Potato marketing in North Sumatra and an assessment of Indonesia’s potato trade – A summary

8/8/2019 Potato marketing in North Sumatra and an assessment of Indonesias potato trade A summary

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Feed and the Feed CropEconomy in Sou th AsiaBudiman Hutabarat*

Objectivesn Asian developing countries changes in dietary habits haveoccurred and these changes have been partly responsible

for bringing about the surge in demand for livestock and fishproducts in recent years. Another factor is the population growth.As feed grain demand is a derived demand of animal husbandry,livestock and fish farming, its per capita utilization has also beenincreasing rapidly at 3.4 per cent per annum during the lastdecade. Accordingly, total demand for cereals, especially maize,sorghum and millet, which are used both for human consumptionand feed, may have increased by around 6 per cent per annum.This article aims to elucidate and analyze the current prospects offeed and feed crops in South Asia and investigate theirdevelopment potential, weaknesses, opportunities, constraints andpropose strategy and policy options for their farm development inSouth Asian developing countries to counter-balance the rapiddevelopment of livestock and aquaculture industries in Asia.

Commodity balance sheetsFor the South Asian region, the analysis of supply origin and

commodity utilization is presented in Table 1. Utilization for seed,waste and other uses is not included as these are still insignificantin the region.

Origins: domestic production

India is a very significant producer of cereals, starchy rootcrops, pulses and vegetables compared with the other countries inthe region. Taking a three-year average (1997-1999), total supply

Feed and the Feed Crop Economy in South AsiaBudiman Hutabarat

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Message from the Director 3

Potato Marketing in North Sumatra and anAssessment of Indonesias Potato TradeWitono Adiyoga, Keith O. Fuglie and

Rachman Suherman

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CGPRT Centre News and Activities

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* Research Staff at Indonesian Center for Agro-Socio-Economic Research andDevelopment, (ICASERD), AARD and formerly the Project Leader at UN ESCAPCGPRT Centre, Bogor, Indonesia.

In this ISSUE:

I


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of cereals in Bangladesh, India,Nepal, Pakistan, and Sri Lanka is24,840, 175,533, 5,281,24,585 and 2,912 metric tons

respectively (Table 1).Domestic production is 90, 106,98, 100, and 61 per cent oftotal supply of each respectivecountry. Indias percentage is inexcess of 100 per cent becausethe total supply is defined as asummation of domesticproduction and imports and asIndia exports cereals in a volumethat is higher than it imports,total supply is less than itsdomestic production.

A similar case is noted forstarchy roots. Total supply is2,377, 28,819, 1,111, 1,766and 481 metric tons inBangladesh, India, Nepal,Pakistan and Sri Lankarespectively. Total domesticproduction is 98, 100, 99.8,103, and 71 per cent of therespective countries totalsupply. Pakistans exports are

more than its imports.Consequently, total supply is inexcess of total domesticproduction.

Total supply of pulses is616, 14,666, 176, 1,229 and148 metric tons in Bangladesh,India, Nepal, Pakistan, and SriLanka and domestic productionis 77, 96, 117, 87 and 19 percent of total supply respectively.Here, Nepal was able to exportmore than it could import. Totalsupply of vegetables in India,Nepal, Pakistan and Sri Lanka is57,723, 1,421, 4,544 and 728metric tons and domesticproduction is 101, 96, 99 and85 per cent of the respectivecountry supplies.

Origin: imports

The contribution of importsto total supply varies amongcountries. In India and Nepal,imports of cereals are aninsignificant element of total

supply, while in Bangladesh,Pakistan and Sri Lanka itconstitutes around 12, 11 and43 per cent respectively. Starchy

root imports are quite substantialin Sri Lanka, amounting to 30per cent of total supply, but lesssignificant in Bangladesh (lessthan 2 per cent of imports andeven less in India, Nepal andPakistan (Table 1).

For pulses, imports seem tocontribute to the total supply ofeach country, starting from 5.4per cent in India, 6 per cent inNepal, 13 per cent in Pakistan,23 per cent in Bangladesh and81 per cent in Sri Lanka. Withregards to vegetables, threecountries documented an importcontribution in the range of 2 to4 per cent, that is Pakistan,Bangladesh and Nepal, andnearly 17 per cent in Sri Lanka,while Indias vegetable importsare insignificant.

Table 1 Total supply, domestic production, imports and exports of primary food crops in South Asian countries (average 1997-1999)

Country Cereals Starchy roots Pulses Vegetables

1,000 mt% of total

supply 1,000 mt% of total



supply

Bangladesh Total supply 24,839.77 100 2,377.41 100 616.21 100 1,674.49 100

Domestic production 22,377.64 90.09 2,336.51 98.28 475.09 77.1 1,638.66 97.86

Imports 2,852.96 11.49 40.9 1.72 141.12 22.9 43.91 2.62

Exports 0.24 0 0 0 0 0 8.08 0.48

India Total supply 17,5533.1 100 2,8819.5 100 14,665.71 100 57,723.23 100

Domestic production 18,5762.6 105.83 28,887.43 100.24 14,008.57 95.52 58,102.09 100.66

Imports 1,727.63 0.98 2.11 0.01 789.39 5.38 16.5 0.03

Exports 3,362.68 1.92 53.38 0.19 132.25 0.9 395.36 0.68

Nepal Total supply 5,280.77 100 1,111.07 100 175.74 100 1,421.46 100

Domestic production 5,177.61 98.05 1,108.62 99.78 205.77 117.09 1,371.37 96.48

Imports 40.39 0.76 2.51 0.23 10.74 6.11 50.44 3.55Exports 25.58 0.48 0.06 0.01 38.76 22.6 0.35 0.02

Pakistan Total supply 24,585.3 100 1,765.7 100 1,229.24 100 4,544.19 100

Domestic production 24,641.75 100.23 1,818.52 102.99 1,071.75 87.19 4,496.9 98.96

Imports 2,762.83 11.24 15.93 0.9 164.81 13.41 104.24 2.29

Exports 1,848.69 7.52 68.75 3.89 10.65 0.87 56.95 1.25

Sri Lanka Total supply 2,911.5 100 481.38 100 147.52 100 727.55 100

Domestic production 1,766.54 60.67 342.07 71.06 28.01 18.99 617.99 84.94

Imports 1,241.38 42.46 144.61 30.4 119.56 81.05 121.24 16.66

Exports 3.13 0.11 5.38 1.12 0.05 0.03 11.68 1.61

Source: FAO (2002).


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Message from the Director

The CGPRT Centre has been implementing

a three-year research project, Stabilization ofUpland Agriculture and Rural Development inEl Nino Vulnerable Countries since April2000, funded by the Government of Japan.The project is now in its final stage ofcompleting various reports, such as countryreports, an integrated report, and proceedingsof the workshop.

A recent review of the Centre affirmedthat the Centre had performed relatively wellfrom its inception to the mid-1990s, however,in recent years the Centres output andfinancial resources have been decliningcontinuously along with the withdrawal offinancial support by previously contributingdonor countries and organizations. One of keyrecommendations, the possibility of closingdown the CGPRT facility in Bogor, Indonesiawas suggested, if the Centre fails to drawannual financial resources of about US$ 2million over a period of three years.

Accordingly, the Executive Secretary ofUNESCAP has decided to convene an

extraordinary meeting of the CGPRT CentreGoverning Board in August to consult withthem and decide on the future of the Centre.

The most important aspect in determiningthe future of the Centre is whether there stillremains a strong need for the Centresactivities among the countries in the region.The final decision will be made by the politicalwill of the governments concerned. However,as director of the Centre, I do strongly believethat the socio-economic and policy work onCGPRT crop development is crucial in the

context of poverty reduction, particularly inrural areas.During the last two decades, the CGPRT

Centre has been making its utmost effort inline with its mandate. However, our mission isyet to be achieved. As I mentioned before

in the previous Message, hunger, malnutritionand poverty still prevail in the region.Therefore, the Centre needs to continue itsefforts for further contributions to the needsof member countries, alleviating poverty inparticular. For this purpose, the Centre hasidentified a research strategy, in which theemphasis would be placed on seeking betterpolicy options that could provide more incomegeneration opportunities to the farmers livingin less-favored areas through their agricultureand related activities based on CGPRT crops.Therefore, sustaining the Centre is relevantand benefits the member countries bystrengthening national research and

development activities.However, as shown in the report, the

financial situation of the Centre has beenworsening in recent years. The Centre drawsthe attention of the member and associatemember countries and the UNESCAPSecretariat on the occasion of the GoverningBoard Meeting and UNESCAP Annual SessionMeeting every year. As a result of thedecrease in input, the output of the Centrehas also been decreasing.

Therefore, it is crucial to enhance and

stabilize the financial and human resources ofthe Centre. The Centre requires moreunderstanding and support from the membercountries. For this to be realized, the Centremust make its activities and outputs morevisible and beneficial to the members anddonors and to draw their attention to theCentre. The Centre has initiated new activitiesfor providing relevant information that will bemore useful to support policy decision-makingin the member countries.

NOBUYOSHI MAENO


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Utilization: export

Exports make domesticproduction unavailable for

domestic use. Pakistans andIndias cereal exports arerespectively nearly 2 and 8 percent of their total supply, whileNepals, Sri Lankas andBangladeshs are negligible. Forstarchy roots, Pakistan and SriLanka export some of theirproduction, amounting to nearly4 and 1 per cent of their totalsupply respectively. Nepalrecorded exports of its pulsesequivalent to 22 per cent of itstotal domestic supply, whileBangladesh, India, Pakistan andSri Lanka did not showsignificant figures. The same istrue for vegetables, where onlyPakistan and Sri Lanka recordeda volume of exports below 2 percent of total domestic supply.

Utilization: feed

The pattern of croputilization as feed is different

across countries in the SouthAsian sub-region. Ranging from 3to 5 per cent of total supply, SriLanka, Pakistan, and Nepal usecereals to feed livestock and to alesser extent, below 1 per cent,Bangladesh and India use cerealsas feed. This signifies therelative importance of cereals forhuman consumption rather thananimal consumption in the twocountries.

While no other countrieswere noted to utilize starchyroots as feed, Sri Lanka usedaround 16 per cent of its totalsupply as feed. This is not to saythat starchy root crops are notgrown in the other countries butagain it probably indicates thatthe crops are mainly consumed

by the human population.Regarding pulses, Nepal, SriLanka and to a lesser extent

Bangladesh do not show anyindication of the use of theirsupplies as feed, but Indias andPakistans livestock sectorsbenefit from their pulses supply.No country in the sub-regionuses vegetables to feedlivestock. This is understandableas vegetables normally fetchhigher prices than CGPRT cropsbecause they are exclusivelyused for human consumption.However, by-products or wastemight be fed to livestock as iscommon in the sub-region.

The current low utilization ofCGPRT crops suggests fourinterpretations: (1) animals maybe fed with products other thanthose that belong to the groupsbeing considered, (2) the feedmilling industry is stagnant, (3)animals are not optimally fed, (4)the available feedsuffs areexclusively obtained from

imports. These observationsshould be considered as anopportunity for each country toexplore its strengths andweaknesses and comparativeadvantages.

Utilization: processingProcessing activities of

CGPRT crops, aside from feedmilling, have not developed inthe sub-region. The utilization of

these crops is only recorded forcereals and only in smallpercentages. As is in the case offeed, the diminutive use ofCGPRT crops to be furtherdeveloped to other industrialproducts in each country underconsideration is a promising signof development potential, given,

of course, that it must contestwith overall efficiency.

Utilization: food

It is no surprise thatsubstantial amounts of cereals,starchy roots, pulses andvegetable supplies in the sub-region are used mainly as foodfor human consumption aspopulation size in the sub-regionis extremely large and thealternative uses are stillundeveloped. Around 79 to 94per cent of cereals, 74 to 86 percent of starchy roots, 71 percent of pulses, and 86 to 96 percent of vegetable total supplyare consumed as human food inthe sub-region (FAO).

Livestock and its productsThe livestock sector is

irrefutably very important in theagricultural economy of countriesin the South Asian region, inparticular India, Nepal, andPakistan and to a lesser degree

Sri Lanka. Milk and milk productsare the major source of animalprotein in the South Asian diet.Despite its importance andcomplex role in economicdevelopment and food security inthese countries, the potential ofthe livestock sector has not beenfully exploited in the recent past.The population of most animalspecies or the production oflivestock products grows with a

positive trend, as well as itsconsumption.

All countries under analysishave animal product deficits, inmultiple or at least in one or twoproducts. The reasons being thatthe growth in production has notbeen able to keep pace with thegrowth in consumption, raw


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materials and ingredients such asfeed crops are not sufficient toproduce the amount required bythe milling factories, production

growth in the livestock sector isalmost exclusively in the poultrysector, and the productionsector, in particular naturalresources and gene make-up, isrelatively fixed while that ofconsumption is flexible.

In India, Pakistan and acrossthe South Asian region, coarsecereals are not specific only tofeed but are cultivated mainly tomeet human dietary needs or asa staple food for the poor and asa source of income andemployment to millions offarmers. Maize, sorghum andmillets are the major componentsof the coarse cereals in India andPakistan, while in Nepal and SriLanka soybean is also importantafter maize. Maize remains themost important of the cerealgrains available for animalfeeding in the South Asianregion.

Most of the feed supply forruminants in the South Asianregion still originates fromnatural forage resources:rangelands, pastures and cropresidues, which do not competefor human consumption, but asopen grazing lands havedwindled and demand forlivestock products has increased,the substitution to high-calorieand high-nutrient density

manufactured feeds has beguntaking place.All countries included in this

study apply price support policieson cereal grains in many formsbut are only effective for wheatand rice, leaving coarse grains tothe markets. In this sense, thedemand for these crops is

independent or may bediscouraged by the policies.

Feed and feed crop demandprojections

By applying the relevantformulae, all countries areexpected to show increasingdemand for feed and feed cropsand possibly growing demanddeficits of feeds or concentratesin the next decade. The demandfor coarse cereal crops in India isexpected to increase due to thegrowth in food and feed

consumption, and low productiongrowth, to the order of 47 percent to 64 per cent of totaldomestic production. The totaldemand for concentrate feedshows a growing trend over thenext ten years, by 2.69 per centannually. It is noteworthy thatmaximum demand is for cattlefollowed by buffaloand poultry,but the fastest rate of growthwill be for poultry (5.74 percent), swine (4.07 per cent), and

buffalo (2.41 per cent).In Nepal, maize demand is

expected to rise at 5 per cent perannum over the period of 2001to 2010, amounting to 342,000metric tons in 2010 and soybeandemand will grow by 0.93 percent per annum, amounting to18,817 metric tons in 2010. Inaggregate terms, the demand fortotal feed will increase from653,100 metric tons in 2001 to

871,000 metric tons in 2010, oran increase in 3.29 per cent perannum. To the feed millers, thiswill give a growth rate ofsoybean demand for feed ataround 6 per cent per annum.

In the coming decade, totalconsumption of wheat for feed inPakistan is projected at 523,000

tons in 2005 and 654,000 tonsin 2010, or at a growth rate of4.47 per cent per annum. Totalconsumption of maize for feed is

projected at 405,000 tons in2005 and 489,000 tons in2010, which is a growth of 3.34per cent per annum. Totalconsumption of sorghum for feedis projected at 10,800 tons in2005 and 10,500 tons in 2010,a decline of 0.51 per cent. Totalconsumption of millet for feedwill be 90,400 tons in 2005 and88,700 tons in 2010.

Production structureThe production of maize,

soybean, and most coarsecereals in the South Asian regionis in the hands of millions ofsubsistence farmers, mainlyconcentrated in upland ormarginal land areas under rainfedconditions. In Nepal, maize,being the second most importantstaple food crop, is largelycultivated in the hills and grown

by small farmers. In Sri Lanka,nowadays, maize has becomethe second most important foodcrop grown, grown only in thehighlands during the maha(wet) season as a rainfed crop bysmall-scale farmers.

The support price policiesfor coarse grains and otherCGPRT crops in the countriesstudied are not effective toachieve their intended objectives.

In India and Pakistan, thesupport prices for coarse cerealshave a negligible impact on theproduction of cereals. Thegovernment support programs inNepal to supply livestock feedingredients (maize, soybean andother inputs) is not yet seen on apronounced basis. Similarly, the


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distribution of subsidized foodgrains in the food-deficit districtswith a view to stabilize prices inthe past has created more

problems than price controls.All countries are likely toexperience positive growth ratesin coarse grain production in thecoming decade, except for a fewcrops in India. Across allcountries, maize production isexpected to increase at around1.0 to 3.00 per cent per annum,with again, India as theexception. In Sri Lanka, theanticipated growth of productionfor the period 2001-2010 isestimated at 1.08 per cent perannum, reaching around 34,450metric tons in 2010. Forsoybean, as the domesticproduction projection fluctuatesa lot, the historical averagegrowth rate of 2.45 per cent perannum seems to be unattainable.Maize and soybean production inNepal is projected to increase at3.00 per cent and 3.65 per centper annum in the coming decade,

amounting to 1,942,000 and24,872 metric tons respectivelyin 2010.

In Pakistan, within the nextdecade, wheat production isprojected to grow at a rate of3.03 per cent, amounting to23.1 million metric tons in 2005and 27.1 million metric tons in2010; the growth rate of maizeproduction is estimated at 2.60per cent per annum amounting to

1.8 million tons and 2.1 milliontons for 2005 and 2010respectively; the growth rate ofsorghum production is estimatedat 0.34 per cent per annum,resulting in 249,000 metric tonsand 261,000 metric tons for2005 and 2010 respectively; themillet production growth rate is

estimated at 0.75 per cent perannum, giving 169,000 and159,000 metric tons for 2005and 2010 respectively. Sorghum

production was 230,000 in1981, falling to 221,000 tons in2000, giving an overall growthrate of 0.22 per cent.

In terms of unit numbers,there seems to be a fair amountof feed millers in each countryand they may even appear to betoo numerous considering thelimited quantity of localproduction of feed crops at therequired quality standard. As aresult, most of the processingindustries are operating at onlybetween 50 and 70 per cent oftheir installed capacity.

The feed processing unitsare usually, or at least attempt tobe vertically integrated, providingvarious kinds of inputs andservices such as hatcheries,veterinary supplies, otherlivestock inputs, health andoutput marketing services andother support services. The large

commercial feed processing millsare usually located in areas withgood or excellent infrastructureand in close proximity to theirusers, that is, the poultry farms.

Regional trade andcooperation

The significance of trade co-operation through export andimport activities is clearly

apparent among the countriesunder consideration and to alarger extent within the SouthAsian region not only for coarsegrains, but their products andanimal products as well. Throughthis, additional demand for feedcrops in livestock productexporting countries could be

expected. Sri Lanka is expectedto reap extensive benefits fromtrade co-operation andliberalization, while Nepal,

Pakistan, and India would facedifficulties in adjusting to theglobalization of trade. India willbe confronted by competitionfrom other coarse grainproducing countries. Sri Lankaand Nepal would gain fromregional preferential agreements.

Collaborative research anddevelopment programs amongthe countries studied have agreat potential in view of thedeclining trend in public researchfunding worldwide. In theprogram of feed crop productionenhancement, productdevelopment, especially theexploration of the possibilities ofroots and tuber crop utilizationfor animal feed, could beincluded. The participation of theanimal feed industry and otherrelated private firms in theresearch and development fieldshould be encouraged.

There is also tremendousscope for enhancing regionalcooperation in research andtrade: (i) where India andPakistan could share theirresearch findings on productionand processing technologies ofCGPRT feed crops to theirneighboring countries. This couldbe implemented as part ofSAARC activity to materializeregional networks on agriculture,

information and extension, and(ii) each country will have anopportune time to exploit itscomparative advantage in theframework of the regional tradeassociation of SAPTA (SouthAsian Preferential TradeArrangement). In view of theliberalization of trade, there is


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also a pressing need to capitalizethe regional trade association ofSAPTA, where Nepal, forexample, could concentrate on

producing more high-valuehorticultural products in the hills,rather than oilseeds or otherCGPRT crops that can beexchanged with the producegrown in India; and Sri Lanka onproducing industrial, cash ormedicinal crops, rather thansoybean.

For expanding feed cropfarming in the participatingcountries, the study hasidentified elements of strengthssuch as: available areas thatcould be brought undercultivation, high-yielding varieties(particularly maize), feed cropfarming as a means ofagricultural diversificationpromotion, and low productioncosts. For India and Pakistan,crop outputs as potential exportcommodities to neighboringcountries could be considered astrength, while specific to Sri

Lanka the involvement of theprivate sector in large-scalecultivation is an importantelement.

Development potentials andconstraints

In terms of weaknesses,most farmers are subsistencefarmers with fragmentedlandholdings, support prices and

effective marketing systems arelacking, drought-resistant high-yielding varieties are unavailable,hybrid seeds are expensive,harvest and post-harvesthandling is poor, systematicresearch on feed crops islacking, crop area expansionposes a threat to the natural

environment, especially in the hillcountry of Nepal and Sri Lanka.The move towards intensivelivestock farming, the persistent

growing animal population,government policies toencourage agriculturaldiversification, growing privatesector involvement, and tradeliberalization and regional co-operation are listed asopportunities. Specific to SriLanka, there is the activeinvolvement of cottage level feedmixtures and positivegovernment intervention infacilitating large-scale cultivation,and the imposition of a maizeimport tax structure. Forsoybean there is the directinvolvement of the private sectorin purchasing and providing otherfacilities.

The threats are that thelivestock are reared in atraditional manner, theproduction capacity of feedfactories is very low, thetransportation system to collect

and distribute harvests is poor,the competition from foreigncountries is mounting and thecontrol over feed quality isinadequate.

ConclusionsThe most serious concerns

in the region are that: (i) thedemand for CGPRT crops as feedin each participating country will

increase faster than its domesticsupply. The gap betweendemand and supply will be moresignificant in Sri Lanka and Nepaland less in India and Pakistanand, (ii) the expansion of CGPRTfeed crops is constrained byundeveloped markets,insufficient research, lack of

support for farmers, priceincentives and transparentpolicies.

The immediate programs

required are: (i) governmentsshould facilitate the developmentof contract procurementbetween farmers and feedprocessing industries, (ii)governments should promotefarming organizations inproduction blocks to exploiteconomies of scale throughincreasing productivity andmarket efficiency but maintainingquality, (iii) the public sectorshould apply greater investmentin the development of HYV,possessing resistance to droughtand insect pests, (iv) the privatesector should be invited to beinvolved in collaborative researchon many areas such as varietydevelopment and grain qualityimprovement, (v) governmentsshould establish a program ofminimum support prices on parwith wheat and rice, which,however, may be unpopular

these days.

RecommendationsIt would be very difficult to

generalize recommendationsbecause each country has itsown specific naturalendowments and governmentpolicies. It is even morecomplicated as many feed cropsare involved and each has its

own characteristics.Nevertheless, this study is stillable to identify some strategiesand policies that are thoughtapplicable and could be adoptedto accelerate feed cropproduction in each country:


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General:

i. Further promotion of feedcrops as feeds and for otheruses and the continuous

promotion of diversifiedcultivation of these crops inthe traditional producingareas is required.

ii. Encourage contractual-farming for CGPRT crops inconsolidated land blocks andcontract procurement withfeed processing industries.

iii. Expand feed crops in suitableareas under rainfedconditions on drylands orhighlands as well aslowlands such as thelowlands during the dryseason in Sri Lanka, summerand winter in India, Nepal (inthe Tarai region), andPakistan. There is also thepossibility for increasingcropping intensity throughinter- or relay-cropping.

iv. Investment in research anddevelopment on these cropsshould be increased,

especially on high-yieldingvarieties that are resistant todrought and insect pests tofurther reduce productioncosts. Research anddevelopment is also requiredon harvest and post-harvestprocessing. The participationof the private sector shouldbe sought.

v. Active participation in tradenegotiations and cooperation

at the regional orinternational level and at thesame time gradually makesome adjustments in theagricultural and industrialsector to guarantee acompetitive structure at thefarm-level and industrial-level.

vi. The public and private sectorshould undertake steps toproduce more improvedseeds and make them

available to the farmingcommunity to narrow thegap between the farmersyield and the potential yieldof the seeds developed atresearch stations. Effortsshould be made to providethe required quantity offertilizer to the farmingcommunity in time.

vii. Strong linkages amongresearchers and extensionpersonnel on a regular andsustainable basis should bedeveloped to make bothparties well equipped andinformed about the needs offarmers and the productiontechnologies available.

viii. A well-planned farmereducation program should bedeveloped to introduce newtechnologies and provideother services. The extensionservices should identify the

high potential areas for feedcrops, especially maize, andinitially concentrate theirefforts in these areas beforeexpanding to larger areas.The private sector must alsobe encouraged to establishits own commodity-basedextension services.

Specific:

India

i. There has to be apromotional effort for coarsecereals for feed and otheruses and its provision to thepoor at subsidized rates.

ii. Public research institutes arerequested to improvesorghum productivity and thegovernment should establish

a program of minimumsupport prices for coarsecereals on par with wheatand rice.

iii. All stakeholders shouldpromote the agenda ofdiversification of agriculture.

iv. As some of these crops arealso consumed by humans,the supply of these coarsecereals should be provided atsubsidized rates to the BelowPoverty Line (BPL) families toensure them access to food.

v. Support prices for coarsegrains would be desirable tomaintain the interest of thefarmers. At the same timethe organized marketing ofanimal products will berequired.

vi. Import restrictions tosafeguard the interests ofcoarse cereal growers in thecountry are important. Thiscould probably be donethrough customs duty onimports.

vii. Proper execution of market

intervention mechanisms inconsonance withadministered Market SupportPrices (MSP) with respect tocoarse cereals on par withwheat, rice, pulses, oilseeds, cotton and jute is amust to provide a bettermarket and also promoteproduction growth by thefarmers.

viii. For sorghum: Large-scale

popularization of inter-cropping of sorghum withpulses/oilseeds throughincentives underdevelopment programs is amust. Appropriate marketinterventions for theprocurement of sorghum atadministered prices shall be


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ensured on par with wheatand rice; assured productionof quality seeds of publicbred sorghum cultivars and;

effective quality control ofsorghum seeds sold in themarket.

ix. For maize: maize should beaccorded special status anddelinked from the coarsecereals for strategicdevelopment; a minimumsupport price of maize shouldbe made more remunerative;food subsidies on maize shallalso be provided similar tothat of wheat and rice and;promotion of the cultivationof Quality Protein Maize(QPM) and single crossmaize hybrids should beundertaken.

Nepali. As Nepal is ecologically

divided into two regions, theTarai and the mountain (hills)areas, the governmentshould promote winter maize

and soybean in the Tarai anddevelop oilseeds, millets andother crops on the hill farms.

ii. The government should alsomonitor developments intechnology, products andprices so that the localfarmers can benefit fromIndian market trends,feedstuffs and feed cropinflows and prices.

iii. Developing oilseeds, millets

and other crops on the hillfarms will require additionalcollaborative efforts fromgovernment and researchand development centres likethe CGPRT Centre.

Pakistani. A more continuous and

coordinated effort should be

made for the development ofHYV, and disease anddrought resistant varietiesfor feed crops.

ii. There is a need to expandaccess to production loansand to strengthen the linkageof farm-producers and usersof improved seeds with thepatrons of governmentagencies. There is also aneed to launch a program ofbreed improvement andavailability of balanced feedand feeding systems.

iii. There is a need to expandproduction loans to a widerpotential of farm customersand provide credit to farmersfor storing their agriculturalproduce until it can fetchreasonable prices.

iv. There is a need to expandproduction of improvedseeds through progressiveseed growers, who wouldthen supply their seeds totheir fellow farmers.

v. The establishment of proper

storage facilities by theprivate sector to ensure themaximum procurement ofgrains to be subsequentlysupplied to the consumers isrequired.

vi. The ruminant sector is stilloperating a conventionalsystem and needs to becommercialized. To increaselivestock productivity, thereis a need to establish

financially strong feed millsto provide balanced feed andtechnical know how to thefarming communities.

Sri Lankai. To protect local raw material

producers and feed millers, itis recommended that thepresent tax structure for

maize imports be continueduntil the expected levels oflocal production are achievedwithin 3 to 5 years time.

ii. The production anddistribution of potentialhybrid varieties should begiven to the private sectorfor cost and time efficiencyconsiderations.

iii. Organizing farmers inproduction blocks to increaseproductivity, arrangemarketing through forwardcontracts, maintain quality ofproducts, have a wellplanned farmer educationprogram, and exploitingeconomies of scale should bepromoted with the help ofextension services and otherrelevant agencies.

iv. Small scale as well asmedium scale processingequipment must bepopularized among growersand private sectormanufacturers must beencouraged to produce such

machines for sale.v. Due to the high level of

dependency on imported rawmaterials, mainly maize, thepossibility must be exploitedto use other available localraw materials in theagricultural sector, eitherunutilized or under-utilizedfeedstuffs such as rubber,seed meal, fruit seeds, tearefuse, fish waste, jackfruit

seeds and abattoir waste.References available upon

request.


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Potato Marketing inNorth Sumatra and anAssessment ofIndonesias PotatoTrade*Witono Adiyoga, Keith O. Fuglie and

Rachman Suherman**

IntroductionPotato production in

Indonesia has rapidly grown overthe past several decades and

Indonesia has become the largestpotato producer in SoutheastAsia. Between 1969-1995,potato production in Indonesiagrew by an average of over 13per cent per year, more rapidlythan any other country in theworld. By the mid 1990s, totalannual production exceeded 1million tons. Most of the growthin production has come from anincrease in potato planted area

and secondarily fromimprovements in yield (Adiyoga,1999).

Potatoes produced inIndonesia supply not onlydomestic consumption but alsoexport markets. Exports ofpotatoes to other SoutheastAsian countries, mainly to

Malaysia and Singapore, grewrapidly throughout the 1980sand early 1990s, peaking in1995 but have subsequently

declined. Imports of potatoesespecially potato products, alsogrew over this period but fellsharply after 1997. This paperexamines the reasons for thesechanging patterns of trade inpotatoes and potato products inIndonesia. Since most of thepotatoes produced for export aregrown in North Sumatra(Pasaribu, 1989; Ferrari, 1994),the potato marketing system inthis province is given particularattention.

*This article is a summary of a longer

report by the same title, which waspublished in 2001 as UPWARD WorkingPaper Series No. 7. For the full report,please contact the CIP office in Bogor,Indonesia, or the UPWARD office in LosBanos, Philippines.

**Dr. Witono Adiyoga and Mr. RachmanSuherman are agricultural economistswith the Indonesia Vegetable ResearchInstitute, Lembang, and Dr. Keith Fuglieis the Regional Representative of theInternational Potato Center (CIP) inBogor, Indonesia.

Understanding the patternsof trade and constraints toexport will help identify ways toimprove access to profitableexport markets for Indonesianfarmers. Specifically, in thisstudy we: 1) describe the natureof current domestic and exportpotato marketing systems inNorth Sumatra, 2) diagnoseconstraints to the potato export

marketing system in NorthSumatra, 3) identify factorsinfluencing recent potato tradepatterns in Indonesia, and 4)identify needs and opportunitiesfor further improving Indonesiastrade in potatoes and potatoproducts.

A rapid appraisalmethodology (Holtzman et al.,1995) was used in the study.Two field visits to North Sumatra

were made in April 2000 andJanuary 2001 to conduct semi-structured interviews with keyinformants including farmers,small and large traders,wholesalers, and exporters.Interview topics included (i)marketing channels, (ii)marketing margins, costs,

services, and profits,and (iii)potato quality and other possibleconstraints to exportation.

Interviews with potato

importers in Singapore, a majorimport destination, were alsoconducted in November 2000 toidentify constraints toimportation and perceptions onthe quality of Indonesianpotatoes. Food safety inspectorsin Singapore were alsointerviewed to determinewhether phytosanitaryregulations were constraints topotato importation fromIndonesia. Secondary data wascollected to assess trends inpotato prices at the farm,wholesale and retail levels inNorth Sumatra and other majorpotato market centres.

Several hypotheses wereforwarded to explain the changesobserved in Indonesias potatotrade. A conceptual model wasproposed to examine the factorsthat may explain the decline inpotato exports in Indonesia since

1995. Using this model, adecline in exports could becaused by: (1) growth indomestic demand due topopulation growth, change inconsumer preference or anincrease in consumerexpenditures; (2) a decline indomestic supply due to anincrease in unit production costsor more profitable alternativecrops; (3) a decrease in the

export price as a result of a fallin export demand, increase inglobal competition, or decline inmarketing efficiency. This studyevaluates each of these possibleexplanations for recent changesin Indonesias potato trade.


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Potato marketing in NorthSumatra

North Sumatra has become

the second most importantpotato producing area inIndonesia after West Java, andaccounts for about 25-30 percent of the total national potatoproduction. Karo and Simalungundistricts are the largestproduction centres and accountfor over 90 per cent of all NorthSumatra potato production. In1991-1999, the average growthof potato production in North

Sumatra was 7 per cent peryear, mostly due to theexpansion in the area planted tothe crop. By the late 1990s,approximately 250,900 tonswere produced annually on about15,900 hectares in the province.The growth of potato-harvestedarea and yield contributed 8.7per cent and 6.2 per cent toproduction growth respectively.The rate of growth in potatoproduction declined in the latterpart of the decade.

Potato marketing: a general

view

Due to its geographiclocation, potatoes from NorthSumatra can be easily marketedin the local and regional marketsand also in Singapore andMalaysia. Basically, potatomarketing in North Sumatra is aninstitutionalized service to bridge

the movement of potatoes fromproducers to consumers.Government intervention inpotato marketing is mainlylimited to providing physicalinfrastructure, such as roads andmarket centres. Potato trade isprimarily in the hands of privateenterprises, although traders and

exporters are required to registerwith government authorities for alicense to market potatoes.These conditions may imply that

the potato-marketing system inNorth Sumatra, like in otherpotato production centers,largely operates under the forcesof supply and demand.

Problems that may occur ina system are usually due to: (a)producer characteristics largescale vs. small scale, in relationto the potato volume sold; (b)crop characteristics perishability; (c) demand patterns seasonality; (d) marketingsystem complexity inefficientflow of information, insufficientphysical facilities, and lowfinancial capacity of the marketparticipants. For the producers,price instability may discouragecrop intensification and hinderadoption of new technologies,while for the consumers; it mayinfluence the consumptionpatterns and push consumers toswitch to other foods.

Potato market structure and

prices

Marketing outlets forpotatoes basically include local,regional and export markets.Data from the North SumatraRegional Trade Office shows that48 traders are registered asregional potato traders. Thesetraders are responsible forbringing products to local

consumers in potato-deficitdistricts and cities in NorthSumatra. In practice, however,these traders do not only marketpotatoes, but also cabbages,tomatoes, carrots and leafyvegetables. Like the regionaltraders, the exporters do notspecialize in the export of

potatoes but also includeimportant vegetables in theirportfolio.

Based on the existing

number of potato traders andexporters in North Sumatra, lowbarriers to entry, and thehomogeneous nature of thelocally grown potatoes; themarket structure for potatoes inNorth Sumatra can becategorized as competitive.Changes in government licensingpolicy reduced barriers to entryand increased competitionamong traders and exporters.Marketing costs and profits donot appear to be excessive, andproduct losses during marketingappear to be low.

Price fluctuation is a sourceof uncertainty that confrontspotato growers. As negotiationsand trade take place betweenbuyers and sellers, potato pricesmay change from week to week,from day to day, and even withinthe trading day. Domestic pricesare also influenced by

international prices and exchangerates.

The possibility of year-roundproduction means that theaverage duration of storage fortable potatoes is short (1-2weeks) and seasonal prices arerelatively stable. Prices aresomewhat below the annualaverage during the main harvestseason between January andApril.

Potato marketing channels

Marketing channels facilitatethe flow of potatoes fromproducers to consumers. Avariety of well establishedalthough informal marketingchannels exist in North Sumatrafor the distribution and sale of


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potatoes in both the domesticand export markets. Figure 1shows the main marketingchannels for potato in North

Sumatra. Aside from the growersthemselves, the participants inpotato marketing activities arethe assembly traders,commission agents, regionaltraders, exporters, wholesalersand retailers. In this case,government agencies play asupportive role, such ascollecting and publicizing marketinformation, issuing licenses totraders and generally regulatingfair trading practices.

Brastagi and Medan are thetwo most important marketcentres for potato in NorthSumatra. Brastagi serves as animportant assembly point in thepotato marketing system. Medanis an important consumer marketfor potato and a transshipmentpoint for potato export.

Exporters handle the highestpercentage (35.8 per cent) ofpotato supply, specifically to the

final places of destination ofSingapore and Malaysia. In thedomestic market, there are twotypes of wholesalers: those whoreside in the production centre ofBrastagi (rural wholesalers) andthose who operate in the urbanmarket centre of Medan (urbanwholesalers). Moreover, theproportion of potato supplyhandled by wholesalers inBrastagi (28.2 per cent) is much

higher than that handled bywholesalers in Medan (8.4 percent). This may imply thatwholesalers in Brastagi aremainly involved in assemblingpotatoes, while wholesalers inMedan are primarily engaged indistributing them.

Potato marketing margins

Potato marketing marginmeasures the share of the finalpotato selling price that is

captured by a particular agent inthe marketing channel, andincludes costs and sometimesadditional net income.

Potato price variability inNorth Sumatra is higher at thefarm gate level than at thewholesale and retail levels.Meanwhile, the variation in grossmarketing margin is higher thanthat of potato prices at the farm,wholesale, and retail levels.Thus, traders face as much ormore uncertainty in profitmargins as farmers. Thisindicates that traders behave asprice-takers and do not havemuch power to establish pricesin their favor.

In the local market in NorthSumatra; marketing costs arehighest at the retail level, butretailers also earn the highestprofit margin. Interviewsrevealed that a relatively high

farmers share of the marketingmargin does not guarantee thatpotato growers will earn profits.This may imply that when theprice is low, the risk ofexperiencing a loss is seeminglymuch higher for potato growersthan potato traders.The main destination countriesfor potatoes exported from NorthSumatra are Singapore andMalaysia. Some shipments have

been made to Hongkong, Japan,Brunei, Taiwan, and Myanmar,but these shipments are smalland irregular.

The main port ofembarkation for potatoesexported to Singapore andMalaysia is Belawan in NorthSumatra. Exporters follow

standard procedures to ensureproper documentation of theirshipment. Some exporters,however, claim that there is an

informal channel for exportingundocumented shipments ofpotatoes to Singapore andMalaysia.

In the export market, totalmarketing margin for potatoes isquite high at approximately 45per cent of the selling price toimporters. Out of this, 24 percent is profit margin and 21 percent represents marketing costs.The biggest expenses inmarketing costs are charges forfreight and shipping containers.Since charges for freight andcontainers are in US$, themarketing margin is sensitive tochanges in exchange rates.Potato trade in Indonesia

In recent years, NorthSumatra accounted for more than90 per cent of Indonesias totalpotato exports, almost entirely inthe form of table potatoes for the

fresh market.A small quantity of potato seedand processed products wererecorded as exports but thesewere most likely re-exports ofpotatoes that were previouslyimported. Nearly all of Indonesiaspotato exports are destined foreither Malaysia (about 70 per centof total exports) or Singapore (30per cent of total exports).

By contrast, most potatoimports were in the form of

processed products.About 71 percent of the totalpotato imports in1994-2000 were frozen Frenchfries, mostly originating from NorthAmerica. Other processed potatoproducts, such as starch andflakes used in food processing,


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Figure 1 Marketing channels for potatoes in North Sumatra

Tanjung BalaiPOTATOGROWER I

NT

E

R

R

E

G

I

O

N

A

L

T

R

A

DE

R

ASSEMBLY

TRADER

RiauPekanbaruDumai

WHOLESALERIN BRASTAGI

WHOLESALERIN MEDAN

BelawanBinjaiLubuk Pakam

RETAILER

DOMESTIC MARKETEXPORT MARKETPOTATO

GROWER

EXPORTER-OWNED

POTATO FIELDCOMMISSION

AGENT EXPORTER

IN BRASTAGIEXPORTERIN MEDAN

IMPORTERaccounted for another 15 percent of the potato imports duringthis period. Most of theseimports came from Europeancountries.

Seed potatoes, whichmostly come from theNetherlands, are the third mostimportant category of importsduring 1994-2000. Table

potatoes accounted for only asmall part of total imports.

This shows that there aretwo distinct markets for potatoin Indonesia, i.e. fresh table


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potatoes supplied from localproduction and processed potatoproducts supplied mainly throughimports. Frozen French fries are

the most important importedpotato product. With theIndonesian economic crisis, thedemand for imported French friesdeclined sharply.

According to importers,price remains the most importantfactor in determining where theysource their potatoes. In recentyears, Chinese and Dutchexporters have been able to offerpotatoes at lower prices thanIndonesian exporters. This hasbeen the principal reason for theloss of market share byIndonesia, according to theSingapore traders who wereinterviewed. Indonesia is arelatively high cost producer ofpotatoes but enjoys someadvantages over temperate orother Southeast Asian countries.Its competitive advantage overtemperate countries is its ability

to provide a year-round supply.Its proximity to Singapore andMalaysia is also a majoradvantage because of lower

transportation costs, timelydelivery, and freshness of theproduct.

Singapore enforces strictpesticide residue limits on freshfruits and vegetables, andshipments that do not meetstandards are rejected. Althoughpesticide use on potatoes isrelatively high in Indonesia, theissue of excessive pesticideresidue has so far not been aconstraint to exporting potatoes.No shipments from Indonesia toSingapore have been rejected forthis reason.

Indonesias potato marketsare increasingly integrated withregional and global potatomarkets. Indonesian potatoexporters face competition fromEurope, China, andAustralia/New Zealand inregional trade of fresh table

potatoes. Potato prices faced byIndonesian farmers areinfluenced by global supply anddemand conditions and currency

exchange rates.The principal reasons for thedecline in potato exports fromIndonesia in 1995-1998 werethe rapid growth in domesticdemand and increasedcompetition from otherexporters, especially China andthe Netherlands. The fall inconsumer purchasing power andthe devaluation of the rupiah asa result of the current economiccrisis in Indonesia reduceddomestic demand for potatoesand improved Indonesias exportcompetitiveness. These findingshave implications for futuredirections of Indonesian potatotrade.

References available upon

request.

CGPRT Centre News and ActivitiesMAPSuD

The MAPSuD projectsupported by the CIRAD

Amis Ecopol programme aims atstrengthening the capacity ofresearch and developmentorganizations working in Asiaand the Pacific on socio-economic and policy analysis forthe development of CGPRTcrops. It includes an inventory ofthe needs and proposals fortraining activities, networkdevelopment and specific fieldstudies.

In the framework of theproject, two publications in theMonograph series of the Centreare in preparation. The first one,entitled Reconciling ActorsPreferences in AgriculturalPolicy-Towards a NewManagement of Public

Decisions present concepts andmethods developed and used towork on the issue ofcoordinating the multiplestakeholders involved indecision-making. This frameworkcan be applied in many situationswhere the future of a complexsystem depends on the capacity

to take into consideration thevarious stakes and peopleinvolved.

The second one, DomesticSupply and ConsumptionPatterns of Coarse Grins, Pulses,Root and Tuber Crops in Asiaand the Pacific synthesizes

twenty years of statistical datafor a set of twenty-six Asian andPacific countries, focusing oneight major commodities amongthe CGPRT crops. It depicts thecurrent importance of thesecrops in the region, their use andthe perspective for the future.


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The UN ESCAP CGPRT Centre is calling potential contributors to submit short articles

for its quarterly NewsletterPalawija News.

Articles should cover recent social, economic orpolicy aspects related to research or development ofCGPRT crops in Asia and the Pacific. Priority is givento the following types of articles: benefits of newtechnologies (varieties, cultivation techniques, etc)for poor farmers based on economic assessment,assessment of trade and market potential for CGPRTcrop diversification, farmers preference for CGPRTcrops versus other crops, environmentally friendlyCGPRT crop based production systems. Comparativedata among regions and/or countries is highlyappreciated.

Submitted articles should be sent by E-mail [email protected] or by regular mail. Contributionsmust be in English. They will be reviewed by theeditorial committee of the CGPRT Centre, including atleast one external reviewer, before approval forpublication. Priority is given to original andunpublished material, but published articles may bealso included provided the CGPRT Centre audiencesignificantly differs from the previous targetedaudience of the published article.

Topics

Requirements


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Submitted articles should not exceed eight pageswritten in Arial 10 pt font, single space, including

graphs, tables, references and author information.

F

ormat


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Potato marketing in North Sumatra and an assessment of Indonesia’s potato trade – A summary

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