger, achieve food security and improved nutrition and promote sustainable agriculture” will play an integral part in achieving other SDGs as well. Agriculture and food yields are already affected by climate change, thus placing communities especially in developing countries at risk of food shortage and hunger. Here, changes in dietary and food consumption habits further poses adds to the complexities of any mitigating and adaptation efforts. Studies have shown negative effects on agricultural production due to decreased production and disappearance of animal species. Thus, as shown in Figure 2, food security is affected across four dimensions: access, availability, utilization and stability (FAO 2016).

Figure 1 Widespread impacts attributed to climate change based on available scientific literature since the Fourth Assessment Report (AR4) (IPCC 2014)

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Figure 2 Impact Pathways – From climate change to food security

On the flipside, this cause-and-effect loop highlights the risks to low income and high agric

ulture dependent communities. Agriculture and food sector at large contribute one-fifth of greenhouse emissions from losses of above and below ground organic matter, deforestation, enteric fermentation in livestock, fertilizer application, as well as fossil fuel use across the value chain. All these point towards the necessity of a second Green Revolution. This entails creating an agricultural sector that is able to sustainably provide abundant and healthy food, while requiring less resources, reducing encroachment on natural ecosystems and conservative utilization of ecosystem services and biodiversity (FAO 2016). As certain food crops face production plateaus, agricultural innovation in the form of new cultivation technologies, high-tech digital planting aids and botanical genomic manipulation will bring increased precision, efficiency and yield. Although technology will act as a springboard to this second green revolution, its role alone in food security policies will not be sufficient to overcome interdependencies of all five interlinked transformation drivers, where diet and food demand change is one of the five (Reardon and Timmer 2014).

Food security and changing trends

Ensuring food security for a growing population that is targeted to reach 8.5 billion by 2030

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(United Nations General Assembly 2015) will involve providing stakeholders far greater access to technologies, markets, information and credit for investment to adjust their production systems and practices. This will allow them to adapt and mitigate the effects of climate change, while at the same time maintaining current food production capacities. Here, a broad-based transformation of food and agriculture systems will also promote an increase in agricultural production, improving global supply chain, increased access to nutritious food, as well as reducing post-harvest or food losses and wastes.

As seen in Figure 3, an increase in consumption of food types other than cereals, roots and pulses is seen across time, and is projected to rise further. Coupled with increasing calorific demand as well, diversification of food types will add additional strain to existing supply chain. In Asia, this change has been attributed to income increase, lifestyle changes through urbanization and changes in consumer attitudes and behavior (Pingali and Rosegrant 1995; Kearney 2010). Besides focusing on a sustainable supply chain to safeguard national food security, an emphasis in improvement of nutrition and health should also be given consideration. Future food policies must adhere to the need for a system that provides a sustainable and diversified supply of staples and macronutrient-rich foods, at the same time resisting excessive consumption energy-dense, nutrient-poor foods (Kearney 2010).

(Source: FAO)

Figure 3 Breakdown and projection of worldwide consumption based on type of food

Within Malaysia, addressing issues of sustainability, food security and food consumption trend change must be viewed through several state policies. In-line with achieving goals tabulated under the latest SDG, Malaysia’s aspiration to attain high-income country status comes concurrently with efforts in striving for greater inclusiveness among its inhabitants (EPU 2015b). Within this comprehensive plan to achieve inclusiveness and ensure sustainable socio-economic development, empowerment and transformation of the Agrofood sector is paramount. This sector contributes to about 38.8% of total national GDP in 2015 and is projected to have a growth rate of

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5.4% under the 11th Malaysia Plan (EPU 2015a). This is in line with objectives of the National Agrofood Policy (NAP) 2011-2020, to meet growing demand for affordable and nutritional food, and ensuring supply of raw materials for resource-based industries. Similar to trends in other developing countries, trade liberation has facilitated the availability and affordability of highly processed, nutrient-poor foods. Widespread availability of transnational food corporations in the form of westernized fast-food market further drives the pressure for demand of food sources not locally produced and manufactured. Consequently, traditional diets are being influenced and transformed to mimic these westernized fast food, calorie-rich food types. This scenario further adds to the burden on balancing national food trade figures, where it continues to see increasing deficits at an average of 8.9% from 2011-2014. Aiding this sector requires addressing issues of low productivity, high post-harvest loss, non-optimal land use, unorganized marketing, ineffective institutional support and inadequate and low-skilled workers (EPU 2015a). Within this framework lies the opportunity to inculcate a change in mindset towards achieving food security through technology infused, sustainable and health centric agriculture. To ensure maximum effect of these initiatives, a collective effort by stakeholders involved will enable them to maximize economic benefits through effective sharing of resources, shared financing, knowledge dissemination, interaction and exchange of experiences as well as facilitating marketing and distribution. In essence, technological empowerment of agricultural cooperatives in this nature will ensure effective involvement and utilization of resources along the value chain.

BRIDGING THE GAP

Role of cooperatives

A cooperative is an autonomous alliance or “association of people, united voluntarily to meet their common economic, social and cultural needs and aspirations through jointly-owned and democratically-controlled enterprises” (ILO 2002). By virtue of functioning as a value-based and principle driven organization, this sustainable and participatory form of business ensures emphasis is given to foster democratic knowledge and practices, and social inclusion (Wanyama 2014). Furthermore, this nature allows cooperatives to be a relevant part in achieving sustainable development’s triple bottom line of economic, social and environmental objectives. In its role in promoting food security and good nutrition, cooperatives allow small agricultural producers overcome remoteness and/or lack of access to information relating to market food prices; access to high-quality inputs and variable cost of buying seeds and fertilizers; access to financial instruments in purchasing these inputs; as well as access to infrastructure and transportation in rural areas (Wanyama 2014). Historically in Malaysia, this cooperative setup played a vital role in alleviating capitalistic marginalization and oppression of smallholders in the paddy industry. With the inception of Co-operative Societies Enactment 1922, a regulatory body was put in place to administer various cooperatives that were initiated to overcome this affliction and promote greater collaboration and

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resource sharing among its members. Realizing its enormous role in assisting national development and growth, a national cooperative act was promulgated in 2002 and revised in 2010 to promote greater involvement of cooperatives together with private and governmental sectors in striving towards national development and growth agendas (KPDNKK 2010). As of 2015, there are more than 12,700 cooperatives registered under the Malaysian Cooperatives Societies Commission (SKM). With the involvement of 7.49 million members, this total also equates to about RM13.8 Billion (USD $3.3 Billion) in share capital and RM123.3 Billion (USD $29.4 Billion) in assets (SKM 2015).

Within that figure, 2,746 are agriculture-based cooperatives, which amounts to about 21.5% of the total cooperatives registered under SKM. In 2015, 40% or 1,107 of these cooperatives were profitable, and this translates to a total of RM1.39 Billion (USD $0.33 Billion) in acquisition and RM3.99 Billion (USD $0.81 Billion) in assets (SKM 2015). With cooperatives being strategically placed as the third engine of national economic development, agricultural cooperatives must be enhanced with not only improving management with better strategic planning and participation of its members (Mahazril, Hafizah, and Zuraini 2012), but also being able to adopt and evolve with demands of changes in its surrounding environment (Hariyoga 2004). As seen in the factors discussed previously with regards to achieving the triple bottom lines of SDG and national interests, technology input will be an important focal point to guide this growth.

TECHNOLOGY In its latest iteration, the 11th Malaysia Plan laid out six strategic thrusts in its endeavor to transition to an advanced economy and inclusive nation. Under the “Re-engineering economic growth for greater prosperity” strategic thrust, high income generation through modernization of agriculture will be carried out with the promotion of sustainable practices and adoption of modern farming technology (EPU 2015b). Furthermore, as illustrated in Figure 4, modernization of agriculture will be carried out through 7 strategies, where infusion of smart farming technology and ICT will improve production efficiency, farm management and reduce cost of production. This is then expanded through a cluster-based approach to vertically integrate production, quality control, processing, marketing within cooperatives and associations in Agrofood supply chain.

Research, development and commercialization (R&D&C) activities related to agricultural based technologies are carried out by various universities and research institutions in Malaysia, each with its specific goals and focus areas.

Figure 4 Seven modernization strategies to spur growth of agriculture sector

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Agrofood research in agriculture excluding commodities (oil palm, cocoa, rubber) is carried out by the Malaysian Agricultural Research and Development Institute (MARDI), a statutory body established in 1969. In its role as the focal point of churning R&D&C Agrofood initiatives, modernization of the Agrofood sector will be achieved through efforts in development and dissemination of knowledge and training for quality seeds, breeds, fries and animal feed, as well as integrated pest and disease management. Higher quality seeds and effective pest and disease management especially in the paddy industry is paramount to enable higher yields as with proper training and awareness would ensure responsible usage of pesticides and other resources. The role of cooperatives here will be vital in ensuring members adhere to the latest practices as well as providing support among members and feedback to the authorities and researchers for further improvements.

Dissemination and training can also include awareness of related certifications such as Malaysian Good Agricultural Practice (MyGAP) or organic produce certifications, or food processing accreditations such as GHP, GMP and HACCP. Adoption of such certifications will elevate the standard of produce and increasing its appeal to local and international markets, as well as ensuring it complies with the objective of producing healthy food supply to the market. This growing trend gravitating towards health-conscious segment of the market also applies to the growing interest locally and worldwide in Halal market. “Halal” or permissible by Islamic laws applies to foods and products consumed by Muslims, requires strict adherence to a set of guidelines manifested in the creation of MS1500: 2009, that covers all requirements for the entire supply chain (JAKIM 2014). In relation the role of cooperatives at this juncture, training and dissemination of information, as well as financial aid in the acquisition of these certification, more smallholders through their association with cooperatives are now better equipped to attain relevancy to these growing trends.

Agriculture modernization efforts also include assisting agricultural development authorities in determining suitable and required inputs for increased productivity gains, as well as adoption of modern farm technology such as rain house shelters, fertigation system, farm automation, use of information and communication technologies (ICT) and mechanization. This will ensure effective utilization of resources such as land, water and fertilizers, as well as providing the opportunity to insert innovation of more efficient techniques such as soil or soil-less fertigation system that can ensure higher yields, as compared to conventional planting methods. Enclosed structure planting will also reduce or eliminate use of pesticides. Although requiring high startup capital, these unconventional options are feasible under a cooperative structure that provides opportunities of resource, infrastructural and finance sharing. On the other hand, implementation of ICT in the Agrofood supply chain will require a collective effort that involves support and encouragement to bridge the technological gap especially among rural stakeholders that are usually relatively less educated. Modernization of agriculture must begin with digitizing or implementation of digital technologies across the supply chain, unlocking assets for Internet of Things and big data analytics, that will allow the leap towards an Agriculture 4.0 complex within Industry 4.0.

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Technological empowerment can also aid cooperatives involved with the ruminant industry, where R&D&C in genetic enhancement, improvement of breeding techniques, animal feed supply, dairy management and production facilities and implementation of Radio Frequency Identification Tagging (RFID). This will ensure that the industry is capable of improving self-sufficiency level of beef from 27.7% in 2014 to 50% in 2020, 16.1% to 24.6% for mutton and 12.8% to 13.6% for milk (EPU 2015a). MARDI is tasked with developing resilient genetic quality of indigenous cattle and goat breeds to enhance meat quality, improve fertility and increase cost efficiency. Agricultural cooperatives will play a role in providing wider access to these enhancements through training, awareness, as well as connecting rural farms to technological centers. MARDI will also be tasked to intensify research of intensive breeding system to increase supply of high quality local breeds. Through agricultural cooperatives, increased participation of stakeholders can be achieved to develop a national database on genetic characterization of cattle and goat. This will aid breeding programs as well as providing vital genetic information for the planning of future R&D&C initiatives and policies.

As demand for rice is targeted to increase from 2.6 million tons in 2013 to 2.8 million tons in 2020, full self-sufficiency level initiatives require consolidation of small farms, technological inputs in the form of supply of high yielding varieties and provision of adequate irrigation and drainage infrastructure, as well as efficient management of performance-based subsidies (EPU 2015a). Cooperatives in the form of Area Farmers Organization (PPK) will be heavily involved in the consolidation and management of paddy fields averaging 2.2 hectares into 100-hectare estates, to reduce cost of production and benefit from related economies of scale. Cooperatives will also be tasked to voluntarily manage and maintain irrigation and drainage infrastructures. This infrastructural improvement will increase crop yield intensity from 188% in 2014 to 200% in 2020. Training, dissemination of knowledge and awareness through the cooperative mechanism will also aid successful promotion and adoption of new certified paddy varieties that are less susceptible to pest and disease attacks and improved yields. Furthermore, this effort can also be extended to equip farmers with knowledge on sustainable agriculture practices including efficient fertilizer scheduling, water management, pest and disease management, as well as the effects and mitigation steps in relation to climate change.

CASE STUDY

Area Farmers Organization (PPK) Kuala Langat

The success of PPK Kuala Langat can be used to illustrate and exemplify the dynamic nature of food consumption trend, technology and cooperative structure. PPK is part of the Farmers Organization Authority (LPP) that endeavors to improve socio-economic standards and increase skill and knowledge of its members, in order to create a progressive, independent and integrated farming community (LPP 2017). Realizing the need to improve participation of its members in the vegetable value chain, LPP Kuala Langat identified key issues that required immediate

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intervention. This includes empowering its members with relevant knowledge and skillsets especially in the latest relevant techniques and technologies, harvest scheduling and post-harvest processing. Furthermore, market value of produce cultivated by its members was found to be impaired by low quality and inconsistent supply.

(Source: Sinar Harian; fertigasihijau.blogspot.my) Figure 5 A successful cooperative effort in cultivating high-valued cash crop

Established in 2012, PPK Kuala Langat repositioned itself with the aim of becoming a

highly productive producer of vegetables and fruits. Under the SHAKRAN (Sharing Knowledge Replicate Approach Networking) initiative, a collection center was erected on a 12-hectare plot of land in Lot 305, Kampung Pulau Nyatoh, Bukit Jugra, Kuala Langat, Selangor, Malaysia, with the intention of developing it as a Permanent Food Producer Hub under PPK Kuala Langat. This collection center functions not only as a focal collection point of vegetables produced by its members, but also as a center to process, grade, distribute and provide information. This role also includes all marketing activities regardless of produce grades, collection and analysis of produce price information, promotion, consultation and ensuring a concerted effort is given in consistent production and supply through systematic cropping schedule.

Chili was chosen as the initial cash crop due to its high value and demand. Cultivation is done through soil or alternative soil (coco peat) polybags in a fertigation system. Because this practice is different from conventional open field farming, the need for a focal point of reference is vital to disseminate technical expertise and know-how among its members, as well as providing a standardized model or operating procedure. In this system, networking among its members is solidified with the usage of ICT tools (apps, social media) to ensure effective sharing of planting information, consultation and market insights. Members are required to cede marketing responsibilities to the management team of LPP Kuala Langat in order for them to fully focus on upstream activities. LPP Kuala Langat is then tasked to source for a network of diversified marketing opportunities that maximizes profit. Marketing outlets varies from hyper markets, wholesale markets, food producers and food outlets, as well as to the Federal Agricultural Marketing Agency (FAMA).

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From its initial success, its members have grown to include other collection centers in various states across Malaysia (Johor, Melaka, Negeri Sembilan, Pahang). All produce is funneled to the collection center in Kuala Langat, and administration is centralized and managed from there. Currently, polybag capacity is at 650,000 tended by about 213 members in all five states. Since its inception, it has produced about 104 tons (as of 2016) and members have seen a 10-15% increase in farm gate price, thus providing proof of success of this project in relation to increased income generation. As stated in its future plans, by replicating this successful model, PPK Kuala Langat will look at expanding its vegetable production into producing other cash crops such as rock melons, mushrooms, as well as quail rearing and cattle breeding.

CONCLUSION The role of a cooperative structure is apparent in amalgamating the objectives of SDG’s triple bottom line and current food trends including halal, high quality and healthy supply of agricultural produce. It is apparent that an effective mechanism to empower cooperative members must be done through technology and knowledge. To achieve strategic national goals, Malaysia requires this third engine of growth to be more robust and dynamic, especially in addressing the vagaries of agricultural production and supply. Through the role of institutions such as MARDI in providing technical expertise, as well as successful value chain management experience carried out by PPK Kuala Langat, this growth can more in a trajectory that conforms to the needs of sustainability and environmental stewardship.

REFERENCES EPU, Economic Planning Unit. 2015a. “Driving Modernisation in Agro-Food.” Rancangan

Malaysia Kesebelas (Eleventh Malaysia Plan) : 2016-2020, 2016–20. EPU,Economic Planning Unit. 2015b. “Eleventh Malaysia Plan, 2016-2020.”

http://www.epu.gov.my/en/rmk/eleventh-malaysia-plan-2016-2020. FAO, (Food and Agriculture Organization of the United Nation). 2016. The State of Food and

Agriculture. Livestock in the Balance. doi:ISBN: 978-92-5-107671-2 I. Hariyoga, H. 2004. “An Economic Analysis of Factors Affecting the Failure of an Agricultural

Marketing Cooperative: The Bankrupcy of Tri Valley Growers.” University of Missouri. ILO, International Labour Organization. 2002. “Recommendation 193,” 1–6. IPCC. 2014. Climate Change 2014: Synthesis Report. Contribution of Working Groups I, II and

III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change. Core Writing Team, R.K. Pachauri and L.A. Meyer. doi:10.1017/CBO9781107415324.004.

JAKIM. 2014. “Manual Procedure for Malaysia Halal Certification. Putrajaya: Jabatan Kemajuan Islam Malaysia (JAKIM).”

Kearney, J. 2010. “Food Consumption Trends and Drivers.” Philosophical Transactions of the Royal Society B: Biological Sciences 365 (1554): 2793–2807. doi:10.1098/rstb.2010.0149.

KPDNKK. 2010. Dasar Koperasi Negara 2011-2020. LPP, LEMBAGA PERTUBUHAN PELADANG. 2017. “Farmers Organization Authority

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Introduction.” http://www.lpp.gov.my/en/farmers-organization-introduction?p_p_id=56_INSTANCE_9ssP&p_p_lifecycle=0&p_p_state=normal&p_p_mode=view&p_p_col_id=column-3-inner&p_p_col_count=1&page=1.

Mahazril, ’Aini Y, H.A.K Hafizah, and Y Zuraini. 2012. “Factors Affecting Cooperatives’ Performance in Relation to Strategic Planning and Members’ Participation.” International Journal of Productivity and Performance Management 65: 100–105. doi:10.1016/j.sbspro.2012.11.098.

Pingali, Prabhu L., and Mark W. Rosegrant. 1995. “Agricultural Commercialization and Diversification: Processes and Policies.” Food Policy 20 (3): 171–85. doi:10.1016/0306-9192(95)00012-4.

Reardon, Thomas, and C. Peter Timmer. 2014. “Five Inter-Linked Transformations in the Asian Agrifood Economy: Food Security Implications.” Global Food Security 3 (2). Elsevier: 108–17. doi:10.1016/j.gfs.2014.02.001.

SKM, Malaysia Co-operative Societies Commission. 2015. “2015 Annual Report.” United Nations General Assembly. 2015. “Transforming Our World: The 2030 Agenda for

Sustainable Development.” https://sustainabledevelopment.un.org/content/documents/7891Transforming%20Our%20World. Pdf, no. 1: 1–5. doi:10.1007/s13398-014-0173-7.2.

Wanyama, Fredrick. 2014. “Cooperatives and the Sustainable Development Goals.” 2013. http://www.ilo.org/wcmsp5/groups/public/---ed_emp/documents/publication/wcms_240640.pdf.

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ANALYSIS OF MULTI-SECTORAL BUSINESS DEVELOPMENT AND ROLES OF JAPAN’S AGRICULTURAL COOPERATIVES

Noriaki KAWASAKI

Graduate School of Agriculture, Division of Natural Resource Economics, Kyoto University

Email: nori3@kais.kyoto-u.ac.jp

ABSTRACT

The Japan Agricultural Cooperatives (JA), is going through a time of massive reforms toward more business-oriented operations in response to changes in food consumption trend. But innovative farmers and the JAs have not always been in collaborative relationship and tended to alienate each other not least because of their different business orientations. Then now, JA can find a way to establish and coordinate sound governance and management embracing diverse actors with varying innovative interests. Recognizing gaps in competence between JAs and innovative farm operators, this paper explores possibilities of constructive and synergetic relationship between the two parties for more effective acquisition and deployment of resources that allow for productive farm business.

More specifically, three ideal-types of innovative farmers and their mode of alliance with JAs for acquisition of resources (especially information) were examined: 1) those who tend to rely on existing local actors, 2) those who tend to be independent and have less reliant on existing local actors, and 3) those who build networks of similar-minded farmers and work together for resource acquisition. The paper concludes with an examination of challenges facing each of the three ideal-type operations.

Keywords: Constructive and synergetic relationship, Governance and management, innovative farmers

INTRODUCTION In Japan, the trend of food consumption and food culture is changing rapidly and diversifying. The key factor made the most influence on the diversification of Japanese food consumption was "Westernization" that began in the 1960's. Until now, Euro-American foods such as bread, meat, eggs, and dairy products have spread through to Japanese culture, centered on rice, seafood, simmered dishes and miso soup.

In general, the Japanese people have purchased food materials such as fish and shellfishes, meat and vegetables at retail shops and supermarkets, and cooked at home and eaten at home tableware (Kohnosu 2004). However, after the high economic growth, food service industry1, such as family restaurants and fast food have expanded and greatly grown. In recent years, the home-meal replacement service industry such as convenience stores handling rice balls and bento (boxed lunch) and the groceries at supermarkets and department stores have been growing. In the background of such growth of the industry, various changes such as improvement of income level, diversification of food consumption, women's participation in society, and the

1 In this paper, I define the food service industry as meals in buckwheat restaurants, fast food restaurants, pubs etc. 33

trends toward the nuclear family are conceivable. Along with the flow of the times, consumers are requesting more convenience of food

consumption by utilizing snacks and eating out including processed foods and cooked foods from the style of cooking at home. To respond to those times, the food service and home-meal replacement industry, such as family restaurants, tavern chains, supermarkets and convenience store has grown rapidly and is now one of Japan's major industries. Processed food dealers and the industries are taking advantage of low price trends, import liberalization and yen appreciation and importing raw materials from overseas (Fujino 2007).

Such a change in the social environment has also caused a major change in the production structure of agriculture. One of them is the expansion of commercial demand for agricultural products. In particular, it has a big influence on the production (supply) structure centered on vegetable production. Currently, the procurement method for vegetables mainly formed in the food service industry, has been widely penetrated into the home-meal replacement industry such as groceries at supermarkets and department stores. Such transformation of the procurement method has a great influence not only on the production and wholesale markets but also on the entities surrounding them. With the conventional supply system, it is impossible to deal with it.

THE STATE OF PRODUCTION IN JAPANESE AGRICULTURE Focusing on agriculture in our country, the difficulties are increasing year after year. The direction of change in such situation is as follows. Firstly, it is a decline of agricultural producers and a remarkable aging. Striking trends in farming populations in Japan are their decline in number and aging. The statistical data on farmers and percentage of those who are 65 years old or older (Table 1), collected by JMAFF, demonstrate clearly these trends. During 25 years from 1985 through 2010, the Japanese farming population plummeted from 5.4 million to 2.6 million with a decrease of 51.9 percent. For the same time period, the number of “senior” farmers (65 years old or older) increased from 1.4 million to 1.6 million. Accordingly, the percentage of the senior farmers also was increasing steadily. But this problem is a remarkable situation in agriculture compared to other industries. However, in Japan as a whole, the declining birthrate and the aging of the population are proceeding, and food demand will shrink significantly in the future.

Table 1 Number of farmers and farmers of 65 years old or older in Japan (Unit: 1000)

Year 1985 1990 1995 2000 2005 2010 Total number of farmers 5,428 4,819 4,140 3,891 3,353 2,606

Farmers of 65 years old or older(%) 1,443 (26.6)

1,597 (33.1)

1,800 (43.5)

2,058 (52.9)

1,951 (58.2)

1,605 (61.6)

Source: JMAFF statistics (Note: The “farmers” refer to individuals engaged in mostly farming as an occupation.)

Second, due to technological innovation such as storage and transportation, food

globalization has progressed. Along with this situation, inexpensive agricultural products are imported from overseas, and domestic agricultural products prices tend to be sluggish over the long term. Third, it is a deterioration of production environment. The influence of abnormal

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weather such as guerilla heavy rain and drought for a long time, and the influence of the production environment such as monkey and wild boar and other damage of wildlife damage are also expanding, and the producers are suffering from these influences.

Trends in the food service industry and "externalization of food consumption”

Trends in the food service industry According to the "Family Income and Expenditure Survey" (Figure 1) of the Ministry of Internal Affairs and Communications, the proportion of fresh food in food consumption has decreased from 48.4% in 1965 to 27.5% in 2011. On the other hand, the proportion of cooked food has increased from 3.0% to 11.7%, and the proportion of outdoor food consumption has increased from 7.2% to 17.8% respectively. The food consumption trends have changed significantly during the half century. It is said that dependency on processed foods and food service and home-meal replacement industry has increased, so called "externalization of food consumption"2 has progressed. Indeed, everyone may have experienced restaurants, fast food restaurants, and meals at department stores, supermarkets, convenience stores. In this section, I will look at the actual situation of the Japanese lifestyle, which has been changing dramatically in recent years, from the viewpoint of the food service industry and "externalization of food consumption".

Source: Ministry of Internal Affairs and Communications statistics

Figure 1 Changes in consumption expenditure ratio of food consumption

Trends over the food service and home-meal replacement industry

With the rise in income due to high economic growth and robust consumption demand in the

2 Refer to Kobayashi (2006), for the research on 'externalization of food consumption'.

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mass consumer society, the food service industry has grown dramatically. The driving force was innovation in terms of management and food procurement. On the management side, standardization and manualized process of store management and "chain development" by standard design stores were aimed at. Next, on the food procurement side, they have introduced a stable supply system of mass production and identical quality by unification of menu, "central kitchen system3 "and" specification order system 4". These two innovations became both wheels and industrialization was attempted (Oda 2004).

With this systemization, the taste of the cooked goods to be provided at the chain store was made uniform, and the industry resulted in a large growth. During the growth period, sales increased with the expansion of stores and food cost was reduced. However, with the bubble economy coming to an end and economic growth slowing down, the market of food service industry turned to a trend toward a shrinking trend. Consumers tended to refrain from expensive eating out as personal income declined. At the same time, the home-meal replacement industry has emerged as a threat to the food service industry (Figure 2). The meal form is to eat foods cooked outside the home at home, and a representative example is pick-me-up and lunch boxes. With the progress of quality control technology, it has become possible to purchase foods of quality that has never existed, easily at supermarkets, convenience stores and department stores. Moreover, the deliciousness is a certain degree or more, and improvements are repeated year by year. Because the price is affordable, it is getting penetrating to consumers as a handy accessible meal.

Source: Japan food service industry general research center

3 Central kitchen system is a facility that has the function of intensively managing ingredients, cooking and delivering it to stores. 4 This is an ordering method that entrusts production to a specialized manufacturer based on the "specification sheet" that specifies the ingredients and the amount of ingredients to be used.

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Figure 2 Changes in the rate of eating out per household

Changes in 'externalization of food consumption' According to the trends in the externalization rate of food, it increased from 28.4% in 1975 to 45.2% of the peak in 2007. After that, it shows a moderate declining trend, and the externalization rate of food consumption in 2011 is 44.1%. Recent trends are characterized by relatively decreasing the specific gravity of eating out, and increasing the gravity of home-meal replacement (Kobayashi 2006). Looking at the trend of the home-meal replacement, it was only 0.7% in 1975, but it increased to 8.9% in 2011. On the other hand, the rate of food service industry has reached its peak (37.8%) in 1997, after that it has begun to gradually decline. As of 2011, the externalization rate is 35.2%.Despite the rate of food service industry is on a downward trend in the prolonged recession, the "externalization of food consumption" rate is kept at a high level. The reason for this is that the existence of simplified home-meal replacement is increasing its importance. The use of prepared dishes and lunch boxes, which is started with young people and households with a common income, but now they are spreading in all households including the elderly.

Along with changes in people's lifestyles, the form of food consumption has undergone major changes, the dependence has increased, and "externalization of food consumption" has progressed. These Factors include (1) women's advancement in society, (2) increase in single generations, (3) changes in purchasing places / purchase patterns of food items, and (4) progress in food manufacturing industry. Moreover, in addition to these, supply of information on food, and presence of mass communication also have a great influence on consumers in recent years. It can be said that these changes have a great influence not only on the food consumption but also on the manner of agricultural production itself. In particular, the environment surrounding agriculture is changing dramatically, such as the demand for processing and business uses.

Current status of vegetable production and distribution and new movement

Current status of vegetable production Regarding the production of vegetables, the long-term declining trend of vegetable production in Japan and the increase in import volume from overseas are characterized, and it can be said that the production structure of vegetable production is changing. Several factors can be conceived as a cause of such change. First, domestic consumption of vegetable is decreasing, especially by young people. Secondly, domestic productivity declines due to vegetable producers' aging and a decrease in arable land area. In addition, it can be considered that the price of imported goods is lowered due to the appreciation of the yen and the transportation technology innovation such as aviation and maritime transport.

Figure 3 shows the trend of vegetable cultivated area and its production since 1998. The cultivated area consistently shows a decreasing trend since about 500,000 ha in 1998. It has remained flat in recent years, and the area in 2010 is about 430,000 ha. Production volume of vegetables decreased from 13.9 million tons in 1999 to 11.17 million tons in 2010. It has been declining nearly 20% in the past 10 years.

Figure 4 shows the trends in the import volume of vegetables including processed goods. In 1985, the volume of vegetables imported to Japan from overseas was 280 thousand tons, but it was 950 thousand ton in 1990, 1.85 thousand ton in 1995, and 2.24 thousand ton in 2000. As imports of vegetables are rapidly increasing, they are 2.27 million tons in 2011.

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Source: JMAFF statistics

Figure 3 Changes in cultivated area and production volume of vegetables

Source: JMAFF statistics

Figure 4 Changes in the import volume of vegetables including processed goods

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Among imports, weights account for a large portion from China. China was expanding its export volume to Japan steadily, from the end of December 2007 to January 2008, a Chinese frozen incident occurred, shook the domestic affair. As a result of this incident, Japanese consumers will have distrust and doubt on Chinese food. The influence remarkably appeared and the import volume of vegetables from China decreased by 40% compared with the same period last year in February 2008 and 25% in 2008 as a whole.

Current status of vegetable distribution Figure 5 shows the outline of the main distribution route in vegetable production. Flows of the thickest surplus arrows are the vegetable producers shipping fruits and vegetables to shipping associations such as agricultural cooperatives, trading is done in the wholesale market, fruits and vegetables are arranged at shops and supermarkets and fruits and vegetables in stores, and consumers go to buy it , Indicating the distribution route. Currently, the flow through these wholesale markets is on a downward trend over the long term. Nonetheless, the wholesale market route rate accounts for about 70% and it can be said that the main body of vegetable distribution still passes through the wholesale market. The reason why the wholesale market is the main body of vegetable circulation is because it has a collection function that gathers various products from all over the country and divides it into customers and a settlement function that surely collects the fee.

Source: JALIC statistics

Figure 5 Main distribution path of Vegetable production in japan

As a flow not going through the wholesale market, there are an increasing number of cases where vegetable producers ship directly to processors or middle / eater, and agricultural cooperatives, etc. are shipped to processors, meals, and restaurants. More recently, attention has also been drawn to cases where vegetable producers directly bring in and sell fruits and vegetables to neighboring direct sales departments.

There is an indirect flow by mediating agricultural cooperatives and processing agencies as a flow to vegetable producers directly as a flow to a middle-meal · restaurant. As a meal / bakery supplier, we are seeking producers who would like to supply the foods we want for as long as

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possible in order to have a system of annual supply. With respect to vegetables whose annual supply system is difficult, we are trying to deal with measures such as inter-production relays that take advantage of our own network. Also, if there are missing items due to various conditions such as natural phenomena, you will depend on purchasing vegetables from the wholesale market and importing from overseas.

Prospects of vegetable farming under cooperation with food service industry

Benefits of Contract Cultivation with food service industry As a benefit of vegetable producers contracting cultivation with cut vegetable dealers and meals / restaurant staff, it is possible to cultivate without being restricted by standards as it is mainly based on weight-based transactions. From cultivation that emphasizes quality including good appearance etc., it will be transformed into weight-oriented cultivation. Also, until now, it is possible to deal with skins that are not traded on the market (nonstandard items). Transaction prices are usually determined every half year or year, so they are less susceptible to price fluctuations due to unseasonable weather.

On the other hand, the point that contract cultivation is difficult is that lack of items is not allowed. Since the needs of actual customers are "fixed time, fixed amount, fixed price, constant quality", the correspondence becomes important. The producer side is required to pay the ordered quantity at the predetermined price, in accordance with the order quantity, within the delivery date. However, in agriculture production is unstable because it is affected by natural phenomena and climate change as its characteristic. Therefore, producers are trying to cope with the shortage of production by cultivating about 1.5 times as much as usual in order to avoid risks due to missing items. Even so, if a missing item appears, the producer himself must purchase and ship the shortage at the wholesale market or the like.

In recent years, new relationships between processors and meals and food service industry are beginning to appear. Many processors such as cut vegetable dealers are concurrently working with green fruit wholesale and wholesale businesses and in the process of business relationships such as fruit and vegetable supply to restaurant businesses, mainly in the form of sharing work processes such as under treatment etc. We have created a new entity to sell to merchandisers and meals dealers (Oda 2004). In such a relationship, there were many sales by single item cuts such as vegetables according to the needs of the meals and food service providers. However, in recent years, there is a growing need for kit products that anyone can easily cook in supermarkets and other backyards.

Sustainable collaboration with food service industry Many of the processors such as cut vegetable dealers were concurrently engaged with green fruit wholesale and wholesale industry. However, due to the growing demand for cut vegetables in recent years, companies are increasingly seeking to expand processing facilities and expand processing divisions. On the other hand, companies that cannot respond to such demand, and are going to be out of business, are also steadfast. In the past few years, including the movement of the meal and dining industry, the processing industry centering on cut vegetable industry will show big movements.

The biggest problem for cut vegetable dealers is the quantitative expansion of market needs and response to qualitative diversification and advancement. In order to meet the needs of these markets, it is necessary to level the mass of the company's cut project. To that end, it is

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absolutely necessary to secure a certain level of vegetables in the anniversary. However, in the situation of excessive demand like present, it is expected that securing vegetables itself will become difficult situation. From now on, in order to stably secure raw materials for cut vegetables, it is important to form diverse networks including peers and other businesses. Agriculture not only depends greatly on natural phenomena such as weather, but also has various unexpected factors such as difficulty in procuring at the end of the term. Therefore, in order to secure the quantity even at the time of unexpected (shortage), it is essential for operators to strive for risk avoidance in contracts with producers and production sites, and to establish a safety net.

Therefore, it can be said that building a network with vegetable producers and stakeholders (such as production brokers) surrounding cooperation between food and restaurant staff, and related entities such as JA is effective for reducing risks. As a risk avoidance of such anniversary, there are business operators who are dealing with cut vegetable business owners and dealing with multiple items. Also, in addition to recognizing inexpensive vegetables, in view of such risk avoidance, many businesses rely on imported goods from overseas.

As a countermeasure for risk avoidance, there is a production relay using long Japanese land in the north and south, and an information network for that purpose is being constructed. In some cases, processors and middle-meal / dinner companies directly send stakeholders to the locality, or they may combine hands with those who originally brokered themselves locally to obtain information and fruits and vegetables efficiently. In such a case, margin trading accounts for an important position, it is important to build a relationship to build relationships with local stakeholders for long-term relationships of trust, vegetable origin and a partnership with medium- to long-term prospects Become. In addition, if it is possible to have such creditworthy production areas, it will lead to a reduction in the risk of sudden accidents and disasters in the production area. It is also important for such relationships to build good relationships among vegetable producers, meals and restaurants, brokers, but it is important to build relationships with people beyond industries. It will become increasingly important in the future.

New roles of Japan’s agricultural cooperatives (JA) Farming entities are emerging Recently in Japan, farming entities demonstrating a dramatic breakthrough in their development are emerging. Such entities often extend business activities beyond farming as such to other entrepreneurial endeavors, including distribution (i.e., collecting and marketing) of agricultural products, transportation service, food processing, and mail-order and Internet sales. The emergence of these entrepreneurial endeavors has led to this study to examine how agricultural entrepreneurship can be materialized. More specifically, this paper aims first to propose a theoretical framework to analyze the agricultural entrepreneurship, then using case studies, to elucidate the process of entrepreneurial business development and characterize essential features of agricultural entrepreneurship.

Until recently, research on farm business development in Japan has tended to center on the managerial ability of farm executives (owners or managers), yet paid scant attention to entrepreneurship. While entrepreneurship with innovation as its central element has been considered the primary engine of economic development, it has distinct meanings for a diverse range of researchers, namely, innovation, establishment of a market, and creation and management of a business, hence has resulted in varying approaches to investigate it. In Europe,

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for instance, researchers have articulated agricultural entrepreneurship with competence of farm managers, organizational capability, policy measures and institutional frameworks, and government. In Japan where private financing, consulting services, and human resource providers are way less developed than most European countries and some in the Americas, farm managers attempting to embark on entrepreneurial activities are faced with many challenges and need to figure out alternatives, such as networking with partners with similar interests. Despite the dearth in research on entrepreneurship, therefore, researches on farm management should delve into agricultural entrepreneurship to better support rising entrepreneurial farm entities.

Rokuji-sangyo-ka and Japan’s agricultural cooperatives (JA) Rokuji-sangyo-ka means, if translated literally, sixth or hexadic industry or industrialization. It also means fusion or synthesis of primary or first, secondary and tertiary industrial sectors. 1 + 2 + 3 makes or 1 x 2 x 3 makes 6. That's why six.

First, I introduce some of backgrounds against which rokuji-sangyo-ka has emerged in Japan's farm and food sectors. One of many dire problems facing Japanese farm and rural sector is decline in income and rural economy. As consumers demands have diversified, retail sectors are eager to respond to them by developing new products, and as a result, increase influence and control over upstream side of the value change, that is, primary sector, resulting in lowered prices of products. While the downstream sector may gain more added values, the most critical problem is that primary sector producers, such as farmers, tend to be left out from such benefits. Global competition can exaggerate the pressure to lower product prices. Aging and depopulated rural communities just lose economic vitality.

In response to the situation, Rokuji-sangyo-ka movement intends to help primary sector producers, or farmers, increase their income by integrating pluri-sectorial business activities. By doing so, farmers are expected to be able to market their products, control prices, gain profits from added values that would belong to downstream players, increase income and contribute to revive local economy. Rokuji-sangyo-ka business can be instigated in different ways. But one of the most straightforward examples is an initiative of a farmer who wishes to do processing of his or her products by his/her own and market and sell it directly to consumers. With this business model, the farmer could gain more from added values. Or another pattern is an initiative to start up a joint venture with players of other sectors such as processing and retail.

From my past research, there are diverse patterns of Rokuji-sangyo-ka business development. This one, showing an ideal typical pattern of some farmers, demonstrates that Rokuji-sangyo-ka can be done by outsourcing processing. The next one is a more comprehensive pattern in which a farmer incorporates processing and direct sales to retailers of consumers. As the business goes well and sales increase, oftentimes more ingredients are needed. So, some farmers doing processing and marketing would build a network of collaborating growers who supply ingredients. The last pattern demonstrates a more complex business endeavor that incorporates more service-sector oriented business combining vineyard with restaurant, café, or wedding service.

In the agri-food value chain in Japan, Japan Agricultural Cooperatives, JA for short, have been playing vital roles in connecting products of predominantly small-scale farmers to the downstream sectors; but JA is now faced with the same problem of lowered product prices.

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METHODOLOGY To illuminate how JAs overcame obstacles to successfully coordinate between farmers and food service industry, this paper employs case studies, and two specific. The data collection relied on primarily interviews with the key informants involved in each case. In the analysis, specific foci were put on the processes. Also special analytical attention was paid to the support by and cooperation with the local government and other organizations for JAs.

The chosen cases were traditional JAs who were established by vegetables farmers and the choices were deliberate—while its production constitutes the core of agriculture of the region. Let's theoretically organize the role of JA to coordinate the actions of each business entity involved in business collaboration. In organizational theory represented by Kagono (1980) , the role of JA, which coordinates between business entities accompanying business collaboration, in order to facilitate business smoothly while participating by each entity, It will be adjusted in various processes from project planning stage to project implementation. When considering the schedule of adjustment that arises in the process of promoting business collaboration at the decision-making level, A. A preliminary examination stage (planning stage), which plays an important role in deciding adoption / rejection of the proposed business introduction, B The stage of concrete examination of business direction and business contents (concrete examination stage), the final decision such as specific concrete management method and finalization of members etc. to implement C project Three stages are considered: (final stage).

FINDINGS Overview of Japan’s Agricultural cooperatives In the food service industry, we are struggling to secure stable raw material vegetables, so it has been an issue to form diverse networks including peers and other businesses. However, neither advanced agricultural management, nor catering industry has management resources to form such a network, and cases using JA are increasing. JA aiming to collaborate with agricultural management bodies and meals and restaurant staff has actively developed countermeasures such as establishing a safety net to reduce the risk so that the quantity can be secured in recent years. Specifically, JA creates personal relationships with many agricultural management bodies with technologies that provide stable agricultural production, thereby reducing the risk of sudden accidents and disasters through relocation of production areas.

Case: JA Shimabara-Unzen and JA Kinosato At the planning stage (stage A), the sense of time required for product development is generally long, the agricultural management side who tends to forget the necessity to change the developed product for each season, and the season of agricultural products giving priority to the sense of speed of product development and social prevalence And frequent exchanges of opinions with the agricultural commerce and industry side that often tends to forget the harvesting period (four or five times so far). In addition to exchanging opinions at the conference, by setting up places for on-site training at farms by commerce and industry, on-site training at agencies for agricultural management to grasp consumer needs, and so on, It aims to foster sense of solidarity. "It is important for fostering a sense of solidarity to eliminate differences in expectations and targets among business entities," JA says. JA uses the "expertise" and "information" on agriculture, commerce, industry, and logistics cultivated in his / her career so far as power resources, and is appropriate for the meeting to lead agreement for product

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development Provide advice. Next, when the collaboration of the project is decided and the stage of concretely

examining the direction and contents (stage B, concrete examination stage), JA said, "We will give priority to withdrawing energy for development of both business entities It is said. For that reason, we will conduct tutoring sessions of prototypes and create concrete sites for net sales, present to the extent to which concrete power fee "remuneration" is achieved by product development, and collaboration between both parties we are striving to maintain and improve motivation towards. Also, at the time of further improvement of the prototype, it is necessary to reorganize the management resources owned by both the agricultural management side and the commercial and trading side, and to keep in mind whether further proposals for improvement can be made, The conference is proceeding so that both sides think something about the strength of this collaborative project and present it.

Finally, in the final stage (stage C, the final stage) where specific management is carried out, using JA's personal relationships and business relationships built up so far, it is possible to promote commercialization and sale by agricultural, commercial and industrial collaboration As a service, we are also implementing measures to provide environment friendly to agricultural commerce and industry collaborative projects as a package, such as introducing labels making companies and sales partners that would be short of business entities. Again, it can be said that JA's "expert knowledge / information" is useful as a power resource.

Summaries From the case studies above a few noteworthy lessons can be elicited. JA puts emphasis on the adjustment function among the business entities, especially at the planning stage, in the three stages of planning stage, concrete examination stage, and final stage, which are the three stages of business promotion shown above. As a reason for that, JA said, "From the experience as JA so far, rather than persuading business participants who have some dissatisfaction or resistance to the plan of business promoted by agricultural commerce and industry collaboration, agreement of project participants It is easier for the later stages to work out if you are patiently trying to find a solution until you can form it.

In order for JA that we saw in this article to play its role, as essential qualities, we can point out the following two points. The first point is to notice and appreciate the points that each entity can evaluate. For example, the processor will develop products closely tailored to individual management, such as processing using high quality of agricultural products, consignment with small lot, pursuit of new taste. In this process, the strengths and advantages of agricultural management bodies are emerging as commodities of products such as taste, texture and label design. In addition, although the scale of agricultural management bodies cooperating with commercial and industrial companies varies from family management to corporate management, each philosophy and management's creation adds its own "story property" to the product. These can be said to lead to the attractiveness of consumers.

The second point is to provide various information resources of JA as a package. It is of course indispensable to have a high consulting ability to respond to the detailed attention from the agricultural management side and commercial and industrial side and to prepare a sufficient human network. However, it is requested not only to provide it, but also to provide the know-how and networks that we have acquired so far as a package that can accommodate all scenes ranging from production, processing, and sales, to arrange it so that it fits the field of

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agriculture . In addition, when necessary, it is also necessary to provide an environment that is easy for the agricultural commerce and industry collaboration project, such as introducing labels making companies and sales outlets as a service to facilitate commercialization and sales.

Figure 6 JA’s role for Sustainable relationship between farmers and industries

CONCLUSION Generally, agricultural management bodies are considered to cooperate with commerce and industry in order to add some sort of strength to management. For example, it is possible to develop new products with reduced investment by building collaborations with vendors with expertise when trying to annihilate sales or brand agricultural products. In addition, there is no need to acquire new skills and secure human resources, and there is also the merit that stable product production and development are possible. Thus, the results obtained by cooperation with commercial and industrial agricultural business entities have great potential, not only in the framework where farmers expect to enjoy. In the price competition surrounding the current food industry, products developed by agricultural commerce and industry collaboration for general products that can be mass produced often cannot demonstrate superiority. That is why the characteristics and thoughts of each agricultural management entity and how commitment can be reflected in products are important factors in sales. Under such circumstances, in agricultural commerce and industry collaboration tackled by agricultural management bodies, it is important to "commercialize their thoughts and commitment" while pulling out "individuality" of farm management. Based on the above points, when conducting agricultural commerce and industry collaboration, agricultural management and industry companies need to pay attention to the following points. On the agricultural management side, in order to have a certain "thought" to become the personality of the product, the management philosophy should be clarified. On the other hand, it is important for commercial and trading companies to reconfirm that they possess

High quality

Management

philosophy

Sustainable relationship

Construct collaboration that draws out the

strengths and characteristics of each entity

Farmers

High product

development

Branding

know-how

Industry

①Highlight the points that can be evaluated ②Provide various information resources as a package

JA

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a large number of technology capital that can be utilized in collaboration with agricultural management bodies by rearranging the processing techniques owned by their company and the know-how of branding. Up to now, efforts to maximize the utilization of technology capital and information resources cultivated in the secondary and tertiary industries and to promote attractive product development for farmers are indispensable.

REFERENCES Fujino, N. 2007. Trends and challenges of vegetable import, Nounrin-kinyuu 60-3: 2-14.(In

Japanese) Kagono, T. 1980. Environmental response of management organization, Hakutoh-Shobo, Tokyo,

Japan. (In Japanese) Kobayashi, S. 2006. The trend of vegetable demand by intended purposes and the main issues of

domestic production, Journal of Agricultural Policy Research 11:1-27(In English) Kohnosu, T. 2004. Issues of vegetable supply based on actual demand - Response to demand for

vegetables for business, Nounrin-kinyuu 57-3: 2-13.(In Japanese) Oda, K.2004. Management development of food service industry and procurement of

ingredients, Norin-Toukei-Kyokai, Tokyo, Japan. (In Japanese)

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ENHENCING THE ROLES OF TAIWAN FARMER’S ASSOCIATIONS INRESPONSE TO CHANGES IN FOOD CONSUMPTION

Zou-nan Chou

Deputy Director, Dept. of Farmers’ Service, Council of Agriculture, Executive Yuan, Taiwan

ABSTRACT

Since the pattern of food consumption in Taiwan has tremendously changed over the past 3 decades, resulting in the food self-sufficiency ratio as low as 31.4% in 2015, the new government of this country make a lot of efforts in planning the new agricultural innovation policy, which includes the strategy of construction agri-food security and safety system to raise the food self-sufficiency by changing this food consumption pattern.

As one of the best partners of government which play the role of bridge between government and farmers, the farmers’ associations help government to promote the policy of food security and agricultural safety . To help the rural and urban consumers to build the confidence with domestic agricultural produce and to attract young people to start up their careers in agricultural section, the farmers’ associations are implementing the following measurements: 1) to assist with promotion of food and farming education programs, 2) to implementing the “Country Mother’s “ programs, 3) to develop the agricultural premiums with local produce, and 4) to encourage the young farmers to grow import substitute crops.

Keywords: Food and farming education, Food security, Food safety

I. INTRODUCTION For the past 30 years, the food consumption pattern has tremendously changed in Taiwan. Due to the increase in personal disposable income and more westernized life style, food selection is more diversified and specially consumes less on the starchy food.

From Table 1, it has shown the food consumption change in cereal, meat, eggs and milk for the past 30 years.

Table 1 The Per Capita Annual Availability of Food in Taiwan (Unit: kg)

Year Cereals

Meat Eggs Milk Total Rice Flour

1985 111.5 86.0 25.5 54.3 11.2 29.6

1995 100.4 59.1 31.9 72.8 16.2 58.8

2005 92.3 48.6 38.7 77.1 16.8 47.4 2015 86.6 45.7 37.0 78.1 17.3 46.7

Data Source : Council o f Agr icul ture , Food Balance Shee t , var ious year

For cereals, people prefer pasta to rice, as a result of increasing for imported wheat flour and the annual consumption of local rice per capital from 86 kilograms in 1985 to 45.7 kilograms in

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2015, while the protein intake from meat, eggs and milk consumption is rising. Meat consumption from 54.31 kg in 1985, jumped to 78.1 kg in 2015, milk consumption from 30 kg in 1985 to 46.7 kg in 2015. As a result, people in obesity in this country has significantly increased, and people health also gets alarmed. To educate people in Taiwan a balanced diet has become a major issue.

Due to the small scale of farmland and the climate in Taiwan, farm is not suitable for planting grains. For the consideration of cost for feeding hog and chicken, supply of soybeans and corn has to be depended on imports. Also, as mentioned before, the dietary habit has changed from rice to flour (wheat), the food self-sufficiency rate in Taiwan declines significantly. From Table 2, food self-sufficiency rate by calories from 47.7% in 1985 down to 31.4% in 2015, which means one-third of the food eaten by people in Taiwan is dependent on imports.

Table 2 Food Self-sufficiency of Ratios in Taiwan (%)

Year Calculated by Calories

Calculated by Prices

1985 47.7 88.0

1995 37.3 84.9

2005 30.2 74.0

2014 34.0 68.3

2015 31.4 66.4

Data Source： Council o f Agr iculture , Food Balance Shee t , var ious year

On the other hand, Taiwan's current world-wide political situation, to maintain a stable international food supply become increasingly important. Therefore, the food security in Taiwan has been promoted to the level of national security. Raising the food self-sufficiency rate has long been one of the priorities of Taiwan's agricultural policies, based on ensuring food security supply.

In addition, with the rise of consumer and environmental awareness, people eat healthy and safety has also been the major concern. More and more consumers like to know the food traceability.

II. The New Agricultural Innovation Program The new government in Taiwan won the national election in 2016 and the new agricultural team (the Council of Agriculture, Executive Yuan, equivalent to the Minister of Agriculture) proactively planned The New Agricultural Innovation Program which the strategy of constructing agri-food security system to ensure consumers’ rights and interests is one of the three major strategies. The measurements of this strategy are as follows:

(1) Implement the Big Granary Project: designate non-genetically modified grains production areas

To increase rural vitality and farmers’ income, COA will encourage farmers to grow import-substituted crops or non-genetically modified soy beans or corns on fallow lands. In

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addition, COA will construct post-harvest and agro-products processing system, encourage contractual production between farmers and enterprises, and offer advises to young farmers for vertical integration food production to processing.

(2) Promote organic and environmentally-friendly farming To enhance water conservation, soil fertility preservation, and soil microbe, COA will

promote organic farming, biotic- control, and carbon sequestration technology. Furthermore, COA will promote the legislation of Organic Agriculture Act for facilitating organic farming.

(3) Strengthen agriculture products safety from source To prevent farmlands pollutions, COA will promote the separation of irrigation and discharge

system, and strengthen investigation on farmland contaminations. In addition, COA will promote the reduction of chemical pesticide and fertilizers use, agricultural consultation system, and integrated management on crop cultivation and pest control.

(4) Increase inspection frequencies on agricultural products To prevent contaminated agricultural products being consumed, COA will strengthen

inspections for residual chemicals, heavy metals, or animal drugs on agricultural, fishery, and livestock products as well as heavy metal contamination on agricultural materials such as fertilizers and animal feed.

(5) Establish a trust worthy labelling system of agricultural products By the end of 2015, the production area of traceable agricultural products (TAP) reached

8,932 hectares, taking up 1.7% of cultivated areas. COA will establish a TAP task force to strengthen capacity building and raise consumer's recognition and trust in it. In addition, COA will make a connection between TAP and Global Good Agricultural Practice (Global GAP) and increase the production scale of certified agricultural products.

The above strategies and measures hope to reach 40% of the grain self-sufficiency rate in 2020, and the goal of integrating the single trust-worthy labeling for consumers in four years.

III. The efforts of Taiwan Farmers’ Association (TFAs) in helping government to promote the policy of food security and agricultural safety

In addition to all levels of government to actively counseling the relevant organizations to help promote “food security and food safety” policy, the TFAs, the government’s vital partners, also play an important role.

TFAs in Taiwan are one kind of the civil organizations which are long-standing, well-organized, deep-rooted and have large number of members, having been playing the role as a communication bridge between the government and farmers. Each association has 4 departments dealing with the tasks as credit, insurance, supply and marketing, and agricultural extension respectively. The TFAs also work in collaboration with the agricultural extension departments which not only help the government to communicate with farmers on many aspects, but actively counseling the consumers participation in promoting food security and food safety.

(A) Promote local food and farming education program Taiwan Farmers’ Associations are the most nationwide and grassroots organizations. Almost every township has a Farmers’ Association, which has the most direct and extensive contact with the farmers. The goal of agricultural extension work in Taiwan is to help rural people improve

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their life economically, socially, and physically by obtaining new knowledge, applying new skills, and developing new attitudes. The Farmer’s Association takes advantage of the group approach to handle the extension programs, which includes Production and Marketing Clubs for adult farmers; 4-H Clubs for rural youths; Home Economics Clubs for rural women. These three kinds of clubs emphasizes on strengthening the linkage of the local food and farming.

In respect of 4-H club, the advisors guide the 9-24-year-old rural youth who are students, or residents of rural communities to organize as units to practice the projects which include in learning the friendly farming, the relationship between the food they eat and farming, and knowledge about the local food coming from, and the benefits of local food, etc. The advisors also act as the tutors of schools near their county to provide the guidance toward the children to understand the agriculture of their hometown, to know the source of the food they eat, what the crop grows locally etc. The 4-h advisors all around the country hope to make the rural youth to be interested in agriculture, to support local agriculture products, love to enjoy the food produced by local farmers instead of the imported products, and even want to be a farmer as his career in the future. In 2017, there were 189 township farmers’ associations handling 620 4-H units, with a total of 24,000 young people, over 50% of them focusing on the local food and farming.

In regarding the home economic clubs, the home economics advisors take the responsibility to help rural women to reinforce the function of family and improve their livelihood situation. The advisors will direct the members to discuss major goals and subjects under the guidelines of COA national policy every year. For example, food consumption by local production, healthy diet and green consumption are the major subjects in 2017, and the members of home economics must discuss or practice in each meeting at least 4 times per year. Through the meeting process, the members will involve the local food and farming education activities. They also develop the specific recipes with local food materials, and promote it to other groups. For example, they apply the rice flour to make rice noodle, rice cake, rice bread or other traditional rice cookies or deserts. There were 245 FAs which have 2,751 home economics clubs, a total of 72,168 members, serve as a bridge between producers and consumers, They actively strive for cooperation with the county government, school community, supermarket, farmers market, young farmers to discuss cooperation promotional activities in marketing agricultural products, cooking, recipes and so on . And through the activities of the story-tell contest of “from the farm to the table”, contesters will tell the characteristics of local food and farmers, and to show the type of "good recipe by talk."

In addition, according to the diverse demand, advisors of 4-H and home economics are also encouraged to design the different teaching materials on local food and farming which strengthen healthy eating and agriculture care, so that rural youth and women would understand the crop production process, the friendly farming environment, organic agriculture, and also know how to eat local grown and on-season food, and have a balanced diet.

In 2016, on the 60th anniversary of Home economics education, TFA promoted the ”Having dinner at home” project to encourage family members to have dinner together at home. At the same time, the rural women are motivated to do the specific lunch box by local food and to cook rice instead of noodles, to eat at home instead of eat -out and fast food.

Besides, there are another 18 Farmers’ associations which are subsidized to implement the local food and farming and education activities for the general public and school children in the year of 2017. These activities are requested to select one of any local farm products as the

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contents which at least including the experience on farming, harvesting or processing on specific local food, to support local agricultural industry, and to identify the certificate of the healthy product such as CAS, TPG logo etc.

(B) Implement the “Country Mother’s” programs The advisors of home economic club in the farmers associations not only promote the concept of “ local consumption by local production” among the members of home economics and general consumers , and how to identify the certificate of the health agricultural product such as CAS,TPG etc. they also teach their members to eat healthy and more balance. Meanwhile, they encourage the members of home economics club who are good at cooking to organize the ‘Country Mother’ (Tian-Ma-Ma) group to develop business as another source of income. The members of Tian-Ma-Ma, are trained and inspired to use the local food materials and combine their unique skills with traditional menu to generate innovative and healthy cuisine.

Additionally, coping with the policy of agri-tourism which is encouraging people from cities to stay one night and having meals at countryside, Tian-Ma-Ma’s program provides a good chance for consumers to know the local, seasonal and delicious food which are made by friendly farming. These members of Tian-Ma-Ma are very proud of their dishes with three 8’s principles (80% food materials from local, within 8 kilometer distance or 8 minutes). They not only have created the job opportunities for other rural women, but also have developed their business successfully. Currently in Taiwan 138 Tian-Ma-Ma gourmet units around the country, which were sponsored by the COA and guided by the farmers associations, have generated 1,472 local jobs including the younger generation and earned a total of NT$330 million in revenue over the past years.

(C) Develop the premium produce in agriculture In supply and marketing departments, many farmers associations have been motivated to develop premium products with fine package and high quality by local agricultural produce. Every years COA will selected the top 100 products produced by Farmers’ and Fishermen’s Associations which are printed as delicate catalogues and are sent to the large enterprises in Taiwan for their reference on large-scale purchase as holiday gifts. Under COA restrict inspection and TFA’s efforts by themselves, these premium products not only meet the food safety regulation and upgraded to the high quality, but also won the trust of consumers, and becoming the best choice of souvenirs or holiday gifts for their friends. These premium products include, rice, fruits, tea, beverages, liquors, seafood, delicacies and combines.

In 2015 the premium products make profits about totally NT$800 million for TFAs. For instance, Da-Hu(in Mia-li), Xi-yi and Wu-Feng Farmers’ Associations take the rural product such as strawberry, plum and rice respectively to make different kinds of wine which won the top 100 products in 2015 , but also earned gold medals and silver medals from international liqueurs award, helping to introduce Taiwan’s wine and liqueurs to the international markets. Meanwhile, integrating with agri-tourism, these Farmers Associations make a lot of money from these products every year to improve their economic status.

There are some good examples as following: 1. The Cha-yi Farmers’ Association has taken advantage of local maize which are grown by

its contract farmers to make it as delicious snacks. Due to the non- GMO and freshness, it becomes as the best-selling product.

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2. Making contract with young farmers who are motivated to produce the imported substitute grain, such as soybean, the Lo-Dong Farmers’ Association in I-Lan County makes bottled soybean milk as drink and has become popular breakfast choice.

3. Kinmen Kaoliang Liquor Inc., which makes very famous and popular sorghum liquor in Taiwan, recently researched and developed the wheat wine which the materials are grown by farmers contracted with FA in the year of 2017. The National Farmers’ Association is in charge of marketing to around the country through the local Farmers’ Association. Because this kind of wheat liquor which are made by Taiwan local grown wheat with special flavor get more and more popularity with consumers, by the assistance of TFA, Kinmen Kaoliang Liquor Inc. is able to expand its scale of production through the contracted farming. This is another successful story of the Big Granary Project.

(D) Encourage the young farmers to grow imported substitute crops Grains grown in Taiwan may not be able to compete with other countries on the basis of quantity and the price, but the quality is superior. Consumers won’t have to worry about GMO, and local produce will always be more fresh than imported produce. Through the Implementation of above the local food and farming education activities, plenty of consumers have built the confidence on local agricultural food and are willing to pay extra on home-grown grains both for the guaranteed quality and freshness and to support organic farming practices. In recognition of the market potential, many young people have been interested in those areas and tried to start up their career in agriculture and engage in the production of imported substitute crops. Those young farmers not only get assistance from relevant authorities directly or indirectly while facing the challenges and difficulties in the actual practices of agriculture, but also get a lot of support and assistance from the Farmers’ Associations. For example, with the respect to obtain farmland, TFAs establish the e-farmland bank making the linkage of land lord and tenants to introduce the fallow land or land owned by the elderly farmers to the young farmers.

With the respect of demand on operational capital, the credit department of FAs will provide policy-oriented specific agricultural loans which is long term and low interest. There are more than 10 types of agricultural loan projects for young farmers, including the startup loan, business improvement loan, land purchasing loan, and agricultural machinery loan as well. In 2015 NT$360 million are loaned to 224 young farmers to solve their financial problems. If the mortgages are not sufficient, FAs will assist the young farmers to seek assistance from the Agricultural Credit Guarantee Foundation and receive a guarantee for 95% of its loan. The advisors of 4-H club and Production and Marketing Group have built a platform for the young farmers on exchanging their knowledge, skill and experiences. And hopefully the young farmers will successfully manage their agricultural business and will become a problem-solving team together.

IV. CONCLUSION

To the change on the food consumption pattern as well as the raising concern on the food security and food safety are the big challenges for Taiwan. The government not only has to make the best efforts to deal with it, but needs the assistances from civil organizations. Taiwan Farmers’ Associations (TFAs) are best friends and partners by the government historically. The TFAs could play both the pulling-pushing role on this issue. On the pulling side, TFAs have

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made great efforts on pulling up the confidence of domestic consumers on our local agriculture products. On the other pushing side, TFAs have motivated the farmers, especially the young farmers, to supply safe and healthy food. In the future, we have strong confidence that the TFAs could make great contributions in overcoming the challenges on the Taiwan’s agriculture.

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A VIETNAMESE AGRICULTURAL COOPERATIVE’S INVOLVEMENT IN THE FOOD SAFETY VALUE CHAIN: PERSTECTIVE AND POLICY

Dao The Anh

Centre for Agrarian System Research and Development (CASRAD)

Field Crops Research Institute (FCRI)

ABSTRACT

Over the past 20 years, Vietnam has changed the Law of Cooperatives 3 times with the aim of finding the most appropriate organizational model of production to support for household agriculture development. After the 2012 Cooperative Law came out into society, old cooperatives had to convert to a new type of cooperative, closer to the cooperative model proposed by ICA in mid-2016. With administrative constraints, only about 70% of the cooperatives of over 11,000 cooperatives have converted and about 30% have successfully converted in organizational form and mode of operation. In addition, the problem of food safety control is a challenge for agriculture with more than 80% of small scale farmers. The government is promoting a value chain linkage model aimed at ensuring safe food supply to consumers by using VietGAP certification. Currently there are about 557 supply chains have been voluntarily certified around the country. Agricultural cooperatives play an important role in these safe food supply chains with contribution of 27% in the total of certified chains. In particular, agricultural cooperatives play the role of organizing production for small scale farmers, common quality certification, common market access and linking with businesses in the value chain. However, the new type of cooperative has many difficulties in management capacity, access to capital and land so the scale of operation is small and the sustainability is low. In the future, the state needs realize policy to create a fair business environment for cooperatives, promote capacity strengthening and also changing the credit assess condition for agricultural cooperatives.

Keywords: Agricultural cooperative, value chain, food safety, Vietnam

I. INTRODUCTION In Vietnam, after the period of collectivization with the old cooperative model has ended by Doi Moi policy in 1988. In 1996, for the first time, Vietnam had a Cooperative Law, the agricultural cooperative of Vietnam was changed in terms of organization form and mode of operation in accordance with the law. Up to now, the agricultural cooperative in Vietnam had twice of adjustment in organization form and mode of operation under the Cooperative Laws 2003 and the Cooperative Laws 2012. The cooperative law has created a legal basis for the cooperative to make a strong and profound change in the organizational model, management and operational mechanism in practice, creat good conditions for cooperatives to assert themselves in a multi-sector economy. The new cooperative model is based on the principles that the International Cooperative Alliance (ICA) has confirmed for cooperatives in the twentieth

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century, as reflected in the Cooperative Law 2012: voluntary joining and leaving cooperative; democratic and equality management; self-responsibility and mutual benefit; the distribution ensures the combination of member’s benefits and cooperative’s benefits; cooperation and community development.

At present, agricultural cooperatives play an important role in the structure of agricultural production in our country, which is reflected in the number of members and activities of cooperatives: According to statistics, in 2015, there are over 7.3 million cooperative members in the country, 6.7 million households and individuals of which are members of agricultural cooperatives, accounting for about 45% of total agricultural and rural households. Some agricultural cooperatives have innovated in the mode of operation, applied technical advances in production, linked with enterprises, joined the safe food value chain, therefore the cooperative's performance and the members' incomes has been improved, the cooperative economic role has been affirmed for member.

However, the situation of small-scale and decentralized production, traditional and common practices in farming, animal raising and processing products are difficult to change, there are many difficulties in controlling food safety. On the market, good quality and ensuring food safety products is confused with conventional products, which makes it difficult to distinguish and choose. The society is very concerned about hygiene, food safety and their harm to the human body and social security. In the circumstances, agricultural cooperatives are a way for small farmers to participate in the supply chain of safe food to consumers. Base on these issues, we conducted a study on “The status of agricultural cooperatives involving in the food safety value chain".

(1) Status of agricultural cooperatives in the transition process under the Cooperatives Law 2012 In July 2016, the transition period of the cooperatives under the Cooperative Law 2012, the cooperatives did not comply with the deadline for re-registration under the Cooperative Law in 2012. Up to December 1st, 2016, there were 7,869 cooperatives (of total 11727 agricultural cooperatives) registered and re-organized according to the Cooperative Law, 5,633 cooperatives of which re-registered. In the agricultural cooperatives that didn’t re-register, about 1,097 cooperatives had stoped working and 277 cooperatives were operating badly, they would have to carry out procedures for dissolution or transfer to other forms in accordance with the Cooperative Law 2012.

In terms of the number of members and activities of the cooperative, the country now has 11,727 agricultural cooperatives, an average of 615 members per cooperative. The production and business value is about 44,555 USD/cooperative. Average profit is about 8,911 USD/cooperative/year; The average income of members and employees is about 44 USD/person/month. Most of the agricultural cooperatives now provide services for agricultural production and rural life (minimum services is 3 and, maximum services is 16), including: Provide input services (seeds, supplies, fertilizers, irrigation, etc.), preservation, processing and consuming products; management and exploitation of infrastructure for agricultural production, to cooperate with enterprises to invest in production, processing and consuming of agricultural products. Some agricultural cooperatives have innovated in the mode of operation, applied technical advances in production, linked with enterprises, joined the agricultural product value chain. However, the supply of other important services such as preservation, processing and

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consuming products has not been paid attention, so the number of agricultural cooperatives implementing contract farming for farmers only accounts for about 10%, therefore, the cooperative has not represented a role in supporting to increase the production value for farmer households.

(2) Assessment of the status and results of transformation of the organization form and mode of operation of agricultural cooperatives under the Cooperative Laws 2012 show the following characteristics: The process of transforming agricultural cooperatives under Cooperative Law 2012 has not been completed as scheduled by the Government on 30/06/2016. The progress of registration of cooperative activities is rather slow: 7.3% in 2014, 18.87% in 2015, to 30/6/2016 is 69.9%. Agricultural cooperatives have not been actively converted due to the lack of real motivation. The awareness of members is limited so they prepared the procedures for the conversion too close the deadline. Therefore, many cooperatives hasn’t transformed successfully, they need to finish (Department of Cooperatives and Rural Development-MARD, 2016)

Surveys in 9 provinces show that 30% of the cooperatives have successfully transformed in time, 51% of the cooperatives have converted but have not been successful according to the evaluation of the project and local authorities. The experience of 27 successful cooperatives under the Cooperative Law 2012 shows that cooperatives have been proactively implementing the transition from 2013-2015 to be successful as the transition needs to be well prepared and time. Therefore, the extension of the cooperative transition time and dissemination to have more cooperative members changing the awareness of cooperatives under the Cooperative Law 2012 (Tran Thi Thai, 2017)..

The process of transforming the cooperative has not been successful because most of the cooperatives have changed their organization or re-registered under the Cooperative Law 2012, but the rate of cooperatives actually change their mode of operation, the efficiency of activities is still low and the number of newly established cooperatives is also low..

To overcome this situation, the state level should implement comprehensive solutions in order to create favorable business environment in agriculture and rural areas for agricultural cooperatives, equal to enterprises to attract new cooperatives would be established and come into operation effectively. In addition, it is necessary to conduct research and assessment of indicators on business environment in agriculture and rural areas in order to create a healthy environment for the operation of agricultural cooperatives.

(3) Real situation of cooperatives involving in food safety value chain The problem of supplying agricultural products ensuring food safety in urban areas is the most urgent problem in Vietnam today. According to the results of the program and project of safe vegetables show that, Although the production organization of small-sacle farmers has partly satisfied the requirements of creating safe products through collaborative groups and cooperatives, other issues in the supply chain such as: Linking businesses and cooperatives, advertising and trade promotion, building a product identification system, provide origin information, linking with modern consumers in the inner city (safe vegetable shops, supermarkets, distribution companies) should be given priority (Dao The Anh, 2017).

In 2013, the National Agro-Forestry-Fisheries Quality Assurance Department (belong to MARD) implemented a policy of developing a safe food supply chain, Then, in 2016, MARD

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launched the program "Green Address - Clean Agriculture". By April 2017, there were 557 safe food and agricultural product supply chains in 62 provinces and cities. In the above mentioned safe food supply chains, agricultural cooperatives participate in 150 chains. Thus, the percentage of cooperatives participating in the safe food chain was 26.9%. There are 227 addresses of safe food business. At the time of launching the program (May 2016), according to MARD statistics, only 36 provinces and cities reported that 282 supply chains for agricultural and fishery products have been developed and MARD has also officially announced 69 addresses for the supply of agro-products that have been certified for food safety control by chain.

2016 is the year when the gorvernment concentrates on communication on cooperative economy in order to promote cooperative transformation according to the Cooperative Law 2012. However, the construction of large-scale commodity value chains and the establishment of cooperative alliances for the consumption of products are not really paid attention. The number of cooperatives involved in the product value chain has not been much; in some provinces, new cooperative models have not yet been established in association with the development of commodity value chains. The support, consultancy and service activities have not met the diversified needs of cooperatives in terms of both quantity and quality, especially in trade promotion, credit, science and technology. Some Cooperative Alliance have no Cooperative Support Fund.

Operational quality of agricultural cooperatives has been strongly changed since 2015 and especially in 2016, thus the number of cooperatives that operate effectively has increased from around 10% in 2014 to over 30% in 2016. The average revenue is 49,010 USD/cooperative, the average profit is around 8,911 USD/cooperative, the average income of members and employees is 66 USD/month. There are many cooperative alliances and cooperatives operating effectively, the revenue was over 445,553 USD/year as: Anh Dao Agricultural Service Cooperative (Lam Dong Province), Phuoc An Trade and Service Agricultural Cooperative (Ho Chi Minh City), Tam Vu Dragon Fruit Cooperative (Long An Province), Evergrowth Agricultural Cooperative (Soc Trang Province), Quy Hien livestock cooperative (Lao Cai province), Phuoc Hung agricultural cooperative (Binh Dinh province).... These cooperatives are mainly in the specialized areas of agriculture, quite far from urban areas and occupy a small amount.

However, only agricultural cooperatives in the peri-urban areas of big cities such as Hanoi and Ho Chi Minh with near-market advantages have been proactive in accessing safe food supply chains, especially safe vegetable and fruit cooperatives have more participation rate than other fields. For example, in Hanoi, a number of specialized farming areas have been established in the direction of high quality and safety: safe vegetables area in Van Noi (Dong Anh), Van Duc, Dang Xa (Gia Lam); High quality rice production area (Chuong My, Phu Xuyen); area of fruit trees combining ecotourism (Tu Liem, Soc Son); Area of pig raising ( Dong Anh ); area of dairy farming along the Red River, Duong River, Ca Lo River (Gia Lam, Dong Anh, Thanh Tri, Soc Son) and aquaculture areas (Thanh Tri and Dong Anh). Experience shows that good production models for safe vegetables are cooperatives or collaborative groups. Enterprises that participate in preliminarily processing and distributing cooperate closely with cooperatives and collaborative groups.

Hanoi has more than 40 safe vegetable pre-processing facilities mainly in the form of agricultural cooperatives, 5 facilities of which with high capacity (from 2,000-5,000 kg / day) in the vegetable production areas such as Yen My, Duyen Ha (Thanh Tri); Thanh Da (Phuc Tho); Van Duc (Gia Lam); Tien Le (Hoai Duc). The remaining is small processing facilities with a

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capacity of 200-1,000 kg / day and they are also associated with safe vegetables production activities of cooperatives including small-scale farmers. General characteristics of the pre-processing houses is having areas for washing, preliminary processing, sorting, packing vegetables, having water sources to ensure quality standards. However, most of the pre-processing houses have only operated with a part of their capacity. In the case of Tien Le Cooperative, with the support of many projects, a relatively modern pre-processing area of 40 m2 was built for the cooperative, but this area was also rarely used for pre-processing vegetable for cooperative members. The reason is that the scale of production of each household is small, there is no stable consumption contracts for products, famers consume their products. On the other hand, in order to reduce the costs (preliminary processing fee, transportation cost), the farmers conduct preliminary processing in the field or their house.

II. RESEARCH ON THE CASES OF AGRICULTURAL COOPERATIVES INVOLVED IN THE SUPPLY CHAIN OF SAFE VEGETABLES

(1) The case of cooperatives participating in the peri-urban short value chain, but loses comparative advantage Dao Duc Safe Vegetable Cooperative (Van Noi, Dong Anh) was established in 2003, from 12 members in the begining, now the cooperative has 352 members with 25 ha of land for all type of vegetables production in Van Noi safe vegetables zone. The cooperative produces and supply 100 tons of vegetables per month, mainly leafy vegetables and the most effective vegetables are mustard greens, choy sum and especially super sweet melon that bring to farmers 891 USD for 2,5 months. This is a cooperative with good vegetable production capacity and has a large market share of safe vegetables in Hanoi. Through the field survey, Van Noi safe vegetable area has a huge advantage with the location at the gateway to the capital, only takes ten minutes to provide vegetables to shops, supermarkets.

However, these advantages have not been used in practice, Dao Duc safe vegetable cooperatives (and many agricultural cooperatives in Van Noi) are facing many obstacles in vegetable consumption and it is very difficult to control the practice of the members. The cetification of VietGAP (Vietnamese Good Agricultural Practices) have not been implemented regularly so there is no trust of consumers. The operation scale of Dao Duc safe vegetable cooperatives is very fragmented, Cooperatives cannot control the production and consumption processes of their members. The cooperative also has a lot of awareness and effort to pay attention to safe vegetable production, but strict monitoring of vegetable safety is beyond the capacity of the cooperative's staff, and the involvement of members in quality and safety management is weak. In the commercial phase, there is still the phenomenon of mixing safe vegetables and unsafe vegetables for sale, so consumers loss their belief, leading to loss of market share. This is a failure of many cooperatives producing vegetables in the suburban area, Although they have good production capacity and are close to the market, they are not able to develop value chain and quality management in the chain so they are competed by the non-certified vegetable channels.

(2) The case of cooperatives involving in the peri-urban short value chain, supplying safe vegetables Here we analyze the case of Tien Le Cooperative (Hoai Duc, Hanoi) and Tien Kha Cooperative

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(Dong Anh, Hanoi). The common characteristics of the concentrated safe vegetable production areas of Hanoi are the participation of cooperatives. However, the role of cooperatives is quite different. Tien Le Cooperatives play an important role in organizing VietGAP quality certification, supervising safe production techniques and signing sales contracts. Meanwhile, Tien Kha Cooperative is only an intermediary actor for receiving government support and looking for consumers, the cooperative is not responsible for quality management

Table 2 The role of farmer organizations in the supply chain of vegetables (%) Source: Survey data from CASRAD, 2014

Table 3 Vegetables consumption of farmers' organizations in the vegetable supply chain (%)

Source: Survey data from CASRAD, 2014

Although vegetable production is safe, cooperatives have not built a sustainable

consumption linkage with enterprises and supermarkets, so farmers still organize their own consumption of vegetables at high rates.

Role of cooperatives Tien Le Cooperative (%) Tien Kha Cooperative

(%) Implementation of activities supported by the gorvenment

100 100

Technical supervision 16.67 0 VietGAP joint cetification 100 0 Supporting product consumption 20 0

Proposing to cooperative Organizing trade promotion and signing sales contracts

Looking for consumers

The form of consumption Tien Le Cooperative Tien Kha Cooperative 1. Self-consumption 80 100 2. Consumers

+ Collectors 30.00 66.67 + Whosale markets 58.89 94.44 + Retailers 51.11 21.11 + Collective kitchen 18.89 0.00 3. Consumption through cooperatives

households participation rate 20 0

Requirements of customers purchased via cooperative

- Fresh, tender, washed, sorted - Packing, tied, stamping - Shipping to the store - Average daily purchase volume: 50 - 100 kg

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Table 4 Effectiveness of farmer organizations participating in the vegetable supply chain Source: Survey data from CASRAD, 2014

To build and develop pre-processing facilities, wholesale markets and safe vegetable

consumption networks. The good thing is that beside the consumption of vegetables in wholesale markets, at present, Giao Long Investment Joint Stock Company (brand name of Lien Thao) has bought vegetables in Tien Le Cooperative. Therefore, the level of specializing in the growing of vegetables in Tien Le is higher than in Tien Kha.

(3) The case of cooperatives participating in long value chain, providing safe food for Hanoi: Tu Nhien Cooperative (Dong Sang, Moc Chau, Son La) Tu Nhien cooperative s a organization that has set up a collaborative groups of farmers producing safe vegetables, experiment and select quality vegetable varieties, transfer techniques of production, harvesting, preliminarily processing, packing and transporting safe vegetables to farmers, build high quality vegetable distribution channels in Hanoi market, in particular, building a strong linkage with major supermarket chains in Hanoi and neighboring provinces such as Fivimart, Metro, AEON and food stores. The cooperative has 35 members, producing and trading vegetables and fruit. Cooperative has successfully converted in 2015. Revenue in 2015 reached 218,321 USD. The cooperative has created many jobs locally, helping to increase the income of its members. Capital growth is now 22.277 USD, up 150% compared to the early period of establishment. The revenue reached 84,655 USD in 2014, 218,321 USD in 2015 and 104,705 USD in the first 6 months of 2016 The products of the cooperative (4 groups): vegetables for leaf, vegetables for tuber, vegetables for stem and flower, spice vegetable. In the first nine months of 2016, 140 tons of vegetables were consumed in supermarkets in Hanoi with stable prices and VietGAP standards. The output of vegetables distributed to businesses in Hanoi has increased from about 200 tons/year to over 450 tons/year, Fivimart Supermarket in Hanoi accounts for over 50% of vegetable consumption. Currently, the cooperative has been involved in the supply of safe vegetable products in the food safety value chain.

Criteria Unit Tien Le Cooperative

Tien Kha Cooperative

Total output of vegetables / household / year Kg/household 5,054 3,960 Total cost USD 411 282 Total revenue USD 2,031 1,182 Mixed income USD 1,620 900 Share of income from vegetables in total household income

% 62 38

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Table 5 Vegetable output is distributed through safe food supply chains (Unit: kg) Source: Off-season Vegetables ACIAR project, 2016

Retailer

Farmer Dinh Thi Xoa

Farmer Nguyen Thi Luyen

Farmer Nguyen Thi Tam

Farmer Nguyen Van Duyen Total

FIVIMART

225,060

225,060

Metro

155,580

64,410 219,989

AEON

74,273 74,273

Others 4,153 40,775 3,405 14,496 62,829

Safe vegetable shop 1,885 23,132 758 2,858 28,633

Ta Niet Group 24,829 3,423

28,252

Big Green

18,535 140 18,675

Bac Tom

12,405

12,405

Son Ha

2,715 2,715

VIG Company 2,462

2,462 In recent years, cooperatives have participated in the safe food supply chain of the Ministry of Agriculture and Rural Development, The actors involved in the project are more profitable than the outside chain. Specifically, the comparison of the efficiency of tomato consumption shows that: For the channel in the project, the sale price of producer is 0,04 USD/kg higher than the price in local market. Value added of producers is 0.2 USD/kg, collectors and retailers are 0.03 USD/kg and 0.21 USD/kg respectively. Compared with the consumption channel outside the project, the added value of the collector or retailer is lower (0.02USD/kg and 0.08 USD/kg).

Table 6 Consumption effeciency of 1 ton of tomatoes between the channels in 2016 (Unit: USD)

Source: Off-season Vegetables ACIAR project, 2016

Actor

Safe food chain Outside chain

Cost Buying price

Selling price

Add value Cost Buying price

Selling price

Add value

Producer 0.22 4.23 0.02 0.22 0.38 0.16

Collector 0.21 0.42 0.67 0.03 0.04 0.38 0.45 0.02

Retailer 0.23 0.67 1.11 0.21 0.02 0.45 0.55 0.08

The table below provides more details on cost accounting of the buying actor per ton of tomatoes.

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Table 7 Consumption effeciency of 1 ton of tomatoes of collector in project in 2016 Source: Off-season Vegetables ACIAR project, 2016

Type of cost Unit Quantity Unit price Total (USD) (%)

The cost of buying product

Kg 1,000 0.45 450 76.05

Packing (plastic bags …) USD 6.68 1.14 Transportation USD 60.15 10.27

Transportation loss 8% Kg 80 0.45 36 6.08

Labor for pre-processing Wage 2 4.46 8.92 1.52

Other USD 28.96 4.94

Total cost USD 558.9 100.00

Revenue Kg 920 0.67 616.4 Value added (VA) USD 28.96

In structure of costs during collection and selling process of collectors (cooperatives), Input costs accounted for the largest proportion of 76.05%, followed by transportation costs accounted for 10.27%, other costs accounted for 4.94%. Due to the high rate of loss in transportation (8%), in total cost, this cost accounted for over 6%.

Source: Off-season Vegetables ACIAR project, 2016

Figure 1 Value added per kg of tomatoes in the safe food chain

Selling price 0.42 USD 0.67 USD 1.11 USD

Value added 0.2 USD 0.03 USD 0.22 USD

Farmers Collecting, pre-processing

(HTX)

Retailers Consumers

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Figure 2 Tomatoes for FIVIMART Figure 3 Transport vegetables from Moc

Chau to Hanoi

(4) The case of cooperatives participating in long value chain, providing safe vegetable for Ho Chi Minh city: Anh Dao Cooperative (Dalat, Lam Dong) Anh Dao Cooperative was established in 2003 with 7 members and total initial capital of 4,455 USD. Cooperative has successfully converted in 2014. Anh Dao Cooperative is one of the effective production cooperatives in Lam Dong province. The cooperative has a relatively large vegetable production area, with 73.1ha of vegetables production according to VietGAP standards, mainly concentrated in Da Lat city and Lac Duong district, the annual output is 42,000 tons. Anh Dao Cooperative chooses the path of sticking with Dalat vegetables, because this is the advantage, the direction is favorable with the members who are farmers growing vegetables. At present, more than 70 types of VietGAP vegetables bearing the brand name Anh Dao are available around the country including Coopmart supermaket. Anh Dao Cooperative also take the lead in the cooperation with cooperatives in neighboring provinces such as Tan Phu cooperative (Dong Nai) to open the distribution of safe vegetables and ecome the agent for Anh Dao vegetable brand. From a startup cooperative with 311 USD of capital and a few hectares of land, after more than 10 years, Anh Dao became a million dollar cooperative, producing safe vegetables that got VietGap certification on the land of 270 ha, 127 ha of which are used by members to grow more than 70 varieties of vegetables, and they are consumed throughout the country and exported from 4,000-5,000 tons of vegetables and fruits mainly to markets such as Korea , Taiwan, Singapore, Cambodia and even Europe either directly or through pre-processing, packaging. Currently, the cooperative has two retail stores for consumers in Ho Chi Minh City Average revenue in 2014 is 7,128,854 USD, 8,019,960 USD in 2015 and 9,802,174 USD in 2016. The cooperative also invested 1,247,549 USD with interest-free refunds and guided cultivation techniques for 73 out of 180 labors that are ethnic minorities of the Central Highlands in Lac Duong district to grow safe vegetables in the direction of high-tech agriculture.

Anh Dao is a new style of cooperative that has effectively applied the open mechanism of the Cooperative Law 2012, and has done a good job of linking and promoting the role of the cooperative. Farmers only need to produce according to the standards while the cooperative takes care of the rest. It supports the farmers by linking, not admitting, and collective association in a flexible way. It also applies science and technology into production and business, encouraging competitive brands and ensuring dynamic management and application. Anh Dao cooperative produced with closed process from farming, harvesting, preliminary processing and

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consumption. The products of the cooperative are diverse and abundant. The products are quite good quality, most of the products have been controlled in terms of quality (analysis of pesticide residue, pathogenic microorganisms etc.). Thanks to always follow the safe production process, not only Coopmart supermarket but many other enterprises also buy vegetables from cooperatives. Therefore, the cooperative is increasingly developing both in terms of market and attracting more members.

The common supply chain

The common agriculturer supply chain is a one way channel from farmers to the consumers through harvesting, preprocessing, packing, transport and distribution by retailers. There is a lack of linkage in actors' activities and there is no main actor to maintain the sustainable linkages of the chain. The linkage in the chain are weak at all stages:

Input of production: cooperative will represent the members to select the material supply agents in the local area or associate with company of input material supplying for buying, Cooperatives can pay by cash or buy oncredits then pay later. This association is based on acquaintance, trust. Producers: Cooperatives and producers based on their experiences and relationships to select varieties to produce. Supply of seeds is strictly controlled from the input, thus limiting the outbreak of disease. Harvesting and Processing: Most of the products are consumed through contracts with Coop Mart, Big C, Metro.,... so the volume of products is not redundant due to market fluctuations. In addition, the cooperative has a system of preliminaries so the products are guaranteed hygiene and safety, packaging and labeling.. Transportation: Vegetables are transported to gathering points, then loaded onto trucks and transported to provinces, usually harvested in the morning and transported to the provinces in the afternoon and to the markets in the early morning of next day Distribution: 50% of vegetables in this chain are transported to Ho Chi Minh City, 30% are transported to other provinces. Mainly transported to reputable retailers, supermarkets, where vegetables are delivered to the consumer.

Value chain has linkage between cooperatives and enterprises Effort of cooperative members in recent years is to increase the proportion of products supplied in the chain. In the vegetable chain at the cooperative, the outstanding point is that there were key actors operating the chain, these actors have impluse the formation of other links in the whole chain. The two main actors in the chain are Cooperatives and Supermarkets. Supermarkets work with cooperatives to develop product consumption contracts. From the requirements of the contract, The cooperative organizes production, infrastructure investment, creates operating regulations at the stage of production inputs, organizes and plans production, links with households to produce, transport, preliminary process and distribute. The bright spot in the chain of vegetables in the cooperative is creating more and more the linkage chains that have high specialization and high binding by linking strategies between retailers and cooperatives. Cooperative plan between Coop Mart supermarket and Anh Dao cooperative in forming the concentrated clue in purchasing and processing in Da Lat. In addition, the linkages at the production stage were organized quite closely from the input and production plan. Cooperatives represent the producers to negotiate the price of materials with the agents to

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buy materials for the cooperative members and then redistribute them to the members. With this form, producers can reduce the cost of production by 5% and ensure quality of input materials. The linkage chain is strengthening and creating its own brand as vegetables in the chain must meet VietGAP standards.. As a result, the area of vegetable production under the good agricultural practice has been promoted, creating a general spreading for other production actors. However, the development of the current chain is also facing some difficulties in demanding higher and higher quality control issues, but the main difficulty is in the organization of production. The characteristics of the cooperative members in Lam Dong are their land is not concentrated in the same area but is located between the plots of other cooperatives. Therefore, the management and prevention of threats in food safety becomes difficult, In addition, the investment in infrastructure has become difficult because the producers in the cooperative do not use all services that the cooperative has invested but have to invest separately and push production costs up. Production land pollution also occur in the province, many production areas are not eligible for production due to pollution of irrigation water from other areas. Linkage of production-trade to bring sustainable development for the value chain, but with the current conditions, supermarkets in Ho Chi Minh City can not consume all the vegetables of the cooperative. Anh Dao Cooperative provides the supermarket with over 3000 tons of vegetables per year. But that amount only accounts for 40-50% of the total vegetable output of the cooperative. Therefore, it is still necessary to target other consumption channels such as wholesale markets. According to supermarkets in Ho Chi Minh City, safe vegetables are vegetables that have to be purchased directly from cooperatives / farms. Meanwhile, vegetables in cooperatives or farms are limited in varieties. Consequently, a supermarket must be connected with 4-5 vegetable suppliers, while the wholesale market has all the vegetables that supermarkets need. Therefore, it is necessary to change the viewpoint of wholesale markets and organize the operation of trading system of safe vegetable products in wholesale markets. Hence, in order to reduce intermediate costs, the price of safe vegetable products is closer to the income of the common consumer. The number of supermarket chains and convenience stores is rapidly increasing in Ho Chi Minh City and neighboring provinces, but supermarkets also have strategies for creating the supply of inputs for supermarket products. Many supermarkets have capital and are supported by provincial policies in attracting agricultural investment. Supermarkets have built large production areas to supply products for supermaket that lead to many chains that may be competing in the near future. In addition, supermarkets tend to sign contracts with producers about the types of vegetables that is difficult to produce, and need to invest in labor. Supermarkets are also want to develop their brands, products that are purchased from suppliers then will be pre-processed and labeled by supermarkets. This leads to the identification of the product is not clear, reducing the ability of traceability and monitoring of the origin of vegetable products.

III. LIMITATIONS AND CONSTRAINTS OF AGRICULTURAL COOPERATIVES IN THE SAFE FOOD SUPPLY CHAIN

The constraints in the safe agricultural production chain with the participation of many small scale farmers as in the case of vegetable production, cooperatives need to show the clue role. Because enterprises cannot sign contracts with each household. The role of cooperatives is very

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important, but now the cooperatives stand to buy agricultural products is limited because of weak business capacity. At the same time, the government should create mechanisms and policies to encourage businesses to produce and trade in safe agricultural products such as Trucks used to transport safe agricultural products are allowed to circulate in the city, exempted from corporate income tax in the first period, exempted from value added tax for safe agricultural products. The story of linking enterprises with farmers in raw material areas in supply chain, Enterprises cannot sign contracts with each household but through cooperatives. At present, only new cooperatives can ensure the same mechanism of operation as enterprises, However, this form of cooperative is not much, the management capacity to link with successful enterprises is limited. Key constraints of agricultural cooperatives when involving in the food safety chain The majority of agricultural cooperatives have changed their form in accordance with the Cooperative Law 2012, but the mode of operation has not changed, the thinking is still heavy on administration, still subsidized by the old style cooperative. The majority of agricultural cooperatives are currently focusing only on input service activities for agricultural production.: Supply of seeds, materials, fertilizers, plant protection, inland irrigation, etc.; The output services are very important such as: preservation, processing, marketing products are not interested, therefore, the number of cooperatives consume products for farmers is less, only about 10% of cooperatives have contracts to buy a part of product for farmers. Therefore, there is no support for increasing in production and value of agricultural production. Many agricultural cooperatives are confused in orienting activities and investing in production and business development. There are not many good services to meet the demand of producing goods. There is a lack of close cooperation between cooperatives and their members so the efficiency operation of agricultural cooperatives is limited: Considering the possibility of re-expanding activities of production services and the benefits that cooperatives bring to members, only about 10% of agricultural cooperatives operate at high efficiency; about 80% of cooperatives is average and weak in operation; 9.75% of cooperatives operate poorly or stop working (Now, there are 1,062 cooperatives). Due to the limited operating efficiency, the benefits to the members are not high, so the farmers don’t join ardently and have a strong attchment to the cooperative, they have not considered the cooperative as "their own house". The formation of linkage chain of production and consumption between farmers, farmers organizations, enterprises have many limitations. At present, the demand for linkage is great, but the number of cooperatives that can asociate with enterprises to sell products is still less. Most farmers still have to "self-produce, self-selling", leading to high risks in production, consumption and income of the people. In the fields of commodity production as rice in the Mekong Delta, dairy cows, sugarcane, coffee, pepper, only about 10-15% of the agricultural products are consumed through collaborative group and cooperatives. 4.2. Difficulties of agricultural cooperative The awareness of agricultural cooperatives at all levels, sectors and farmers on the role of agricultural cooperatives is not correct to the nature of cooperatives under the Cooperative Law 2012.. Regulations on the operation, assets and ownership of assets of the cooperative and members, support policies for the development of cooperatives and especially the responsibility of state management of ministries and branches for agricultural cooperatives are still common, this is the reason why people hesitate to join the cooperative.

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The situation of capital and funds of agricultural cooperatives is still difficult: The average capital of agricultural cooperatives is low and mainly is fixed assets that have been used for a long time, the factories and equipment has been downgraded, backward. Most of the agricultural cooperatives lack capital for production and business; it is dificult to access loans from credit institutions due to the need to mortgage their assets, Meanwhile, difficulties in mobilizing capital from members affect the production capacity and competitiveness of cooperatives. The quality of human resources in the management of agricultural cooperatives is currently low. Now, the qualification of the main staff of the cooperative is limited, lack of special training in the market. Thinking about business and production development has not kept pace with the development of the market mechanism, lack of acumen and dynamism in the organization of production and business. Beside objective factors are barriers of agricultural cooperatives in accessing food safety value chains is modernizing very quickly as mentioned above, agricultural cooperatives should actively improve their capacity to continue and properly implement cooperation agreements with enterprises on business and production planning, information recording, internal quality management and traceability. Cooperatives need to be proactive in planning production and expanding potential markets to promote the expansion of scale and model in the cooperative. The legal framework and policy system to support the development of cooperatives is not appropriate and lack of synchronism: Cooperative support policies are many but not strong enough and lack synchronism, lack of breakthrough mechanisms and policies to support strongly and practically to the cooperative. After the pulic of Cooperative Law 2012, the Government issued many policies for cooperatives in general and agricultural cooperatives in particular, but some were general, not specific and not suitable with the characteristics of agricultural cooperatives. Agricultural cooperatives should be supported in terms of registration and trademark protection, though safe vegetables now have a reputation in the market. However, the lack of registration of trademark protection can lead to the dispute, or be forged trademarks on the market, causing discredit of safe vegetable products.

IV. CONCLUSION Involving in safe food supply chain models is a way to motivate agricultural cooperatives to change methods of production and market access, thereby increasing the value of their products and the incomes of small-scale farmers who participate in cooperatives. However, currently the number of agricultural cooperatives accessing and participating in safe food value chains is limited, accounting for only about 27% of the total certified food safety supply chain by Mard. However, this is the successful chain organization model in Vietnam in recent years. Cooperatives play an important role in the organization of food safety certificates and good agricultural practices for small-scale producers, creat opportunities for many small farmers to involve in the safe food supply chain. Opportunities for agricultural cooperatives to involve in the supply chain of safe food is very large. To ensure sustainability, the food supply chain needs to develop management model following the value chain, cooperation contract between cooperative/or farm and enterprise through clear quality standards is a prerequisite condition for success. Government policies should focus on supporting agricultural cooperatives as: Create an equal business environment, capacity building for managers of cooperatives , promoting product

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marketing activities, cooperate with the cooperative to use promotional tools, increase consumer belief for safe products, is the bridge between the cooperative and the market, supporting in the preparation of procedures for certification of quality standards, protection of trade marks, legality in relation to the export of agricultural products. There are still many difficulties for cooperatives, especially when it is necessary to adhere to the principles of food safety management stipulated in the Law on Food Safety which is based on risk analysis for food safety and traceability. In order to comply with this principle, it is necessary to implement a food safety control mechanism throughout the entire production chain with the participation of actors in the chain, including the cooperative, small-scale farmers and members of the cooperative.

REFERENCE Dao The Anh. 2016. Current status and solutions to promote the change of organizational form

and mode of operation of agricultural cooperatives under the Cooperative Law 2012, Vietnam rural development and science association, No. 29/2016;

CASRAD, 2017. Solutions for the development of high quality and safe agricultural supply chains in Hanoi, Final Report. Hanoi.

Department of Cooperative Economy and Rural Development - Ministry of Agriculture and Rural Development. 2016. Summarize 03 years of implementation of Cooperative Law and tasks and solutions for cooperative economic development in 2016 in agriculture.

Chu Tien Quang. 2016. Some viewpoints and solution orientation to promote the transformation of agricultural cooperatives into effective organization form and mode of operation under the Cooperative Law 2012 to build new rural areas . Vietnam rural development and science association, No. 30/2016

Tran Thi Thai, 2016. Understanding the transformation of agricultural cooperatives under the Law of Cooperatives in 2012 through research and surveys in some provinces, "Journal of Party History, No. 3/2016.

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THE ROLES OF AGRICULTURAL COOPERATIVES IN CERTIFICATION AND PRODUCTION OF GEOGRAPHICAL INDICATION (GI) RICE IN

THAILAND5

Orachos Napasintuwong

Department of Agricultural and Resource Economics, Faculty of Economics, Kasetsart University Bangkok, Thailand

Email: orachos.n@ku.ac.th

ABSTRACT

Hom Mali rice or Jasmine rice from Thailand has been reputable for its strong aroma and soft texture, and perceived as high quality in the world market. With increasing demand for high quality products from rice consuming countries, the competition for Hom Mali rice has been escalating by exports of Jasmine-type rice from competitors. Thung Kula Rong-Hai area, located in the Northeast Thailand where most farmers are smallholders and poor, is famous for high quality and prominent aroma Hom Mali rice. To provide the origin information and differentiate Thailand’s Hom Mali rice from competitors, in 2006, Thung Kula Rong-Hai Hom Mali rice was registered as Geographical Indication (GI) by the Department of Property Rights, and in 2010, it was registered as Protected Geographical Indication (PGI) by the European Commission. This paper investigates the roles of agricultural cooperatives located in Thung Kula Rong-Hai areas in facilitating the GI certification and production process. It is found that agricultural cooperatives are important intermediary in connecting farmers to high quality product market.

Keywords: Geographical Indication, GI, Protected Geographical Indication, PGI, Hom Mali rice, Jasmine rice, Cooperatives, Thailand

INTRODUCTION Aromatic rice, specifically Basmati rice (hard varieties) and Jasmine rice (soft varieties), is generally preferred in the international markets (Custodio et al. 2016), and fetches considerably higher price than normal white rice. Prior to 2007, Thailand was the only exporter of Jasmine rice. As the demand of high quality rice is increasing in rice consuming countries, especially among high income countries and high income consumers, several rice exporters started to direct their policy towards expansion of aromatic rice production. Thai Hom Mali rice or Jasmine rice from Thailand has set an excellent reputation in the international market for several decades due to its unique aroma, soft and sticky quality as preferred by consumers from rice eating countries (Suwannaporn and Linnemann 2008).

Thung Kula Rong-Hai (TKR) located in Northeast Thailand is known among Thai consumers that it is the area where the premium Hom Mali rice is produced due to the nature of the soil, quality of the water used, number of hours of sunshine, narrow range of temperatures, cool dry weather in the harvesting season, etc.) The area extends across five provinces make up to about 337,000 ha. Yoshihashi et al. (2004) found that Hom Mali rice produced in the rain-fed area of TKR has higher 2AP (the volatile compound constitute in aromatic rice) than the same

5 Paper prepared for presentation at the International Seminar on Enhancing Agricultural Cooperatives’ Roles in Response to Changes in Food Consumption Trend, Sept 18-22, 2017, Taipei, Taiwan.

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rice produced in other areas. In other words, Hom Mali rice from TKR has a more prominent aroma than the same rice produced elsewhere. Due to its reputation and to protect Hom Mali rice produced in TKR from its competitors, Geographical Indication (GI) is one of the ways to protect the products that have quality or reputation attributable to its geographical origin (World Trade Organization 1994). A GI is a sign used on products that have a specific geographical origin and possess qualities or a reputation that are due to that origin, and those who have the right to use the GI can prevent its use by a third party whose product does not conform to the applicable standards (World Intellectual Property Organization). Khoa Hom Mali TKR, literally translated into Hom Mali rice in crying Kula plain, was registered GI by the Department of Property Rights, Ministry of Commerce of Thailand in 2006, and later registered Protected Geographical Indication (PGI) by the European Commission in 2010. The motivation to use GI to protect TKR Hom Mali rice is not only to differentiate the products with outstanding characteristics specific to the TKR plain, but also to help the development of the community in TKR plain through quality recognition and premium price of GI products. Farmers who produce Hom Mali rice in TKR plain and fulfill the standards set out in the code of practice for the GI will be certified and have the right to use GI sign. They can to exclude the use of the term “Thung Kula Rong-Hai” from Hom Mali rice produced in other areas or not produced according to the code of practice.

Although the GI certification is one of the ways to build quality recognition and bring more benefits to farmers in this geographical area, the adoption of GI certification is still limited. Ngokkuen and Grote (2012) found that one of the limitations of adopting GI certification is the access to the market. Due to large area of TKR, farmers bear high cost of transportation to deliver the paddy to certified GI buyers or millers. As farmers have choices to sell rice to different buyers such as, agricultural cooperatives, middlemen, private rice mills, government and certified GI rice buyers; even if they are located in the geographical area of TKR, they may not have incentives to sell the products to certified GI millers in further locations unless the transportation cost is compensated by price premium of certified GI products. Furthermore, in this study, found that access to information about GI and being a member of agricultural cooperatives significantly affect the adoption of GI rice production. Thus, this paper aims at exploring the roles of cooperatives located in the TKR plain in the production and certification of GI Khoa Hom Mali Thung Kula Rong-Hai.

GI THUNG KUKLA RONG-HAI HOM MALI RICE PRODUCTION Thung Kula Rong-Hai is a large plain extending across five provinces in Northeast Thailand, namely Roi Et, Mahasarakam, Surin, Yasothon and Srisaket (Fig. 1). It covers a total of 337,230.40 ha (European Commission, 2010). The main crop produced in this area is Hom Mali or Jasmine rice. In order for Hom Mali rice to be GI TKR, the production has to be performed according the Code of Practice (CoP) which describes the manner of production, requirements for processing, and packaging resulting from a consensus among the stakeholders in the value chain concerned with the GI. Two photoperiod-sensitive varieties, namely KDML 105 and RD15, constitute Hom Mali rice. It has to be produced from seeds obtained from the Rice Department or rice grain producers, i.e. farmers’ organizations or private organizations certified by the Rice Department based on the standards for rice grain production, cultivated during the rainy season, and the whole of the production process from sowing to harvesting must take place in the defined geographical area. Furthermore, the processing has to take place in the five

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provinces of the TKR area.

Figure 1 TKR plain in Thailand Note: Shaded area represents the location of Thung Kula Rong-Hai and the thicken lines demonstrate provincial

boundaries of Roi Et, Mahasarakam, Surin, Yasothon and Srisaket provinces To ensure the quality of GI product, one important element in the CoP is the control plan

which describes how the controls will be used and when needed, the certification system. The control system of GI TKR Hom Mali rice could be through self-control, internal controls or external control system. Under the external control system, the Certification Body (CB) has a responsibility to perform GI control on behalf of the Department of Intellectual Property. Under the internal control system, GI committee at provincial level, has a responsibility to inspect the operation of producers, processors, farmers, and industries that have self-control system. For the self-control or auto-control system, producers, processors, farmers, and industries have to control themselves following production manual.

Certification of GI products is the most commonly used and required verification system in international markets for which producers have to pay for the services (inspection and certification) (Vandecandelaere et al. 2009). For Thai GI certification, the stakeholders have to follow the production manual consistent with the CoP, and have a control plan at provincial level or producer level. The certification of Thai GI is valid for two years. The EU PGI certification, however, requires that the production process has to be done only through third party CB who has met ISO 17065 standards. A CB certification for GI TKR Hom Mali rice involves an independent and external body (i.e. Bioagricert) that has no direct interest in the

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economic relationship between the supplier and the buyer and which provides assurance that the relevant requirements have been followed. The certification of EU PGI is valid for one year.

AGRICULTURAL COOPERATIVES IN THUNG KUKLA RONG-HAI RICE CLUSTERS The study by Ngokkuen and Grote (2012) regarding the adoption of GI certification by rice farmers in TKR in 2009 suggested the GI registration and institutional framework as illustrated in Fig. 2. Under this framework, the agricultural cooperatives were one of the key stakeholders in the Hom Mali rice production in TKR along with rice mills and other rice processors. Their study also found that being a member of agricultural cooperative also influence the adoption of GI TKR Hom Mali rice certification. The producers of certified GI TKR Hom Mali rice consists of rice farmers, collectors, millers, packing houses, marketing mediators and distributors (Fig. 3). Under geographical indication rice standard of Thailand, certified GI farmers have to also meet either Thailand’s organic or Good Agricultural Practice (GAP) standards (National Bureau of Agricultural Commodity and Food Standards, 2014). The certified GI collectors and millers (who also usually carry out packing and labeling) have to meet requirements in the CoP. The milling and packing can be taken place in the five provinces of the TKR area, and not necessarily in the TKR itself.

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Source: Ngokkuen and Grote (2012)

Figure 2 GI certification process of Khao Hom Mali TKR

Figure 3 Supply chain of GI Khao Hom Mali Thung Kula Rong-Hai

Agricultural cooperatives have played an important role in the production of GI TKR Hom Mali rice, especially under the cluster. Cluster is the geographic concentration of interconnected companies and institutions in a particular field (Porter 1998). The main advantage of a cluster is to enhance productivity i.e. better access to farmers and access to specialized information regarding the production and markets of the Hom Mali rice products. In 2004, the government has initiated “Production of Thung Kula Rong-Hai Hom Mali Rice for Exports” project. The initiatives of this project were collaborative efforts from several organizations under the Ministry of Agriculture and Cooperatives (MOAC) including Land Development Department, Royal Irrigation Department, Department of Agriculture, and Rice Department, Department of Agricultural Extension, and Cooperative Promotion Department. Following this project, between 2009 and 2010, the Cooperative Promotion Department has established the “Thung Kula Rong-Hai Hom Mali Rice Cluster Development” project to enhance rice production efficiency and development rice products to meet the markets demand, and, in turn, contribute to increases in incomes and livelihoods of farmers. The members of Thung Kula Rong-Hai Hom Mali Rice Cluster consist of 20 agricultural cooperatives. After a few years of collaborative efforts among member cooperatives, and with advice from local universities, namely Khon Kaen University and Maha Sarakham University, and supports from the MOAC i.e. seminars, training, the cluster has improved their rice production performance via a better understanding of the market, and rice production knowledge. Furthermore, the export market channel was widening through an arranged supply for major rice exporters. The revenue of the cluster’s cooperatives members increased from about 2.62 million USD in 2006 to about 5.57 million USD in 2010 (Bangkok Business News, 2011). Several collaborative efforts were initiated such as sharing the rice supply orders, taking advantage of milling and processing capacity of cooperative members and access to the members’ market network.

In addition, as nearly half of TKR area is located in Roi-Et province, the Roi-Et Hom Mali Rice Cluster was also established in February 2010. The Roi-Et Hom Mali Rice Cluster includes not stakeholders located in TKR area, but the whole province. Twenty seven agricultural cooperatives, five community enterprises, and one private company were members of Roi-Et

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Hom Mali Rice Cluster. The goals of this cluster are not only to enhance competitive advantage of Hom Mali rice, but also to create a network of production, processing, and marketing of all Hom Mali Rice and its products such as cosmetic and food products. There were seven rice millers in this cluster (six of which belong to agricultural cooperatives). There are several advantages of clusters in the innovation system such as promoting competition and cooperation. Both Thung Kula Rong-Hai Hom Mali Rice Cluster and Roi-Et Hom Mali Rice Cluster reveal that they can create the cooperation across vertical integration, and at the same time create competition across horizontal integration i.e. among cooperatives.

At the present, 2017, there are at least 46 agricultural cooperatives located in TKR area engaged in rice cultivation activities, but only three of them, namely Kaset Wisai Agricultural Cooperative, Ltd. (Kaset Wisai District, Roi-et province), Chumphon Buri Agricultural Cooperative, Ltd. (Chumphon Buri District, Surin province), and Agricultural and Land Reform Chumphon Buri Cooperative, Ltd. (Chumphon Buri District, Surin province) are certified GI TKR Hom Mali rice collectors. Among the three, only one (Kaset Wisai Agricultural Cooperative, Ltd.) is also certified GI TKR Hom Mali rice processor For the other two certified GI TKR Hom Mali rice collectors, the Agricultural and Land Reform Chumphon Buri Cooperative, Ltd. does not have its own milling capacity while Chumphon Buri Agricultural Cooperative, Ltd. does have its own miller but is not certified as GI miller because the collection of paddy from certified GI farmers is transfer entirely to other certified private GI miller located in Roi-et province but outside of TKR area.

It is worth mentioning that not all members of certified GI TKR Hom Mali rice cooperatives are certified GI TKR Hom Mali rice farmers, and vice versa. Certified GI TKR Hom Mali rice farmers commonly belong to a group i.e. community enterprises and rice community centers that has supported programs from the Department of Intellectual Property or the Rice Department for rice production standards i.e. GAP. Although the cost of GI certification of TKR Hom Mali rice by the CB is rather expensive, it is almost entirely subsidized either by the Department of Intellectual Property and the Rice Department at the moment. For organic and GAP rice producers, the cost of compliance to GI standard should be not be a burden especially when the certification cost is subsidized. Nevertheless, only a few of rice farmers’ organizations successfully attain the GI certification although several rice farmers’ organizations have met GAP or organic standards in the TKR area. Furthermore, some certified GI producers including cooperatives that were able to meet GI standards become ineligible after the certification expires. As Porter (1998) suggested that a dynamic competition to win and retain customers is needed for the success of clusters, it is evident that through the competition, not all agricultural cooperatives perform well and remain competitive in certified GI production.

THE ROLE OF AGRICULTURAL COOPERATIVES GI CERTIFICATION AND PRODUCTION

The certification of GI products is one of the innovations in production systems to improve product quality and assurance to consumers. Agricultural cooperatives can play an important role as intermediaries in innovation process. Howell (2006) suggested that innovation intermediary can be a range of organizations involved in supporting the innovation process. Functions of innovation intermediation as he described include foresight and diagnostics; scanning and information processing; knowledge processing and combinations/recombinations;

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gatekeeping and brokering; accreditation, validation and regulation and standards work; advice and mentoring on protecting intellectual property; and commercialization, for example (Howell 2006 p. 720). In addition, Agogue et al. (2013) reviewed the traditional roles of intermediaries as networking and brokering, and suggested that under high uncertainty and societal demand for collaborative innovation was strong; the intermediaries are in the position where they can perform activities in a more collaborative setting, and that no single organization can perform by itself.

In this section, the role of agricultural cooperative as intermediaries is discussed. There are several roles that agricultural cooperatives are involved in the GI certification and production of TKR Hom Mali rice. First, and maybe one of the most important roles is scanning for information on potential GI rice farmers, and filtering or selecting collaborative partners, namely rice farmers group, millers, regulators, and technical service providers. As certified GI TKR Hom Mali rice agricultural cooperatives are all paddy collectors, the certified agricultural cooperatives connect certified GI farmers and their products to the market, in this case, to certified GI millers. Potential GI farmers were first identified with the assistance of the Rice Department among members of the cooperatives from existing groups complying with GAP or organic standards as a prerequisite to GI certification. Identifying potential farmers is important to ensure the success of certified paddy procurement. As agricultural cooperatives have information on social, economic and production background of their members, screening and selecting partners are less complicated. All the certified GI rice farmers in TKR area who sold their paddy to agricultural cooperatives are the members of the three certified GI agricultural cooperatives. The agricultural cooperatives not only locate close to the area of paddy fields, but also have extensive relationships with farmers through providing credits, input procurement services, and saving, for example. As a result, despite several choices to sell their paddy, agricultural cooperatives’ member farmers have a trust in fair market price of paddy sold to agricultural cooperatives and not only because they are located near the collecting silos.

Second, agricultural cooperatives manage knowledge processing by providing technical and information services. The production of GI rice compliance with the CoP is mostly provided by the Rice Department. Nevertheless, staff of agricultural cooperatives often received the production and accreditation knowledge from the regulators, academia, and public and private sectors, and also have a better access to information on market demand and product preferences, for example, than farmers. They also transfer the information and knowledge to farmers i.e. through trainings and meetings.

Third is gatekeeping and brokering. This role is important for match-making and collaborative deals of certified GI products. Agricultural cooperatives are often located closer to the farms than certified GI millers. The collections of certified GI paddy by certified GI agricultural cooperatives are sometimes facilitated prior to the production season with the assistance from the Rice Department. Through this arrangement the Rice Department help negotiating with certified GI millers to help farmers obtaining premium price for certified GI paddy. Because certified GI agricultural cooperatives are located closer to farmers, and some certified GI millers are located in a more remote area, paddy collection by agricultural cooperatives is crucial in helping farmers access to the GI market. As mentioned by Ngokkuen and Grote (2012) that distance was one of the constraints in adopting GI certification in 2009, but through this current intuitional arrangement, the production of certified GI products become more promising. Furthermore, one agricultural cooperative is also a certified GI processer. In

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this case, its role of brokering is finding business deals with the potential clients of certified GI products.

Forth is product testing and validating. In procuring paddy from farmers, the agricultural cooperatives have to ensure that they are registered GI farmers. Furthermore, the paddy has to be tested for purity and quality at the time of delivery. It is not the test of GI farm management compliance, but the products have to be at least of minimum standards for Hom Mali rice. The accreditation of product standard is done by external CB. Vandecandelaere et al. (2009) stated that the role of producer organizations is important in making it more efficient and less costly in the GI guarantee system than one managed individually, for example, by reducing cost of complying with administrative and technical procedures. In the case of certified GI TKR Hom Mali rice, agricultural cooperatives manage collecting, sorting, storing for GI paddy ready for milling process. Under the control plan, it is important that the certified GI paddy is traceable back to certified GI famers. The transfer of paddy to millers by agricultural cooperatives has to ensure that certified GI products are isolated from other paddy, and well-documented of the sources. Economies of scale occur from collecting a large volume of paddy at the same time of delivery and minimizing the cost of administration and transportation. Their role are contributing to the controls and record keeping (traceability system).

Last is the commercialization. Although there is only one certified GI producer, this Kaset Wisai Agricultural Cooperative, Ltd. is successful in producing quality product as its product brands received national award for quality packaged Hom Mali rice very several consecutive years. Furthermore, the marketing and sales through agricultural cooperative network nationwide help identifying market opportunities and ensuring steady demand. This is important for certified GI products as the market for GI products is still new, and most Thai consumers are not very much aware of the advantages of certified versus non-certified GI products.

CONCLUSION Agricultural cooperatives traditionally play a significant role in the rural agricultural communities as people of the same interests voluntarily join together to meet their common economic, social, and cultural needs. The production of high quality agricultural product in this study, namely certified GI TKR Hom Mali rice in Thailand is relatively new to the market, and still has several market uncertainties as most Thai consumers are not aware of the benefits of certified products. The review of three certified GI agricultural cooperatives in Thung Kula Rong-Hai revealed that they are important intermediaries that increase production productivity by reducing the transaction cost through the economies of scale of product procurement, sorting, storing and delivering to the processor. Furthermore, the cooperation among cooperatives and between cooperatives and other stakeholders in the area that concern for the community make the role of agricultural cooperatives significant as they have close relationships with the members. Nevertheless, not all agricultural cooperatives have the same capacity for being certified producers despite locating in strategic area for GI products. Further investigation will be needed to identify competency of the certified versus non-certified ones.

ACKNOWLEDGEMENT This paper is based upon work supported by the European Union’s Horizon 2020 research and innovation programme under grant agreement No 678024.

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REFERENCES Agogue, M., A. Ystrom, P. Masson. 2013. Rethinking the role of intermediaries as an architect

of collective exploration and creation of knowledge in open innovation. International Journal of Innovative Management 17(2): 1-24.

Bangkok Business News. 2010. Hom Mali Thung Kula Rong-Hai Rice Cluster: From Collaboration to Opportunity Creation. 7 August 2010 page 10.

Custodio, M. C., M. Demont, A. Laborte and J. Ynion. 2016. Improving food security in Asia through consumer-focused rice breeding. Global Food Security 9: 9-28.

European Commission. 2013. Commission implementing regulation (EU) No 120/2013 of 11 February 2013 entering a name in the register of protected designations of origin and protected geographical indications (Khao Hom Mali Thung Kula Rong-Hai) (PGI)). Official Journal of the European Union.

Howell, J. 2006. Intermediation and the role of intermediaries in innovation. Research Policy 35: 715-728.

National Bureau of Agricultural Commodity and Food Standards. 2014. Geographical indication rice. Thai Agricultural Standard. TAS 4005-2014. Ministry of Agriculture, Bangkok, Thailand.

Ngokkuen, C. and U. Grote. 2012. Geographical indication for Jasmine rice: Applying a logit model to predict adoption behavior of Thai farm households. Quarterly Journal of International Agriculture 51(2): 157-185.

Porter, M. E. 1998. Cluster and the new economics of competition. Harvard Business Review November-December 1998. 76(6): 77-90.

Suwannaporn, P. and A. Linnemann. 2008. Consumer preferences and buying criteria in rice: A study to identify market strategy for Thailand Jasmine rice export. Journal of Food Products Marketing 14(4): 33-53.

Vandecandelaere, E., F. Arfini, G. Belletti and A. Marescotti. 2009. Linking people, places and products: A guide for promoting quality linked to geographical origin and sustainable geographical indications. FAO, Rome, Italy.

World Intellectual Property Organization http://www.wipo.int/geo_indications/en/. World Trade Organization. 1994. Trade Related Aspects of Intellectual Property Rights, Annex

1C (http://www.wto.org/english/docs_e/legal_e/27-trips_01_e.htm; accessed 15 August 2017).

Yoshihashi, T., T.T. Nguyen and N. Kabak. 2004. Area Dependency of 2-Acetyl-1-Pyrroline content in an aromatic rice variety, Khao Dawk Mali 105. The Japan Agricultural Research Quarterly 38(2): 105-109.

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GREENING OPPORTUNITIES AND PROSPECTS FOR PHILIPPINE COOPERATIVES TOWARD A MORE SUSTAINABLE FOOD MARKETING

Karen P. Quilloy

Institute of Cooperatives and Bio-Enterprise Development College of Economics and Management, University of the Philippines Los Baños

Email address: kpquilloy@up.edu.ph / karenquilloy@gmail.com

ABSTRACT

The impacts of climate change on cooperatives are a growing concern that needs to be urgently addressed for a cooperative to become competitive and sustainable in the long run. This paper presents the cooperative case for going green where opportunities and prospects for greening the practices and business activities of Philippine cooperatives are tackled in the context of enhancing their competitiveness, resilience, and sustainability. Issues and constraints to mainstream green practices in their operations and management are also discussed with corresponding recommendations to address them. In this study, two agri-based cooperatives namely, the Green Beans Multipurpose Cooperative and the Calamba Vegetable Growers Marketing Cooperative were featured to demonstrate how cooperatives can adopt green practices. Results showed that cooperatives are capable of integrating green practices in their operations and in doing so, can promote sustainable food marketing in terms of reducing their operating costs, recapturing value from their products and byproducts, enhancing their resiliency, and using natural resources efficiently. However, some of the identified issues and constraints to realizing these impacts were the lack of awareness or inadequacy of knowledge and understanding of the greening strategy, the failure to assess the greenness of their cooperative activities, the limited resources to support the adoption of more green practices, and the weak policy institution to support the greening of cooperatives. Among the recommendations of the study were to strengthen green education among cooperatives; develop more support mechanisms such as green financing; and review the existing cooperative policies to explore the possibility of institutionalizing the greening of cooperatives.

Keywords: Agricultural cooperatives, Green practices, Sustainability, Philippines

INTRODUCTION Over the next few decades, the Philippines is expected to require greater food supplies due to burgeoning population and changes in consumer food preferences and expectations for food quality and standards. Meeting the expanding food demand is foreseen to be more challenging as food production and distribution are faced with environmental threats and increasing impacts of climate change. With the natural assets remaining scarce, productivity improvements will be needed in all phases of food commodity value chains in order to meet the changing consumer demands and market requirements amid the changing climate. In pursuit of improving productivity however, it is important to ensure the sustainability of the growth process through more efficient use of natural resources and improved resilience to climate impacts. The “business as usual” may not work anymore if one has to deal with the increasing risks and pressures brought about by climate change and environmental degradation while aiming for

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increased productivity and enhanced competitiveness. It is in this context that a kind of productivity growth that does not compromise

environmental and social responsibilities or promotes minimization of tradeoffs between economic and social and environmental sustainability is deemed more appropriate. This growth path, which encourages shifting from the “grow first, clean up later” to the “grow clean, grow more later” practice is what green growth strategy promotes. Technically, green growth can be defined as “a means to foster economic growth and development while ensuring that natural assets continue to provide the resources and environmental services on which our well-being relies” (OECD 2011). This strategy can be adopted at all levels of the economy, from global or national down to industry/market, business/organization, community, or household level. Yet, a joint greening effort that cuts across different market levels and deals with the vulnerable sectors can create more significant growth impact compared to individual greening actions.

Micro, small and medium enterprises (MSMEs), which make up 99.6% of all enterprises in the country, play a significant role in food marketing and are a key contributor to the economic growth. MSMEs include the cooperatives whose majority (76%) fall under the micro category or have total assets of not more than US$60,000 (PhP3.0 million). Cooperatives in particular assume different roles in food value chains, where they can act as input suppliers, producers, consolidators, processors, wholesalers, retailers, and/or as final markets or end consumers. With their multiple market roles and people-centered nature of their businesses, cooperatives can be a strategic entry point for promoting green growth. However, maximizing cooperatives’ full potential as catalysts of green growth require adequate knowledge, capacity, and willingness to support the strategy. Their resilience to the impacts of climate change is also a factor that has to be developed, given that MSMEs are particularly vulnerable to the impacts of climate change due to their limited resources and sensitivity to prices (Antonio, et al. 2015).

This study analyzed the opportunities and prospects of cooperatives for adopting and promoting green growth strategy in their business activities and operations. It attempted to answer the following research questions using evidences from the cases of Calamba Vegetable Growers Marketing Cooperative (CVGMC) and Green Beans Multipurpose Cooperative (GBMPC)6 and other related survey information generated for the study: • Are cooperatives capable of adopting and promoting green growth strategy? • What benefits can cooperatives reap from doing green practices? • What could be the issues and constraints that cooperatives face in going green and how can

these be addressed? • What are the implications of greening cooperatives to sustainability of food marketing?

The paper is organized into four sections. The first section explains the link between cooperatives and green growth. The second presents the opportunities for and benefits of doing green activities. The third discusses the issues and constraints in going green as supported by the results of the case study of CVGMC and GBMPC. The last section concludes the paper by stating the significance of green growth initiatives of cooperatives to sustainable food marketing and the way forward to promote greening among cooperatives.

COOPERATIVES AND GREEN GROWTH NEXUS

6 CVGMC and GBMPC were the case cooperatives used in the action research entitled “Leveraging Philippine Agri-based Cooperatives for Green Growth: A Pilot Study,” which was implemented by Quilloy and Cruz (2017) under the funding of the ASEAN CSR Network, Ltd., Singapore.

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A cooperative enterprise grows by carrying out key economic activities which include production and consumption as well as socio-environmental activities as part of its concern for community (Figure 1). These activities require natural resources to make and deliver outputs that are aimed at improving welfare of the cooperative members. In production, natural asset base serves as the key source of inputs for producing outputs. These outputs then flow through the market to reach the consumers, which also involves the use of natural resources to do exchange, physical and facilitating marketing functions. The natural asset base also serves as the sink for production wastes, pollutants and residues. In consumption activities, natural assets provide the environmental services needed to ensure health and safety of consumers and again serve as the absorber of wastes from the goods and services consumed. Socio-environmental activities also require natural resources as inputs to deliver services to cooperative members and target communities. The socioeconomic activities of a cooperative are highly dependent on natural assets, thus in order to sustain its activities, the availability of natural assets must also be sustained.

Figure 1 Natural asset functions in cooperative activities

Sustainability and cooperatives are directly linked with each other. Cooperatives are builders of sustainability, which is inherent in the nature of cooperatives. They can make positive contributions to sustainability, and therefore to green growth too. Anchored to the three pillars of sustainable development – economic growth, social inclusion, and environmental protection, cooperatives are described in the International Cooperative Alliance (ICA)’s Blueprint for a Co-operative Decade as “highly sustainable businesses, combining financial health, environmental concern and social purpose in a triple bottom line.” They are based on the values of self-help, self-responsibility, democracy, equality, equity, and solidarity and on the principles of concern for community. The cooperative principle of “concern for community,” states that “cooperatives have a special responsibility to ensure that the development of communities – economically, socially and culturally, is sustained. They have a responsibility to work steadily for the environmental protection of their communities” (Republic Act 9520,

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Philippine Cooperative Code of 2008). During the Third International Summit of Cooperatives in 2016, the cooperative movement

set for itself the objective to act on social, environmental and economic issues and fulfill its role in achieving the Sustainable Development Goals (SDGs). The movement’s Power to Act Declaration emphasizes that cooperatives are in a position to introduce sustainable development strategies in different societies. It has a specific section tackling the actions that can be taken by cooperatives to support climate change- and green growth-related SDGs (Appendix 1).

Given the general characteristics and nature of cooperatives and their commitment to sustainable development, integrating greening in the management and operations of a cooperative can be a justifiable business strategy. For the purpose of this study, greening refers to the use of processes, business practices, technologies that reduce adverse impact on the environment; promote efficient use of power, water, resources and raw materials; improve solid and wastewater management; reduce air and water pollution and climate-related risks; and produce green products and services (ProGED 2016). It is a strategy that could complement the strategies for cooperative enterprise development by balancing the economic, social and environmental objectives of the cooperative; making the cooperative enterprises sustainable; promoting resource-efficient production; finding or creating clean sources of growth; and providing opportunity to enhance cooperative competitiveness.

WHY GREEN THE COOPERATIVES A critical question in the decision to engage in greening practices is what are the benefits of going green. Several literature have already articulated the advantages or benefits of pursuing green growth strategies. Generally, moving towards cleaner and greener sources of growth may deliver economic, environmental, and social benefits such as those listed below.

Source: OECD (2012)

Figure 2 General benefits of going green

At enterprise level, integrating green practices in business strategies can address the negative impacts of climate change, enhance the enterprise competitiveness and ensure its sustainability and survival (ProGED 2014). Specifically, going green can help enhance

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competitiveness and long term sustainability by reducing operating costs, gaining access to markets and niche markets, and enhancing resiliency (Antonio, et al. 2015). Increased resource efficiency (e.g., reducing power and water consumption) for instance, will not only reduce greenhouse gas (GHG) emission but will also reduce costs, thereby generating savings (Antonio and Finkel 2010). With consumers’ increasing awareness of their environmental responsibilities, an enterprise can create a unique selling point and stand out against its conventional competitors by building its identity as a green and sustainable business. It can create new income streams that can increase current sales through greening products and services. Developing own sources of resources such as power and water, for example by investing in solar power and/or rainwater harvesting facility can cushion the enterprise from the impacts of fluctuating prices and enhance business resiliency in times of shortage or lack of power and water resources for instance due to extreme weather events (ProGED 2015). Employees may also benefit in working in a green enterprise or having green jobs in terms of improving their morale, health, and productivity.

Sources: ProGED. (2014) and Carbon Trust (2012)

Increasing savings through improved operational efficiency

Gaining a marketing edge over its competitors

Expanding sales and developing new income streams

Cushioning the impacts of extreme price fluctuations

Improving employees’ morale, health, and productivity

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Figure 3 Benefits of greening an enterprise

Greening a cooperative enterprise involve sustainable business practices that may require low, high or no investment. Some of the examples of green strategies that can be adopted are the following:

• Reducing energy consumption, for instance by shifting to energy efficient lighting fixtures

(e.g., compact fluorescent (CFL) or light emitting diode (LED) bulbs) and appliances. The Promotion of Green Economic Development (ProGED) program of the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH and the Philippine Department of Trade and Industry (DTI) had a comparison of the cost savings that can be generated from using energy efficient light bulbs.

• Reducing water consumption, examples of these are rainwater harvesting and use of low flow plumbing fixtures

• Wastewater management, for instance through installation of wastewater treatment facility • Solid waste management by recycling and/or composting of of waste materials • Material efficiency by using less or alternative material to produce a particular product

thereby translating to less waste. This also involves shifting to greener production process and product design.

• Construction of green building design that allow for natural lighting and ventilation, which minimizes the use of electricity.

• Greening the supply chain, wherein suppliers are encouraged to green their operations and producers to source their inputs locally and do bulk purchasing to reduce carbon emissions, lower energy consumption, and minimize use of chemicals and more efficient use of raw materials. This also includes encouraging consumers to patronize goods and services manufactured or delivered using green processes (e.g., naturally grown agricultural commodities)

Table 1 Sample cost and savings computation from energy efficiency measures

Description LED CFL Incandescent Light bulb projected lifespan 50,000 hours 10,000 hours 1,200 hours Watts per bulb (equivalent to 60 watts) 10 14 60 Cost per bulb US$35.95 US$3.95 US$1.25 Cost of electricity (@ 0.10 per kilowatt hour) US$50 US$70 US$300 Bulbs needed for 50,000 hours bulb 1 5 42 Equivalent 50,000 hours bulb expense US$35.95 US$19.75 US$52.50 Total cost for 50,000 hours US$85.75 US$89.75 US$352.50 Sample savings computation: Energy savings over 50,000 hours, assuming 25 bulbs per household Total cost for 25 bulbs US$2,143.75 US$2,243.75 US$8,812.50 Savings to household by switching from incandescent bulb

US$6,668.75 US$6,568.75 0

Source: ProGED (2014)

It is unfortunate that at present, there is a dearth in evidence-based literature that demonstrate the quantitative benefits of green practices among cooperatives. However, various

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studies were already done for enterprises in general, which can be applicable to cooperatives too. In one of the studies of the European Union under its SWITCH-Asia Program (as cited in Antonio, et al. 2015), entitled Green Philippine Islands of Sustainability (GPIoS), savings from resource efficiency measures of enterprises were estimated. Table 2 shows a sample computation of savings generated by select enterprises involved in manufacturing and food marketing services that participated in the project.

Other common green practices are listed in Table 4. The point of laying down the green practices here is to present the possible areas for greening the cooperative. These wide options indicate there is a range of opportunities for cooperatives to green their operations and business activities. Depending on its key goals and its desired benefits, the cooperative can identify the environmental hotspots where it has been contributing to or suffering from. It can then select and prioritize the green practices that could adopted, given their resources and capabilities, to move towards a low-carbon, climate-resilient, resource-efficient, clean and sustainable growth path.

Two general criteria are often considered in prioritizing green practice – synergy and urgency. Prioritizing based on synergy is considering the extent to which green practices provide immediate and local benefits to the cooperative and promote a faster and/or a more inclusive growth. Urgency, on the other hand, is basing the priority on the extent to which a green practice can be or cannot be postponed depending on the risk of irreversible damages or locking into unsustainable growth patterns that is associated with it.

Table 2 Sample savings computation from resource efficiency measures Name of enterprise

Batis Asul Caterers Calfurn Manufacturing Philippines Incorporated

Oasis Hotel

Nature of business

Catering services/ events venue Export/manufacturing (rattan and wood furniture)

Services (Hotel, restaurant and bar)

Number of employees

58 508 151

Implemented measures

• Proper storage of soap and chemicals • Established standards for proper food handling • Bulk purchasing • Use of vinegar instead of chlorinated cleaning agents • Replacement of aerosol spray with isopropyl alcohol for pest control • Repair of refrigerator magnets/ • Daily energy/ water consumption monitoring • Replacement of plastic bags with reusable bags for transporting linens • Repainting of the roof of the ballroom to a lighter color

• Improved waste management by selling used cartons • Installation of natural lighting system • Implementing planned cluster trips of delivery trucks

• Energy conservation measures (i.e., turning off lights and aircon in vacant rooms) • Regular maintenance of equipment (freezer, aircon) • Establishment of waste segregation area • Disposal of fully depreciated kitchen and other hotel equipment • Replacement of window type aircons w/ split type • Bulk purchasing of supplies

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• Installation of rainwater catchment facility

Savings • Reduction of power consumption by 35%, annual savings of US$2,370 (PhP118,500) • Reduction of water consumption by 40%, annual savings of US$2,206 (PhP110,300) • Reduction in the use of hazardous chemicals, annual savings of US$322 (PhP16,100) • Reduction of food and residual waste, annual savings of US$1,180 (PhP59,000)

• Reduction of mixed waste, annual savings of US$600 (PhP30,000) • Reduction of power consumption by 1%, annual savings of US$800 (PhP40,000) • Reduction of diesel consumption for transportation by 66%, annual savings of US$4,600 (PhP230,000)

• Reduction of paper consumption by 10%, annual savings of US$360 (PhP18,000) • Reduction of mixed waste, annual savings through additional income of US$2,000 (PhP100,000)

Investment and payback period

Low Investment: US$396 (PhP19,800) Payback: 0.8 months

Mid Investment: US$1,000 (PhP50,000) Payback: 2 months

High Investment: US$20,000 (PhP1.0 million) Payback: 8.4 months

Note: US$1.00 = PhP50.00; Source: Antonio et al. (2015)

ISSUES AND CONSTRAINTS IN GOING GREEN

Lack of Awareness/Inadequate Knowledge on Greening In the previous section, the benefits of going green as well as the possible green practices that can be adopted in order to reap those benefits were presented. This information establishes the fact that cooperatives can indeed take a green growth path by shifting to more sustainable or greener practices. However, if such information is not known to the cooperatives, it is most likely that they may not be able to take the opportunities in greening their operations and benefit from a greener business strategy. In another research of ProGED (Hiemann 2013), it was particularly pointed out that information and awareness on greening is an important line of intervention for MSMEs to adopt climate-smart and environment-friendly strategies. Similarly, in the study of Pabuayon, et al. (2016) on greening of Philippine cooperatives, the lack of awareness and information on green practices also appeared as one of the issues that need to be addressed in pushing green cooperatives in the country.

The level of knowledge on greening has an implication on the belief in and support of cooperative stakeholders for promoting and adopting green practices. Using the case of CVGMC and GBMPC of which the profiles are described in Appendix 2, the knowledge, attitude and perception of cooperative members, which included officers, manager/management staff, and non-officer members, on greening cooperatives were examined through a simple quick survey before and after undergoing a one-day capacity building training on greening cooperatives. From a scale of 1 to 10 (1 being the lowest and 10 being the highest), 18 respondents were asked to rate themselves in terms of the following criteria: • Knowledge on greening practices (knowledge); • Support on the promotion and adoption of greening practices (attitude); and

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• Belief in the benefits of going green (perception).

Table 3 Knowledge, attitude and perception of CVGMC and GBMPC members on greening cooperatives before and after training, Laguna, Philippines, 2017 (n=18 respondents)

Criteria Score (Rating Scale)

No answer 1.00 to 4.00 (Low) 4.01 to 7.00 (Fair) 7.01 to 10.00 (High) No. % No. % No. % Before training Knowledge 4 22 5 28 5 44 4 (6%) Attitude 1 6 4 22 11 61 2 (11%) Perception 0 0 3 17 14 78 1 (6%) After training Knowledge 1 6 4 22 10 56 3 (16%) Attitude 0 0 3 17 12 67 3 (16%) Perception 0 0 0 0 16 89 2 (11%)

Source: Quilloy and Cruz (2017) With an increase in the knowledge of cooperative members on green growth strategies and practices, more respondents rated their attitude and perception toward green practices with scores greater than 4. From 61% and 78% of respondents rating their attitude and perception with high scores, the percentage of respondents increased to 67% and 89% respectively. These results imply that raising awareness of cooperatives on green growth strategies and their applications to cooperatives can have positive effects on the promotion and adoption of green practices.

Failure to Assess the Greenness of Cooperative Activities Another issue related to awareness and information is the failure of cooperatives to regularly assess whether or not its operations and business activities are environment-friendly, resource-efficient, and climate-smart and to determine the level of the “greenness” of their cooperatives based on the number of green practices that they adopt.

A short survey involving 26 members from 11 cooperatives was randomly conducted by the Institute of Cooperatives and Bio-Enterprise Development (ICOPED) during one of its cooperative seminars to have a general idea of cooperatives’ extent of adoption of green practices.7 Survey results showed that while 80% of the participants indicated that they are doing green practices, a common observation is the limited number of activities that they adopt, ranging only from one (1) to three (3) practices. The most common green practices were tree planting activity, recycling, and waste management. The lack of awareness of other options for greening their activities constrains them from addressing environmental hotspots, thereby limiting them to contribute better to sustainable growth. If one is able to assess its current practices as to whether green or not and to identify the other opportunities for greening its activities, it can maximize its capability of going green and gain more benefits from it. Without green audit, cooperatives might continue to contribute to environmental degradation and climate

7 Survey was conducted among the cooperative participants who attended the Seminar on “Amendments on Cooperative Guidelines: Issuance of Certificate of Compliance, and Exemption from Payment of Local Taxes, Fees, and Charges” held last February 15, 2017 at ICOPED Auditorium, CEM, UPLB, College, Laguna.

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change and miss the opportunities to take green practices that they do not know they are capable of doing.

The two case cooperatives, CVGMC and GBMPC, when asked if they have ever done a green audit of their businesses, both responded that they have not done it yet. As a result, they have not realized that with same amount of their resources, they can do more green practices, until they finally did a green audit. The green audit template serves both as a checklist of green practices that a cooperative can adopt and as an instrument for measuring the degree of the greenness of the cooperative. Being aware of the current green status of the cooperative and the areas where greening can still be adopted through green audit can guide the cooperatives on their greening process. This has been proven by the results of the green audit exercise done by CVGMC and GBMPC right after their capacity building training on greening cooperatives and three weeks after undergoing the training.

In the green audit exercise, the two cooperatives were asked to accomplish a green audit form, where they have to indicate the green practices that they are doing and give each practice a score of 3 if they fully adopt the practice, 1 if they are partially doing it, and 0 if they are currently not doing the green practice. They were also asked to denote whether they have plans of doing the green practice in the future. The comparative results of the exercise provided evidences of the positive outcome of doing green audit. Both cooperatives improved their green scores as they were able to engage in more green practices and willing to do more, given the same set of resources, compared to when they were not yet guided by green audit (Table 4).

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Table 4 Green audit results of CVGMC and GBMPC, Laguna, Philippines, 2017

Green Practices

CVGMC GBMPC 1st Green

Audit (May 5)

2nd Green Audit

(May 26)

1st Green Audit

(May 5)

2nd Green Audit

(May 26) Improve Environmental and Climate Awareness and Knowledge Incorporate green in the cooperatives Vision, Mission and Goals

Advertise “green credentials” in documents & communications

x

Communicate green in packaging, website, office signage x Publicize green accreditations and certifications Conduct training to cooperative members on benefits of green and green practices

x

Give preference to suppliers that implement green practices x x Reduce Energy and Emissions Check lighting and controls 3 3 Install energy efficiency lighting (i.e. LED, solar-powered) 3 Collect and record energy consumption information x Set targets on energy consumption Check water usage and controls 3 3 Capture and store water x 3 Check faucets, pipes and toilets for leaks 3 3 3 Install water-saving devices in business or farm operations 3 x Collect and record water consumption information Set targets on water consumption Manage Resources and Wastes Send information electronically to save paper 3 Do waste segregation and recycling 3 3 3 3 Implement efficient waste disposal systems 3 3 Collect and record waste information 3 3 Set targets on waste for reduction Reduce, reuse, recycle materials in business and farm operations

x 3 3

Check vehicle usage and reduce unnecessary trips/journeys x Check and maintain vehicles regularly 3 3 Invest in Green and Climate Smart Technology Make and use compost 3 3 x Repair and improve drainage 3 3 3 3 Reduce cultivations 3 3 1 Target fertilizer applications to soil conditions, crop requirements and weather

3 3 3 3

Explore opportunities to build organic materials and use legumes to fix Nitrogen

3 3 3 3

Limit the use of chemical fertilizer 3 3 3 3 Use improved (e.g. climate-resistant) crop varieties 3 3 3 3

TOTAL GREEN SCORE 36 45 21 40 Source: Quilloy and Cruz (2017)

Note: The listed green practices were selected based on existing literature, best practices of farmer-members of some cooperatives, technical recommendations from government experts and academic consultants provided during a consultation workshop done by Quilloy and Cruz (2017).

“x” indicates that the green practice has been added to the plan of action of the cooperative.

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Limited Resources to Invest in Green Practices While there are green practices that only require behavioral change and do not require any financial investment, cooperatives should not be limited to adopting only these kinds of practices (e.g., checking lighting and controls, doing waste segregation, and saving office materials). More opportunities to create greater impact and gain more benefits are available if a cooperative can integrate more green practices in its operations. However, high-impact green practices such as the use of climate-smart and green technologies often require mid to high initial capital investments, which micro cooperatives usually do not have. In effect, they are constrained to just practicing low impact green practices.

This constraint has been recognized by various organizations and agencies promoting green growth in the Philippines like DTI, Land Bank of the Philippines (LBP), Department of Agriculture, National Economic and Development Authority, and international development organizations (e.g., GTZ and Global Green Growth Institute). Programs and projects to assist enterprises like cooperatives in pursuing green strategies have been implemented by these institutions to enable them to expand their green actions. With capital investment as a critical requirement in adopting high-impact green practices, LBP, a government bank in the country, has particularly established green financing programs for agri-based enterprises. These programs are intended to finance projects and activities that seek to address climate change and environmental threats.

An example of green financing program of LBP is its Climate Resilient Agriculture Financing Program. The program aims to provide credit assistance to promote climate change mitigation and adaptation initiatives towards climate resilient agriculture and to address climate change risks and helps nurture innovation development at community level. It can finance adaptation and mitigation projects such as climate-resilient technologies (e.g., controlled irrigation system) and infrastructure, adaptive planting calendar, use of improved crop varieties, terracing and system of rice intensification, establishment of windbreaks, rainwater harvesting, biogas digester, and facilities for hydroponics and aquaponics.

Another response to the limited financial resources constraining the cooperatives from adopting green practices is enabling the cooperatives to properly prioritize the green practices that they can implement based on a certain set of criteria that are deemed important to them. In a prioritizing exercise done by CVGMC and GBMPC, the cost and ease of implementation appeared to be one of the key criteria in identifying which among the green practices that they have chosen can be first implemented. The prioritization process involved giving weights to the set criteria and giving score to each green practice selected, wherein the top five practices with the highest scores will be prioritized for implementation. This exercise guides the appropriate allocation of available resources to green practices that the cooperative is willing and able to implement. Table 5 presents the results of prioritization done by the two case cooperatives.

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Table 5 Prioritized green practices of CVGMC and GBMPC, Laguna, Philippines, 2017 CVGMC GBMPC

Make & use compost Waste segregation Waste segregation Waste reduction Record and collect energy data Incorporate greening in the cooperative vision

and mission Check lighting Save paper by communicating electronically Limit use of chemical fertilizer Conduct training on greening Note: Criteria set by cooperatives in the prioritization were the following: (1) low cost of implementation; (2)

highest savings potential; (3) availability of required resources; (4) ease of implementation; and (5) speed of translation into benefits.

Support for Greening Not Institutionalized It is clear that the global cooperative movement is committed to support the SDGs, including the climate change mitigation and adaptation and environmental conservation actions. At national level, the government is also in full support of achieving the SDGs, making them part of the strategies in the current Philippine Development Plan as well as in its MSME Development Plan. Policies, laws and regulations related to environmental protection and resource conservation (e.g., Renewable Energy Act, Biofuels Act, Clean Air Act, Mini-Hydroelectric Power Incentives Act, Clean Water Act, etc.) have been implemented to strengthen the country’s actions towards a greener growth. However, this is not the case in the cooperative sector. While there is the cooperative principle of “concern for community” that covers the environmental responsibility of a cooperative, such principle does not compel any cooperative to specifically integrate green practices in its operations nor legally apprehend it from not doing so.

This is one of the reasons for cooperatives’ poor adoption of green practices identified during the Consultation Workshop on Greening Cooperatives for Sustainable Growth conducted by Quilloy and Cruz last April 25, 2017. In the case of CVGMC and GBMPC, it was found out that both cooperatives do not have any statement in their bylaws and in their vision and mission that specifically mentions the need to promote and practice greening (Quilloy and Cruz 2017). The suggestion therefore during the consultation was to explore the possibility of institutionalizing the greening of cooperatives or the adoption and promotion of green practices in the Philippine Cooperative Code. This will emphasize the importance of going green and reinforce the cooperative movement’s initiatives to promote green growth as cooperatives will then be compelled to develop and implement green actions.

IMPLICATIONS TO SUSTAINABLE FOOD MARKETING Agri-based cooperatives play multiple roles in the food value chains. As mentioned earlier, they can be present at all levels of the chain, doing various marketing functions to deliver the good or service to the end users. Hence, when a cooperative goes green, greater impact can be created in terms of greening the value chain thereby making food marketing sustainable, especially if it assumes more market roles.

What is interesting to note is the fact that most of the green strategies discussed in this paper are applicable at various level of a value chain and can be done by different market players. For instance, energy and water efficiency measures, waste management, and use of

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environment-friendly materials can be done by a cooperative involved in production, processing, wholesaling, or retailing stage. Improvement of environmental and climate awareness through conduct of trainings can also be carried out by cooperative at any stage of the chain, hence reaching more market players, including consumers. The case of CVGMC and GBMPC, which are engaged in production and marketing of fresh vegetables and green coffee beans respectively, demonstrates how cooperatives can contribute to making agri-food marketing sustainable. Integrating green practices, which include resource and waste management practices and adoption of sustainable agricultural practices (i.e., limited use of chemical fertilizer, use of climate-resilient crop varieties, composting, and improved drainage), in the activities of CVGMC and GBMPC is a clear indication that cooperatives are capable of adopting green growth strategy in their businesses and making an impact on sustainable food marketing.

CONCLUDING REMARKS A wide range of opportunities to go green can be explored by Philippine cooperatives. They can focus on several areas of greening, where they can apply green practices that they are capable of doing. To maximize their greening potentials, cooperatives must have the following enabling factors: (1) adequate knowledge on green growth strategy and practices; (2) awareness on the degree of greenness of own activities; (3) access to green financing and other resources; and (4) policy institution that support the greening of cooperatives.

Particularly, it is recommended that the cooperative sector together with other sectors supporting the cooperatives strengthen its green growth awareness campaigns and information drives through capacity building activities in order to develop a positive mindset towards greening and educate the cooperatives on various greening opportunities. It is suggested that these capacity building activities also include green audit and green practice prioritization exercises to better guide the cooperatives in their greening process. Development of more support mechanisms like green financing and incentives programs that are accessible to the cooperatives is also suggested to further encourage the adoption of green practices. Lastly, there might be a need to review the existing policies and laws concerning cooperatives (i.e., the Philippine Cooperative Code of 2008) to determine how greening can be institutionalized. Such action can streamline the individual green efforts of cooperatives and strengthen the implementation of more green practices, which can help increase the contributory impact of the whole cooperative sector to the environment. With all these recommendations, cooperatives can foster enhanced competitiveness and sustainable food marketing in the advent of climate change and environmental degradation through a more resilient, resource efficient, and environment-friendly business strategies while at the same time contributing to achieving a greener growth for the economy and realizing the goals of sustainable development.

REFERENCES Antonio, M.A., R. Capio, M. Bacalso, and N. Ritsma. 2015. Promotion of Green Economic Development (ProGED) Approach. Reference Document. Bonn, Germany: Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH Antonio, V. and T. Finkel. 2010. Integrating Green Growth Strategies into the 2011-2016 MSME

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Development Strategy. Strategy Brief No. 4. Makati City: Private Sector Promotion (SMEDSEP) Program Office

Carbon Trust. 2012. Green your Business for Growth. Management Guide. London: The Carbon Trust

Cooperatives: The Power to Act Declaration. International Summit of Cooperatives. October 11-13, 2016. Quebec, Canada. Available at https://www.sommetinter.coop/sites/default/files/library/declaration_finale_eng_2016.pdf

Hiemann. W. 2013. Green Finance for Micro, Small and Medium Enterprises (MSMEs) in the Philippines. Makati: Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH

OECD. 2011. Towards Green Growth. Paris: Organisation for Economic Co-operation and Development (OECD).

_______. 2012. Green Growth and Developing Countries. Consultation Draft. Pabuayon, I.M., B.R. Pantoja, A.B. Vista, and A.C. Manila. 2016. Greening of Philippine

Cooperatives: Integrating Business and Environmental Objectives for Competitiveness. Project seminar paper presented on December 21, 2016 at ICOPED Auditorium.

ProGED. 2014. Greening Enterprises for Enhanced Competitiveness. ProGED Videos. Accessed August 10, 2017 at http://greeneconomy.ph/proged-videos/

______. 2016. Climate Change and MSMEs Competitiveness. ProGED Videos. Accessed August 10, 2016 at http://greeneconomy.ph/proged-videos/

Quilloy, K.P. and L.S. Cruz. 2017. Leveraging Philippine Agricultural Cooperatives for Green Growth: A Pilot Study. Final project report submitted to ASEAN CSR Network, Ltd., Singapore.

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Appendix 1 Excerpts from Cooperatives: The Power to Act Declaration

Source: Cooperatives: The Power to Act Declaration. International Summit of Cooperatives. October 11-13, 2016.

Quebec, Canada. Available at

https://www.sommetinter.coop/sites/default/files/library/declaration_finale_eng_2016.pdf

CLIMATE CHANGE AND SUSTAINABLE DEVELOPMENT Whereas climate change is one of the three biggest global risks to the future of societies and the planet’s biological systems, according to the World Economic Forum; Whereas it has been scientifically proven that the atmosphere is warming due to greenhouse gas emissions produced by human activity, which has led to a rise in the number of natural disasters, thereby threatening food production, among other things; Whereas greenhouse gas emissions must urgently and significantly be reduced in order to limit global warming; Whereas tremendous effort will be required to achieve the goal set out in the Paris Agreement, negotiated at COP21 and adopted on December 12, 2015, to keep a global temperature rise well below 2 degrees Celsius above pre-industrial levels, and to pursue efforts to limit this increase even further to 1.5 degrees Celsius; and Whereas cooperatives are in a position to help address several challenges related to Goal 13 (Climate action), as well as Goal 6 (Clean water and sanitation), Goal 7 (Renewable energy), Goal 11 (Sustainable cities and communities) and Goal 12 (Responsible consumption) of the UN 2030 Agenda for Sustainable Development; Now, therefore, cooperatives undertake to contribute to sustainable development and to act in order to limit global warming by: making the general public and businesses aware of the impact of greenhouse gas emissions on the climate and fostering a stronger culture of sustainable development; promoting cooperatives in energy production and distribution, in particular in the field of renewable energies, and helping to carry out and finance green renewable energy projects; supporting the development and application of energy efficiency measures; protecting populations against the risk of natural disasters associated with climate change; promoting and providing mutual risk protection mechanisms and solutions to communities affected by increased natural disasters as a result of climate change; preserving ecosystems and biodiversity, namely by promoting sustainable forest development, smart agriculture, and smart water-resource management; supporting water and sanitation management by citizen cooperatives; promoting gender equality and the autonomy of women in climate change mitigation and adaptation strategies in order to achieve equitable and inclusive sustainable development, as women should be heard at every decision-making level, from family life to politics;

• supporting young people and indigenous populations so that they can play an active role in protecting the environment and finding innovative solutions to climate change;

• investing in energy efficiency, as it is one of the key pillars of the world’s future that will increasingly depend on oil;

• combating environmental degradation and dangerous extractive practices; • pursuing local, harmonious and sustainable development for economic, environmental and social

issues; and • promoting the important role that cooperatives already play

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Appendix 2 Profile of CVGMC and GBMPC, Laguna Philippines, December 2016 Calamba Vegetable Growers Marketing Cooperative (CVGMC)

Address Looc, Calamba City, Laguna, Philippines

Category of cooperative Primary; micro cooperative

Type of cooperative Multipurpose

Business activities Production, marketing, agricultural equipment rental

Commodities handled Vegetables (tomato, bottle gourd, squash, etc.)

Membership 52

Total assets PhP824,647 (US$17,363.74)

Total net surplus PhP10,906 (US$229.64)

Green Beans Multipurpose Cooperative (GBMPC)

Address Banlic, Calamba City, Laguna, Philippines

Category of cooperative Primary; micro cooperative

Type of cooperative Multipurpose

Business activities Production, marketing

Commodities handled Coffee beans

Membership 43

Total assets PhP1,754,473 (US$36,942.13)

Total net surplus PhP5,854 (US$123.26)

Note: exchange rate: PHP1.00 = US$0.0211

Sources: 2016 Annual Reports of CVGMC and GBMPC

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AGRUCULTURAL DEVELOPMENT THROUGH COOPERATION BETWEEN AGRICULTURAL COOPERATIVES AND CONSUMERS’

COOPERATIVES IN JAPAN: FOCUSING ON DIRECT MARKETING OF AGRICULTURAL PRODUCTS

Yukihisa Yamada

(Norinchukin Research Institute Co.,Ltd.) Email: yamada.yukihisa@nochuri.co.jp

ABSTRACT In the context of recent high economic growth in Asian countries, agrarian structure has also been drastically transforming. Agricultural development has been mainly led by increase of production. Nowadays, however, farmers’ response to urban consumers’ demands for safe and environmental-friendly foods is becoming more and more important to further development of agricultural sector.

Considering the situation above, direct marketing conducted by agricultural cooperatives (JA) and consumers’ cooperatives (Co-op) in Japan is one of outstanding efforts to improve relationship between farmers and consumers. The purpose of this study is to discuss effects of “farmer-consumer communication activities” on agricultural development and to consider cooperation structure for implementation of the activities through some successful cases.

Implications from case studies are summed up as follows. (1)Communication activities have positive effects on trust building among the cooperatives, which stabilizes or improves product trades within the cooperatives. (2)Virtuous circle of communication activities and product trades is needed to maintain direct marketing. (3)Cooperation between staffs of JA and Co-op, cooperative members and staffs, and cooperatives and other organizations is required to vitalize direct marketing.

Direct marketing based on cooperation among cooperatives is suggestive as an alternative approach to improve agricultural situation in Asian countries.

Keywords: Direct marketing of agricultural products, Cooperation among cooperatives, Relationship marketing

INTRODUCTION

Perspective Agricultural development in Asian regions had been based on increase of productivity which was initially led by Green Revolution during 1960s. Subsequently, transition to market economy mainly after 1990s also had drastically improved farmers’ incentive to produce in some countries. Nowadays, however, increase of production seems not to be enough for further agricultural development. As shown in Figure 1 and 2, increase trends of rice production and consumption have gradually becoming stagnant in recent years. In this situation, farmers’ response to rising consumers’ demands toward safe food or products which are cultivated in the process of environmentally friendly way are highly regarded than the past.

In the case of Vietnam, as a country under rapid transformation of food consumption and agrarian structure, consumers’ demand towards “safe-vegetable” which is certificated by Vietnamese government has been expanding, and farmers’ have gradually begun to undergo its

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production. Farmers’ efforts towards safe-vegetable production, however, are not always successful in improvement of their income standard. The main reason of the stagnancy is information imbalance on quality of vegetable between producers and consumers (Yamada 2014). There are many cases of falsification or mislabeling in the process of safe-vegetable supply chain. Such problems can be seen not only in Vietnam but also in other countries. Overcoming these problems is thought to be a key for further development of agricultural sector in future.

In order to discuss directions to improve the situation above, direct marketing of agricultural products between agricultural cooperatives (JA) and consumers’ cooperatives (Co-op) in Japan is suggestive. It is one of outstanding efforts to develop marketing of safe products putting emphasis on “farmer-consumer communication activities” which enhance relationship between members of JA and Co-op. The purpose of this paper is to consider the effects of communication activities on agricultural development and implementation structure of cooperative cooperation through some successful cases of direct marketing.

Agrarian structure in Japan compared with other regions in Asia In order to illustrate characteristics of JA and discuss direct marketing hereafter, it is helpful to clarify the feature of agriculture and rural society in Japan from perspective of Asian scale.

Agrarian structure between Japan and other Asian courtiers is partly similar. Above all, mass volume of small-scale paddy farmers is a common feature of rural villages in Monsoon Asia. Active paddy cropping has strongly supported population growth due to favorable nutrient of rice which allows to sustain mass population, so that approximately 60% of world population is living in Monsoon Asia, even though its land area is only approximately 20% of the world land area. Recent high economic growth in many Southeast Asian countries has been based on rich labor supply and low food price thanks to abundant supply of rice.

Differences in agrarian structure between Japan and other Asian granny areas, especially three great deltas of Mekong, Ayeyarwady, and Chao Phraya rivers, also should be referred. As Embry (1950) pointed, “tightly-structured society” can be seen in Japan, in contrast to “loosely-structured society” of Thailand and other many areas in Southeast Asia. This difference in social structure is partly affected by the history and process of farmland development. In

0255075100125150175200225250

-500-400-300-200-100

0100200300400500

70 80 90 00 10 1701234567

020406080

100120140160

70 80 90 00 10 17

Figure 1. Production trends of rice in Asian countries

1960

(mil. ha)

Production area

Productivity

(Crop year)

(mil. t)

(Crop year)

(kg / person)

Figure 2. Consumption trends of rice in Asian countries

1960

(t / ha)

Source: World food statistics and graphics , Shoichi ITO, Laboratory of food and agriculture policies, Graduate School of Bioresource and Bioenvironmental Sciences, Kyushu University

Consumption

Consumption per capita

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Japan, development of alluvial plain for paddy cropping had already become close to the end in 17th century. On the other hand, the three great deltas were started to be actively developed after 19th century, mainly because of technological difficulty in flood management.

From historical perspectives mentioned above, it is implied that Japanese rural society had faced with population pressure for a long periods. In order for survival of mass population in limited farmland area, rural society had been strongly organized for the sake of response to agricultural intensification. In the process of quality-wise agricultural transformation in early modern Japan, “autonomous village” which is stated by Saito (1989) has generated. Such tightly structured village has been a prominent feature of Japan compared to other countries.

Role and structure of JA Existence of autonomous village had strongly affected development of Japanese agricultural cooperative (JA) as Saito (1989) mentions. JA is known as one of the well-organized cooperatives in the world because of the background that each JA has originally been based on tight communities. Recently, the number of JA has been decreasing8 because of merger, but the activities of its branch offices are often based on local communities especially in rural areas. In addition to the organizational feature, it should also be noted that JA is categorized to “multi-purpose agricultural cooperatives” which provides wide range of services to its members, in contrast to “single-purpose agricultural cooperatives” in Western countries.9 Almost all JA provides agricultural marketing, farming guidance, credit services, mutual insurance and other various supports for local development.

These diverse activities are supported under cooperation between JA and other related organizations. JA is mainly established in municipal areas, and there are several organizations in prefectural and national level (Picture 1). These organizations including JA are generally called “JA Group”. In case of JA’s agricultural marketing business, a certain individual JA collects agricultural products from its members, and prefectural organizations such as “economic

8 The number of JA was more than 12,000 in 1960, but is approximately 650 in 2017. 9 In Japan, there are also simple-purpose agricultural cooperatives which provide specific services to specialized field of farming such as livestock, but the development of multipurpose type is remarkable in comparison with other countries. In most of cases, JA does not indicate single-purpose type but multipurpose type.

(Individual) JA

Agricultural marketing

Mutual Insurance

General management of JA Pref. union of JA

Credit service

Union of JA mutual insurance

Central union of JA

Main Services

(Individual) JA Prefectural level organizations

National level organizations

(Individual) JA(Individual) JA(Individual) JA

Prefectural level organizations

Picture 1. Structure of JA Group

Source: Author of this paper

Pref. office of JA Zen-Noh

Pref. economic federation

Branch office of The Norinhukin Bank

Pref. economic federation

JA Zen-Noh

The NorinchukinBank

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federation of JA” or “prefectural office of JA Zen-Noh” collect products from each JA in the certain prefecture and sell the products to wholesale markets or retailers. This process of “mass collection and mass sales” supports enhancing bargaining power of farmers.

However, there are some cases that individual JA sells the products directly to wholesale markets or retailers because they often prefer to appeal “local brand” of products. This study is regarding this pattern of JA’s agricultural marketing focusing on direct marketing with Co-op.

DEVELOPMENT PROCESS OF DIRECT MARKETING BETWEEN JA AND CO-OP Direct marketing of agricultural products10 has been mainly led by JA and Co-op in Japan. This is because not only these cooperatives have continuously made efforts to vitalize safe products trade but also their organizational structures and relationship are effective in implementation of direct marketing. Recently, however, direct marketing of these cooperatives has been facing some difficulties such as hyper aging of producers and competition with other retailers who newly entered to business of organic product from around 2000. In the situation, JA and Co-op are now actively trying to appeal the originality of their direct marketing products through vitalizing “farmer-consumer communication activities” as an important part of their direct marketing.

Feature and scope of direct marketing Direct marketing had initially been spotlighted and vitalized during 1970s and 1980s as the era of high economic growth symbolized to “mass production and mass consumption.” In this situation, environmental pollution was a serious social problem and a number of people began to strongly concern about it. Along with this movement, arose of consumers’ concerns towards food distribution system also could be seen. Development of wholesale food market in those eras promoted efficiency of mass volume food distribution, but the distribution process was unclear for consumers. It caused consumers’ doubts on mass use of pesticides in production process as well as immoderate profit seeking of wholesalers in distribution process. These problems regarding information imbalance among producers, wholesalers, and consumers was a trigger to vitalize direct marketing of agricultural products as an alternative food distribution system which farm products are not distributed via wholesale food market but distributed directory from producers’ side to consumers’ side. In this context, JA and Co-op have been main actors which have led development of direct marketing.

There are notable rules of direct marketing adopted by almost all Co-op, which are “three principles of direct marketing” initially introduced by Kyoto Co-op in 1982. Their keystones are as follows; (1) “traceability” which means production area and producers is clear, (2) “standardization” which means production process is clear, and (3) “communication” which means communication activity between producers and Co-op members is conducted. The principles are important factors to overcome information imbalance between farmers and consumers which is often seen in food distribution via wholesale market. The principles seems to meet consumers’ demand to purchase safe products, however, strict implementation of them requires Co-op and producers’ side to conduct detailed adjustments between them. In response to this issue, well-organized membership and relationship structures

10 “Direct marketing of agricultural products” is mainly called “Sanchoku” in Japanese. Japanese Consumers' Co-operative Union (JCCU) also uses the term.

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of JA and Co-op is effective in terms of following points. Firstly, producers basically belong to members’ organization of JA for direct marketing or

organic farming in which using method and criteria of fertilizer and pesticides are shared. In addition, these organizations continuously develop their farming skills through cooperation with farming instructors of JA. Secondly, Co-ops also have well-organized memberships structure. There are members’ organizations for cooperative activities and are sometimes members’ organizations specialized for promotion of direct marketing. Members of these organizations are not only active purchasers of direct marketing products but also activists of direct marketing who plan communication activities or develop new products through cooperation with Co-op staffs. Thirdly, active intercommunication between staffs of JA and Co-op is absolutely essential for implementation of products trade and communication activities.

The three principles and multilayered structure within cooperatives are ones of the key factors that direct marketing has been led by cooperatives rather than other organizations. However, some difficulties in implementation of direct marketing within these cooperatives can also be seen. Problems such as falsification of production area occurred around 2002, immoderate requests from Co-op to producers’ sides, JA’s intention not to ship farm products to out of JA Group, hyper aging of producers, and recent competitive circumstance in sales of organic and specially cultivated products are sometimes pointed as challenging aspects of direct marketing.

Recent challenging situation in direct marketing between JA and Co-op Within the problems pointed above, hyper aging of producers and competitive circumstance are particularly challenging factors towards maintaining direct marketing between these cooperatives.

Figure 3 is recent trend of agricultural workforce, which is not limited to the producers of direct marketing products. Number of agricultural workforce rapidly decreased from 2005 to 2015, whereas aging of farmers became severe. In contrast, it seems to have positive effect on improving agricultural productivity that number of large-scale farmer has increased caused by retirement of old farmers (Figure 4). In case of direct marketing, however, this trend cannot be thought optimistically, since its main producers are small-scale farmers. In addition to production and sales lot of direct marketing being limited, direct marketing requires producers to keep complicated rules such as the principals mentioned above, so that large-scale farmers tend not to prefer direct farming. In this situation, “Report on National Survey of Co-op’s Direct Marketing11” (JCCU 2015) states that more Co-op has begun to actively undergo “creation of sustainable food production model and maintenance and improvement of food productivity” as one of “three new challenging issues12”. It indicates that promotion of direct marketing is aimed in terms of not only food marketing but also efforts toward sustainable farming.

Active entry of retailers towards organic products marketing is also a challenging factor. Since around 2000, distribution of organic products has shown a big change. Co-op has faced competition with other retailers after introduction of “organic JAS system13” in 2001 which

11 Its original name is “Zenkoku Seikyou Sanchoku Chousa Houkokusho” in Japanese. This series of reports have been continuously published by JCCU once in three or four years. 12 Other two challenging issues are as follows; (1) innovation of supply chain which allows to acquire mutual benefit between production and consumption, (2) promotion of intraregional economic circulation through “local production for local consumption” on which this paper focuses. 13 It is a kind of JAS (Japanese Agricultural Standard) certification system. Organic JAS is certificated to the foods

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facilitate active new-entry of other retailers to direct marketing. Above all, Ishikawa (2007) states that Aeon, a large retailer, started organic products sales which substantially keeps the principles of Co-op’s direct marketing. Under these circumstances, Japanese Consumers'

Co-operative Union (JCCU) points that supply chain of Co-op’s direct marketing had long been a great advantage of theirs but it is now in difficult situation to stand out from other retailers’

supply chain (JCCU 2015).

Recent changes in scope of Co-op about direct marketing As these issues became obvious, goals and scope of direct marketing have diversified and extended. This trend became clear in recent versions of “Report on National Survey of Co-op’s Direct Marketing” (JCCU 2012, 2015) which puts emphasis on sustenance and vitalization of agriculture and society as goals of direct marketing. These reports introduce some Co-ops’ efforts to involve enhancement of environmentally friendly agriculture, “local production for local consumption 14 ” (LLPC) and practical supports for agriculture such as pecuniary assistance or farming help by Co-op, and those efforts are regarded to important parts of direct marketing. In terms of the extended scope, it is implied that recent direct marketing has been not only a safe food supply chain but also an approach to achieve sustainable agriculture.

The reasons Co-op have actively extended the goals and efforts could be thought as follows. First is to improve supply situation of direct marketing products. Under hyper aging of farmers, supply sides have been drastically declining, so that vitalization of agriculture is thought to be becoming more important for Co-op. Second is response to new-entry of other retailers to organic products sales. Under competition with them, Co-op has to develop originality of direct

which are produced in organic way such as non-use of chemical fertilizer and pesticides, use of organic feeds for raising livestock, or limited use of food additives, etc. 14 In most of cases, LPLC indicates that a product is cultivated and consumed within a prefecture. This movement has also often rooted to the reflection of emerging food culture in the era of high economic growth which is based on “mass production and mass consumption.” The scope and merits of LPLC are to reduce environmental burden and cost in distribution process, to vitalize local economy, to access to local flesh and seasonal food, etc.

Figure 3. Trends in No. of agricultural workforce by age

(％)

(year)

(Thou. person)

（63.2） （65.8） （66.4） Average age

69.1

73.876.8

Figure 4. Increase rate in No. of agricultural entity by management farm size from 2005 to 2015

Source of figure 3 and 4: Census of agriculture and forestry (Ministry of agriculture, forestry and fishery 2005, 2010, 2015)

Percentages of age ≥ 60

%

%

%

318 177 141240

147 110

479358 234

883

679627

1,106

859634

327

386

350

3,353

2,606

2,097

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2005 2010 2015

≥� 80 years old70-79

60-69

50-59

40-49

> 40years old

Total

Under 0.5ha

0.5 – 2

2 – 5

-31.5

-35.7 -34.7

-24.7 3.2 20.9

33.8

-50 -25 0 25 50

5 - 1010 - 50

Over 50 ha

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marketing products such as contribution towards environmentally friendly agriculture. “Story” of agricultural products has been becoming an important value in Co-op’s marketing.

These changes in Co-op have often provide important opportunities to promote agriculture in some regions. In response to them, growing number of JA have started to undergo unique activities based on direct marketing such as following successful cases.

CASE 1: Vitalization of sustainable interregional resource circulation through enhancing “local production and local consumption”

by JA Midroino and Miyagi Co-op in Miyagi prefecture

Miyagi Co-op has actively conducted direct marketing since 1970s with some aspiring JA including JA Midorino aiming at achievement of “local production for local consumption (LPLC)” within Miyagi prefecture. This case study focuses on the efforts of these cooperatives to vitalize intraregional resource circulation system through development of LPLC based on direct marketing.

Locality-based direct marketing of Miyagi Co-op Characteristic of Miyagi Co-op’s direct marketing is that its marketing partners such as JA are located in Miyagi prefecture because of its intention to vitalize LPLC. When Miyagi Co-op and a supplier makes an alliance on direct marketing, supplier is required to make“Basic Agreement on Promoting Relationship between Farmers and Consumers15”with Miyagi Co-op and also to be a member of “Convention for Promoting Relationship between Farmers and Consumers in Miyagi Prefecture16” established in 1985. The main purpose of the agreement is to promote healthy and safe diet, maintaining and developing agriculture, forestry and fisheries, and preserving culture and natural environment through cooperation among its members. Under the agreement, Miyagi Co-op has actively planned and implemented communication activities with partners and continued to diversify activities regarding direct marketing. Table 1 is the list of recent activities and number of participated Miyagi Co-op members. It shows that almost 10,000 members have participated in total. Among the wide range of events, following activities are remarkably important to illustrate the characteristics of Miyagi Co-op’s direct marketing.

Firstly, annually-held general meeting on direct marketing is outstanding in its large numbers of participation from Co-op members, Co-op staffs, producers, JA staffs etc. Approximately 1,300 people including the 924 Miyagi Co-op members participated the meeting held around FY 2015 (table 1). Such large-scale meeting regarding direct marketing is quite rare in Japan. The reasons of the scale are not only Co-op members’ high interest in local agriculture, but also Miyagi Co-op’s efforts to promote locality-based direct marketing so that many producers in Miyagi prefecture were able to attend.

Secondly, each Miyagi Co-op’ branch store holds communication activities which are highly locality-based and promote close relationship between producers and consumers. Each store has farmers’ market corner to which producers directly ship their products. At the corner, Co-op members, staffs and producers have daily communication. In addition, “branch store-based meeting” in table 1 is also held approximately 11 times a year taking turns by each

15 Its original name is “San Shou Teikei Ni Kansuru Kihon Kyoutei Sho” in Japanese 16 Its original name is “Miyagi Ken San Shou Teikei Suishin Kyougi Kai” in Japanese.

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store. These meetings give important opportunities to the producers to appeal their own farm products to the Co-op members through detailed explanation of production process.

Thirdly, there are varieties of activities regarding farm study as shown in table 1 while the most thriving one is year-round program to study on local farming and food culture for family participants. This program is held once a month throughout a year supported by host farmers who are members of JA Midorino. Hosts farmers and JA Midorino provides participants various seasonal experiences such as paddy planting and harvesting, survey on biodiversity at paddy fields which direct marketing rice are cultivated, making traditional foods, etc. This program is limited to thirty families per year due to the capacity of host farms. It is very popular so that the registered families are selected by lot every year.

In addition to these diverse activities aiming at strengthening relationship between producers and Co-op members, training courses regarding direct marketing are also conducted. During FY 2015, these courses were held ten times and total 266 staffs participated them held on production area. It can be said that LPLC has been developed through promotion of locality-based direct marketing under active interrelationship among members and staffs of

Co-op and JA.

Advancement of environmentally friendly agriculture LPLC is further developing through advancement of environmentally friendly agriculture in recent years. Here are the examples of characteristic efforts to promote and sophisticate sustainable agriculture.

The prominent endeavor which should be firstly noted would be “Survey on Paddy Field Biodiversity” conducted by JA Midorino and other related organizations. This kind of activities have been widely spread throughout the nation responding to legislation of Measures to Conserve and Improve Land, Water and Environment in 2007 and International Year of Biodiversity in 2010. Although these are basically targeting at elementary school pupils for their environmental education, JA Midorino conducts more professional survey in addition to the activity for children.

No. ofparticipant

Tours to production area or food factories 97 2,766General meeting on direct marketing 1 924Workshop for direct marketing 10 266Branch store-based meeting on local farm products 11 288Workshop held by Co-op members' organization for cooperative 39 974Study session about direct marketing 34 785Study session about cooperative activities (including theme of food) 3 33Co-op festival (No. of pariticipants is its exective members) 58 1,503Promotion activities for direct marketing 158 1,147Cocking class held by producers 15 252Practical study on paddy farming at members' house 21 713Total 9,651

Table 1. Various communication activities regarding "local production for

(Source) Provided by Co-op Miyagi and translated into English by author

Contents Times its members (from 21st May 2015 to 20th May 2016) local consumption" and dirct marketing by Co-op Miyagi and

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In April 2009, “Survey Project on Paddy Field Biodiversity in Tajiri Area (located to business area of JA Midorino)” began with wide range of cooperation networks among JA Midorino, farmers’ groups for direct marketing, Miyagi Co-op, Tohto Co-op, NPO, Miyagi University, some JA Group organizations, etc. The project conducts professional survey on ecosystem of paddy fields which cultivate direct farming rice, as well as environmental education for elementary school pupils. It should be noted that the project aims not only at conserving agricultural environment but also at making use of biodiversity information as an indicator to measure quality of direct marketing products. It helps to complement existing certification systems of direct marketing products17. Direct marketing rice for Tohto Co-op, a member of the project and marketing partner of JA Midorino, have introduced a special mark on rice bag which indicates the survey is implemented. This effort is highly evaluated and the rice bag with the special mark was displayed at Convention on Biological Diversity 2010 (COP10). This effort is considered as a visualization of information on environmental conservation.

In addition to the Survey on Paddy Field Biodiversity, JA Midorino has actively undergone indication of “carbon footprint (CFP)” which is also considered as an effort to visualize information on environmental conservation. CFP indicates the amount of carbon dioxide emitted in whole process of foods production and distribution. It aims to visualize environmental burden through showing CFP on food package. Reduction of CFP is strongly supported by producers’ endeavors toward promoting resource circulation agriculture. Besides reduction in use of chemical fertilizer and pesticide, there are characteristic activities such as exchange of paddy straws and composts through cooperating with local cattle farmers and use of recycle compost making use of Miyagi Co-op’s food residues.

Intraregional resource circulation system based on cooperative cooperation JA Midorino and Miyagi Co-op have deepened their cooperation and constantly tried to vitalize LPLC through various characteristic activities. It is considered that these efforts towards vitalizing LPLC have been evolving into intraregional resource circulation system. The following two points can be listed as the background of the sophistication.

First is both cooperatives’ cooperation in conducting diverse communicating activities that allows Miyagi Co-op members to deepen their understanding of local agriculture. It is an important factor to promote environmental conservation agriculture through active purchase of agricultural products which are cultivated with environmentally friendly process. Second is to make clear the merit of effort to promote environmentally friendly agriculture. Visualization of its information increases the value of direct marketing products and it is also thought to have positive effects on promoting purchase from co-op members who are actively interested in agriculture.

These series of activities could be considered as a successful model to vitalize intraregional resource circulation system through sophistication of LLPC led by locality-based direct marketing between local cooperatives.

Case 2: Response to producers’ risks through enhancing communication

17 JA Midorino conducts certification system of direct marketing products in two ways. First is that Miyagi prefecture, the third party, provides certification to farmers whose production process meets the standards of reduction in chemical fertilizer and pesticides set by the prefecture. Second is participatory certification by both producers and Co-op members. First system is adopted in direct marketing towards Miyagi Co-op and second is towards other partners including Tohto Co-op.

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activities between JA Shimane’s regional headquarter OF OOCHI AREA and Co-op Hiroshima

JA Shimane’s regional headquarter of Oochi area18 and its member farmers have actively developed and cultivated a unique product named “herb rice.” Herb rice is a kind of specially cultivated rice, which is particularly spotlighted due to its high evaluation of flavor and environmentally friendly production process. Co-op Hiroshima, an active direct marketing partner of the headquarter, has continuously trades it as one of the main commodities of the Co-op, although there is a fluctuation risk in its production caused by geographical reason. This case study discusses the effects of enhancing communication activities among between these cooperatives on contribution to overcome the risk and stabilize trade condition of herb rice.

Background and feature of herb rice production Business area of the headquarter is typical mountainous areas facing hyper aging and population decline. In addition, it is distanced from consuming areas and the easiest area to access from the area is Hiroshima city which locates in next prefecture. In such difficult economic and social condition, development of local brand products has been in urgent needs and herb rice was introduced under initiative taken by the regional headquarter in 2003. Thanks to active organic farming including herb cultivation and favorable geographic condition for good flavor rice19, the regional headquarter and some innovative paddy farmers have succeeded in development and cultivation of herb rice.

The main feature of herb rice production is that use of 99% chemical fertilizer and more than 50% of pesticide must be cut off compared to conventional farming process. Instead, red clovers or crimsons clover which are kinds of herb are used as green manure. Herb rice production requires producers to work at the paddy field throughout a year. They sow clovers into paddy field right after rice harvesting in autumn, grown them during winter, and clovers are ploughed into soil in next spring before paddy planting. The important point is that better growth of clover is needed for better growth of paddy so that farmers are required to continuously take care of both paddy and clover. In addition to the endeavors of producers, the regional headquarter also actively take initiative in quality management of herb rice through various efforts such as strict implementation of production record specialized to herb rice, continuous consulting for producers about usage of fertilizer and pesticides, holding workshops, development of efficient farming methods, etc. These efforts are complimented through yearly agreement document for herb rice cultivation between herb rice farmers, herb rice farmers’ group and staffs of the regional headquarter.

As the results of various efforts of producers, all of them have acquired “eco-farmer” certification from Shimane prefecture and started to receive “direct payment for environmentally friendly farming” since 2011. In addition, the flavor of the rice is highly evaluated so that it has obtained trademark registration as “Iwami-kogen20 herb rice” in 2009 and proceeded to final judgement in “The 12th Japanese Top Rice Contest in Shizuoka21” in 2015. Through these high evaluations of herb rice and active demands from Coop Hiroshima, as shown on Table 2, its

18 Its original name is “JA Shimane Shimane Oochi Chiku Honbu” in Japanese. 19 Good flavor of rice is thanks to the difference in temperature between day and night caused by the geographical feature of mountainous area. 20 Iwami-Kogen is a name of region in which herb rice is actively produced. 21 Its original name is “Dai 12 Kai Okome Nihon Ichi Contest in Shizuoka” in Japanese.

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producers’ price22 in reality is higher than other rice produced in the regional headquarter.

Production area of herb rice has expanded rapidly from 6.6ha in the first year of its cultivation to 181ha in FY 2016 in the context of active entries by local farmers to its production, even though agriculture of this area has been in challenging situation under hyper aging of and severe population decline. Production and production area of herb rice, however, drastically decreased in 2014 and 2015 as shown in figure 5, due to heavy downpours and landslides occurred frequently in 2013 and 2014, and also because it took long to rebuild or repair damaged paddy fields. The regional headquarter could not stably supply enough herb rice demanded by Co-op Hiroshima in some years due to the geographical risk.

Enhancing communication activities between these cooperatives When supplier could not stably fulfil the demand from business partner, it is generally urged to cease the trade from the partner. In case of herb rice, however, Co-op Hiroshima strongly intends to continue the trade every year and intends to further expand the trade amount in the future. At this point, enhancing cooperation among these cooperatives is thought to have positive effect on stabilization and development of herb rice trade.

Herb rice direct marketing, started from 2003, is based on the long term interaction between these cooperatives mainly through vegetable direct marketing started in 1980s. In recent years, these cooperatives have been become to make more efforts to sophisticate the contents of cooperation. These series of efforts could be seen in their joint-signature of “Statement about Development of Environmentally Friendly Farming” under approval of prefectural governor in 2009 and their “Agreement on Promotion of Cooperation between Cooperatives”. Both statement and agreement aim to expand trade of environmentally friendly agricultural products and to promote farm study for Co-op members and staffs. Direct marketing of herb rice have been playing main role in the statement and agreement mentioned above.

Under these efforts, communication activities have been actively conducted. It should be noted that the recent activities also rooted to vegetable direct marketing from 1980s, when JA and Co-op often jointly organized workshops about vegetable marketing. After introducing herb rice in 2003, farm study as a main project of communication activity started to be carried out in a certain part of herb rice field managed by the regional headquarter. Farm study at herb rice field includes wide range of contents such as paddy planting and harvesting, weeding, and survey on herb rice field biodiversity conducted by members and staffs of JA and Co-op under cooperation with Shimane prefecture. These events attract Co-op members and staffs well so that approximately 60 members of Co-op continuously participate per activities. Furthermore, aspiring staffs of Co-op organized a group for intensive farm study from 2008.

Through these efforts, herb rice is highly regarded by the Co-op in terms of its environmentally friendly aspects as well as its good flavor. Co-op Hiroshima conducts farm study in various contracted areas while herb rice production area is the most active one. This is rooted to the environmentally friendly aspects of herb rice farming as well as its good flavor. It could be pointed that the endeavors of farmers and staffs of the regional headquarter towards environmentally friendly farming and enhancement of communication activities contribute to stabilize and expand demand from Co-op Hiroshima.

22 Producers’ price indicates the price of which the headquarter purchases from paddy farmers.

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Towards sustainable agriculture through cooperative cooperation

( ha )

(Source) Provided to author by the headquarter

Amount of production

Production area

( t )

(Harvest season of year)

Land slides

Figure 5. Trend of herb rice production

Grade ofproduction

area 2015 2016 2015 2016 2015 2016Herb rice

KoshihikariKosihikari(type A)

Kosihikari(type B)

Herb riceKoshihikariKosihikari(type A)

Kosihikari(type B)

5,800 4,200 5,450 3,900 4,950 3,400

http://oochi-ja-shimane.jp/pkobo_news/upload/6-0link_file.pdf(note) JA brand rice is certificated to the rice of which cultivation record is clear.

Table 2. Producers' price of rice by kind (FY 2015 and 2016) (JPY/30kg)

5,3506,200Normal

5,2506,100Normal

Normal 5,3006,0005,7506,450

6,5006,3007,000superior

5,5006,350superior

Grade of riceIntermediateGoodSuperiorRice

5,250 4,450

Source: Two websites of JA Shimane's regional headquarter of Ochi area as followshttp://oochi.ja-shimane.gr.jp/smoc_02_13_einou-parts/%E3%82%B3%E3%83%94%E3%83%BC%E3%82%B3%E3%83%94%E3%83%BC27%E5%B9%B4%E5%BA%A6%E7%94%A3%E7%B1%B3%E6%A6%82%E7%AE%97%E9%87%91%EF%BC%88%E3%82%84%E3%81%BE%E3%81%AA%E3%81%BF%E3%83%BB%EF%BC%A8%EF%BC%B0%EF%BC%89.xls.2.pdf

JAbrandrice*

Normal Koshihikari

5,750 4,950

4,9505,7505,6006,450superior

5,650

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As seen above, efforts regarding herb rice have developed through deepening cooperation between cooperatives. Herb rice production is considered as a well-balanced agricultural management in terms of ecological and economic aspects. Expansion of herb rice production contributes to sustain abundant ecology. Survey on biodiversity of the Herb rice field mentioned before confirmed that there are rich kinds and amounts of living things. From economic view point, in addition, herb rice is profitable than other conventional rice because of its high price and subsidies. The business area of the regional headquarter, Ochi area, is one of typical depopulated areas which urgently needs innovative models to revitalize local economy. Herb rice direct marketing is thought to be a quite suggestive case towards sustainable development in such economically challenged areas.

Case 3: Development of farm study through organizing wide range of cooperation network under the initiative of “JA Ohmi Fuji” and “Co-op Shiga” in

Shiga prefecture

Co-op Shiga runs one of the most popular farm study in Japan, named “Challenge-Farming Group”23 mainly supported by JA Ohmi Fuji, a direct marketing partner of the Co-op. Furthermore, these cooperatives have sophisticated the activity through establishment of “intensive course” within the group in 2016 for participants who want to study about agriculture more depth or plan to be new entry farmer in the future. The background of such sophistication is based on multilayered relationship among cooperatives and wide range of cooperation networks.

Formation and developing process of Challenge-Farming Group “Challenge-Farming Group” is rooted to aspiring rural–urban communication activities conducted by “Ohminchi”, a farmers’ market of JA Ohmi Fuji opened in 2008. In the process of Ohminchi’s endeavors to develop these activities, JA Ohmi Fuji and Co-op Shiga have deepened cooperation. Ohminchi is not only one of the biggest farmers market in Shiga prefecture but also it is popular because of its diverse activities putting emphasis on “local production for local consumption (LPLC)”. For example, Ohminchi runs local food restaurant located next to Ohminchi and food truck car for local food catering to neighboring schools, etc. In addition, the notable activities are promotion of rural-urban communication activities and green tourism. The trigger of these activities was food stock shortage in afternoon when Ohminchi was just opened in 2008. In response, Ohminchi started a service which consumers themselves could harvest vegetables at the farmland managed by Ohminchi. This service has been becoming popular and Ohminchi began to focus on and diverse rural-urban communication activities based on farming. Farm study project named “Aozora Fitness Club”, which offers the participants one-day farmer experience, is especially known widely so that many come to participate it from inside and outside the prefecture. Moreover, Ohminchi connects various businesses such as farmers market, restaurant, and communication activities to green tourism. It offers tourists to enjoy harvesting, cooking and eating opportunities by themselves as well as shopping at the farmers market. Such tourism plan is popular within and out of the country.

Through Ohminchi’s diverse efforts regarding communication activities and LLPC, the relationship between JA Ohmi Fuji and Co-op Shiga has been enhanced and sophisticated much more than other cases of direct marketing. They have deepened interaction through “Convention for Promotion of LPLC24” of which both of them were members, and they subsequently signed to “Agreement on Cooperation between Cooperatives for Promotion of Local Agricultural

23 Its original name is “Farmer Challenge Tai” in Japanese. 24 Its original name is “Chisan Chisho Suishin Kyogi Kai” in Japanese.

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Products25” in 2012. During the same year, “Group for Promoting Interrelation between Local Farming and Food Consumption26” which plans farm studies was organized and managed by Co-op Shiga’s secretary generals from its branches and a staff of JA Ohmi Fuji. Furthermore, 2012 was International Year of Cooperatives so that the group offered harvesting activity for Co-op Shiga staffs and members supported by JA Ohmi Fuji in order to deepen cooperative cooperation. This was the beginning of periodic communication through harvesting activity as a part of direct marketing and LLPC.

The harvesting activity mentioned above is the precursor of Challenge-Farming Group. Since witnessing the popularity of “Aozora Fitness Club” mentioned above, Co-op Shiga also became to have an intention to develop the harvesting activities into more active farm studies. In addition, JA Ohmi no longer had capacity to accept more participants from Co-op Shiga because there were rapidly growing numbers of the Co-op members who were interested in harvesting activity. In response to these situations, JA Ohmi Fuji and Co-op Shiga organized “Challenge-Farming Group” in 2015 thanks to new cooperation by JA Koka as a host of participants from Co-op Shiga, and they started more active farm studies. The group provides two courses per year and each course implements farming activities such as planting, weeding, and harvesting for several times. Due to high evaluation towards these efforts, this farm study received subsidy from Ministry of Agriculture, Forestry and Fisheries regarding contribution to food education in 2015. Furthermore, this project was enlarged thanks to new entry to the hosts of participants by JA Higashi Biwako and JA Nishi Biwako in 2016, and the number of participants increased even more (Picture 2).

In addition, it is noteworthy that “Group for Promoting Interrelation between Local Farming and Food Consumption” mentioned above has continuously made efforts to feedback participants’ opinion about farm study to producers and JA. This effort is thought to be one of the key factors to maintain farm studies. Their opinions are valuable for host producers and the JA because not only they cheers and motivates producers’ sides, but also they allows producers’ sides to access the details of consumers’ demands for farm products which are essential information to improve trade situation.

25 Its original name is “Jibasan Teikei Ni Kansuru Kyoudou kumiai Kan Kyoudou No Kyoutei” in Japanese. 26 Its original name is “Shoku To Nou Wo Tsunagu Kai” in Japanese.

245 262 257

582

745

0

100

200

300

400

500

600

700

800

FY 2012 13 14 15 16

(Co-op members) Harvesting activities of

Co-op members supported by Ohminchi“Challenge-Farming Group”

of co-op members

JA Kokaparticipates

JA Higashi Biwakoand JA Nishi Biwakoparticipate

Ohminchi (JA Ohmi Fuji)started the activity

International Year of Cooperatives

2012 2013 2014 2015 2016 (Fiscal year)(Source) Website of Ministry of Agriculture, Forestry and Fishery and Co-op Shigahttp://www.maff.go.jp/j/syokuiku/attach/pdf/torikumi-146.pdf, http://www.pak2.com/spiral/pdf/1701.pdf

Picture 2. Number of participants (Co-op members) and evolution of farm study

Specialized coursesupported byKaihotsu

111

Establishment of intensive course through expanding cooperation network In the process of enhancing these farm studies, there have been growing number of participants who intend to study more about vegetable production. Responding to the situation, JA Ohmi Fuji organized “intensive course” within Chalange-Farming Group in 2016 thanks to practical supports from community-based farming corporation named “Kaihotsu” located nearby Ohminchi.

Intensive course is divided into summer and winter vegetable cultivation program, and it has just started from the winter FY 2016. So far, 16 participants in winter FY 2016 and 24 participants in summer FY 2017 were welcomed. This course is only hosted by JA Ohmi Fuji cooperated by Kaihotsu offering training field and instructors. Implementation of this course requires more complicated works such as farming practice at training fields and lectures about usage of agricultural materials etc., and these course works are basically held once or twice a month. In order for efficient implementation of these intensive coursework contents, JA Ohmi Fuji outsources provision of technical advice and training fields to Kaihotsu and mainly take responsibility in coordination between participants and Kaihotsu.

Behind the establishment of Intensive course, there have been efforts towards enhancing interrelation between JA Ohmi Fuji and Kaihotsu aiming at local agricultural development through vitalization of farm study by non-farmers. Their activities named “Agri-education Project” have been funded by “Agriculture, Forestry and Fisheries Future Fund” in 2015. The project offers wide range of plans, from a simple harvesting activity to more intensive farm trainings for those who wish to start farming. It is considered that Intensive course of Challenge-Farming Group has been actively and efficiently managed because of these efforts by JA Ohmi Fuji and Kaihotsu.

Function of farmers’ market as a connecting point between various local actors Farm study which was originally started as a part of communication activities of direct marketing finally became an important opportunity to bring up new entry farmers in this area. It could be pointed that the farm study has been sophisticated in parallel with development of cooperation networks.

JA Ohmi Fuji and Co-op Shiga have played role of coordinators which actively connect farmers and consumers. Above all, it should be emphasized that the function of Ohminchi which is farmers’ market of JA Ohmi Fuji is regarded as an aspiring coordinator of diverse communication activities. Farmers’ market is not only a sales place but also a connecting point between local farmers and consumers. Ohminchi is one of outstanding farmers’ markets which fully brings out its potential to connect producers and consumers. Development of Farm study conducted under strong initiative of JA Ohmi Fuji and Co-op Shiga is an outstanding case that cooperatives has played role of coordinator which connect producers and consumers.

FINDINGS AND IMPLICATIONS OF CASE STUDIES

Contents of each case mentioned above are different, however, it can be implied that three points below are quite effective to sophisticate direct marketing and to develop agriculture through cooperative cooperation.

Effects of trust building among cooperatives on stabilizing products trade Enhancement of communication activities contribute to build trust between staffs of JA and Co-op, which is quite important to stabilize trade condition of products. This effect could be clearly observed in Case 2 of herb rice direct marketing that trustful relationship between cooperatives stabilizes herb rice direct marketing in spite of its yield fluctuation risk.

Communication activities based on environmental study such as “Survey on Paddy Field

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Biodiversity” shown in Case 1 and 2 are also noteworthy because producers and JA can directly appeal their efforts to produce farm products with environmentally friendly way to Co-op. This appeal from producers’ side builds trust from Coop, and it boost demands for their products from Co-op members. In addition, activity of “Group for Promoting Interrelation between Local Farming and Food Consumption” in case 3 is also noteworthy in the viewpoint that they put emphasis on feedback of participants’ opinions to producers’ side. It is effective to improve trust relationship among both sides of producers and consumers and to make details of information on them such as demands or difficulties clear.

These effects of communication activities could be regarded as analogy with “relationship marketing” which indicates strengthening relationship with consumers contribute to stabilize trade27. This perspective fits well in the case of direct marketing among cooperatives putting emphasis on “face to face relationship.”

Virtuous circle of business profit and communication activities Implication derived from those cases is that business profit and communication activities are inseparable to and balanced promotion of both aspects is required to maintain and develop direct marketing between cooperatives. Although communication activities can be seen not as a profitable section at a glance, stable trade of farm products is supported by communication activities. In addition, business profit from active trade is transferred into implementation of communication activities. This virtuous circle is clearly shown in case 1 and 2.

In case 3 of JA Ohmi Fuji, however, it is not always the most active direct marketing partner because it is located to relatively urban area so that agricultural production is not so active. But it should be emphasized that JA Ohmi Fuji actively makes effort to acquire funds for implementation of diverse communication activities. As mentioned in the chapter of case 3, these communication activities are funded by “Agriculture, Forestry and Fisheries Future Fund” and subsidized by Ministry of Agriculture, Forestry and Fisheries for their contribution to food education. This case can be regarded as a successful model to promote communication activities by inspiring cooperation from wide range of organizations.

Recently, however, increasing number of JA has been merged and has enlarged their business area, and Co-op has also actively established business federation organized by several of Co-op from some prefectures. These allow improving operational efficiency of their management, but on the other hand, it is concerned that locality-based membership activities may decline due to dilution of locality-based relationship between members and cooperative28. Cooperatives are now required to have well-balanced perspectives of efficiency and membership more than the past.

Enhancement of cooperation network within cooperatives and outside of them As mentioned above, enhancement of relationship within cooperative and its members is essential to implement wide range of communication activities. Under increase and sophistication of consumers’ demand toward food and farm study, cooperatives are also required to implement more highly specialized projects. In this situation, strengthening wide range of cooperation networks is also required along with enhancement of cooperation within cooperatives.

In recent years, words such as “biodiversity” and “sustainability” have become to be

27 For example, Sakurai (2003) discusses on marketing strategy for development of agricultural production area in terms of relationship marketing. Fujishima and Iwasaki (2010) is an empirical research which indicates positive effects of consumers’ participation in farm study on high consumers’ preference towards direct marketing products regardless of how many times they have participated it. 28 As mentioned at the beginning part of this paper, branch offices of JA have often been continuously based on local community although business area of each JA has enlarged. However, in the decrease trend of farmer, it has been gradually difficult to keep locality-based close relationship between members and JA staffs. In addition, this trend is also an important factor that growing number of JA has been emerged to improve operational efficiency.

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actively spotlighted while environmental awareness has been rising especially after the Great East Japan Earthquake hit in 2011. In this situation, contribution towards environmental conservation is also valuable information of farm products. “Survey Project on Paddy Field Biodiversity in Tajiri Area” in case 1 conducted under wide range of cooperation networks is responding well to consumers’ growing interest in sustainable agriculture. In addition, intensive course of Challenge-Farming Group in case 3 is also regarded as an outstanding project, which attract aspiring consumers who are highly interested in agriculture or plan to be new entry farmer in the future. This project could be implemented thanks to practical supports by community-based farming corporation “Kaihotsu.”

It could be pointed that multilayered and wide range of cooperation structure has been getting more important to maintain and improve situation of agriculture as well as direct marketing between JA and Co-op.

CONCLUSION As considering development of food production and distribution from global perspective, there are many kinds of efforts analogically regarded as direct marketing.

Above all, community supported agriculture (CSA) which is actively conducted in Western countries highly connects producers and consumers. Its notable idea is that production risk is distributed between consumers and farmers by means of consumers’ advance payments to products which they want. This system requires consumers to well-understand about agriculture which has yield risk caused by climate, and to actively participate in production process such as exchanging opinions with producers and supporting farming activities. The system regarding CSA is not still popular in Japan, however, groping for creation of risk distribution system between farmers and consumers is gradually underway among JA and Co-op.

In Asian developing countries, efforts toward improvement of food value chain regarded to direct marketing can be seen nowadays. In case of Vietnam, it is not major yet but gradually developing that some corporations are making contract with farmers’ groups which strictly keep safe condition in production process and deliver their products to registered consumers. This business is thought to be appreciated by aspiring farmers and consumers because general food supply chain in Vietnam has problem of severe information imbalance as mentioned at the beginning.

Sophistication of wholesale market system is continuously needed for development of agriculture in Asian countries, but direct marketing is also an effective way to improve agricultural management, especially for small-scale farmers. It could be pointed that Japanese cases of direct marketing which put emphasis on the role of cooperatives and intercommunication among them are ones of suggestive models to consider development of food value chain in Asian countries.

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ESTABLISHMENT OF A SUSTAINABLE FOOD SYSTEM AND THE ROLE OF HANSALIM FOR AGRICULTURE AND RURAL AREAS

HyungGeun Yoon

Hansalim Cooperative Federation, Korea

ABSTRACT Hansalim was established in 1986 to make a world where urban and rural communities live together. Through the direct trade of safe food such as eco-friendly agriculture products etc, Hansalim producer member is responsible for the consumer member’s table and consumer member is responsible for the producer's livelihood. As of the end of 2016, Hansalim supplied 349.5million USD of products with 596,000 member households and 2,500 producers. Emphasizing that 'production and consumption are one', the urban members and rural producers are engaged in various exchange activities such as visiting producing area, experience programs and helping rural workers 1,000 times per year for 15,000 persons.

Hansalim has been implementing Participatory Guarantee System (PGS) called Autonomous Certification System. Through Autonomous Management and Autonomous Check System, producer and consumer check the production process and improve the quality of product together. In addition, Hansalim works hard to save our agriculture by conducting Rice Consumption Promotion to save the rice which is the basic crop of Korea, Native Seed Protection Movement, Anti GMO campaigns, Agricultural Land Saving campaign and etc. Hansalim also operates Production Stabilization Fund and Price Stabilization Fund to maintain and encourage ecological local agriculture. In order to realize the value of life-saving food, Hansalim is developing and practicing dietary life programs for all lifestyles ranging from baby foods to the table for the elder with the local community. During the past year, Hansalim conducted 1,073 times of dietary education for 22,098 persons to think about health, environment and be grateful for nature. Hansalim is also engaged in a variety of lifestyle and cultural movement to overcome the crisis of civilization such as climate change, nuclear dangers and energy depletion, agriculture and the food crisis.

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