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PHILIPPINE RURAL DEVELOPMENT PROJECT (PRDP)

I-PLAN Component Luzon A Cluster

DEPARTMENT OF AGRICULTURE Luzon A Cluster

November 2014

MB/II.- ONION VCA STUDY, DA-PRDP- LUZON A Página 1

CONTENTS

CONTENTS Page

EXECUTIVE SUMMARY 7

Section 1: INTRODUCTION 10

A. Background Information and Objectives 10

B. VCA Objectives 11

C. Methodology and Approach 11

Section 2: OVERVIEW OF THE INDUSTRY 13

A. Production Description 13

B. Production Trends 14

Section 3: NATURE AND STRUCTURE OF INDUSTRY 23

A. Value Chain Mapping 23

B Key Players and Function 27

C. Nature of Interfirm Relationship 36

D. Price and Cost Structure 38

Section 4: MARKETS AND MARKET OPPORTUNITIES 44

A. Markets and Market Trends 44

B. Price Trends 52

Section 5: SUPPORT MARKETS 60

A. Financial Services 60

B. Non-Financial Services 61

Section 6: ENABLING ENVIRONMENT 63

A. Formal Rules, Regulations, and Policies 63

B. Informal Rules and Socio-Cultural Norms 64

Section 7: CONSTRAINTS AND OPPORTUNITIES 65

Section 8: COMPETITIVENESS DIRECTION 70

A. Competitiveness Vision 70

B. Priority Constraints/Opportunities and Interventions 71

Section 9: CONCLUSIONS AND RECOMMENDATIONS 86

Annex 1: PRIORITIZATION OF INTERVENTION STRATEGY: ILOCOS REGION 88

Annex 2: PRIORITIZATION OF INTERVENTION STRATEGY: CAGAYAN VALLEY 89

Annex 3: PRIORITIZATION OF INTERVENTION STRATEGY: CENTRAL LUZON 90


LIST OF TABLES

No. Title Page

1 World Production of Dry Bulb Onion, 2008 to 2012 15

2 World Production of Dry Bulb Onion, 2008 to 2012 15

3 World Production of Shallot and Green Onion, 2008 to 2012 16

4 Onion Production in the Philippines, 2013 18

5 Onion Production in Ilocos Region, 2009 to 2013 18

6 Breakdown of Onion Production by Variety and Key Municipalities, 2013 19

7 Onion Production in Cagayan Valley, 2009 to 2013 20

8 Onion Production in Central Luzon, 2009 to 2013 21

9 Breakdown of Onion Production in Nueva Ecija by Municipality and Variety, 2013 22

10 Number of Onion Farmers in Central and Northern Luzon Regions, 2013 29

11 Planting and Harvesting Calendar in Key Onion Producing Areas in Northern and

Central Luzon Regions

30

12 Cold Storage Plants in Onion Producing Provinces in Northern and Central Luzon 34

13 Cold Storage Fees of KASAMNE and Argo in Nueva Ecija, 2013 35

14 Number of Onion Associations and Cooperatives in Northern and Central Luzon 47

15 Production Costs and Returns of Red Creole, Yellow Granex, and Shallots, 2013 38

16 Comparison of Production Cost per Hectare of Red Creole between Nueva

Vizcaya, Nueva Ecija, and Occidental Mindoro, 2013

39

17 Relative Financial Position of VC Players: Fresh/Wet Market – Red Creole

1 kilo of red creole onion that has been stored in cold storage

41

18 Relative Financial Position of VC Players: Institutional Market – Peeled Yellow

Granex Onion

42

19 Relative Financial Position of VC Players: Export Market – Shallots 43

20 Onion and Shallot Exports from the Philippines, 2009 to 2013 44

21 World Exports and Top Exporters of Onions and Shallots, 2009 to 2013 45

22 World Imports and Top Importers of Onions and Shallots, 2009 to 2013 46

23 Onion Imports Made by the Philippines, 2009 to 2013 48

24 Indicative Requirements of Institutional Buyers 49

25 Philippines Onion Self-Sufficiency Ratio, 2009 to 2013 50

26 Industry Perspective of Onion Consumption and Supply in the Philippines, 2013 50

27 Projected Demand of Onion in the Philippines, 2015 - 2020 52

28 Price Competitiveness of Philippines vis-à-vis Major Suppliers in Country’s Target

Export Markets , 2013

52


No. Title Page

29 Export Price Trends: Philippines vis-à-vis Top World Exporters, 2009 - 2013 54

30 Variety of common onion and shallot 55

31 Prices of Imported Onions Versus Locally Produced Onions, 2009 to 2013 66

32 Prices of Onions in Different Markets, 2009 to 2013 57

33 Constraints and Opportunities 65

34 Priority Constraints/Opportunities and Interventions 78


LIST OF FIGURES

No Title Page

1 Type of onions cultivated in Central and Northern Luzon Regions 13

2 Countries delivering the highest 5 yields (2012) vis-á-vis average yield in key shallot producing areas in the Philippines, 2013

16

3 Percentage distribution by Region of onion production in the Philippines, 2012 17

4 Value Chain Map: fresh market chain in Central and Northern Luzon Regions 23

5 Geographic Flow of Onion: Ilocos Norte trading centers 24

6 Geographic Flow of Onion: Pangasinan trading centers 24

7 Geographic Flow of Onion: Nueva Vizcaya trading centers 25

8 Geographic Flow of Onion: Nueva Ecija trading centers 25

9 Value Chain Map: Institutional Buyers 26

10 Value Chain Map: Export Market 27

11 Common Onion Farming Practices in Bongabon, Nueva Ecija 30

12 Effect of VAM application in Onion Production 31

13 Transplanting of Onions in Bongabon, Nueva Ecija 31

14 Harvesting of Onion in Pangasinan 32

15 Cleaning and sorting of Onions in Nueva Ecija 33

16 Onion and Garlic hanger storage in Ilocos Norte and Nueva Ecija 35

17 Cost centers across all types of Onion Producing Provinces in Northern and Central Luzon regions, 2013

40

18 Relative Financial Position of VC Players: Fresh Market – Red Creole 41

19 Relative Financial Position of VC Players: Institutional Market – Yellow Granex 42

20 Relative Financial Position of VC Players: Export Market – Shallot 43

21 Onion Self-Sufficiency Ratio in The Philippines, 2009 to 2013 50

22 Exports Price Trends: Philippines vis-á-vis Top Exporters, 2009-2013 54

23 Prices of Imported versus Local Onions (PhP/Kg), 2009-2013 56

24 Price of Imported and Local Onions in Metro Manila Supermarkets, 2014 57

25 Percentage Difference between farm gate and Wholesale Prices in Onion producing Provinces, 2013

59

26 Synthesis of Competitiveness vision, 2014 to 2020 70


ACRONYM

ACEF Agricultural Competitiveness Enhancement Fund

ACPC Agricultural Credit Policy Council

AFMP Agri-Fishery Microfinance Program

AMCFP Agro-Industry Modernization Credit Finance Program

ASKI Alalay Sa Kaunlaran Incorporated

BAFPS Bureau of Agricultural and Fisheries Product Standards

BACs Bank-Accredited Cooperatives

BAS Bureau of Agricultural Statistics

BSWM Bureau of Soils and Water Management

BGA German Federal Health Agency

BPI Bureau of Plant and Industry

CRS Catholic Relief Services

CHIPI Chamber of Herbal Industries of the Philippines, Incorporated

DA Department of Agriculture

DA-BAR Department of Agriculture Bureau of Agriculture Research

DOH Department of Health

DOST Department of Science and Technology

DTI Department of Trade and Industry

FAO Food and Agriculture Organization

FEP Farmer Entrepreneurship Program

FDA Food and Drugs Administration

FGD Focus Group Discussion

GAP Good Agricultural Practices (Global GAP)

GATT General Agreement on Tariffs and Trade

GMP Good Manufacturing Practices

ha Hectare(s)

HDL High-density lipoprotein (good cholesterol)

HVCDP High Value Crop Development Program

JGF Jollibee Group Foundation

KASAMNE Katipunan at Samahan ng Magsisibuyas ng Nueva Ecija

KII Key Informant Interview

LBP Land Bank of the Philippines

LGU Local Government Unit

MFIs Micro Financing Institutions


MLGU Municipal Local Government Units

MRDP Mindanao Rural Development Program

MT Metric Tons

NCCAP National Climate Change Action Plan

NLDC National Livelihood Development Corporation

NOGROCOMA National Onion Growers Cooperative Marketing Association, Inc.

NHVT Natural Healing Methods of Theophrastus

PCIP Provincial Commodity Investment Plan

PDP Philippine Development Plan

PLGUs Provincial Local Government Units

PRDP Philippine Rural Development Project

PSA Philippine Statistics Authority

RCEP Regional Comprehensive Economic Partnership

SFC Splash Foods Corporation

SUCs State Universities and Colleges

VAM Vesicular Arbuscular Mycorrhizae

VCA Value Chain Analysis

VIEVA The Vegetable Importers, Exporters, and Vendors Association of the Philippines, Incorporated

WHO World Health Organization

WII Weather-based index


EXECUTIVE SUMMARY

This report provides an overview and analysis of the onion industry in the Luzon A Cluster with the aim of identifying main leverage points and key strategies to improve competitiveness and promote development in a pro-poor and sustainable manner. It will provide the basis for the formulation of the Provincial Commodity Investment Plan and will lay the foundation for PRDP’s cooperation with the private sector and other government agencies active in the onion industry. Onion is grown in about 175 countries. Total world production of dry bulb onion reached 82,851,732 MT and 4,342,135 MT of shallot and green onions in 2012. Major onion producing countries include China, India, USA, Pakistan, and Turkey, where China and India accounted about 47%. Philippines registered in 2013 a total production of 134,169.92 MT with an average yield of 8.70 MT/Ha. Central Luzon is the largest onion producing region accounting of 55% of the total production. Production from Ilocos Region comprised 30% of the national production. Cagayan Valley accounted for 5 of the production. In Ilocos Region, Ilocos Norte is the main onion producing province and accounted for 51% of the region’s production in 2013. . Ilocos Norte specializes in shallot production with the municipalities of Badoc, Vintar, and Pasuquin as the major producers. In Cagayan Valley Region, Nueva Vizcaya produced 99% of the region’s onion production in 2013. Most of the onion in Nueva Vizacaya is grown in the municipality of Aritao. Red onions comprised majority of the production in Nueva Vizcaya. Central Luzon, on the other hand, has Nueva Ecija as the leading producer of onions, accounting for 99.9% of the region’s production.. Based on data from the Provincial Government, about 5% of Nueva Ecija’s production consisted of red shallots. Yellow granex made up 12% of the production. The remaining 82% of the production consisted of red onion. In general, there was a decline in production among all Regions in Luzon A, mainly caused by the following 3 reasons:

The prolonged rainy season during the recent years has been a bane to onion farmers. The more it rains, the lower is the productivity.

Severe attack by a fungus, locally known as “amag”, causing the average harvest to drop sharply.

Farmers became a little bit apprehensive in expanding their production due to stiff competition from imported onion which almost always caused a decline in farm gate price.

There are about 23,500 farmers engaged in onion cultivation in Northern and Central Luzon regions. About 57% of the onion farms are 1 hectare and below. Farmers with than 1 hectare to 3 hectares planted to onion comprise about 37% of the total number of farmers. Only 6% of the farmers devote more than 3 hectares to onion cultivation. Onions are usually grown in rice paddy fields after the rice is harvested. Farmers in Nueva Vizcaya and Central Luzon practice only one cropping per year, while in Ilocos Norte and Ilocos Sur where shallot is the most dominant type of onion planted, farmers practice two croppings per year. Onion drying is carried out in the field in a process commonly called ‘windrowing’. It involves harvesting the mature bulbs and laying them on their sides (in windrows) to dry for 1 or 2 weeks. A critical factor during this stage is to ensure that bulbs are not bruised so as to prevent rotting during storage.


The traditional onion marketing channel involves a complex chain of intermediaries between farmer and consumer. In most cases, a local trader will consolidate and supply to assemblers, who in turn supply to various tiers of resellers and retailers. Intermediaries and farmers (with large farms) generally place a portion of their stocks in storage facilities in anticipation of a higher price during the lean season. During lean months or off-seasons, wholesalers source onions from intermediaries who have the capacity to store onions. In Ilocos Norte, the main trading centers are the Laoag City Public Market and the Badoc Public Market. These trading centers carry onions from both Ilocos Norte and Ilocos Sur. Pangasinan onions are traded in the Bayambang Bagsakan and Urdaneta Trading Center. Intermediaries from Nueva Ecija also sell their onions to assemblers in Urdaneta Trading Center. Onions from Nueva Vizcaya are sold via Aritao and Bambang Markets and directly to Nueva Ecija and Manila. . Main trading centers in Nueva Ecija are the markets in Cabanatuan City, San Jose, San Leonardo, and the Sangitan Bagsakan Market. Onions from Ilocos Region are also traded in Nueva Ecija. Although each Region sells some of their produce within their provinces, most of the production from Luzon A are distributed to Metro Manila and other regions in Luzon, Visayas, and Mindanao. Traders and/or assembler-wholesalers including cooperatives usually pick up the farmers’ produce at their farms. When farms are not accessible by trucks (e.g., farm areas separated by river without bridge), farmers bring the onions to the nearest accessible road by “Kariton”, “carabao””, and manual hauling. Farmers shoulder the additional cost of bringing the products to the nearest road. Traders generally pay the farmers in cash. Farms located in areas with bad roads generally get lower price to compensate for higher than normal transportation costs and depreciation. Across all types of onions and all onion producing provinces, farmers spend the most on labor comprising about 42% of the total production cost. Fertilizer is the second major cost center accounting for 24% of the production cost. Seeds comprise about 17% of the cost. About 4% of the production costs are spent on transporting inputs to farms and harvest to the nearest road that can be accessed by trucks of traders. Most of the supermarket chains in the country prefer to partner with full line consolidators like UBM Corporation and Dizon Farms rather than working with a large number of suppliers delivering various vegetables. The Vegetable Importers, Exporters, and Vendors Association of the Philippines, incorporated (VIEVA) also facilitates the distribution of onions to various buyers and retail outlets. The country is gradually revitalizing the exports of yellow onion and shallots after sales dipped in 2012 due to inability of farmers to comply with food safety quality standards. About 75% of locally produced onions are sold in wet markets. Supermarkets purchase around 15% of the onions produced by Filipino farmers. It is estimated that about 10% of local production are sold to fast food chains, hotels, restaurants, and processors. Metro Manila is the largest single market for onions in the Philippine primarily due to its growing population. In the chains involving institutional buyers (fast food chain, restaurants, supermarkets, etc.) and exporters, formal agreements are usually drawn between cooperatives and the buyers. Pricing is agreed before purchase. Buyers set the standards including quotas. Contracts between Jollibee and cooperatives are governed by non-disclosure clause. Philippines imported 8,533 MT of onions valued at US $ 1,142,000 to meet domestic demand, consisting mostly of the white or yellow granex variety. The three main suppliers of imported


onions in 2013 were China, Netherlands, and India. The bulk or 50% of the onions that entered the Philippines in 2013 came from China. Fueled by growing consumer awareness and concern, compliance with food safety and sustainable environmental practices is increasingly becoming a basic requirement from both domestic and export markets,. Farmers and exporters are now under more pressure than ever to adopt production practices that are compliant with Good Agricultural Practices (GAP). Onion exports from the Philippines consist primarily of shallots and some yellow granex. About 65% of onions exported by the Philippines came from Nueva Ecija and 35% from Ilocos Norte. In 2013, Philippines exported 3,571 MT valued at US$ 1,565,000. Indonesia was the main buyer and accounted for 86% of the total export sales. To ensure that local production remains viable and profitable, the onion industry needs to upgrade itself to become more competitive both in the domestic and export markets. The following key focal points of action were identified by stakeholders and the players: a) Access to seeds at more affordable terms b) Improved access to, availability, use, and utilization of fertilizer and other inputs appropriate for

onion farming while reducing environmental costs c) Enhanced flow and quality of extension services for onion farming to facilitate adoption of GAP

in both regular and off-season onion production d) Access to farming mechanization technologies to improve production efficiency e) Improved access to cost efficient low-cost irrigation technology f) Improved access to GMP compliant postharvest and storage technologies necessary for the

consistent production of high quality onion g) Improved physical/infrastructure linkages to input, support, and product markets h) Improved communication, coordination, transparency, and collaboration between and among

value chain players


Section 1: INTRODUCTION

A. BACKGROUND INFORMATION AND OBJECTIVES1

The agricultural sector strategy (Agri-Pinoy) embodied in the Philippine Development Plan (PDP) for 2011-2016 advances the principles of inclusive growth, food staple sufficiency, natural resource management and area-based development. Agri-Pinoy also includes the following new strategies: (i) institutionalizing regionally-based, spatial planning (ii) developing a systems approach for both planning and resource allocation; (iii) providing the critical infrastructure needed by priority value chains; and (iv) building a more resilient production base to accommodate fluctuations in global markets and effects of climate change. Complementing the Agri-Pinoy strategy is the National Climate Change Action Plan (NCCAP) which highlights the priority to be given to the rural sector in pursuing climate adaptation measures. The Philippine Rural Development Project (PRDP), a flagship project of the Department of Agriculture (DA), is aligned with the Agri-Pinoy strategy. It is a six-year project (2013-2019) designed to establish the government’s platform for a modern, climate-smart and market-oriented agri-fishery sector. Externally, it will focus on expanding market access and improving competitiveness. Internally, it will introduce reforms in operating the DA bureaucracy. Specifically, it aims to achieve the following development objectives:

At least, 5% increase in annual real household incomes of farmer beneficiaries; 30% increase in income for targeted beneficiaries of enterprise development

7% increase in value of annual marketed output

20% increase in number of farmers & fishers with improved access to DA services To facilitate the achievement of above objectives, the program has four main components, namely:

I-PLAN: Investment for AFMP Planning at the Local and National levels

I-BUILD: Infrastructure Development (new development)

I-REAP: Enterprises Development (new development)

I-SUPPORT: Implementation Support to PRDP

The design of PRDP and its implementation aspects draw heavily on the experiences of the Mindanao Rural Development Projects (MRDP 1 and 2), a program that has been successfully implemented over the past decade. The project adopts a value chain development approach as a platform for promoting inclusive, climate resilient, and sustainable growth in key agricultural subsectors and value chains. Onion is one of the priority products of the Luzon A Cluster, particularly Ilocos Region, Cagayan Valley, and Central Luzon. Collectively, the three regions account for 90% of the national production volume and 87% of the area planted to onion. Self-sufficiency of the Philippines in onion will depend to a significant extent on the robustness of the onion production in these regions. Onion is an important bulb vegetable in the Philippines and its use as condiment is part of the traditional cuisine.

1Overview of PRDP was taken from the Program Information Document – World Bank website


The Philippines used to export large volumes of onion, notably to Japan and Indonesia, but such exports have been declining since 2012 due to problems on complying with the stringent food safety and quality standards and price competitiveness. Gradually, the industry with the support from Department of Agriculture (DA) has incrementally revitalize export sales but still way below the 2011 level.

B. OBJECTIVES OF THE VCA

The decision to conduct a Luzon A cluster level value chain analysis was based on the recognition that the 3 regions in Luzon A Cluster are interdependently linked with each other in various functions in the chains particularly with regards to inputs markets and the marketing of onions. The cluster level approach to value chain analysis also hopes to bring cohesiveness into the various onion development initiatives that would be undertaken on a provincial basis. This report provides an overview and analysis of the onion value chain with the aim of identifying main leverage points and key strategies to improve competitiveness of Luzon A regions and promote development in a pro-poor and sustainable manner. It will provide the basis for the formulation of the Provincial Commodity Investment Plan and will lay the foundation for PRDP’s cooperation with the private sector and other government agencies active in the onion industry. Specifically, the value chain analysis aims to: a) Provide an in-depth understanding of the range of factors and relationships that affect the

performance of the onion industry in the three regions and in Luzon A in general, including end markets, enabling environment and coordination/cooperation among firms.

b) Identify in a participatory process the systemic chain level issues that hinder or promote the

gainful participation of rural households, sustainability of the chain, and its competitiveness in general.

c) Under a participatory process, identify and prioritize interventions needed to overcome

bottlenecks throughout the chain that would foster value chain competitiveness and climate change resiliency.

d) Identify and explore how to catalyze private and public sector stakeholders in the onion industry

to collaborate for improved industry performance

C. METHODOLOGY AND APPROACH

An initial desk study was conducted to collect and summarize information from currently available reports and studies. It provided guidance to issues that needed to be the focus of field research. The field work component of the study was conducted using qualitative research techniques particularly value chain analysis workshops, key informant interviews (KII), and focus group discussions (FGDs). Key informants and participants to the workshops and FGDs consisted of farmers, traders, processors, exporters, and representatives from relevant government agencies. Key informant interviews were used for collecting data on individuals’ perspectives, experiences, and quantitative data. FGDs were effective in generating broad overviews of issues of concerns to the groups or subgroups represented and in the triangulation/vetting of information obtained from the KII.


Constraints and interventions were identified and further elaborated based on iterative and inductive analysis of responses during the KII and FGD/Stakeholders Workshop primarily from the following perspectives:

Context of key informants and FGD participants

Third party observations (e.g., government agencies, providers, VC facilitators with experience in onion VC development projects, etc.) were important for suggesting important issues to explore and for substantiating the results of the company interviews

Experiences of other onion producing countries such as Indonesia and Malaysia

Past assessment studies of the Philippine onion industry Competitiveness is generally defined as the ability to efficiently produce goods (and services) for which there is high demand that leads to increased income generation capacities that are sustainable in the future. Strategy is about choice --- choosing what to do to build competitiveness from a long list of viable and promising options. Given the competing and varied incentives and motivations among and between stakeholders and players, the process required iterative ranking and prioritization and arriving a consensus on what needs to be done within the next 5 years. The competitiveness strategies proposed in this report reflect the choices made as a result of extensive analysis of the industry’s key constraints and a dialogue with stakeholders and players.


Section 2: OVERVIEW OF THE INDUSTRY

A. PRODUCT DESCRIPTION Bulb onion ((Allium cepa L) is one of the most important and popular culinary ingredient in the Philippines and the world. It is a favorite seasoning ingredient and commonly used to flavor dips, salads, spread, meat and vegetable dishes. Onions can be eaten raw, cooked, fried, dried, or roasted. Onion also has a long history of use as a medicinal preparation in traditional herbal medicine in Asia and Europe. It is a rich source of fructo-oligosaccharides. These oligomers stimulate the growth of healthy bifidobacteria and suppress the growth of potentially harmful bacteria in the colon. In addition, oligomers can reduce the risk of tumors developing in the colon. The World Health Organization (WHO) supports the use of onions for the treatment of poor appetite, prevention of atherosclerosis, and in providing relief in the treatment of coughs and colds, asthma and bronchitis. In 1986 the German Federal Health Agency (BGA) authorized the use of onion bulb (fresh or dried) or the fresh pressed juice of onion for treating loss of appetite and for prevention of age-related vascular diseases. Last June 2014, the onion was elected by a jury of the German Society for Promotion of the Natural Healing Methods of Theophrastus (NHV Theophrastus) to be medicinal plant of the year for 2015.


Onions are photoperiod sensitive, which means that varieties initiate bulb formation based on day length. Onions are classified as short day, intermediate day or long day varieties, depending upon the day length which will trigger bulb formation. Varieties listed as short-day onions form bulbs when the day length is between 10 and 12 hours. Intermediate-day varieties form bulbs at 12 to 14 hour days. Long-day onions, on the other hand, begin to form bulbs when the day length is between 14 and 16 hours. The varieties grown in the Philippines are short day onions. According to the Bureau of Plant Industry (BPI), some intermediate varieties may be adapted to the Northern Philippines, Claveria in Misamis Oriental, Valencia in Bukidnon and in Davao. Onions are members of the Allium family of which there are over 300 varieties around the world. They are believed to have originated in the Middle East and have been consumed by humans for at least 5,000 years. There are three types of bulb onion grown in Ilocos Region, Cagayan Valley, and Central Luzon, namely: red onion (Sibuyas Bombay/Sibuyas Pula), the white/yellow onion (Sibuyas Puti), and the shallot/multiplier (Sibuyas Tagalog/ Tanduyong). Strains of Red Creole and Red Pinoy are among the popular varieties being grown. Among the different types of onions, red onions have the highest demand among Filipino households. Likewise, farmers prefer to grow the red varieties because of their long storage life. . Locally-grown onions of the red variety are round reddish in color and their skin/peeling can be removed easily whereas imported red onions have a pale or lighter red color and somewhat elongated in shape. Yellow onion varieties popularly grown by Northern and Central Luzon farmers are the granex (flat) or the grano (round) type. Yellow granex hybrids and Superex are among the good varieties tested in the Philippines. Main users of the yellow varieties are the hotels, restaurants, and fast food chains. The local “white/yellow” onions have meat that is softer/more tender, more aromatic and juicier than imported ones whose meat is yellowish, rather than white, in color. Shallot is a biennial herb and a member of the Aggregatum Group, which is usually propagated from lateral bulbs off the main bulb. Shallot is sweeter than onions with a greater piquancy. Its higher sugar content also means that it caramelizes more easily than onions. It is fast gaining popularity as a gourmet vegetable in both the domestic and export markets. Shallots comprise majority of the onions being exported by the Philippines. Some of the emerging processed shallot products especially in Ilocos Norte are the whole shallot pickle, chopped shallot pickles, dried shallot chips, and shallot powder. These products are sold within the local market. Local onions also come in different sizes, such as, small (‘pickles’), good/medium, and oversized, compared to imports which are mostly bigger (considered ‘oversized’). Onions can be divided into two marketable categories: the fresh market onions and the storage (dry bulb) onions.

B. PRODUCTION TRENDS

1. Global Production Onion is grown in about 175 countries under temperate, subtropical and tropical conditions. Total world production of dry bulb onion or storage onion increased from 74,484,149 MT in 2008 to 82,851,732 MT in 2012. Major onion producing countries include China, India, USA, Pakistan, and Turkey. In 2012, about 47% of all onions were harvested in China and India.


Table 1 . World Production of Dry Bulb Onion, 2008 to 2012 In Metric Ton

Country 2008 2009 2010 2011 2012 % Change 2012/09

World 74,484,149 73,640,837 78,865,614 85,008,230 82,851,732 11%

China, mainland 20,750,000 21,000,000 21,690,000 22,000,000 22,600,000 9%

India 13,565,000 12,158,800 15,118,000 17,511,090 16,308,990 20%

USA 3,407,370 3,429,100 3,338,380 3,360,970 3,277,460 -4%

Pakistan 2,015,200 1,704,100 1,701,100 1,939,600 1,692,300 -16%

Turkey 2,007,120 1,849,582 1,900,000 2,141,373 1,819,000 -9%

Egypt 1,948,937 2,128,580 2,208,078 2,304,207 2,024,881 4%

Iran 1,849,275 1,522,147 1,922,973 2,168,015 2,260,000 22%

Russian Federation 1,712,500 1,601,550 1,536,300 2,122,740 2,080,814 22%

Brazil 1,367,066 1,511,853 1,753,311 1,523,316 1,519,022 11%

Nigeria 1,365,670 1,300,000 1,346,218 1,238,090 1,350,000 -1%

Rank of Philippines

51 56 54 56 59

Source: FAOSTAT

In 2012, Korea had the highest average yield at 57.03 MT per hectare. Other major onion producing countries with yields above 50 MT are the United States of America (USA) and Spain. China and India had average yield of 22.05 MT and 17.01 MT per hectare, respectively. Average yield in the Philippines is just about 51% of India and 49% of China.

Table 2 . Average Yield of Major Dry Bulb Onion Producing Countries, 2012

Country Average Yield (MT/hectare)

Korea 57.03

U.S.A. 54.62

Spain 52.03

Netherlands 49.68

Japan 44.06

Egypt 33.75

Iran 31.83

Russian 22.59

China 22.05

India 17.01

Source: FAO

More recently, with changes in culinary tastes, there is renewed interest in shallots. Total world production of shallot and green onion increased from 4,181,251 MT in 2008 to 4,342,135 MT in 2013. China is the largest producer followed by Japan.


Table 3 . World Production of Shallot and Green Onion, 2008 to 2012 In Metric Ton

Country 2008 2009 2010 2011 2012 % Change 2012/09

World 4,181,251 4,180,948 4,170,890 4,329,035 4,342,135 4%

China, mainland 725,000 760,000 785,000 813,000 850,000 17%

Japan 575,500 575,100 541,300 549,500 550,000 -4%

Republic of Korea 505,056 446,991 417,229 482,143 356,734 -29%

Iraq 336,244 308,239 291,212 326,616 350,000 4%

Tunisia 235,000 210,000 220,200 210,000 228,600 -3%

Nigeria 226,000 179,706 235,500 236,000 240,000 6%

New Zealand 200,000 203,000 210,000 228,000 257,000 29%

Thailand 199,435 201,662 180,696 195,228 200,000 0%

Turkey 168,223 169,271 165,478 153,823 151,166 -10%

Taiwan 107,073 123,190 111,205 105,826 110,000 3%

Source: FAOSTAT

As can be seen in Figure 2, countries with the top 5 highest average yield in shallot and green onion production worldwide had yields ranging from 38 MT to 53 MT. Based on available data on shallot


production in the Philippines, Ilocos Norte has the highest yield at 10.41 MT, but it is just about 28% of the average yield in China.

2. Domestic Production Onions are grown in 22 provinces in the Philippines covering 15,415.47 hectares. Total 2013 Philippine onion production was 134,169.92 MT, six percent (6%) higher than 2009 production levels of 127,054.69 MT. Compared to major onion producing countries, average farm productivity in the Philippines of 8.70 MT per hectare is generally low.

Onion producing regions in Luzon A Cluster accounted for 90% of the national production volume and 87% of the area planted to onion. In 2013, Central Luzon had the highest production volume and hectarage under onion cultivation. Ilocos Region ranked second both in terms of volume and area planted but average yield per hectare is below the national average farm productivity. Among the onion producing regions in Luzon A Cluster, Cagayan Valley had the lowest production volume but the region had the highest average yield per hectare. The only region outside of Luzon A Cluster with significant onion production in 2013 was Mimaropa.


Ilocos Region

Table 5 . Onion Production in Ilocos Region, 2009 to 2013

Indicators 2009 2010 2011 2012 2013 % Change 2013/09

ILOCOS REGION

Volume (MT) 39,779.73 42,090.83 40,620.53 40,421.19 39,770.05 0.00%

Area Planted (Ha) 4,617.78 4,689.13 4,752.93 4,724.61 4,622.49 0.02%

Average Yield (MT/ha) 8.61 8.98 8.55 8.56 8.60 -0.03%

Ilocos Norte

Volume (MT) 17,990.57 18,528.18 19,991.72 20,570.20 20,274.71 2.54%

Area Planted (Ha) 2,173.63 2,173.63 2,253.63 2,261.61 2,213.50 0.37%

Average Yield (MT/ha) 8.28 8.52 8.87 9.10 9.16 2.13%

Ilocos Sur

Volume (MT) 14,840.57 16,084.20 15,857.24 15,245.33 14,805.68 -0.05%

Area Planted (Ha) 1,650.50 1,706.00 1,703.00 1,673.00 1,623.99 -0.32%


La Union

Volume (MT) 34.00 30.45 23.52 23.28 21.51 -7.35%

Area Planted (Ha) 4.75 4.50 3.80 3.50 3.00 -7.37%


Pangasinan

Volume (MT) 6,914.59 7,448.00 4,748.05 4,582.38 4,668.16 -6.50%

Area Planted (Ha) 788.90 805.00 792.50 786.50 782.00 -0.17%


Source: BAS/PSA

During the last five years, Ilocos Region produced an average of 40,536.47 MT of onions per year. During the last five years, region’s production has not significantly improved due to incidence of pests and diseases, excessive use of pesticides and inorganic fertilizers affecting the soil productivity,

Table 4 . Onion Production in the Philippines, 2013

Region Area (in hectares) Volume (in MT) Yield (MT/ha)

Philippines 15,415.47 134,169.91 8.70

Ilocos Region 4,622.49 39,770.05 8.60

Cagayan Valley 627.25 7,208.27 11.49

Central Luzon 8,171.00 73,911.12 9.05

Mimaropa 1,831.95 12,589.79 6.87

Other Regions 162.78 690.68 4.24

Source; BAS/PSA


and postharvest losses. It is estimated that shallots comprise about 60% of the onions produced in the region. Ilocos Norte is the main onion producing province and accounted for 51% of the region’s production in 2013. Between 2009 and 2013, onion production in the province posted a positive growth rate. Ilocos Norte specializes in shallot production with the municipalities of Badoc, Vintar, and Pasuquin as the major producers. Onion production in Ilocos Sur comprised 37% of the region’s output. Average yield slightly increased but area cultivated went down by an average of 0.32% per year resulting to an overall decline in production volume. The top 3 onion producing municipalities are Sinait, San Juan, and Narvacan. The decline in Pangasinan’s production was caused primarily by the decrease in productivity. Production volume decreased from 6,914.59 MT in 2009 to 4,668.16 MT in 2013. The prolonged rainy season during the recent years has been a bane to onion farmers. The more it rains, the lower is the productivity. As of the May 2014 monitoring report from the Provincial Government, Pangasinan harvested 18,368 MT of onion during the last cropping season. About 97% of Pangasinan’s production consisted of the red onion varieties with the municipality of Bayambang as the main producer. White onion was about 2.7% of total onion production. Shallot production is very minimal.

Table 6 . Breakdown of Onion Production by Variety and Key Municipalities, 2013 Note: Data is from the municipal and provincial local government units and may vary with BAS/PSA data.

Municipality Area Harvested (Ha) Volume (MT) Ave Yield (MT/ha)

Ilocos Norte

Shallots 1,813.10 18,875.62 10.41

Badoc 995.10 9,457.52 9.50

Vintar 300.00 3,594.00 11.98

Pasuquin 111.00 1,332.00 12.00

Other municipalites 407.00 4,492.10 11.04

Ilocos Sur

Red and White Onions 1,474.75 16,538.80 11.21

Sinait 500.00 4,000.00 8.00

San Juan 360.00 3,261.60 9.06

Narvacan 120.00 2,160.00 18.00

Sto. Domingo 65.00 1,300.00 20.00

Bantay 60.00 1,260.00 21.00

Santa 75.00 1,125.00 15.00

Caoayan 75.00 1,102.50 14.70

Other municipalities 219.75 2,329.70 10.60

Pangasinan

Red Onion 1,479.30 17,862.00 12.07

Bayambang 577.00 8,655.00 15.00


Table 6 . Breakdown of Onion Production by Variety and Key Municipalities, 2013 Note: Data is from the municipal and provincial local government units and may vary with BAS/PSA data.

Municipality Area Harvested (Ha) Volume (MT) Ave Yield (MT/ha)

Bautista 243.00 1,730.00 7.12

Alcala 210.00 1,675.00 7.98

San Manuel 111.00 1,398.00 12.59

Villasis 75.00 1,125.00 15.00

Other municipalities 263.30 3,279.00 12.45

White Onion 46.50 465.00 10.00

Alcala 35.00 340.00 9.71

Bautista 8.00 80.00 10.00

Bayambang 2.00 30.00 15.00

Villasis 1.50 15.00 10.00

Shallots 5.00 41.00 8.2

San Quintin 2.00 18.00 9.00

Natividad 3.00 23.00 7.67

Source: Provincial Government of Pangasinan

Cagayan Valley

Table 7 . Onion Production in Cagayan Valley, 2009 to 2013


CAGAYAN VALLEY

Volume (MT) 2,058.54 3,183.38 4,798.97 2,761.86 7,208.27 50.03%

Area Planted (Ha) 334.00 382.50 477.35 578.10 627.25 17.56%


Cagayan

Volume (MT) 48.97 41.96 43.46 43.23 45.05 -1.60%

Area Planted (Ha) 12.00 11.00 11.00 11.00 11.00 -1.67%


Isabela

Volume (MT) 55.42 29.92 27.97 23.43 16.15 -14.17%

Area Planted (Ha) 12.00 11.50 6.35 5.10 4.25 -12.92%


Nueva Vizcaya

Volume (MT) 1,954.15 3,111.50 4,727.54 2,695.20 7,147.07 53.15%

Area Planted (Ha) 310.00 360.00 460.00 562.00 612.00 19.48%


Source: BAS/PSA


Nueva Vizcaya produced 99% of the total onion production in Cagayan Valley in 2013. Most of the onion in Nueva Vizacaya is grown in the municipality of Aritao. Red onions comprised majority of the production in Nueva Vizcaya. Production volume in Nueva Vizcaya increased from 1,954.15 MT in 2009 to 7,147.07 MT in 2013. In 2012, hundreds of hectares of onion farms in the southern part of Nueva Vizcaya were severely hit by a fungus, locally known as amag, causing the average harvest to drop sharply. Severely hit by the fungus were nine villages in southern Aritao town, among them Bone North, Bone South, Cutar, Banganan, and Comon. The fungus was caused by prolonged rainfall and cold weather during the latter part of 2011 and 1st quarter 2012. According to reports, the fungus has caused yields in the affected areas to fall to 4.5 metric tons from the usual 10 MT. This has also resulted in the price of onion to drop from P25 to P17 per kilo because of poor quality of the produce. Central Luzon

Table 8 . Onion Production in Central Luzon, 2009 to 2013


CENTRAL LUZON

Volume (MT) 72,719.05 74,868.40 73,535.31 72,499.93 73,911.12 0.33%

Area Planted (Ha) 7,973.00 8,195.00 8,178.00 8,126.20 8,171.00 0.50%


Nueva Ecija

Volume (MT) 72,703.45 74,678.35 73,500.37 72,481.43 73,854.24 0.32%

Area Planted (Ha) 7,966 8,170 8,170 8,120 8,161 0.49%


Pampanga

Volume (MT) 3.00 3.00 2.80 3.50 4.50 10.00%

Area Planted (Ha) 2 1 1 1.2 1 -10.00%


Tarlac

Volume (MT) .. 174.00 18.36 .. 36.48

Area Planted (Ha) .. 19 2 .. 4

Average Yield (MT/ha) 9.16 9.18 9.12

Zambales

Volume (MT) 12.60 13.05 13.78 15.00 15.90 5.24%

Area Planted (Ha) 788.9 805 792.5 786.5 782 -0.17%


Source: BAS/PSA

Nueva Ecija is the leading producer of onions in Central Luzon and the whole country. In 2013, 99.9% of the region’s onion production came from Nueva Ecija. Based on data from the Provincial


Government, about 5% of Nueva Ecija’s production consisted of red shallots. Yellow granex made up 12% of the production. The remaining 82% of the production consisted of red onion. The province was also affected by the prolonged rainy season in 2012 causing a slight dip in farm productivity. Between 2009 and 2013, area planted to onion increased by only 2%. Farmers became a little bit apprehensive in expanding their production due to stiff competition from imported onion which almost always caused decline in farm gate price. Between 2012 and 2013, there was also a lack of supply of seeds which resulted to a steep increase which farmers felt was unreasonable. East West Seeds has already resolved the seed supply problem.

Table 9 . Breakdown of Onion Production in Nueva Ecija by Municipality and Variety, 2013 Note: Data does not match with BAS/PSA data

Municipality Volume (MT) Area (Ha) Yield (MT)

Red Shallots 5,456.34 560.24 9.74

San Jose City 2,319.59 304.08 7.63

Sto. Domingo 168.88 14.17 11.92

Munoz 1,741.98 125.9 13.84

Llanera 416.4 35.93 11.59

Lupao 766.44 76.29 10.05

Other municipalities 43.05 3.87 11.12

Yellow Granex 12,620.15 661.23 19.09

Bongabon 8,895.09 389.06 22.86

San Jose City 1,508.58 138.63 10.88

Rizal 359.61 45.88 7.84

Palayan City 133.77 9.79 13.66

Llanera 1,564.33 66 23.70

Other municipalities 158.78 11.86 13.39

Red Creole 85,012.43 8,245.06 10.31

Bongabon 30,445.54 2655.39 11.47

San Jose City 6,573.23 686.53 9.57

Rizal 8,311.33 797.83 10.42

Talavera 4,711.70 475.95 9.90

Laur 4,562.04 450.07 10.14

Gabaldon 9,543.91 1144.32 8.34

Guimba 4,538.68 468.41 9.69

Other municipalities 16,326.02 1,566.59 10.42

Source: Provincial Government of Nueva Ecija

Immediate concern of the onion industry in Central Luzon is to come up with strategies to produce enough onions during the off-season. The critical months are the months of November, December and January. Tarlac farmers especially in Sapang - Moncada are specializing in off-season onion production. Based on interviews with farmers, average yield is about 20 MT per hectare. Among the members of the Sapang Multi-Purpose Cooperative, about 100 hectares are planted to onion.


Section 3: NATURE AND STRUCTURE OF THE INDUSTRY

A. VALUE CHAIN MAPPING Fresh Market

The traditional onion marketing channel involves a complex chain of intermediaries between farmer and consumer. In most cases, a local trader will consolidate and supply to assemblers, who in turn supply to various tiers of resellers and retailers. There are many types of assembler-distributors in onion marketing ranging from municipal to interregional assemblers. They perform similar trading practices and the main difference lies on the geographic scope of operations. These intermediaries assemble the onions sourced from farmers and local traders and distribute the same to buyers within and outside their base of operations. Municipal assemblers, for instance, can opt to sell to a provincial assembler or directly to a wholesaler and/or vendors in the wet market. Provincial and regional assemblers usually sell the onions to buyers outside of the province. Intermediaries and farmers (with large farms) generally place a portion of their stocks in storage facilities in anticipation of a higher price during the lean season. During lean months or off-seasons, wholesalers source onions from intermediaries who have the capacity to store onions.


In Ilocos Norte, the main trading centers are the Laoag City Public Market and the Badoc Public Market. These trading centers carry onions from both Ilocos Norte and Ilocos Sur. The onions are sold within the province and to provinces such as Cagayan, Isabela, Pangasinan, Nueva Ecija, and Metro Manila.

Pangasinan onions are traded in the Bayambang Bagsakan and Urdaneta Trading Center. Intermediaries from Nueva Ecija also sell their onions to assemblers in Urdaneta Trading Center. Key


destination markets include Metro Manila, Batangas, Cavite, Laguna, Central Luzon provinces, and to Mindanao (Davao and Cagayan de Oro via Metro Manila). Onions from Nueva Vizcaya are sold via Aritao and Bambang Markets. Interviews also indicate that cooperatives sell directly to traders who bring the produce to the various markets within the region, Pangasinan, and Metro Manila.


Main trading centers in Nueva Ecija are the markets in Cabanatuan City, San Jose, San Leonardo, and the Sangitan Bagsakan Market. Onions from Ilocos Region are also traded in Nueva Ecija. The trading centers in Nueva Ecija are the main sources of onions distributed to Metro Manila and other regions in Luzon, Visayas, and Mindanao. Institutional Buyers Through the Farmer Entrepreneurship Program (FEP), a program implemented by the Jollibee Group Foundation (JGF), Catholic Relief Services (CRS), and the National Livelihood Development Corporation (NLDC), opportunities are opened up to small-scale farmer groups for them to supply their produce like onion, garlic, and pepper to institutional buyers such as fast food chains, supermarkets, and food processors.

Most of the supermarket chains in the country prefer to partner with full line consolidators like UBM Corporation and Dizon Farms rather than working with a large number of suppliers delivering various vegetables, these consolidators, in turn, are increasingly working with farmer groups. The Vegetable Importers, Exporters, and Vendors Association of the Philippines, incorporated (VIEVA) also facilitates the distribution of onions to various buyers and retail outlets.

The country is gradually revitalizing the exports of yellow onion and shallots after sales dipped in 2012 due to inability of farmers to comply with quality standards. Main players in the export supply chain are the National Onion Growers Cooperative Marketing Association, Inc. (Nogrocoma), Samahan ng mga Katipunan ng Magsisibuyas ng Nueva Ecija (KASAMNE), VIEVA, and the exporters that have already received their Good Agricultural Practices compliance certification.


B. KEY PLAYERS AND FUNCTIONS

1. Input Provision Farmers use imported seeds acclimatized to Philippine conditions in the production of the red creole and yellow granex varieties. Hybrid seeds are distributed by East West Company and Ramgo International Corporation. Open pollinated varieties are supplied by Allied Botanical Corporation and Pilipinas Kanero Seeds Corporation. Farmers can also choose between regular and off-season varieties. Filipino farmers though prefer the Red Pinoy variety from East West which is suitable for regular season planting. Aside from its high bulbing percentage, the choice is also dictated by consumers’ preference for the deep red color and medium sized bulbs. Pale red onions fetch a lower price in the market. Farmers obtain the seeds from accredited distributors. A concern raised by farmers during the Stakeholders Consultation is the tendency of distributors and retailers to raise the price arbitrarily when demand is high. As such, cooperatives would want to look into the possibility of distributing the seeds themselves to their farmer-members. East West, on the other hand, is concerned with the need for proper storage facilities for the seeds as maintenance of good quality seeds is a complex problem due to heat damage that is attributed to desiccation and changes in enzyme structure, function and coagulation of protein due to direct cellular activity. East West is in the process of developing seeds for mechanized direct seeding. The current practice of transplanting to ensure proper spacing and good growth is considered by many farmers to be


laborious. PhilMech, on the other hand, is further developing the prototype of a low cost mechanical onion planter that would allow maximized spacing and direct seeding in farm lots, which could result in better yield in terms of bulb size, lower mortality rate and early maturity compared to transplant method. Countries with high yield are using mechanical onion planter and direct seeding. Some experiments have been made by the Nueva Ecija Fruits and Vegetable Seeds Center to produce locally the seeds for the red and yellow onion varieties. To date, the experiments have not yet been successful as the plants withered before they reached the flowering stage. According to experts, the temperature in the Philippines is not suitable for seed production. Bolting (the growth of seed producing inflorescence) requires a period of chilling at temperatures of 45 degrees to 55 degrees Fahrenheit for approximately one month or longer, depending on the onion variety. Insufficient chilling temperatures often result in poor flower development and low seed yields. Industry players, however, are still hoping that that the various agencies mandated to conduct research and development work would be able to find ways to produce the seeds local at competitive cost. To promote the planting of red onion varieties, the Ilocos Norte Provincial Government provided seed assistance to the farmers through the 50-50 scheme onion production assistance. In the production of shallots and multiplier onions, farmers use both the bulb sets/small bulbs and seeds. Based on interviews, it would seem that farmers are more inclined to use the bulb sets which they produce themselves or buy from traders cum input suppliers. Farmers generally prefer to plant the dry bulbs that have been stored for quite a long time, although they are relatively more expensive, because of their belief that old sets have a better germination ability and higher survival rate, produce good and healthy plants, and give better yield performance. Farmers use both inorganic and organic fertilizers. The most common grades of inorganic fertilizer used are the complete (14-14-14), urea (46-0-0), and ammonium phosphate (16-20-0). Main concern of farmers is the rising cost of fertilizer. Fertilizer marketing generally passes through three levels, namely, importers/manufacturers; distributors-wholesalers; and dealers-retailers. Distributors operate in one province and sell to dealers, and then dealers sell to end users, such as farmers. Distributors can also sell directly to farmers or large plantations, and may also have a dealer’s license. In the study conducted by Philippine Institute for Development Studies (PIDS).Senior Research Fellow Roehlano M. Briones, it was stated that farmer-cooperatives can also import fertilizer. From the same PIDS study released sometime early 2014; poor infrastructure was identified as the main cause for inefficiencies in fertilizer prices nationwide. Infrastructure problems have made fertilizer prices expensive in some areas and cheaper in others. Variations in fertilizer prices are similar across fertilizer grades and range between 6% and 7%. The widest range in the index is for urea, followed by ammonium sulphate. Cooperatives that are part of the VIEVA network use organic fertilizer produced by the Koronadal City Vegetable Producers Association. This is part of the barter trade scheme promoted by VIEVA. KASAMNE and the Aritao Onion Growers Cooperative, for example, pay back the fertilizer with their onions. According to these cooperatives, the quality of fertilizer from Koronadal is better than the organic fertilizer produced within their respective provinces. Likewise, even with the added transportation cost, the overall cost is lower than the organic fertilizer being commercially distributed within their localities.


The most common mulching materials used by farmers are the rice straws. Farmers in Ilocos Region tend to use more mulching materials than farmers in Central Luzon and Cagayan Valley. Farmers also use herbicides/weedicides sourced from local agri-vet suppliers.

2. Farming There are about 23,500 farmers in Central and Northern Luzon who are engaged in onion cultivation. About 57% of the onion farms are 1 hectare and below. Farmers with 1 hectare to 3 hectares planted to onion comprise about 37% of the total number of farmers. Only 6% of the farmers devote more than 3 hectares to onion cultivation.

Table 10 . Number of Onion Farmers in Central and Northern Luzon Regions, 2013

Region/Province Approximate Number of Farmers

Ilocos Region 8,468

Ilocos Sur 2,357

Ilocos Norte 3,434

Pangasinan 2,677

Cagayan Valley 1,285

Nueva Vizcaya 1,225

Other Provinces 60

Central Luzon 13,747

Nueva Ecija 13,250

Tarlac 15

Other Provinces 482

Source: Provincial Local Government Units/KII

Onions are usually grown in rice paddy fields after the rice is harvested. Farmers in Nueva Vizcaya and Central Luzon practice only one cropping per year. In Nueva Vizcaya and Nueva Ecija where farmers generally plant the red pinoy variety, regular planting starts from October to December and harvested from February to April. In Pangasinan, onions are planted from September to February. In Tarlac, seedbeds are plowed and sown in August. Harvest in Pangasinan and Tarlac commences in December. Yellow granex varieties are grown from October to December with cultivation concentrated mainly in Pangasinan and Nueva Ecija. . Peak harvest months are from January to March. In Ilocos Norte and Ilocos Sur where shallot is the most dominant type of onion planted, farmers practice two croppings per year. Onion is grown almost throughout the year starting from September to April. In many cases, a portion of the onions planted during the second cropping is reserved for seed purposes for the next season. Peak harvest months for shallots are from November to April.


Table 11. Planting and Harvesting Calendar in Key Onion Producing Areas in Northern and Central Luzon Regions

Region/Province Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Ilocos Region

Ilocos Norte

Ilocos Sur

Pangasinan

Cagayan Valley

Nueva Vizcaya

Central Luzon

Nueva Ecija

Tarlac

Source: KII/FGD

Legend Planting Harvest

To prepare the area for planting, farmers alternately plow and harrow until the soil is loose and pulverized. According to farmers, use of herbicide/weedicide is minimized and growth of onions is better - when land is plowed or ripped as deep as possible. Farmers use a combination of tractors (4-wheel and 2-wheel) and carabao. Only a few onion farmers own tractors. Most of them rely on tractor and carabao rental. During the peak planting season, there is a lack of tractors available for rental. To serve all farmers in an area, the norm is to meet the basic land preparation requirement.


Mulching to conserve soil moisture and to minimize the growth of weeds is practiced, more intensively in Nueva Vizcaya and the two Ilocos provinces than in Central Luzon and Pangasinan. Rice straw is the most common mulching material used. Philrice recommends also the application of Vesicular Arbuscular Mycorrhizae (VAM), a biofertilizer that helps in water and nutrient absorption, and prevention of soil borne diseases. It would seem that this practice is not yet widely adopted by onion farmers.

Farmers practice both direct planting and transplanting. Direct planting is more popular in Ilocos Region than in Central Luzon. In both methods, farmers face challenges on ensuring homogenous sizes as per market requirements, maximize utilization of area at the least number of cans of seeds or bulbs, and reduce labor cost.


Watering follows immediately after planting. PhilRice recommends that seedbeds should be watered thoroughly using 10-15g Trichoderma spores, a fungus that helps minimize incidence of soil-borne diseases like damping-off, mixed in 16 L water. From the interviews, it would seem that only a few farmers use Trichoderma. Water management of the crop is very important. Onion is sensitive to water stress and its growth can be inhibited by high temperature. In plots that are not mulched, watering has to be done every day in the morning to prevent damping-off especially during the early stages of vegetative growth. For mulched plots, farmers usually water every 5-7 days (depending on water availability and accessibility) or when temporary wilting occurs. Majority use a long hose or the manual sprinkle to water their farms. Hand-weeding especially at the early stages of growth is done to prevent competition for soil nutrients, water and sunlight. Farmers with ample capital use herbicides. Farmers also apply insecticides and fungicides. It has been observed by farmers though that insects and pests have increasingly become resistant to conventional insecticides. Alternative methods of managing pests such as cultural control have to be employed to reduce vulnerability to pest infestation. Onion requires good fertilizer application. Based on interviews, it would seem that many of the farmers use a combination of chemical and organic fertilizer. It was, however, evident during the focus group discussions that both large and small scale farmers do not use soil analysis as basis for fertilizer management and application. In many cases, farmers rely on traditional know-how and “instinct” (projected price, traditional dosage) on deciding the amount of fertilizer. For marginal farmers, amount of fertilizer to be applied is dictated more by cash availability.


Farms, in general, are not compliant with Good Agricultural Practices (GAP). Likewise, farms are vulnerable to bulb rot, a disease that can infect all flower and crop bulbs and is caused by a variety of fungi and a few bacteria. Onions are harvested manually. This is normally carried out by levering the bulbs with a fork to loosen them and pulling the tops by hand. In developed countries, especially in large scale farms, mechanical harvesting is commonly used.

3. Postharvest Operations Curing and drying remove excess moisture from the outer layers of the bulb prior to storage. The dried skin provides a surface barrier to water loss and microbial infection, thereby preserving the main edible tissue in a fresh state. Drying also reduces shrinkage during subsequent handling, reduces the occurrence of sprouting, and allows the crop to ripen before fresh consumption or long-term storage (Opara and Geyer, 1999). Onion drying is carried out in the field in a process commonly called ‘windrowing’. It involves harvesting the mature bulbs and laying them on their sides (in windrows) to dry for 1 or 2 weeks. A critical factor during this stage is to ensure that bulbs are not bruised so as to prevent rotting during storage. Incidence of bruising depends a lot on the care exercised by farmers and the facilities used during topping and curing. In many cases, farmers use make-shift facilities. Curing becomes difficult when humidity is high and heavy rains persist. Although farmers take care that harvesting should coincide with the dry season, climate change has made the weather very erratic and difficult to predict. Cleaning is carried out manually removing unwanted materials on the bulb surface. Care should be taken to avoid physical injury on the bulb during these operations. Sorting is also done manually. Cleaning and sorting are both laborious.

Onions are packed in open-mesh red net bags. In comparison with the other types of bags, red net bags offer several advantages, including: (i) light weight, small bulk when empty, (ii) fairly good visibility of bulbs, (iii) excellent ventilation, (iv) hygienic, (v) easy closing (draw-string types only), and (vi) crop brand and marketing information may be printed around the middle of the bag for easy identification. Cooperatives are interested to explore the possibility of making the net bags themselves to ensure on-site availability and accessibility and provide livelihood to household


members of onion farming communities. To date, there is only one supplier of the materials used for the manufacturer of the red net bags. The objectives of onion storage are to extend the period of availability of crop, maintain optimum bulb quality and minimize losses from physical, physiological, and pathological agents. Bulbs selected for storage should be firm and the neck dry and thin. Among the factors which are critical for successful onion storage are: choice of cultivars, methods of culture, harvesting and curing, and control of temperature and humidity in storage, and design of storage structures. During the focus group discussions, it was pointed out that losses during storage was high (estimated at 30%) due primarily to poor quality of onions (e.g., bruises, not properly cleaned, etc.). There are about 14 cold storage facilities in onion producing provinces in Northern and Central Luzon. Nueva Ecija has 11 cold storage plants with a combined capacity of 2,840,000 bags. Tarlac has 2 cold storage plants. Pangasinan has one cold storage facility located in San Fabian – Pangasinan. Nueva Vizcaya has no cold storage plant. Main users of cold storage plants are the traders including cooperatives engaged in collective marketing.

Table 12 . Cold Storage Plants in Onion Producing Provinces in Northern and Central Luzon

Pangasinan LDP Cold Storage

Nueva Ecija Gapan Ice Plant

Necosip

KASAMNE

Rivson

Titan

Argo Cold Storage

T. Ilagan

Vergara

Odullo

Hao

LGC

Tarlac Jentec

PYP Cold Storage

Source: DA-Region 3

A key issue among intermediary-cooperatives in Nueva Ecija is the proximity of cold storage plants to their base of operations. While there are 11 cold storage plants in Nueva Ecija, there is no storage plant in District 1. Cooperatives in District 1, especially those with contracts with Jollibee, have to go all the way to Palayan or Bongabon to store their onions. According to Kalasag Farmers' Cooperative, their members spend 1.3M pesos annually for cold storage services in Bongabon – Nueva Ecija excluding the transportation costs. Table 13 presents the storage fees charged by a cooperative owned cold storage plants and by a private corporation. Private owned company charges a higher fee and makes no distinction between red onion and yellow granex. KASAMNE charges a lower fee for red onion vis-à-vis yellow granex since the former fetches a lower price in the market.


Table 13 . Cold Storage Fees of KASAMNE and Argo in Nueva Ecija, 2013

Cold Storage Plant Storage Fee/Bag per six months (in PhP)

Red Onion Yellow Granex

KASAMNE (cooperative) PhP 160.00 PhP 210.00

ARGO PhP 220.00 PhP 220.00

Source: DA-Region 3

During the past three years, the Department of Agriculture (DA) has supported the establishment of onion hangers in the provinces of Ilocos Sur, Ilocos Norte, Nueva Vizcaya, and Nueva Ecija. The onion hanger facility is a two-story structure with cool and dry storage conditions. Each facility can store between 2,000 to 3,000 bags. Establishment of hanger facilities or village level storage facilities can potentially address storage problems faced by intermediary cooperatives.

4. Trading Trading intermediaries perform the important tasks of negotiating, collecting, sorting, and transporting. Intermediaries also act as financiers in the chain. The number of intermediaries providing credit to their clients appears to have declined based on interviews. This may be attributed to the sourcing out of funds by cooperatives from the Land Bank of the Philippines. The following are the different types of Intermediaries based on the geographical area they cover and their activities:


Agents/Local Traders: scout and procure onion from farmers in a particular barangay/municipality; oftentimes, they act as agents for large traders or sell to them within their municipality or province. Large Traders/Provincial Traders: They buy directly from farmers or local traders. They usually have their own trucks and pick-up the onions directly from the farms as long as these are accessible. The large traders deliver to trading centers and exporters. Assemblers-Wholesalers: Assemblers have their permanent stalls in key trading centers. They sell to inter-regional traders, and wholesalers. Assemblers also supply consolidators working in behalf of supermarkets, hotels, and restaurants. Assemblers – wholesalers also pick-up products directly from the farm. Wholesalers/Jobbers: Wholesalers get their stocks from assembler-wholesalers and, at times, from farmers. Selling is on a wholesale basis mainly to local retailers. Consolidators: They source onions and vegetables in behalf of supermarket and hotel and restaurant chains. Consolidators procure onions from large traders, cooperatives, and assembler-wholesalers. While assemblers in transshipment points tend to purchase varying quality levels of vegetables, consolidators are stringent with their quality requirements Cooperatives acting as intermediaries source directly from farmer-members and, when supply is not enough, from non-members. Most of the cooperatives engaged in collective marketing sell to VIEVA and institutional buyers like Jollibee, Splash Foods Corporation (SFC), and CDO Meat Products. VIEVA distributes the products both in the domestic and export markets. Traders and/or assembler-wholesalers including cooperatives usually pick up the farmers’ produce at their farms. When farms are not accessible by trucks (e.g., farm areas separated by river without bridge), farmers bring the onions to the nearest accessible road by “Kariton”, “carabao””, and manual hauling. Farmers shoulder the additional cost of bringing the products to the nearest road. Traders generally pay the farmers in cash. Farms located in areas with bad roads generally get lower price to compensate for higher than normal transportation costs and depreciation.

5. Export Marketing VIEVA is the main exporter of shallots and yellow granex. The other GAP compliant exporters are Agro Trends, JMS Agricultural Marketing, Sparkle Corporation, Eliomar Trading, and Litz Marketing Incorporated.

C. NATURE OF INTERFIRM RELATIONSHIPS 1. Horizontal Relationship There are 47 onion cooperatives and associations in Northern and Central Luzon regions. Industry leadership is to a significant extent provided by the Vegetable Importers, Exporters and Vendors Association Philippines Inc. (VIEVA), Katipunan at Samahan ng Magsisibuyas ng Nueva Ecija (KASAMNE), National Onion Growers Cooperative Marketing Association, Inc. (NOGROCOMA), and the cooperatives operating in each of the key onion producing areas/provinces. Producer organizations vastly enhance smallholder capacity to identify and manage resources, better access services, and improve marketing of onions. The farmer organizations also play a key role in


organizing economic activities beyond local boundaries. The development of effective horizontal relationships among onion farmers has become increasingly important in the light of structural changes in the onion supply chain. Institutional buyers and exporters are generally hesitant to deal with many small farmers due to the high transaction costs involved

Table 14. Number of Onion Associations and Cooperatives in Northern and Central Luzon

Region/Province No. of Cooperatives

Ilocos Region

Ilocos Sur 2

Ilocos Norte 6

Pangasinan 6

Cagayan Valley

Nueva Vizcaya 2

Central Luzon

Nueva Ecija 30

Tarlac 1

Total 47

Source: PLGU/MLGU

2. Vertical Relationship and Supply Chain Governance In the traditional fresh market, marketing activities are almost always conducted on an informal basis. Traders have no formal arrangements with farmers before buying their product. Trading is based on mutual trust and agreement, which is not documented. ‘Word of mouth’ is the normal practice in the trade, which shapes the reputation of both farmers and intermediaries. Marketing relationships between traders and fisherfolks are characterized by the concept of the “suki” system or personalized economic relations. The “suki” system, which is similar to the preferred supplier-buyer relations, proliferated in efforts to find ways to find ways to minimize risks and vulnerabilities to opportunistic behavior and cheating (both intermediary and farmer). Market imperfections such as lack of market information, poor farm-to-market roads, and lack of efficient transportation services also made suki relationships important for security in the transaction process. The depth of the suki relationship differs with each relation but over time, repetitive transactions with the same person develops trust. On both sides, there is reduced search, negotiation, and monitoring costs because the suki lives up to the norms and values of reciprocity and comes close to becoming part of the family mindset. The bonds between people engaged in exchange are determined by informal rules or social institutions and serve to enforce the terms of the exchange. . When credit is involved in the suki relationship, farmers who availed of production loans from traders are usually compelled to sell their harvests to the lender-trader. In the chains involving institutional buyers (fast food chain, restaurants, supermarkets, etc.) and exporters, formal agreements are usually drawn between cooperatives and the buyers. Pricing is agreed before purchase. Buyers set the standards including quotas. Contracts between Jollibee and cooperatives are governed by non-disclosure clause. Institutional value chains have highly organized and integrated operations that require coordination with trusted suppliers who can deliver the right product quality and quantity at agreed schedules and at competitive prices.


To mitigate risks and reliance on one buyer, cooperatives generally supply both traditional and institutional buyers. Similarly, some cooperatives also allow farmer-members to sell a portion of their harvest to a buyer/trader of their choice.

D. PRICE AND COST STRUCTURE

1. Income and Profit

Table 15 . Production Costs and Returns of Red Creole, Yellow Granex, and Shallots, 2013

Items Red Creole Yellow Granex Shallots

Amount (PhP)

% to Total

Amount (PhP)

% to Total

Amount (PhP)

% to Total

Material Costs 93,725 57% 75,525.00 52% 55,900.00 54%

Seeds 23,000 14% 15,600.00 11% 27,300.00 26%

Fertilizer 55,375 34% 32,475.00 22% 16,700.00 16%

Pesticide 3,800 2% 4,185.00 3% 1,520.00 1%

Fungicide 400 0% 4,200.00 3% 450.00 0%

Herbicide 11,000 7% 18,915.00 13%

Mulching materials 150 0.1% 150.00 0.1% 9,600.00 9%

Bamboo 330.00 0%

Labor Costs 64,392 39% 63,372.00 44% 43,200.00 42%

Seedbed Preparation 10,212 6% 10,212.00 7% 2,550.00 2%

Land Preparation 11,340 7% 11,340.00 8% 13,500.00 13%

Transplanting 15,600 9% 9,360.00 6% 3,750.00 4%

Farm Maintenance 13,260 8% 13,260.00 9% 12,750.00 12%

Irrigation/Watering 7,800 5% 7,800.00 5% 1,200.00 1%

Harvesting 6,180 4% 11,400.00 8% 9,450.00 9%

Transportation Costs 7,000 4% 6,048.00 4% 4,000.00 4%

Total Costs 165,117 100% 144,945.00 100% 103,100.00 100%

Average Yield/Ha (kg/ha) 10,300 14,640.00 10,410.00

Production Cost/Kilo 16.03 9.90 9.90

Unit Price/Kilo 20.00 15.00 18.00

Gross Income 206,000 219,600.00 187,380.00

Net Income 40,883 74,655.00 84,280.00

Input-Output Ratio 1.25 1.52 1.82

Profit Margin 20% 34% 45%

Source: Nueva Ecija KII/DA Region 3

Nueva Ecija KII/ DA Region 3

BAS Commodity Profile/ Updates from KII

As can be seen in above table, red creole has the highest production cost and the lowest profit margin at 20% based on farm gate price as of May 2014. At average yield of 10,300 kilos per hectare,


farmer earns net income of about PhP 40,883 per hectare. According to East West, it is possible to achieve a yield of about 25,000 kilograms if farmers apply good agronomic practices. In the past when farm gate price was at PhP 50.00 per kilo (and above), gross income per hectare was usually above PhP 500,000 with net income of about PhP 350,000. For yellow granex, farmers use about 6 cans (450 grams) of hybrid seeds per hectare. Farmers usually calculate their cost based on the number of cans used. As per farmers, total production cost per can of yellow granex seed ranges from PhP 24,000 to 26,000. Average yield per can is about 122 bags at 20 kilos per bag or about 14,640 kilos per hectare. At this production level, profit margin is at 34% and net income is about PhP 74,655 per hectare which is higher than income generated from red creole. There are farmers in Nueva Ecija who are able to achieve yields above 20,000 kilos at relatively the same cost as presented in Table 16 but with better agronomic practices. Shallot cultivation has the least production cost per hectare and the highest profit margin. Farmer spends from PhP 100,000 to 105,000 per hectare and generates a net income of about PhP 80,000 to 90,000. Farmers claim that shallot production is more laborious especially so that majority of the farmers use bulbs for planting and rely on organic inputs and mulching to boost productivity. Although shallot and yellow granex cultivation appears to be more profitable, red creole is still the most popular among farmers because of the following reasons: (i) farm gate price of red onion is higher than white/yellow onion and shallot; (ii) high volume market (wet markets/trading centers) for red onions more accessible and less barriers than institutional markets; and (iii) less competition from imported onions especially during the past years ( a bigger percentage of imported onions are of the white varieties). In a recent snapshot survey conducted by the DA-Region 2 on red creole production covering Nueva Vizcaya, Nueva Ecija, and Occidental Mindoro, Nueva Vizcaya had the lowest production cost per kilo of red creole among the three provinces. Based on follow-through interviews conducted, the following are the basic differences in practices and, consequently, on the production costs between farmers in Nueva Vizcaya and Nueva Ecija:

Number of cans of seeds per hectare: Nueva Ecija - 10 to 12 cans; Nueva Vizcaya – 8 cans

Fertilizer use: Nueva Ecija relies on inorganic fertilizer and tends to use about 7 to 8 bags per can of seeds; Nueva Vizcaya farmers use organic fertilizer and less bags of chemical fertilizer per hectare.

Transportation: difference is primarily due to volume of goods transported and some areas in Nueva Ecija entails higher cost due to remoteness of areas and absence of road infrastructure

Table 16. Comparison of Production Cost per Hectare of Red Creole between Nueva Vizcaya, Nueva Ecija, and Occidental Mindoro, 2013

Item Nueva Vizcaya Nueva Ecija Occidental Mindoro

Seeds 11,625 18,400 8.769

Fertilizer 15,063 46,080 15,538

Pesticide 8,330 7,432 3,097

Fungicide 1,370 955 3,957

Herbicide 2,430 3,938 3,580

Other Inputs 1,270 525 16,094


Table 16. Comparison of Production Cost per Hectare of Red Creole between Nueva Vizcaya, Nueva Ecija, and Occidental Mindoro, 2013

Item Nueva Vizcaya Nueva Ecija Occidental Mindoro

Equipment 490 239 4,426

Labor 41,056 64,294 40,318

Transportation 3,000 12,500 3,000

Total Production Cost (in PhP) 84,634 154,363 90,019

Yield per hectare (kg) 12,000 15,000 10,350

Production Cost/kilo (PhP) 7.05 10.29 8.70

Source: DA Region 2

Across all types of onions and all onion producing provinces, farmers spend the most on labor comprising about 42% of the total production cost. Fertilizer is the second major cost center accounting for 24% of the production cost. Seeds comprise about 17% of the cost. About 4% of the production costs are spent on transporting inputs to farms and harvest to the nearest road that can be accessed by trucks of traders.

2. Relative Financial Position of Players


Total cost to produce and distribute one kilo of red creole in the wet market is about PhP 29.48. Fifty-four percent (54%) of the PhP 29.48 represents farming cost. Assembler’s costs, which includes storage fee, comprise 30% of the cost. The remaining 16% of the costs are those incurred by intermediaries, which consist primarily of hauling and transportation costs. The total profit earned by the chain in the production and sale of 1 kilo of red creole is PhP 10.52. Farmer has the highest percentage share of the profit at 38%. However, farmer’s percentage share of the profit is lower than his/her percentage contribution to added cost. Assembler gets a profit of

Table 17 . Relative Financial Position of VC Players: Fresh/Wet Market – Red Creole 1 kilo of red creole onion that has been stored in cold storage

Player Product Costs Profit Margins

Total Unit Cost

Added Unit Cost

% Added Unit Cost

Unit Price

Unit Profit

% Profit Unit Margin

% to Price

Farmer Fresh Onion

16.03 16.03 54% 20.00 3.97 38% 20.00 50%

Trader 22.70 2.70 9% 24.00 1.30 12% 4.00 10%

Assembler Storage Onion

32.75 8.75 30% 36.00 3.25 31% 12.00 30%

Wholesaler 36.50 0.50 2% 37.50 1.00 10% 1.50 4%

Retailer 39.00 1.50 5% 40.00 1.00 10% 2.50 6%

Total 29.48 10.52 40.00

Source: KII


PhP 3.25/kilo which is about 31% of the total profit. The assembler’s share of the profit is more or less aligned to his/her percentage contribution to total costs. The percentage share to profit of the intermediaries is higher than their percentage share to unit costs. The relative financial position analysis indicates there is a need to improve farming productivity. Likewise, the chain is quite long such that profits are thinly distributed.

Total cost to product one kilo of peeled onion for an institutional buyer is about PhP 23.90. Of this cost, farming comprises 41% while the intermediate processing undertaken by cooperative accounts for 59% of the cost. The chain earns PhP 8.10 per kilo of peeled onion. About 62% of the profit goes to the cooperative. Farmer can get a better percentage of the profit through productivity improvement or if cooperative would increase its buying price.

Table 18. Relative Financial Position of VC Players: Institutional Market – Peeled Yellow Granex Onion

Player Product Costs Profit Margins

Total Unit Cost

Added Unit Cost

% Added Unit Cost

Unit Price

Unit Profit

% Profit Unit Margin

% to Price

Farmer Fresh 9.90 9.90 41% 13.00 3.10 38% 13.00 41%

Cooperative Peeled 27.00 14.00 59% 32.00 5.00 62% 19.00 59%

Total 23.90 8.10 32.00

Source: KII


Table 19. Relative Financial Position of VC Players: Export Market – Shallots

Player Product Costs Profit Profit

Total Unit Cost

Added Unit Cost

% Added Unit Cost

Unit Price

Unit Profit

% Profit

Unit Margin

% to Price

Farmer Shallot 9.90 9.90 46% 12.00 2.10 46% 12.00 46%

Cooperative 16.50 4.50 21% 17.50 1.00 22% 5.50 21%

Exporter 24.50 7.00 33% 26.00 1.50 33% 8.50 33%

Total 21.40 4.60 26.00

Source: KII

The sharing of costs and profits in the export market chain appears to be equitable. Players’ percentage share to profit is proportionate to their percentage contribution to cost. Based on information gathered during the workshops, the three firms act and behave as a vertically integrated enterprise with a unified vision of reviving exports of shallots to Japan and elsewhere which would also translate to improved incomes for each of the players.


Section 4: MARKETS AND MARKET OPPORTUNITIES

A. MARKETS AND MARKET TRENDS

1. Export Market Philippine Exports

Table 20 . Onion and Shallot Exports from the Philippines, 2009 to 2013


World

Value 2,427,000 2,972,000 6,540,000 2,642,000 1,565,000 -36%

Volume 6,584 7,860 14,010 5,825 3,571 -46%

Unit Value 0.37 0.38 0.47 0.45 0.44 19%

Indonesia

Value 2,086,000 2,433,000 5,031,000 2,168,000 1,276,000 -39%

Volume 6,006 6,713 12,934 5,434 3,054 -49%

Unit Value 0.35 0.36 0.39 0.40 0.42 20%

Singapore

Value 317,000 364,000 1,222,000 450,000 116,000 -63%

Volume 535 556 740 332 77 -86%

Unit Value 0.59 0.65 1.65 1.36 1.51 154%

Malaysia

Value 16,000 24,000 246,000 19,000 108,000 575%

Volume 11 60 303 50 267 2327%

Unit Value 1.45 0.40 0.81 0.38 0.40 -72%

Source: Intracen

Onion exports from the Philippines consist primarily of shallots and some yellow granex. About 65% of the products came from Nueva Ecija and 35% from Ilocos Norte. Between 2009 to 2011, export sales have been on an increasing trend. However, in 2012, exports dipped by 58% due to the stringent quality standards (i.e., GAP certification) imposed by importers which shallot farmers were not ready to comply with. Export volume further decreased in 2013. To date, the industry has gradually made some inroads in reviving export sales with the assistance from the High Value Crop Development Program (HVCDP) of the Department of Agriculture.

In 2013, Philippines exported 3,571 MT valued at US$ 1,565,000. Indonesia comprised about 86% of the total exports made by the Philippines. During the last five years, the highest volume exported to Indonesia was 12,934 MT in 2011.


During the recent months, the onion industry with the support of the Department of Agriculture has been working on improving capacity of yellow granex onion farmers to meet quality standards of the Japan market. A trial shipment of 20 MT was made by NOGROCOMA sometime in 2013. Export price in peso equivalent was about PhP 580 per 20 kilogram pack or about PhP 28/kilo. Japan requires Class A onion, which has the following characteristics: 7 cm in diameter, pear or oval shape, and no bruises. Likewise, pesticides used during production should be confined to those accredited or approved by the Japanese government. According to NOGROCOMA, only 10% of its members are able to produce onions that meet the quality standards of the Japanese market. In 2014, NOGROCOMA tried exporting to Japan but the cooperative cannot meet the price of US$ 6 – 8 per 20 kg bag. At that time when the cooperative had the stock, it coincided with the peak harvest month of Japan and other countries. The cooperative opted to sell their stock to VIEVA at PhP 15/kilo.

From December 2013 to June 2014, the onion industry has exported 1,300 MT of shallots to Indonesia, Malaysia and Singapore. According to VIEVA, the shipment fetched a price of US$ 600/MT. Earlier this year, VIEVA also shipped 124 MT of white onions to Malaysia at $850 per ton. The export shipments were produced by the Katipunan ng mga Samahang Magsisibuyas ng Nueva Ecija (KASAMNE), National Onion Growers Cooperative Marketing Association (NOGCOMA), and Anak Bukid and Magtutumana ng Sta. Rosa MPC. These cooperatives are all based in Nueva Ecija.

World Trade

Table 21. World Exports and Top Exporters of Onions and Shallots, 2009 to 2013

Top Exporters 2009 2010 2011 2012 2013 % Change 2013/09

World

Value (in US '000) 2,396,998 3,181,786 3,055,478 2,528,061 3,451,541 44%

Volume 6,677,248 7,296,943 7,087,053 6,746,335 7,346,775 10%

Unit Value (kg) 0.36 0.44 0.43 0.37 0.47 31%

India

Value (in US '000) 474,862 465,440 370,002 294,698 600,886 27%

Volume 1812378 1241434 1110139 1527800 1476575 -19%

Unit Value (kg) 0.26 0.37 0.33 0.19 0.41 55%

Netherlands

Value (in US '000) 396,426 634,510 531,760 426,147 549,251 39%

Volume 1,222,290 1,517,484 1,336,433 1,245,446 1,312,458 7%

Unit Value (kg) 0.32 0.42 0.40 0.34 0.42 29%

China

Value (in US '000) 156,680 250,602 300,820 293,148 371,808 137%

Volume 525,803 644,545 741,958 620,113 743,096 41%

Unit Value (kg) 0.30 0.39 0.41 0.47 0.50 68%

Mexico

Value (in US '000) 277,044 255,065 301,175 308,031 358,133 29%

Volume 311,549 327,432 370,135 374,710 378,016 21%


Table 21. World Exports and Top Exporters of Onions and Shallots, 2009 to 2013

Top Exporters 2009 2010 2011 2012 2013 % Change 2013/09

Unit Value (kg) 0.89 0.78 0.81 0.82 0.95 7%

United States

Value (in US '000) 169,221 260,521 215,390 221,542 257,801 52%

Volume 283,302 360,990 356,159 332,175 358,003 26%

Unit Value (kg) 0.60 0.72 0.60 0.67 0.72 21%

Source: Intracen

World export of onion increased from 6,677,248 MT in 2009 to 7,346,775 MT in 2013. Based on the five year data, export value increased by 9% per year while volume increased by 2% per annum. Top exporter in 2013 was India, accounting for 20% of total export volume. The decrease in India’s export volume in 2013 was brought about by supply shortage due to poor weather and disease infestation. India usually exports onion between March and December, when there is excess crop available in the country. India has limited traceability, high pricing volatility and weather risk. Other key onion exporting countries are Netherlands, China, Mexico, and United States. China had a declining export trend during the last three years due to growing local demand. United States is the largest producer of dehydrated onion.

Table 22 . World Imports and Top Importers of Onions and Shallots, 2009 to 2013


World

Value 2,439,960 3,159,548 3,134,566 2,554,964 3,451,604 41%

Volume 6,738,096 6,981,526 6,855,790 7,045,923 5%

Unit Price 0.36 0.45 0.46 0.49 35%

United States

Value 241,305 288,221 294,263 287,530 364,058 51%

Volume 309,151 391,293 394,053 385,265 436,952 41%

Unit Price 0.78 0.74 0.75 0.75 0.83 7%

United Kingdom

Value 178,430 235,806 240,141 167,062 250,736 41%

Volume 361,950 366,835 365,926 322,039 436,993 21%

Unit Price 0.49 0.64 0.66 0.52 0.57 16%

Malaysia

Value 132,927 189,600 191,418 137,650 213,516 61%

Volume 456,111 465,215 453,651 442,495 390,540 -14%

Unit Price 0.29 0.41 0.42 0.31 0.55 88%

Bangladesh


Table 22 . World Imports and Top Importers of Onions and Shallots, 2009 to 2013


Value 219,187 184,844 79,852 59,644 127,293 -42%

Volume 819,694 493,022 268,109 374,214 360,267 -56%

Unit Price 0.27 0.37 0.30 0.16 0.35 32%

Japan

Value 85,452 165,679 177,725 183,150 171,785 101%

Volume 207,976 339,915 373,500 342,710 302,661 46%

Unit Price 0.41 0.49 0.48 0.53 0.57 38%

The top 5 onion importing countries in 2013 are indicated in Table 22. The United States, United Kingdom, Malaysia, Bangladesh, and Japan imported 27% of onion traded globally. The top importer of onion in 2013 was the United States. Per capita onion consumption in the United States has risen over 70% in the last two decades, from 5.55 kilos per person in 1982 to 9.10 kilos per person in 2010. The National Onion Association notes that onion rings, onion blooms, other onion appetizers, caramelized onions, and classic French Onion Soup remain popular restaurant uses for onions. In the past decade, red onions have gained popularity especially in fast casual dining segments on pizza, sandwiches and salads. The most common sizes sold in the U.S. for retail are between 2 to 3-3/4 inches in diameter. The average annual onion consumption calculates to approximately 6.22 kilos of onions per person across the world. Libya has the highest consumption of onions with an astounding average per capita consumption of 30.3 kilos. Compliance with food safety and sustainable environmental practices is becoming a basic supply chain requirement, fueled by growing consumer awareness and concern in both developed and developing countries. Farmers and exporters are now under more pressure than ever to adopt production practices that meet the requirements of market standards under Global GAP. The following are the indicative preferences of key importing countries:

Middle East and Far East countries demand light red to dark red colour and prefer4-6 cm sized onions

European countries and Japan demand yellowish /brown colour onions with mild pungency and prefer 6-7 cm sized onions,

3-4 cm sized onions are preferred in Bangladesh

Small onions are preferred by Singapore and Malaysia

Singapore, Malaysia, and Sri Lanka are good markets for multiplier/shallot onions


2. Domestic Market

Table 23. Onion Imports Made by the Philippines, 2009 to 2013

Key Suppliers 2009 2010 2011 2012 2013 Average

World

Value (US$) 1,218,000 1,337,000 732,000 2,282,000 1,142,000 1,342,200

Volume (MT) 10,051 10,824 4,978 18,443 8,533 10,566

China

Value (US$) 234,000 166,000 195,000 700,000 552,000 369,400

Volume (MT) 2,096 1,431 1,577 5,010 4,302 2,883

Netherlands

Value (US$) 461,000 559,000 424,000 880,000 286,000 522,000

Volume (MT) 3,694 4,326 2,974 7,771 1,908 4,135

India

Value (US$) 457,000 503,000 No data 688,000 222,000 467,500

Volume (MT) 3,806 4,457 5,559 1,712 3,107

Source: Intracen/International Trade Centre Note: Total imports indicated in BAS/PSA supply utilization accounts are generally lower compared to figures indicated above.

During the years 2009 to 2013, the country’s onion imports ranged from about 4,978 MT to 18,443 MT or an average of about 10,566 MT per year. In 2013, Philippines imported 8,533 MT of onions valued at US $ 1,142,000 to meet domestic demand. The three main suppliers of imported onions in 2013 were China, Netherlands, and India. The bulk or 50% of the onions that entered the Philippines in 2013 came from China. Imports consisted mostly of the white or yellow granex variety. According to news reports, red bulb onions were imported only in minimal quantities. The main buyers or consumers of imported onions are hotels, restaurants and food chains while the locally produced onions especially the red varieties are bought and consumed mostly by households. Imported onions are cheaper compared to locally produce ones. This will be further discussed in the section on Price Trends. Imported onions are generally better packed and of better quality and said to have longer storage life. These attributes make them more attractive to the institutional markets and the supermarkets who cater to the high-end consumer markets. About 75% of locally produced onions are sold in wet markets. Supermarkets purchase around 15% of the onions produced by Filipino farmers. It is estimated that about 10% of local production are sold to fast food chains, hotels, restaurants, and processors. Metro Manila is the largest single market for onions in the Philippine primarily due to its growing population. According to Reardon and Berdegue (2006), the pace of supermarket growth in the Philippines will remain steady in the coming years. Gaiha and Thapa (2007), using econometric analysis of supermarkets in selected Asian countries, projected that supermarkets in the Philippines will have a 36% share in vegetable sales by 2015 based on household incomes, urbanization rate, ease of entry of foreign direct investments, and women’s participation in the labor force. There is also a growing number of hotels, restaurants, and fast food chains in the Philippines. These food businesses generally require the yellow granex. One of the biggest users of onions in the Philippines is the Jollibee Foods Corporation (JFC). In 2008, JFC opened its doors to onion cooperatives. According to


JFC, the process of building an inclusive supply chain continues to pose challenges especially in aspects of standards compliance and reliability. Although the marketing system of onions in the Philippines still operates basically in the traditional channels involving the predominant role of wholesale and retail wet markets, the industry is witnessing the continued emergence of the more modern high value markets which consists of supermarkets, hotels, restaurants, fast food chains, and other institutional buyers. While growing numbers of institutional markets offer opportunities to onion growers, their stringent requirements deter farmers from selling to this channel. Skills and competencies upgrading are needed to help them fit in the emerging retail market structures. Institutional markets are increasingly concerned with the specifications of both products and processes further back along the value chain in a number of different ways: a) quality and safety - based upon product and process controls: b) conformance with social and environmental standards; c) reliability and guaranteed supply in order to avoid stock outs; and d) just-in-time delivery. Table 24 shows example of requirements of selected buyers.

Table 24. Indicative Requirements of Institutional Buyers

Markets Requirements

Supermarkets Red creole 6 tons per week 5 cm diameter and above No bruises Yellow Granex 3 tons per week 6 cm diameter and above No bruises Shallots 650 kilos per month No bruises

Fast food Chains Restaurants

Yellow Granex Not less than 85% recovery No defects/bruises 6 cm diameter Low pesticide residue Red Creole Not less than 85% recovery No defects/bruises 5 cm diameter Low pesticide residue

Meat Processing Companies Red Creole/Yellow Granex Big size Not less than 85% recovery

Source: KII/FGD/ DA Region 3 VCA Team


According to BAS/PSA data, the Philippines is already achieved a 95.12% self-sufficiency in onions as of 2013. Estimated supply gap was at 6,885.35 MT, primarily of the yellow/white onion varieties. Industry players also affirmed that current production levels of red onions and shallots are sufficient to meet domestic requirements provided that corresponding measures are made to reduce postharvest losses. On the average, postharvest losses comprise about 7.6% of total supply based on the five year Supply Utilization Accounts published by BAS/PSA. For the yellow granex, estimate of supply deficit from industry players is twice as that of BAS figures.

Table 25 . Philippines Onion Self-Sufficiency Ratio, 2009 to 2013

Indicators 2009 2010 2011 2012 2013

Domestic Consumption 130,406.45 138,280.90 119,207.99 137,758.53 141,052.35

Production 127,055 135,377 128,387 124,823 134,169

Self-sufficiency Ratio 97.43% 97.90% 107.70% 90.61% 95.12%

Supply Gap 3,351.45 2,903.90 (9,179.01) 12,935.53 6,883.35

Source: Calculated from BAS/PSA Data

Industry players estimate that the domestic market consumes about 142,000 MT of red onions and shallots and 36,000 MT of yellow/white onions per year. Based on calculation of players, the Philippines produced about 180,000 MT of onions. An attempt is made in Table 26 to put into perspective the estimates put forward by industry players.

Table 26. Industry Perspective of Onion Consumption and Supply in the Philippines, 2013

Onion Consumption

Type of Onion Domestic Market Consumption

Export Market Seeds Total Consumption

Red Onion 117,860 117,860


Table 26. Industry Perspective of Onion Consumption and Supply in the Philippines, 2013

Shallot 24,140 3,550 3,265 30,955

White Onion 36,000 20 36,020

Total 178,000 3,570 3,265 184,835

Onion Production

Type of Onion Production (MT) (LGU data for Reg 1 and Nueva Ecija; all other regions based on BAS data)

Postharvest Losses (MT)

(7.6% of production- -

based on Supply Utilization Account)

Available Supply (MT)

Surplus/Deficit (MT)

Red Onion 119,550.82 9,085.86 110,465 (7,395)

Shallot 32,650.36 2,481.43 30,169 (786)

White Onion 25,245.29 1,918.64 23,327 (12,693)

Total 177,446.47 13,485.93 163,960.54 (20,874.50)

Source: KII/LGU/FGD

Although BAS figures and LGU/industry stakeholders data differ in absolute numbers, the same conclusions can be derived, namely:

Domestic production of onions especially red onions and shallots is sufficient to meet domestic market requirement if postharvest losses are reduced. In the BAS Supply Utilization Account, total volume of postharvest losses was at 11,284 MT which was higher than imports. A separate study conducted by Postharvest and Seed Sciences Division, Crop Science Cluster, College of Agriculture, University of the Philippines Los Baños (UPLB) indicated that total postharvest loss for bulb onions, from the farm to the retail level, was about 35 % (5% from farm, 12 % from wholesale, and 18 % from retail).

Production is not evenly spread throughout the year resulting to risk of oversupply during the peak harvest months and, consequently, low prices. The decision to store onions is primarily based on gut feel and financial capacity. There is a lack of information on which players can make informed decision. Off-season production remains a challenge for many farmers. Likewise, there may also be trade-offs in promoting off-season production of onions among farmers whose primary crop is the rice. As such, off-season production may be best suited for onion farmers that are not into rice production. Based on NOGROCOMA’s assessment, Pangasinan/Ilocos Region is suitable for off-season production.

The lack of incentive among farmers to diversify into yellow granex cultivation as this has traditionally and until to date receive the lowest farm gate price among the three types of varieties. The situation is a little bit ironic because almost always during the lean season retail price of imported white onion is always higher than red onion by almost 50%. While there is a risk of oversupply of red onions in the domestic market, achievement of sufficient local supply of yellow granex continues to be elusive.

In the past, a greater percentage of the shallot production was absorbed by the export market. With weak export sales during the past two years, almost all of the production went into the domestic market. To a significant extent, this has helped in improving domestic self-sufficiency but farmers have to bear the consequence of reduced prices. On the other hand, there are good


export market opportunities if only farmers can achieve GAP certification and meet quality standards.

During the last five years, onion consumption grew by approximately 2% per year based on the Supply Utilization Account. Using the 2% growth rate as basis, it is estimated that domestic market demand for onions by 2020 would be about 225,967 MT. Demand from exporters is based on the objective of incrementally raising export sales to 2011 level. It takes also into consideration that facilitating GAP certification among farmers would take from one to two years.

Table 27. Projected Demand of Onion in the Philippines, 2015 - 2020

Volume (MT)

Demand Centers Red Onion Shallot White Onion Total

2015

Domestic Market 122,622 25,115 37,454.40 185,191

Exporters 6,500 1,500 8,000

Seeds 3,331 - 3,331

Total 122,622 34,946 38,954 196,522

2018

Domestic Market 130,126.96 26,653 39,747 196,526.38

Exporters 11,000 3,000 14,000

Seeds - 3,432 - 3,432

Total 130,127 41,084 42,747 213,958

2020

Domestic Market 135,384 27,729 41,353 204,466

Exporters 14,000 4,000 18,000

Seeds - 3,501 3,501

Total 135,384 45,230 45,353 225,967

Source: Own Calculations based on available data on growth rate (e.g., Supply Utilization Account)

B. PRICE TRENDS

1. Export Market

Table 28. Price Competitiveness of Philippines vis-à-vis Major Suppliers in Country’s Target Export Markets , 2013

Export Market/ Key Suppliers

Value ( in US$ ‘000)

Volume (in MT)

Unit Price (US$/kg)

% Share to Total Volume

Indonesia

Total Imports 67,954 124,544 0.55 100%

India 37,713 62,935 0.60 51%

Thailand 9,348 18,984 0.49 15%


Table 28. Price Competitiveness of Philippines vis-à-vis Major Suppliers in Country’s Target Export Markets , 2013

Export Market/ Key Suppliers

Value ( in US$ ‘000)

Volume (in MT)

Unit Price (US$/kg)

% Share to Total Volume

Philippines 2,652 5573 0.48 4%

Malaysia

Total Imports 213,516.00 390,540.00 0.55 100%

India 112,694.00 206,127.00 0.55 53%

China 38,497.00 70,415.00 0.55 18%

Philippines 409.00 748.00 0.55 0.19%

Japan

Total Imports 171,785 302,661 0.57 100%

China 142,715 254,222 0.56 84%

USA 15,949 30,343 0.53 10%

Philippines 7 15 0.47 0.005%

Source: Calculated from Intracen data

Across all target export markets of the country, price from the Philippines was very much competitive vis-à-vis major suppliers. In Indonesia, for example, Philippines had a lower price compared to top suppliers India and Thailand. During the recent months, export price of onion in India increased from US$ 300 to US$ 500 due to shortage. According to a news report from Reuters, onion prices have doubled across India’s major cities despite a record harvest due to crop hoarding, price manipulation and bad weather. The Indian government has raised the minimum export price on onions twice in less than one month, from US$300 per MT to US$500, in an attempt to stabilize the price of onions in the domestic market. With the significant increase in price of onions from India, Philippines has the potential to increase its market share. Price of onions from Thailand is more or less the same level as the Philippines. In Malaysia, price for all supplying countries was at the same level in 2013. This implies that Philippines has to significantly improve quality of onions while maintaining its price competitiveness. In 2014, Philippines was able to sell shallots to Malaysia at US$ 0.60 per kilogram. Likewise, Philippine export of yellow granex onions in 2014 fetched a price of US $ 0.85/kilogram. Compared to major suppliers of onions to Japan in 2013, Philippines had the lower price per kilogram. Early this year (2014), buying price of Japan of the yellow granex went down to US$ 0.30 – 0.40 per kilogram from US$ 0.47/kg in 2013. The price of US$ 0.30 or about PhP 13.20 is already below the breakeven price of cooperatives. Production cost of one kilo of granex ranges from PhP 7 to 10 per kilo. Cooperatives and exporting company usually spend a total of PhP 8 to 10/kilo for packaging, hauling/transportation, and freight charges.


Average world export price during the last five years was at US$ 0.41 per kilogram of onion. India has the lowest average export price. United States, on the other hand, had the highest average export price. Throughout the last five years, the United States had the highest export price during the last 5 years. Average price of Philippine onions was higher than that of the top exporters except United States. Price of onions from the Philippines was very much competitive in 2010. The most significant price increase occurred in 2011, the year when Philippines had the highest export volume. After 2011, both price and volume went down until 2013.

Table 29. Export Price Trends: Philippines vis-à-vis Top World Exporters, 2009 - 2013

Country 2009 2010 2011 2012 2013 Average Annual % Growth Rate

World 0.36 0.44 0.43 0.37 0.47 0.41 6%

India 0.26 0.37 0.33 0.19 0.41 0.31 11%

Netherlands 0.32 0.42 0.40 0.34 0.42 0.38 6%

Philippines 0.37 0.38 0.47 0.45 0.44 0.42 4%

China 0.30 0.39 0.41 0.47 0.50 0.41 14%

United States 0.60 0.72 0.60 0.67 0.72 0.66 4%

Source: Calculated from Intracen Data


2. Domestic Market Classification of common onion and shallots The Bureau of Agriculture and Fisheries Product Standards (BAFPS) has developed and establish The Philippine National Standard for Bulb onion (PNS/BAFPS 14: 2004), which define the following specifications and classification:

Table 30. VARIETY OF COMMON ONION AND SHALLOT, BAFPS SIZE CLASIFICATION RED ONION YELLOW ONION SHALLOT

Small 1.5 -3 2.5 – 4.5 <1.5

Medium 3.1 – 5 4.6 / 6.5 1.6 – 2.5

Large >5.1 >6.6 2.6 - 3.0

Jumbo - - >3.0

Grading system Onion shall be grading according to its variety, general appearance, quality and conditions. Grade 1. - Similar varietal characteristics, mature, firm and well/shaped. They shall be free from decay, wet sunscald, and bottlenecks and free from damages/defects caused by splits, dry sunken areas, sunburn, sprouting, staining, dirt or foreign material, mechanical, tops, roots, translucent scales, moisture, disease, insect and other means. Grade 2. - Similar varietal characteristics, not soft or spongy, free from decay, wet sunscald, and bottleneck. They shall be free from serious damage/defect caused by dry sunken areas, sprouting, staining, dirt or other foreign material, mechanical, watery scales, insects, diseases and other means. Combination.- Consists of combination of Grade 1 and Grade 2 onions. Provided that at least 50%, by weight, of the onions in each lot meet the requirements of Grade 1. TOLERANCE Grade 1. – Incident to proper grading and handling a tolerance 5% of defects of onions by weight in any lot, which failed to meet the requirements of the specified grade including not more than 2% of onions, which are affected by decay. Grade 2. - Incident to proper grading and handling a tolerance 10% of defects of onions by weight in any lot, which failed to meet the requirements of the specified grade including not more than 5% of onions, which are affected by decay.


Figure 22 and Table 31 present the average annual import prices of onions vis-à-vis the farm gate prices of yellow granex and red creole over the period 2009 to 2013 in Philippine pesos per kilo. Import prices of onions across all years were much lower than the farm gate prices of locally produced onions. On the average, farm gate price of yellow granex onion was 232% higher than price of imported onions. The gap between farm gate price of red creole and imported onion was even higher at 336%. The price gap can be attributed to the difference in yield. The percentage difference in average yield between Philippines and top exporters of onions to the country ranged from 96% to 471%, or an average of 240%.

Table 31. Prices of Imported Onions Versus Locally Produced Onions, 2009 to 2013

2009 2010 2011 2012 2013 Average

Prices (PhP/kilogram)

Price of Imported Onion (in PhP/kg)

5.67 5.58 6.40 5.23 5.80 5.74

Farm gate price – Yellow Granex (PhP/kg)

17.28 12.40 25.90 22.77 17.07 19.08

Farm gate price – Red Creole (PhP/kg)

28.01 9.65 36.91 31.30 19.71 25.12

Peso Difference between Imported Onion and Local Onions

Yellow Granex 11.61 6.82 19.50 17.54 11.27 13.35

Red Creole 22.34 4.07 30.51 26.07 13.91 19.38

Percentage Difference in Price


Table 31. Prices of Imported Onions Versus Locally Produced Onions, 2009 to 2013

2009 2010 2011 2012 2013 Average

Yellow Granex 205% 122% 305% 336% 194% 232%

Red Creole 394% 73% 477% 499% 240% 336%

Source: Calculated from BAS/PSA data and Intracen

In the supermarkets, local onions are priced cheaper than the imported onion. As of the writing of this report, price of imported onions ranges from PhP 144 to PhP 180/kilo while the local red onion is priced between PhP 70 to 80/kilo. In a way, the pricing scheme protects farmers.

Across all types of onions and in the various onion producing provinces, prices of local onions at the farm gate as well as in the wholesale and retail markets had negative growth rate over the period 2009-2013. It can also be observed that prices were very volatile with steep dips and increases. It is only in Ilocos Norte that there was a slight positive increase in the price of onions (shallots).

Table 32. Prices of Onions in Different Markets, 2009 to 2013

2009 2010 2011 2012 2013 Average Annual % Growth Rate

Red Creole

Pangasinan

Farm Gate (FG) 25.37 13.43 43.35 33.58 25.16 28.18 -0.2%

Wholesale Price (WP) 44.28 32.68 55.99 52.55 38.63 44.83 -2.6%

Retail Price (RP) 64.18 51.52 76.7 70.78 62.23 65.08 -0.6%

% Difference WP - FG 75% 143% 29% 56% 54% 71% -5.6%


Table 32. Prices of Onions in Different Markets, 2009 to 2013

2009 2010 2011 2012 2013 Average Annual % Growth Rate

% Difference RP - WS 45% 58% 37% 35% 61% 47% 7.2%

Nueva Vizcaya

Farm Gate (FG) 20.29 9.27 22.88 23.48 20.03 19.19 -0.3%


Retail Price (RP) 70.85 47.7 80.08 80.08 62.21 68.18 -2.4%

% Difference WP - FG 170% 380% 174% 187% 145% 211% -2.9%

% Difference RP - WS 29% 7% 28% 19% 27% 22% -1.8%

Nueva Ecija

Farm Gate (FG) 28.01 9.65 36.91 31.3 19.71 25.12 -5.9%


Retail Price (RP) 59.9 47.37 69.38 74.97 59.1 62.14 -0.3%

% Difference WP - FG 110% 377% 102% 125% 181% 179% 12.9%

% Difference RP - WS 2% 3% -7% 6% 7% 2% 57.2%

Tarlac

Farm Gate (FG) 26.71 15.73 39.76 28.04 19.86 26.02 -5.1%


Retail Price (RP) 59.9 47.37 69.38 74.97 59.1 62.14 -0.3%

% Difference WP - FG 120% 192% 87% 152% 179% 146% 9.7%

% Difference RP - WS 2% 3% -7% 6% 7% 2% 57.2%

Yellow Granex

Pangasinan

Farm Gate (FG) 17.28 12.4 25.9 22.77 17.07 19.08 -0.2%


Retail Price (RP) 52.39 42.11 66.1 60.68 54.8 55.22 0.9%

% Difference WP - FG 110% 124% 70% 101% 108% 103% -0.3%

% Difference RP - WS 44% 51% 50% 33% 54% 46% 4.4%

Shallots

Ilocos Norte

Farm Gate (FG) 27.5 31.02 29.79 20.53 36.57 29.08 6.6%

Wholesale Price (WP) 50.32 41.99 68.81 53.2 53.27 53.52 1.2%

% Difference WP - FG 83% 35% 131% 159% 46% 91% -9.0%

Ilocos Sur

Farm Gate (FG) 40.18 35.67 39.6 23.82 33.52 34.56 -3.3%

Wholesale Price (WP) 50.32 41.99 68.81 53.2 53.27 53.52 1.2%

% Difference WP - FG 25% 18% 74% 123% 59% 60% 26.7%

Source: Calculated from BAS/PSA data


The gaps in the prices of onions in the different markets provide some indication of the transaction costs incurred in bringing the onions from one market to another. It can be noted that the gap between the wholesale and retail prices in 2013 were narrower than the difference between the wholesale prices and farm gate prices of onions on the same year except for the red creole onions in Pangasinan. The statistics suggest that higher transaction costs were incurred in bringing the onions from the farm to the wholesale market. Among the key onion producing provinces, statistics indicate that Tarlac and Nueva Ecija farmers had the highest transaction costs and the costs appear to continue to escalate especially transportation expenses. In the other provinces, the gap between wholesale and farm gate prices narrowed down slightly suggesting efficiency improvement


Section 5: SUPPORT SERVICES

A. FINANCIAL SERVICES

1. Under the project “Bridging Small Farmers to the Jollibee Supply Chain”, the NLDC

enlisted around 10 micro finance institutions to redesign their financing packages to cater to the needs of cooperatives interested to participate in the program. To date, MFIs such as the Alalay sa Kaunlaran (ASKI) continue to provide financial services to cooperatives to enable them to link up with institutional buyers. Through the Alalay sa Kaunlaran (ASKI), the small farmers are able to access credit without relying too much on intermediaries. The traditional production loan was transformed to other equally important activities in the chain such as the warehousing and delivery of the produce. In this case, ASKI entered into a financing agreement with the farmers considering the market assurance already established under the project. The marketing agreement with institutional buyers functions as a risk mitigating measure in lieu of the traditional collateral requirement.

2. Land Bank of the Philippines (LBP), in partnership with the Department of Agriculture

(DA) and Department of Finance (DOF), provides financial services to the onion industry primarily under the Food Supply Chain Program. The program extends financial assistance to the key players in the food system such as the farmers, consolidators, processors and other value chain players. It also aims to provide capacity building support to strengthen farmers’ organizations to enable them to meet market requirements in terms of quantity and quality. The following are the key components under the Food Supply Chain Program:

Financial assistance to support the requirements for production, and securing working capital for the acquisition of fixed assets. The assistance is not limited to the processors or firms but it also reaches the producers by way of conduit lending through cooperatives, rural banks, etc.

Market linkages among cooperative producers and anchor firms. Under this framework, the chain of producers and anchor firms on one side working with the market and consumer side. At the centre of this paradigm, anchor firms aid in the collection of loans so that lending is extended to farmers.

Technical assistance to cooperatives to ensure meeting market requirement for volume and product quality.

The following are the broad categories of support services provided under the program:

Agricultural production and production support facilities loans for crops, livestock fisheries


Loans for commodity processing and manufacturing to be used as working capital for acquisition of transport facilities and processing equipment or construction of processing and development plant, cold storage facilities and warehouses

Loans for marketing and trading operations to be used as working capital for

construction of warehouse or storages.

Capacity building programs for farmers organizations in the areas of organizational strengthening, product development, product packaging and marketing

Technical assistance for improving productivity and product quality

3. Another program aimed at facilitating farmers’ access to financial services is the Agri-Fishery Microfinance Program (AFMP) is a joint program of DA, LBP, and the Agricultural Credit Policy Council (ACPC), and the Land Bank of the Philippines (LBP). Target clientele of the program are farmers engaged in the production of farmers/fisherfolks engaged in the priority commodities identified by DA. Created by virtue of ACPC Resolution No. 31-01 Series of 2007, the AFMP provides agri-fishery loans to qualified institutional borrowers and to small farmers and fishing households. The AFMP is one of the lending programs under the Agro-industry Modernization Credit and Financing Program (AMCFP) – the government’s umbrella financing program for agriculture and fisheries.

Eligible borrowers are the Bank-Accredited Cooperatives (BACs) and other Accredited Conduits of LBP). These are institutions that are accredited with LBP and have passed the Risk Asset Acceptance Criteria (RAAC) for microfinance. Main types of loan facilities are the micro financing and the value chain financing.

4. For onion farmers who are not members of cooperatives, the main sources of financial

services are traders and the local usurers. 5. Although crop insurance for farming is available in the Philippines, uptake has been low

among farmers and generally only among those who availed of state sponsored credit programs. Aside from protecting farmers from crop failure due to calamities, crop insurance can potentially facilitate access to credit as it can serve as a substitute for physical collateral and give banks more security and incentive to lend to the sector. Interviews indicate that farmers do not yet fully appreciate the benefits of crop insurance and are more inclined to look at it as an additional cost despite the subsidy.

Currently, there is no weather-based index insurance (WII) scheme that has been developed or piloted for onion farmers. Based on experiences of ongoing WII pilots, there seems to be a potential to develop weather-based and area-based parametric indices for onion farming. This may help reduce risk aversion among farmers as well as facilitate speedy rehabilitation after natural calamities.

B. NON-FINANCIAL SERVICES 1. In 2011, the DA High Value Crops Development Program (HVCDP) through the Bureau of

Agricultural Research (BAR) supported the project “Enhancing the Productivity of Yellow Onion


towards Commercialization for the Export Market.” The project, which was implemented in partnership with NOGROCOMA in Bongabon – Nueva Ecija and Bayambang – Pangasinan, aimed to enhance the production efficiency in onion through appropriate production technologies to come up with higher yield and quality produce for the export market. Capability building activities through on-farm implementations and demonstrations including trainings were conducted to capacitate the farmers on the latest onion technologies. The project also worked with Dr. Turoku Haga, Japanese expert, and Hannan Seika Co. Ltd. The project paved the re-opening of Philippine exports of onion to Japan.

2. Other support services provided by DA to the onion industry under the HVCDP include support

to farmers and cooperatives in accessing and acquiring good quality planting materials and inputs, establishment of hanger storage facilities, development of market linkages, , conduct of appropriate and location-specific researches and its dissemination, and set-up of demonstration farms to showcase different onion varieties. These services have contributed to increased production levels in 2013 especially among key onion producing areas in Northern and Central Luzon regions. It has also helped in laying the groundwork for the revitalization of export sales in Japan, Indonesia, and Malaysia.

3. Under the shallot onion program of DA, the Agricultural Training Institute (ATI) is tasked to train

a pool of experts who will in turn be tapped to conduct trainings of farmers on Good Agricultural Practices (GAP) on onion. GAP compliance is a requirement before onions can be exported to other countries. Onion exporters may also conduct their own training activities on GAP provided they follow the guidelines set by ATI. The Bureau of Plant Industry (BPI) is the lead agency of the shallot onion program while the Bureau of Agriculture and Fisheries Product Standards (BAFPS) is the agency that accredits the exporters for GAP compliance.

The ATI has conducted various training in Central and Northern Luzon regions but the pool of trainors developed is not yet sufficient to cover all onion production areas. Likewise, farmers need on-site guidance and support to facilitate adoption of GAP including tangible demonstrations on the benefits of GAP compliance.

4. The Municipal Local Government Units (MLGUs) and Provincial Local Government Units (PLGUs)

in key onion producing provinces provide capacity building support, planting material subsidies, and cost contribution in the set-up of onion hanger storage facilities.


Section 6: ENABLING ENVIRONMENT

A. FORMAL RULES, REGULATIONS, AND POLICIES Below are the key issues that promote and/or hinder the development of the seaweed industry:

1. The Philippines, as a member of the World Trade Organization (WTO) and a signatory to General

Agreement on Tariffs and Trade (GATT), will have to open its ports to imported agricultural products that comply with the standard by 2015. Similarly, the Association of Southeast Asian Nations (ASEAN) and its six trading partners are targeting to sign by 2015 the Regional Comprehensive Economic Partnership (RCEP), a free trade agreement that is expected to further open up new and bigger markets for local businesses. On the other hand, both of these economic treaties will increase competition among onion producing countries in the ASEAN region. As already experienced, imported onions depress local farm gate prices (especially yellow granex) to levels below production costs, and thus are detrimental to thousands of farmers and devastating to the whole industry itself. The government, at the instance of the local producers, may be able to control the entry of imported cheap onions whether legal or smuggled, but only to a certain extent, since the incentives of traders to procure at cheaper prices always remain. Besides imports, the other factors contributing to the displacement of domestic production by imports include rising costs of production inputs, lack of storage facilities, and inadequate handling and transport facilities (FAO, 2007). The local onion industry therefore needs to upgrade itself in order to compete effectively with international suppliers, more than just relying on policy safeguards or protectionist measures established by the government. This implies more than ever the need to improve competitiveness of onions in all aspects --- price, volume, and quality.

2. The imperative of moving towards more sustainable agriculture practices that respect local

ecosystems within broader landscapes is gaining momentum. Regulations of importing countries have made it imperative for buyers to be more accountable for health, social, and environmental responsibilities. Importing countries are increasingly implementing the Maximum Residue Level (MRL) legislation on onions and other vegetables. Likewise, compliance to Global GAP/GAP is a necessary prerequisite to participate in the export supply chain. To ensure that certification and export regulations do not exclude smallholders ( as what has happened in 2012), reform in the delivery of extension services to facilitate compliance will require the adoption of a multi-provider model and market-based delivery mechanisms including partnerships with lead firms. Equitable access to support services and improved road infrastructure are important in promoting inclusive sustainable and efficient production and marketing systems.

3. For chain actors, price levels are a very important incentive to produce. The predictability of the

price and supply during the year is an important issue that influences business decisions. Onion is characterized by a volatile market price during the year, depending on available supply and demand. There is a lack of readily accessible information on actual supply and demand status at any given period of time that can help chain players especially farmers to make informed decisions. In many cases, decisions are based on speculations resulting to (mis)trust issues, price volatility, and adversarial relationships. In the short term, the concern of the onion industry stakeholders and players especially farmers may be addressed through improved implementation of price and market information transparency measures. A careful study has to made to determine the most appropriate institutional arrangement and policy instrument that


will both mitigate risks from price fluctuations and, at the same time, enable farmers and chain players to have a fair share in the domestic and export price.

4. The Agri-Agra Law in 1970s required banks to have at least 25% of their loan portfolio devoted

to agriculture. This was reinforced by the issuance of Comprehensive Agricultural Loan Fund (CALF) in 1986, and the enactment of the Agriculture and Fisheries Modernization Act (AFMA) in 1997 (Llanto, PIDS, 1993). The Bangko Sentral ng Pilipinas and the Department of Agriculture have been devising favorable climate for investors in agricultural loans. Although the commercial banks were hesitant to cater with agri-finance considering the high risk of natural calamities, the presence of government corporations (e.g., LBP) mandated to lend to farmers balanced the situation. The government initiated the creation of cooperatives and cooperative banks that served as conduits of funds to offer financial services in the rural areas. This rural financing approach characterized the Philippine rural finance landscape even up to the current period. It is important more than ever for PLGUs and MLGUs to encourage farmers to organize or to join existing cooperatives and to assist the cooperatives in the development of internal and external infrastructure and organizational elements needed to achieve the economic, environmental, and social objectives that underlie the viability of collective enterprises.

B. INFORMAL RULES AND SOCIO-CULTURAL NORMS

1. In facilitating the improvement of supply chain collaboration and coordination and

strengthening of horizontal collaboration, the program can leverage the positive values of "Malasakit", " Hiya", " Utang Na Loob", " Pakiki-ayon", " Maaasahang Kagalingan", "Katapatan", ''Malasakit", and "Kagitingan". The approach is to appeal to the individual and the group's higher values and collective sense of "Pagkakaisa". It is important to facilitate the alignment of individual and group objectives.

2. In introducing improved technologies and facilitating upgrading, the “tingi” or piecemeal

mentality may be positively harnessed. Breaking the upgrading or change process into small steps has a number of advantages. Smaller changes are easier to plan and manage. When VC players especially farmers look at a big change, they are easily overwhelmed by the size of it. When things are broken down into smaller pieces, it does not look as something that is really very difficult to do. A pause between stages gives time to re-think and re-plan. It also helps create a sense of closure and reduces tendencies to revert to old ways.

3. Resource-poor farmers are generally risk adverse. As such, it is oftentimes important to

demonstrate the viability and benefits of the change initiative or improved technology. For activities to be effective in resolving doubts and hesitations of farmers and other VC players, these should: a) provide safe spaces for reflection and sharing; b) build relationships; and c) develop responses based on personal experiences, abilities, and perceptions. Visits and interactions with people exhibiting the desired behavior and demonstration farms can be very helpful in guiding target groups toward an acceptable resolution of their doubts about the change initiative. VC players especially farmers see information from peers who have undergone the process as more credible than information from other sources.

4. Informal rules can contribute to the effectiveness of formal rules. If the norm is to abide by

formal rules (e.g., adherence to GAP), then it becomes less costly to enforce the regulations. Norms of civic cooperation reduce enforcement costs by leading individuals to internalize the value of standards and regulations even when the probability of detection for violation is negligible.


Section 7: CONSTRAINTS AND OPPORTUNITIES

Table 33. Constraints and Opportunities

Opportunities Constraints Province

INPUT PROVISION

Barter trade as promoted by VIEVA proves to be successful in facilitating farmers’ access to inputs and basic commodities Cooperatives can be tapped as seed distributors

Farmers lack capacity to pay upfront for seeds resulting to underutilization of farm areas The farther the distance between farms and seed outlets, the higher the cost of seed procurement and the less likely that farmers receive appropriate technical guidance on the proper planting and care for care for specific variety Farmers hesitant to use varieties other than Red Pinoy which hinders the promotion of off season planting

Ilocos Region Ilocos Norte Ilocos Sur Pangasinan Cagayan Valley Nueva Vizcaya Central Luzon Nueva Ecija

Access to seeds is strongly related to efficient and reliable distribution systems and capacity of farmers to pay for the seeds. In many cases, decision on quantity of seeds to be purchased is based on cash that farmer can access at the onset of the planting season rather than what is needed to ensure optimum use of farm area. This results to underutilization of farm areas and poor economies of scale and, consequently, high cost of production per unit yield. In many case, distribution outlets require upfront payment. An option taken by farmers especially those that are not members of cooperatives is to take a loan from traders, which compromises the price they receive during harvest time. Farmers complain that cost of seeds is high but, perhaps, the bigger issue is the lack of capacity among smallholders to pay upfront for the seeds. According to seed companies, they are doing their best to keep the cost of seeds as low as possible but they also have to make their businesses financially viable. Farms located in areas far from seed retailers spend more in transportation cost when buying seeds. Additional expense matters most to resource poor farmers especially that price of onions is very volatile. Likewise, after procurement of the seeds, it would be costly for farmers to go back to distributors to seek technical guidance whenever necessary. Although seed companies have seeds suitable for off-season production, uptake has been very low. Farmers are conservative when it comes to adopting new varieties. They need information about the new varieties. They also need the assurance that these varieties are acceptable to the market.

Proper application and management of fertilizer and pesticides together with use of quality planting materials and

High cost of chemical inputs both to farmers and environment Lack of access to soil analysis services/

Ilocos Region Ilocos Norte Ilocos Sur Pangasinan




good agronomic practices can potentially increase yield by 100%. Agri-waste can be used in the production of organic fertilizer. There are existing enterprises engaged in production of organic fertilizer but quality is inconsistent and price in general is higher than landed cost of organic fertilizer from Koronadal.

Lack of technical know-how on proper fertilizer management and application

Cagayan Valley Nueva Vizcaya Central Luzon Nueva Ecija

On the average, fertilizer expenses comprise about 24% of total production costs. Rising costs of fertilizer and other chemical inputs coupled with low yield contribute to high production costs and erosion of profit margins. High production cost per unit of output also translates to high prices making it difficult for locally produced onions to sustain export market sales or compete with imported onions in the domestic market. Farmers are also not getting the optimum benefit from fertilizer use. In many cases, amount of fertilizer used is based on standard specifications (e.g., 1 bag of fertilizer per can of seeds) rather than results of soil test analysis. For some farmers, price signal influences decision to use fertilizer and the amount of fertilizer to be used rather than soil analysis. Similarly, when farmers lack money or when there are emergencies that we require cash outlay, fertilizer purchase is usually the first one that is sacrificed. Use of fertilizer has a clear impact on production but its effect can vary significantly depending on agronomic practices, the amount of rainfall, soil conditions, etc. Risk aversion also plays an important role in the onion farmers’ decision to adopt fertilizer. Generally, while risk aversion increases farmers’ reluctance to adopt a new technology, it can also increase the intensity of use for farmers who have adopted the technology. In either ways, farm productivity and profitability as well as price and market competitiveness are compromised. Soils constantly undergo change. The quantity and availability of plant nutrient elements in the soil change as a result of removal by the growing or harvested crop, leaching, erosion, or the addition of fertilizer, manure, or compost. Indiscriminate use of inorganic fertilizer may result into soil destruction. Thus, there is a need to institute soil testing in order to provide information necessary to maintain optimum soil fertility conditions. Excessive use of chemical inputs can also prevent entry to export markets.

FARMING

Good agronomic practices and sustainable farming practices can reduce incidence of pests and diseases and improve resilience to climate change resulting to overall increase in productivity and better market access. GAP certification required to access export markets. This can

Limited outreach of existing extension services and providers Low uptake and adoption of good agricultural practices and sustainable production practices Lack of capacity to comply with certification requirements





potential provide incentives to adopt good practices.

Tarlac

Majority of the onion growers are smallholders and most of these do not have the system to ensure production of onions according to international/global quality and safety standards. Consequently, because of non-compliance to GAP and other competitiveness issues, Philippine exports of onions drastically went down in 2012. Poor agronomic practices are also responsible for many of the productivity issues faced by onion farmers. GAP promotion related interventions by DA/ATI/HVCDP, non-government organizations (NGOs) and private sector have contributed to significant improvement in production and productivity. However, the reach has not been extensive enough, leaving a large segment of onion farmers out of the benefits of those interventions. Adoption of GAP among farmers has also been slow and low. In many cases, there is still a lack of understanding among farmers on cost benefits of GAP compliance. The Filipino farmers are calculating and generally reluctant to changes in their farming activities for this is their way of life. They have the "wait-and-see" attitude. Although many farmers are very much open to new ideas and technology, there are more farmers who would first want to see a working model or system before they follow the lead. Likewise, farmers also lack the resources to comply with GAP. To facilitate adoption of GAP, farmers need both training and on-farm mentoring and monitoring including assistance in aligning current production system to GAP at the least cost.

Productivity improving technologies can reduce production costs and promote product and quality consistency PhilMech has developed mechanization technologies specific for onion farming

Lack of access to efficient technology Farmers cannot afford and/or pay upfront for equipment and technology

Ilocos Region Ilocos Norte Ilocos Sur Pangasinan Cagayan Valley Nueva Vizcaya Central Luzon Nueva Ecija Tarlac

All current methods of producing onions depend heavily on manual labor. Labor costs represent around 42% of production cost. Mechanization can reduce production cost. Mechanization, however, is beyond the reach of individual smallholders owing to high acquisition cost. Some of the activities that would greatly benefit from mechanization would be the land preparation and planting/transplanting of onions. Land preparation is to some extent already mechanized but the number of hand tractors and 4-wheel tractors available for rent is not sufficient especially during the planting season. Mechanization, however, would only be viable if farmers agree to the formation of clusters to promote economies of scale.

Proper irrigation can help improve productivity and reduce resource/water use

Lack of access to irrigation facilities Ilocos Region Ilocos Norte Ilocos Sur Cagayan Valley Nueva Vizcaya




Central Luzon Nueva Ecija

Most farmers use a long hose and manual sprinkler to water their farms. Oftentimes, watering with a hose or sprinkler system does not deliver the water to the base of the plant - precisely where it is needed. Aside from the potential waste of water, it is laborious. To achieve a high production potential of onion, appropriate soil moisture should be maintained during the entire growing season. Yield in onion farms with drip irrigation is about twice that of farms without the appropriate irrigation system. Irrigation is necessary to produce the high quality and yields required to be profitable and competitive.

POSTHARVEST OPERATIONS

The dormancy period/shelf-life of onions can be prolonged by proper storage and postharvest handling

Lack of access to storage and postharvest facilities


After harvest, onions are laid out on the fields for a day or two to be partially dried or farmers used alternative ways by hanging in sheds or through air drying. The use of make-shift postharvest and storage facilities contribute to rapid weight loss and deterioration of bulbs, improper cleaning, bulb bruises, and storage pest infestation. Losses from these traditional and makeshift storage and postharvest facilities are very high, both in terms of quantity and quality. Cooperatives supplying institutional markets are constrained by lack of storage, transportation, and postharvest facilities compliant to Good Manufacturing Practices. The cost of bringing the onions to storage facilities outside their municipalities/town is high. Likewise, manual sorting is laborious and time consuming and contributes to quality deterioration (especially bruises).

MARKETING

Good roads and bridge to onion production areas can contribute to reducing cost of transactions and facilitate improved access to product, support, and inputs markets.

Poor farm to market roads No bridge in farming communities located near the river; farmers have to wait for water to subside to cross the river


Poor/Lack of infrastructure results to inefficiencies, deterioration of quality, and limited access to markets. Infrastructure influences the cost structure as well as product quality. The additional




transportation expenses incurred by farmers with farms located in areas not accessible by trucks/4-wheel vehicles reduce the effective “price” farmers receive for their onions. Poor farm-to-market road reduces choice: it results in more limited marketing opportunities, reduced farm-gate prices and returns to labor and capital, and increased input costs. Traders also face high transaction costs arising from poor roads, which affect demand for farmers’ produce and the prices they receive.

INTERFIRM RELATIONSHIPS

Longer term contractual arrangements such as contract growing agreements can to a significant extent insulate farmers from price fluctuations

Dominance of spot transactions makes farmers more vulnerable to price fluctuation. Volatility of prices makes farmers wary to invest in onion cultivation and upgrading. Poor communications infrastructure for disseminating information on supply, demand, and prices


Fluctuating prices adversely affected the profitability of players especially farmers. Farmers act on price fluctuations by changing the intensity of their farm management which in the end compromises their own farm productivity and income generation potential. Onion prices appear to be too sensitive to the supply. Increase in supply of onion beyond a threshold cause a steep decline in price. This is complicated by a poor flow of information regarding supply and demand. . Onion prices appear to be too sensitive to the supply. Increase in supply of onion beyond a threshold cause a steep decline in price. This is complicated by a poor flow of information regarding supply and demand.


Section 8: COMPETITIVENESS DIRECTION

A. COMPETITIVENESS VISION

To ensure that local production remains viable and profitable, the onion industry needs to upgrade itself to become more competitive both in the domestic as well as in the export markets. Specifically, it has to ensure year round supply of onions to cater to the needs of Filipino households, institutional markets, and the export markets parallel to increasing productivity and product quality. For the onion industry to deliver quality onions at the “right” quantities and varieties, at the “right” times, and at the “right” prices, the following key focal points of action were identified by stakeholders and the players: a) Access to seeds at more affordable terms b) Improved access to, availability, use, and utilization of fertilizer and other inputs appropriate for

onion farming while reducing environmental costs c) Enhanced flow and quality of extension services for onion farming to facilitate adoption of GAP

in both regular and off-season onion production d) Access to farming mechanization technologies to improve production efficiency


e) Improved access to cost efficient low-cost irrigation technology f) Improved access to GMP compliant postharvest and storage technologies necessary for the

consistent production of high quality onion g) Improved physical/infrastructure linkages to input, support, and product markets h) Improved communication, coordination, transparency, and collaboration between and among

value chain players

B. PRIORITY CONSTRAINTS/OPPORTUNITIES AND INTERVENTIONS

Drawing on findings from the end markets and value chain analysis and the focal points of action identified by VC actors and stakeholders, below are the proposed intervention strategies and approaches to improve market competitiveness of the Northern and Central Luzon onion industry while promoting broad based growth and climate change resilience. Prioritization of interventions for each of the key onion producing provinces is presented in Annexes 1 to 3 while specific approaches for each province are indicated in Table 34.

INPUTS 1. Development of a more cost-effective seed distribution channels aligned to smallholders’

purchasing capacity To promote the optimum utilization of areas allocated to onion farming and, hence, improve productivity, good quality seeds have to accessible and affordable. Accessibility is strongly related to efficient and reliable distribution systems with proximity to input markets a critical factor especially in relation to cost. Affordability refers to a fair and affordable price, access to credit to buy seed upfront and insurances to make sure that loans can be paid back also if hazards happen on the way. Seed accessibility and affordability to farmers in Luzon A Cluster are determined primarily by institutional/organizational arrangement and socio-economic conditions of farmers. This intervention is aimed at improving access, affordability, and utilization of seeds through the development of seed distribution system aligned to smallholders’ purchasing capacity and responsive to perceived and real risks faced by farmers. The proposed strategy consists of the following components:

a) Assistance to cooperatives especially those with membership based located in remote areas to start a seed distribution business and become accredited distributors of major seed companies

Cooperatives are more accessible to farmers than distributors who are almost always located in the town proper. Proximity to supply will reduce cost of transaction especially transportation expenses. Cooperatives can also be more flexible in in their payment schemes. Likewise, since many of the cooperatives are also engaged in collective marketing, it will be in their interest to ensure that seeds available for purchase by farmers are of good quality and aligned to consumer preferences. This will also address trust and reliability issues between seed outlets and farmers.

Instead of cooperatives giving out cash loans for inputs, it is proposed that loans be provided in the form of seeds. This will also mitigate risks of farmers using the loans for purposes other than seed procurement. Income from seed distribution will ultimately also return back to farmers in the form of dividends. For cooperatives to become viable seed distributors, they would need


assistance in the installation of good quality control systems, storage facilities, and improvement of enterprise management skills.

b) Development and implementation of market-based mechanisms that would allow resource poor farmers to access good quality seeds at the right time and quantity

The development of payment schemes have to be made with farmers. It is also important that farmers are given a range of choices on how seed purchases with utmost considerations that options are mutually fair and beneficial. Some of the possible payment schemes are:

Barter system: This system seems to be very much appreciated by farmers. Under this system, farmers can trade or pledge a portion of their produce at a fair price in exchange of seeds.

Collects back in cash every harvest/Zeroing of account at the end of crop season

c) Engaging end users in participatory variety selection

This will involve decentralizing variety selection to onion production hubs (different agro-ecologies), selecting genotypes under conditions of real farmer input, and giving farmers real choice based on their agro-ecologies. This approach can be expanded to include traders and consumer groups in the screening process. This will facilitate interactions between farmers and buyers and ultimately open market opportunities for farmers. This can also, perhaps, help hasten the widespread adoption of varieties suited for off season production.

d) Establishment of demonstration farms as learning venues and to showcase the different

varieties and corresponding culture management

Given the “to see is to believe” attitude of many farmers, establishment of a demo farm can serve as showcase and learning venue where clients can visually validate results to make informed decision.

e) Development of capacity of cooperatives to provide technical advice to farmer clients

Development of capacity of cooperatives to deliver location and variety specific agronomic advice to their clients will help promote the optimum utilization of seeds. Successful onion production by farmer-clients will create sustainable market for the seed distribution business of cooperatives.

f) Linkage with Philippine Crop Insurance Corporation for piloting of weather-based index crop

insurance tied up with seed loan or purchase

The project may want to explore the possibility of forging a partnership with the Philippine Crop Insurance Corporation for the development and piloting of a weather-based index crop insurance tied up with seed loan or purchase. This is aimed at helping farmers to manage weather risk without increasing default risks of cooperatives and banks.

2. Reduce cost of fertilizer use through local production and increased usage of certified good

quality organic fertilizer specific for onion as well as adoption of proper fertilizer application and management


Soil fertility is central to crop growth. During the recent years, fertilizer prices have risen faster than any other input. The proposed strategy, therefore, entails the development of a competitive supply of quality fertilizer at affordable prices parallel to helping ensure that farmers correctly use the fertilizer. It involves the following components, namely:

a) Establishment of community-based organic fertilizer plant and/or upgrading and scaling up of existing fertilizer enterprises including assistance to get the necessary certification/ accreditation.

The set-up or strengthening of organic fertilizer enterprises has three main objectives, namely: i) To produce premium quality organic fertilizer using waste materials and at a cost affordable to smallholder; ii) To contribute to solid waste management and reduction of greenhouse gases from landfills through composting of farm wastes; and iii) To provide income generation opportunities for farming households through participation in the venture as co-owners of the business, waste collectors, workers, and retailers.

b) Implementation of voucher program, barter, or similar tool to stimulate purchase and use of organic fertilizer/inputs and reduce risk averseness among farmers

PRDP may want to explore the viability of a cooperative-based distribution system of both chemical and organic fertilizer. This will shorten the supply chain and provide some flexibility in the payment scheme. Given the popularity of barter system among the major cooperatives, it may be possible to replicate the same scheme. To minimize risk aversion among farmers especially heavy users of organic fertilizer and encourage the incremental use of organic fertilizer, the project may want to consider the implementation of a voucher program as a risk-sharing mechanism. In a voucher program, a targeted farmer is given a voucher which he/she can exchange for fertilizer from project supported and accredited providers. The providers in turn redeem the vouchers for cash payment from the project. The voucher can be for a certain percentage of the cost of the fertilizer and farmer has to pay for the remaining balance directly to providers. In some cases, vouchers can serve as production credit, with repayment expected at some later date. The voucher can also be effective in encouraging fertilizer enterprises to invest in upgrading to qualify for accreditation. It can also assist newly set-up fertilizer enterprises to build up clientele and stabilize their cash flow. Voucher programs generally include: i) a mechanism for targeting recipients and distribution of vouchers including monitoring of outcomes and impact at farmers’ level; ii) a system for accreditation of providers/suppliers; and ii) a mechanism for managing the cash redemption of vouchers.

c) Develop capacity of organic inputs providers and progressive farmers to deliver technical advice to farmer clients on fertilizer management including scaling up of soil testing services and making these readily accessible to farmers

Fertilizer use alone does not increase crop yields; it must be used properly. Promotion of fertilizer use must be complemented with extension services to ensure that fertilizers have the correct formulation to meet local soil needs, are applied in the correct amount and at the optimal point in the planting cycle, and are used alongside complementary inputs such as improved seed. Without proper application, fertilizer use can actually decrease profitability by creating a significant added cost without a corresponding increase in crop yields. Similarly, the best method for determining a crop’s nutritional requirement is to do a pre-plant soil test. Suggested interventions under this component consist of the following:


- Build up of capacity of organic fertilizer producers and cooperatives to deliver advisory services on fertilizer management and application to their farmer clients

- Develop capacity of cooperatives, organic fertilizer producers, and progressive farmers to

conduct basic soil testing using the kit from the Bureau of Soils and Water Management (BSWM). For fertilizer producers, the soil testing services may be sold as package together with fertilizer purchase. Cooperatives and progressive farmers can soil testing services as fee-based service or can become retailers of the soil testing kits with training and guidance on its use as an embedded service.

- Establishment and/or scaling up of the Mobile Soil Test Clinic to include onion farms

d) Dissemination of success stories and emerging good practices It is suggested that the project involve the media in its activities particularly in the dissemination of emerging good practices as well as in highlighting success stories. Disseminating information in a variety of ways—print materials, in-person events, competitions, and main-stream media—ensures that as many farmers as possible can hear and understand the messages. The main objective of this intervention is to promote widespread adoption of good fertilizer management practices. People learn about their abilities and attitudes by comparing themselves with other people and their opinions. Mostly, people seek to compare themselves with someone against whom they believe they should have reasonable similarity. Giving the farmers opportunities to compare their performance with others similar to themselves pushes them to action or provides them with greater motivation to perform target behavior. Somehow, it builds the general feeling of “if they can do it, we can do it.” Based also on the fact that people often decide what attitudes and behaviours are appropriate from observing those around them, another way that project can get farmers to adopt new/improved practices is by using norm appeals through conformity. A norm appeal campaign is aimed at informing farmers that their peers are adopting the behaviour that the project is trying to promote. Using messages that convey the popularity or growing appeal of the behaviour is a way to get farmers to change over to a new social norm. People tend to do the right thing when they observe others doing it first.

FARMING 3. Development of local capacity to provide services that will enable farmers to adopt GAP

including pilots to demonstrate benefits of GAP compliance GAP implementation can have a number of positive impacts such as improved market access to institutional and export markets, higher yields and profitability, better quality onions, greater occupational safety, and lower environmental impacts. On the other hand, GAP compliance also poses considerable challenges to farmers and exporters ranging from cost/affordability issues to lack of technical know-how and difficulties. The proposed intervention strategy aims to facilitate access of farmers to resources and skills that will enable them to comply with GAP. The following are the proposed interventions under this strategy: a) Formation of farmer training groups and development of lead farmer-trainer per group including

establishment of small demonstration plots


This intervention builds on the experience of ATI and HVCDP in facilitating GAP compliance and will expand the pool of trainors developed by ATI and HVCDP during the last three years. It will involve the organization of interested farmers into farmer training groups. Each group will have lead farmers selected based on interest, experience, and leadership qualities. Lead farmers will receive in-depth training on GAP and may be compensated with the produce from the project supported demonstration plots. The lead farmers will provide training to peers. It is recommended to employ participatory learning methods, such as demonstration plots and hands-on training, to build knowledge of less well-understood areas, such as pest control.

It is also suggested that each cluster of farmer training groups be linked to an exporter or consolidator. Based on experiences, farmers are more receptive to new practices and technology when lead firms or buyers are involved in the upgrading process. It gives them some confidence that upgrading will result to tangible benefits.

b) Conduct of competitions to motivate adoption, stimulate innovation, and facilitate

identification of emerging good practices as basis for regular updating of module

Conduct of friendly competition is also a way to make learning and upgrading fun. The contests can provide incentives to farmers to become aligned with GAP, while simultaneously demonstrating the effects of good practices. Good practices and innovative solutions that will emerge from the competitions can be incorporated into the GAP manual and training modules, helping capture and further disseminate new learning. The competitions are also a way to quickly monitor farmers’ understanding of different elements of GAP and take corrective action whenever necessary.

c) Support research and development to identify opportunities for productivity improvement, low

cost GAP implementation measures, and for improving viability of off-season production.

It is essential that farmers continuously seeks to improve production systems to remain profitable, meet market demand, and maintain a competitive position for Philippine onions. This can be facilitated through research and development support as basis for improving extension services.

4. Strengthen local capacity to commercially provide services and facilities that will enable farmers

to improve efficiency and productivity The productivity of farms can be improved through economies of scale and the adoption of more technically-efficient production systems. The proposed strategy, which aims to facilitate access of farmers to mechanized technologies, consists of the following components:

a) Set-up of common service facilities for mechanized farming with a focus on land preparation and planting technologies

Mechanized planting technologies (e.g., row planters) would not only result to savings on labor but would also enable farmers to achieve uniform bulb size (as per desired size). Likewise, by ensuring the planting of seeds at consistent, optimum distances, farmer can save on input costs. There are also transplanters that can perform the tasks of transplanting, fertilizing, and digging of irrigation canals all at the same time. Mechanized planting would pave the way for mechanized harvesting. Manual harvesting entails a lot of cost and also a source of losses due to bruises and damages.


b) Facilitate establishment of farm clusters to promote economies of scale including piloting support

The development of farm clusters is important to promote efficient utilization of agricultural machinery. Most countries that have successful mechanization programs such as Japan, Korea, and Thailand encouraged land consolidation for a systematic and synchronized farming operation.

5. Improve access of farmers to technologies that will help promote water use efficiency and

reduce resource use This will involve support to establishment of low cost drip Irrigation system particularly in areas depending on rain-fed agriculture and facing water shortages. This will allow for increased land productivity and promote water use efficiency. According to study conducted by Dr. Victor Ella, drip irrigation is adaptable to any crop, soil and topographic conditions. It can be used even with limited water supply and can provide relatively high water use efficiency. Drip irrigation system is easy to install and operate and can reduce the incidence of leaf diseases caused by direct water contact on some plants. Drip irrigation can also facilitate liquid fertilizer application through fertilization.

POSTHARVEST OPERATIONS 6. Establishment and/or upgrading of postharvest facilities to enhance viability of collective

marketing initiatives, ensure compliance to food safety and quality standards, and minimize postharvest losses

Facilitating farmers’ access to GMP compliant postharvest facilities can play a pivotal role in providing a hygienic environment for the proper washing, sorting, grading, packaging, and storage of onions. It is a critical and important component of the infrastructural base to support quality and safety management in the onion supply chains. Availability of postharvest and storage facilities within the proximity of onion production areas will also reduce hauling and transport costs of farmers and cooperatives. This strategy involves the following interventions:

a) Establishment of GMP compliant common service facilities for on-farm curing and drying of onions supported with extension services on good postharvest practices in key onion production hubs where farms are contiguous.

b) Establishment of GMP compliant storage, transportation, and packing facilities

MARKETING 7. Upgrading of farm-to-market roads Proposed interventions consist of the following: a) Cost contribution to rehabilitation of farm-to-market roads b) Cost contribution to bridge construction Farm-to-market road rehabilitation and construction of bridge will help farmer to access markets and vital services. Improvements of rural infrastructure can reduce transportation and labor costs and, more generally, the cost of transaction. Shorter travel time and good road conditions will minimize risks of product deterioration. The overall reduction of transaction costs will contribute to


improving price competitiveness and/or better profit margins that can help farmers cope with price fluctuations of onions. Public investments in road infrastructure can potentially stimulate agribusiness investment, vertical coordination with buyers, and inclusion of small farmers in remote areas.

INTERFIRM RELATIONSHIP 8. Facilitate shift from arm’s length transactions to directed relationships parallel to improving flow

and transparency of market and price information a) Foster linkages between farmer groups and processors/ restaurants/ supermarkets/

consolidators including the promotion of long term contractual commitment under an ethical and responsible trading relationship

Business models such as forward contracting can insulate farmers from price fluctuations as well as promote a more equitable relationship between and among players. To entice institutional buyers to to invest in collaborative and directed relationships, farmer groups have to ensure year round supply of onions at a competitive pricing structure. Key preconditions that entice institutional buyers to enter into collaborative relationships with onion farmer groups/cooperatives are the following:

- Demonstration of capability to meet basic quality requirements, which implies the need for some upgrading and a good understanding of the required standards.

- Access to a significant volume, which calls for well-functioning horizontal collaboration.

- Willingness to invest. Lead firms are more inclined to invest when they see that the

groups have invested their own money or assets. This provides a guarantee that the communities will work towards making the venture a success.

b) Capacity building (coops) on supply chain management, chain governance, and export marketing

For directed relationships to prosper, it is necessary to build capacity of cooperatives on supply chain management and chain governance. Likewise, to enable cooperatives to move up the chain, they would require capacity building on export marketing.

c) Strengthen capacity of existing information systems to disseminate accurate price and market

information

It is important to invest in the collection and timely/up-to-date dissemination of industry data with a focus on supply and demand to assist value chain players in making better informed decisions in regard to enterprise management. Information should be widely disseminated via newspapers, radio, and TV. It can be anchored on DTI’s price monitoring system and PSA/BAS and BPI monitoring system.

Table 34. Priority Constraints/Opportunities and Interventions

Constraints/Opportunities Province Intervention Strategy and Approach Who Can Do It?

Public Private

Input Provision

Farmers lack capacity to pay upfront for seeds resulting to underutilization of farm areas Many of the farms are located in remote areas while seed outlets are usually in town proper. Farmers incur additional costs and also do not receive sufficient guidance on the proper planting and care for specific variety Farmers hesitant to use varieties other than Red Pinoy which hinders the promotion of off season planting Opportunities Barter trade as promoted by VIEVA proves to be successful in facilitating farmers’ access to inputs and basic commodities Cooperatives can be tapped as seed distributors


Development of a more cost-effective seed distribution channels aligned to smallholders’ purchasing capacity (1) Technical and financial support to assist

cooperatives to become accredited seed distributor of major seed companies

(2) Development and implementation of market-

based mechanisms (e.g., barter trade, plant now pay later program) that would allow resource poor farmers to access good quality seeds at the right time and quantity

(3) Engaging end users in participatory variety

selection (4) Establishment of demo farms as learning

venues and to showcase the different varieties and corresponding culture management

(5) Development of capacity of cooperatives to

provide technical advice to farmer clients (6) Facilitate linkage with Philippine Crop

Insurance Corporation for piloting of weather

DA/PRDP - Technical and

financial support

BPI - Technical

assistance PCIC - Development

and piloting of weather-based index insurance

PLGU/MLGU - Organizational

development - Follow

through extension services

- Organization of training and similar activities

Cooperatives - Operations

and management of seed distribution business

- Maintenance of distribution farms

East West/Allied Botanical - Technical

assistance - Support to seed

distribution business




Public Private

based index insurance tied up with seed loan or purchase

- Monitoring Munoz Fruits and Vegetable Center/SUCs - Technical

assistance

High cost of chemical inputs both to farmers and environment Low use of fertilizer among smallholders due to lack of understanding among farmers on cost benefits of proper and efficient use of fertilizer, risk aversion, and limited purchasing capacity Lack of access to soil analysis services/ Lack of technical know-how on proper fertilizer management and application Opportunities Proper application and management of fertilizer and pesticides together with use of


Reduce cost of fertilizer use through local production and increased usage of certified good quality organic fertilizer specific for onion as well as adoption of proper fertilizer application and management (1) Upgrading and scaling up of existing fertilizer

enterprises including assistance to get the necessary certification/accreditation

(2) Set-up of community-based organic fertilizer

plant (3) Implementation of voucher program, barter, or

similar tool to stimulate purchase and use of organic fertilizer/inputs and reduce risk averseness among farmers

(4) Develop capacity of organic inputs providers

and progressive farmers to deliver technical advice to farmer clients on fertilizer


financial support

ATI - Training and

technical assistance

BSWM - Training and


- Customization of soil testing kit to needs of onion farms

- Scaling up of mobile soil test clinic

Cooperatives - Management

and operations of fertilizer business

- Promotional campaign

VIEVA - Market

linkage with other regions




Public Private

quality planting materials and good agronomic practices can potentially result to 100% increase in yield Agri-waste can be used in the production of organic fertilizer.

management including scaling up of soil testing services and making these readily accessible to farmers

(5) Dissemination of success stories and emerging

good practices

PLGU/MLGU - Organizational


through extension services

- Organization of training and similar activities

- Coordination of voucher program or similar mechanism

Farming

Limited outreach of existing extension services and providers Low uptake and adoption of good agricultural practices and sustainable production practices Lack of capacity to comply with certification requirements


Development of local capacity to provide services that will enable farmers to adopt GAP including pilots to demonstrate benefits of GAP compliance (1) Formation of farmer training groups and

development of lead farmer-trainer per group including establishment of small demonstration

(2) Conduct of competitions to motivate


financial support

ATI - Training/


Cooperatives - Base of

delivery of services

- Management of demo farms

NOGCOMA - Training




Public Private

Opportunities Good agronomic practices and sustainable farming practices can reduce incidence of pests and diseases and improve resilience to climate change resulting to overall increase in productivity and better market access. GAP certification required to access export markets. This can potentially provide incentives to adopt good practices.

Tarlac adoption, stimulate innovation, and facilitate identification of emerging good practices as basis for regular updating of modules

(3) Support R and D to identify opportunities for

productivity improvement, low cost GAP implementation measures, and for improving viability of off-season production.

HVCDP - Training/


BAFPS - Technical

assistance - Development

of low-cost measures

- Assistance in GAP certification

BPI - Technical

assistance BAR - R and D

support PLGU/MLGU - Organizational


through extension

VIEVA - Technical and

market information




Public Private

services - Organization

of training and similar activities

SUCs - R and D

support

Lack of access to efficient technology/ Farmers cannot afford and/or pay upfront for equipment and technology Opportunity Productivity improving technologies can reduce production costs and promote product and quality consistency PhilMech has developed mechanization technologies specific for onion farming


Strengthen local capacity to commercially provide services and facilities that will enable farmers to improve efficiency and productivity (1) Support establishment of common service

facilities for mechanized farming (land preparation, direct seeding, etc.) including access to appropriate inputs/planting materials

(2) Facilitate establishment of farm clusters to

promote economies of scale including piloting support


financial support

PhilMech - Further

development of prototype

HVCPD - Technical and

financial support

PLGU/MLGU - Technical and

financial support


and operations of common service facilities




Public Private

- Cluster establishment

Lack of access to irrigation facilities Opportunity Proper irrigation can help improve productivity and reduce resource/water use

Ilocos Region Ilocos Norte Ilocos Sur Cagayan Valley Nueva Vizcaya Central Luzon Nueva Ecija

Improve access of farmers to technologies that will help promote water use efficiency and reduce resource use (1) Support establishment of appropriate irrigation

system (e.g., drip irrigation systems


financial support

LGU - Technical

assistance - Monitoring BSWM - Technical

assistance


and maintenance

Post harvest

Lack of access to storage and postharvest facilities Opportunity The dormancy period/shelf-life of onions can be prolonged by proper storage and postharvest handling


Establishment and/or upgrading of postharvest facilities to enhance viability of collective marketing initiatives, ensure compliance to food safety and quality standards, and minimize postharvest losses

(1) Establishment of GMP compliant common service facilities for on-farm curing and drying of onions


financial support

HVCDP - Technical and

financial support


and operations of facilities




Public Private

Tarlac (2) Establishment of GMP compliant storage, transportation, and packing facilities

Marketing

Poor farm to market roads No bridge in farming communities located near the river; farmers have to wait for low tide to cross the river Opportunity Good roads and bridge to onion production areas can contribute to reducing cost of transactions and facilitate improved access to product, support, and inputs markets.


Upgrading of farm-to-market roads (1) Cost contribution to rehabilitation of farm-to-

market roads (2) Cost contribution to bridge construction


financial support

PLGU/MLGU - Technical and

financial support

- Maintenance of roads

Interfirm Relationships

Dominance of spot transactions makes farmers more vulnerable to price fluctuation. Volatility of prices makes farmers wary to invest in onion cultivation and upgrading.

Ilocos Region Ilocos Norte Ilocos Sur Pangasinan Cagayan Valley Nueva Vizcaya

Facilitate shift from arm’s length transactions to directed relationships parallel to improving flow and transparency of price and market information (1) Foster linkages between farmer groups and

processors/ restaurants/ supermarkets/ consolidators including the promotion of long term contractual commitment under an ethical


financial support

PLGU/MLGU - Foster market

linkages

Cooperatives - Mentoring of

members VIEVA - Market

linkage




Public Private

Poor communications infrastructure for disseminating information on supply, demand, and prices Opportunity Longer term contractual arrangements such as contract growing agreements can to a significant extent insulate farmers from price fluctuations

Central Luzon Nueva Ecija

and responsible trading relationship (2) Capacity building (coops) on supply chain

management, chain governance, and export marketing

(3) Strengthen capacity of existing information

systems to disseminate accurate price and market information

- Organizational development

HVCDP - Market

linkage


Section 9: CONCLUSIONS AND RECOMMENDATIONS

The challenges along the chain revolve around the following interlinked issues: 1 Supply

a) Insufficient supply of yellow granex to meet demand of institutional buyers; The low production of yellow granex relative to other types of onion appears to be influenced by the following: i) low farm gate price vis-à-vis other types of onion due to downward pressure on price from imported onions; and ii) perceived low demand especially so that among farmers the institutional market is less visible than the traditional market whose demand is dominated by the red creole

b) Domestic production of red onions appears to be sufficient to meet domestic market

requirements if postharvest losses are reduced, and on-time information on supply and demand status is available for players to make informed decisions on when to sell, store, withdraw onions from storage, etc.

A. There is a danger that shallot production would exceed domestic demand if export sales continue to be weak due to inability of the industry to sustain price competitiveness and failure to meet the stringent quality and food safety standards imposed by export markets.

2. Price Competitiveness

Farm gate prices of onions from Luzon A Cluster and the Philippines, in general, are higher than wholesale/landed price of imported onions. Unless the local industry can effectively compete with international suppliers in terms of price and reliability of supply, there will always be the threat of imported onions (legal importation or smuggled) displacing local production in the domestic market. The relatively high price of locally produced onions compared to imported onions work against the interest of smallholders. In the export market, statistics indicate that onions from Luzon A are competitively priced. Feedback from the field though indicates that when sales coincide with peak harvest season of major exporters, exporters from the Philippines could not meet price specifications of importers and, in many cases, these are below the average production price especially for yellow granex. The high production cost (financial and environment) per unit output of onions from Luzon A Cluster is due to low productivity and production inefficiencies including high postharvest losses. Low productivity is primarily due to poor agronomic practices, declining fertility of the soil, and limited access to irrigation facilities. Production cost per unit rises along with increases in procurement costs of fertilizers, pesticides, fungicides, and seeds. Improper use and application of chemical inputs unnecessarily increases farm expenditures, not to mention the possibility of intensifying chemical residues found in marketable onions. Low level of mechanization and manual watering results to high labor costs and inefficient use of resources. High marketing expenses arise from poor farm-to-


market roads/absence of bridge which increases transportation and labor costs. Limited access to post-harvest processing technologies results to high spoilage.

3. Food Safety and Quality Standards

Compliance to food safety and quality standards is important not only in accessing markets but also in penetrating the institutional markets. A major constraint to increasing exports is the lack of capacity and capability among farmers to comply with GAP. Compliance to food safety and quality are, therefore, important in improving income generation capacity of smallholders, enhancing market competitiveness, and in making the benefits of a more open and modern economy reach the smallholders. Likewise, alignment of production systems to GAP will address many of the productivity and cost efficiency issues faced by onion farmers.

In addition to interventions geared towards improving productivity, efficiency, and stability of production levels, timely and widespread dissemination of market information is essential for the proper functioning of onion markets. On-time access to market information will allow value chain participants to evaluate different opportunities and market movements and make more informed decisions about production volume, planting schedules, when to store and sell, which allows for greater value capture across the chain. This will also avoid supply gluts; this will also facilitate better matching between downstream market requirements and upstream production supplies and, hopefully, discourage smuggling. Institutional markets have traditionally been served by importers. As such, market linkage efforts across all types of onion should focus on improving linkages between farmers and institutional buyers. Likewise, with the onion supply gap in the domestic market becoming narrower, market development efforts especially for shallots should be geared towards increasing export market sales or at the minimum raising sales back to the 2011 level. For yellow granex, immediate concern should be on fulfilling demand in the local market to eliminate the need for imports. For red onions, utmost consideration should be on improving price competitiveness and ensuring that sufficient supply is available all throughout the year to reduce “attractiveness” of smuggled onions. This also implies the need to focus interventions on areas suitable for off season production such as Pangasinan, Tarlac, and the two Ilocos provinces.


ANNEX 1: PRIORITIZATION OF INTERVENTION STRATEGY:

ILOCOS REGION Ranking and Prioritization of intervention Strategy per Province

Ranking and Prioritization: Ilocos Region

Intervention Strategy Ilocos Norte

Ilocos Sur

Pangasinan

Development of a more cost-effective seed distribution channels aligned to smallholders’ purchasing capacity

1 1 2

Reduce cost of fertilizer use through local production and increased usage of certified good quality organic fertilizer specific for onion as well as adoption of proper fertilizer application and management

2 2 3

Development of local capacity to provide services that will enable farmers to adopt GAP including pilots to demonstrate benefits of GAP compliance

6 4 1

Strengthen local capacity to commercially provide services and facilities that will enable farmers to improve efficiency and productivity

8 8 7

Improve access of farmers to technologies that will help promote water use efficiency and reduce resource use

5 7 8


7 3 4

Upgrading of farm-to-market roads 4 5 6

Facilitate shift from arm’s length transactions to directed relationships parallel to improving flow and transparency of price and market information

3 6 5



CAGAYAN VALLEY Ranking and Prioritization of intervention Strategy per Province

Ranking and Prioritization: Cagayan Valley

Intervention Strategy Nueva Vizcaya


2


3


1


8


7


3

Upgrading of farm-to-market roads 6


5



CENTRAL LUZON

Ranking and Prioritization of intervention Strategy per Province

Ranking and Prioritization: Central Luzon

Intervention Strategy Nueva Ecija Tarlac


7


6


1 1


5 4


4


2 2

Upgrading of farm-to-market roads 3 3


8

philippine rural development project (prdp) i-plan ...drive.daprdp.net/iplan/vca/onion vca...

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