2007-case_study_Litchi-PPRR-Eng

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Rural Income Promotion Programme (PPRR)

MADAGASCAR COUNTRY PROGRAMME:CASE STUDY

Director: Benot Thierry, IFAD Country Programme ManagerEditor: Emeline Schneider, Institut Suprieur Technique dOutre Mer, France

August 2007

LYCHEE COMMODITY CHAIN

CONTENTS

1. ACTORS AND PRODUCE FLOWS ......................................................................................................... 2

INTRODUCTION.................................................................................................................................................. 2CONSTRAINTS ON PRODUCTION........................................................................................................................... 2STANDARD .......................................................................................................................................................... 3PRODUCTION SYSTEMS........................................................................................................................................ 3KEY ACTORS ....................................................................................................................................................... 3EXTENSION ......................................................................................................................................................... 4

2. PROFILE OF THE COMMODITY CHAIN ........................................................ .................................... 8

3. PROFILE OF LYCHEE PRODUCERS ................................................................................................... 9

4. OPERATING ACCOUNT ....................................................................................................................... 105. ANALYSIS OF THE COMMODITY CHAIN: DECISION TREE ...................................................... 12

REPOBLIKANI MADAGASIKARA

Tanindrazana Fahafahana Fandrosoana

MINISTRY OF AGRICULTURE, LIVESTOCK AND FISHERIES

GENERAL SECRETARIAT

GENERAL DIRECTORATE OF AGRICULTURE, LIVESTOCK AND FISHERIES


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1.Actors and produce flows

Introduction

The lychee is cultivated for its fruit, which is generally eaten raw and is rich in Vitamin C and

glucides. It was introduced into Madagascar by Cossigny in 1764. The Malagasy lychee is theearliest on the European markets at the end-of-year period and Madagascar is the worlds

largest exporter to Europe.

Six regions produce lychees: Tamatave, Mananjara, Manakara, Marontsetra, Taolagnaro

(Fort Dauphin) and Antseranana (Diego Suarez). Although it is hard to quantify

production, some figures are available: 25,000 to 35,000 tons from an estimated area of

5,750 hectares (AFDI-Dromes, 1994)

Production is dependent upon gathering. Harvesting takes place from mid-November to

January. The main production zone for export lychees is Toamasina, which accounted for

95 per cent of the volume exported in 1992 (X. Fabrgues, 1994) and almost 100 per cent in1998 (bearing in mind that, apart from a few special loads sent by air from Mananjary-

Manakary, all exports were shipped from Toamasina).

Lychee production involves 20,000 to 30,000 farming families spread along

800 kilometres on the east coast.

The main competitors on the lychee market are Brazil, Mauritius, Runion, Australia,

Zimbabwe, China and South Africa.

Constraints on production

The trees are scattered and located far from collection centres, so that much of the fruit is not

picked, especially fruit in the wild.

Lychees are a perishable product that must be processed quickly. Collection circuits are short,

and production zones accessible to independent collectors or those working for exporters are

the ones harvested. Lychees must be transported to exporters within 24 hours. (Note: a

producers organization in the Brickaville zone supported by Landscape Development

International enters into direct contracts with exporters.)

Road infrastructure is deteriorating and it is difficult to place produce with a harvesting periodthat often coincides with the rainy season, when secondary roads are barely passable.

Lychee trees on the east coast are rarely maintained (X. Fabrgues, 1994).

Apart from producing fruit, the trees have a social and territorial function, and are not

viewed purely in terms of production and trade.

Problems encountered: a lack of market transparency, inasmuch as some information is

available only to certain actors (large-scale exporters); a lack of capital;and a lack of

technical skills, affecting quality. The regions climate is the only element that allows lychees

to grow well, but the fruit must be harvested when ripe, otherwise quality suffers and it is hard

to sell.


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The State does not intervene in the lychee market.

Since 1996, quotas have been established between exporters and importers, allowing export

flows to be regularized. Importers act as intermediaries between exporters and large-scale

distribution networks. The latter try to cut out the importers, who are responsible for loading

produce aboard ships, payment of freight charges, customs clearance and unloading theproduce. Importers play a major role in the commodity chain, entering into contracts with

exporters having facilities up to standard, supervising loading and playing a part in pricing.

Some importers have adopted a joint transport system in order to reduce costs.

Standard

Sound fruit with a minimum diameter of 30 mm; sulphur residue of 250 mg/kg of dry matter

in the shell, 10 mg in the pulp.

Production systems

(Source: study by the ATW consultancy firm for the Madagascar Agricultural ExportLiberalization Support Project/USAID)

It is estimated that 80 per cent of the total fruit produced in Madagascar comes from

trees growing in the wild without human intervention, while 15 per cent comes from fruit

trees maintained by farmers. These trees are cultivated around dwellings or villages.

Ministry of Agriculture experts call this type of plantation extensive village cultivation.

The remaining 5 per cent is produced by professional growers whose main activity is

planting and maintaining fruit trees.

Most lychee plantations are either wild or extensive village plantations (Y. Bertin, 1987).

Key actors

Producers are both planters and gatherers. They may hire seasonal labour at harvest time.

There are three types of producer:

- Small-scale producers with a few lychee trees- Medium-scale producers- Large-scale producers with one or more orchards.

Their location is a major factor with regard to collection.

A large amount of produce is sold to collectors on the tree before harvesting. The collectors,who then resell it to exporters, are either organized with their own or rented means of

transport, or the exporters provide them with vehicles.

Exporters are major actors in the commodity chain, having a large amount of capital in

comparison with other actors. The fruit is generally graded, treated with sulphur, sorted,

packed in cartons and stacked on palettes at the exporters premises. The exporter is also

responsible for transport to the port or aircraft.

Forty-two lychee exporting companies were recorded in 2004, with the number growing each

year. The exporters are grouped together in a structure known as the Lychee Exporters Group

(GEL).


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Contact: Groupement des Exportateurs de Lychees (GEL) Madagascar

c/o Ramanandraibe: tel. +261 20 222 0565; fax +261 20 222 0574

e-mail: [email protected]

Exportation S.A.

5, Rue Lieutenant Lubert

B.P. 106501 Toamasina

B.P. 6211

Antananarivo

The transport of lychees is a key factor at harvest time. Whether the fruit leaves fresh or after

processing, it must be moved out very quickly. The choice of transport plays a decisive role in

terms of price. Transport times were calculated by the Tamatave Horticultural Technical

Centre for the 2000 harvest as follows:

- 8 to 16 hours to reach the sulphur station- 2 to 24 hours to reach the port.

Malagasy lychees are mainly exported by ship, shelled and treated with sulphur.

Many people are actively involved in the lychee harvest and this period allows many

Malagasies (local inhabitants or people from other regions) to augment their incomes.

Some farmers use the layering technique to renew their lychee stands.

A traceability system has been in place for several years.

Extension

The Tamatave Horticultural Technical Centre (CTHT) is a major actor in the lychee chain,

supplying lychee seedlings, popularizing cultivation techniques and boosting quality by

training farmers in good agricultural practices (Euro Retailer Produce Working Groups Good

Agricultural Practices: EurepGAP). The centre also has a processing centre that it makes

available to exporters.

Farmer trainers and extension workers teach techniques of maintenance, fertilizing etc.

(pruning, manure application).

The Agricultural Exporters Support Project (19962002) with French development aid

participated in the development of Malagasy agricultural commodity chains. As part of thisproject, the Lychee Commodity Chain Support Project backed lychee exports.

The Cooperative for Assistance and Relief Everywhere (CARE) also provides funding and aid

after cyclones that damage lychee stands.

The PPRR has been active in the region for three years in support of agricultural commodity

chains. With regard to the lychee chain, it is at present engaged in the long-term task of

renewing lychee stands. It supplies farmers with good quality seedlings, participates in

technical training using service providers, and has also undertaken the training of farmers in

EurepGAP so that they do not find their produce rejected through lack of attention.

The commercial success of a lychee export harvest depends on a number of parameters:


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- A good choice of opening date;- Coordination of logistical activities by importers to avoid any over-supply on the

European market;

- Concentration of activities on Tamatave (Madagascars commercial port) so thatharvesting can be better planned;

- Respect for quality criteria (ripeness, colour, diameter) to ensure the quick sale offruit.

Importers impose their prices on exporters so that Malagasy lychees will be competitive on

the European market.

Lychees: graph of prices for Toamasina.

Source: Technical and Economic Information Centre (CITE)

Marked variations in price can be seen among cropping seasons and also within the same

year.


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CHART OF ACTORS IN THE LYCHEE COMMODITY CANALANJIROFO REGION

SUPPORTPROGRAMME

(PPRR)

TECHNICAL CENTRE(CTHT)

PRODUCERS

(PLANTERS/GATHERERS)

+ SEASONAL

LCOL

INTERNATIONALMARKET

LOCA

PROCESSORS WHOLESALEDISTRIBUTORS

DOMESTIC MARKET

COLLECTORS

EXPORTERS


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CHART OF PRODUCE FLOWS IN THE LYCHEE COMMOANALANJIROFO REGION

SUPPORTPROGRAMME

(PPRR)

TECHNICAL CENTRE(CTHT)

PRODUCERS(PLANTERS/

GATHERERS)

+ SEASONAL

COL

INTERNATIONALMARKET

LOCA

WHOLESALEDISTRIBUTORS

DOMESTIC MARKET

COLLECTORS

EXPORTERS

PROCESSORS

90% 10%

8%

8%


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2.Profile of the commodity chain(drawn from the averages for three districts Fnrive Est, Vavatenina and Soanierana Ivongo based on sur

Historical factors Export commodity chain well-known by farmers, base

programmes

Actors Planters/gatherers, collectors, exporters, importers

Phases in the chain Production, processing, marketing

Techniques used Layering, grafting, pruning, drip irrigation (rare)

Average level of facilities Basic, fruit cultivation (collection), maintenance equipment (p

Actors structures and modes of organization Farmers organizations, producers groups, cooperatives

Labour used Seasonal, generally family

Upstream sub-chains Technical training, development of quality seedlings

Downstream sub-chains Collection, transport, processing, export

Number of cropping seasons per year One harvest (NovemberJanuary)

Annual production About 20,000 tonnes in the Tamatave zone

By-products Lychee pulp, jam (domestic market)

Inventory of costs - production cost (purchase of seedlings, equipment, tra- cost of inputs- cost of labour- transport, for some producers

Production cost to producer 25,500 MGA (30 MGA: production cost per kilogram when f

Rate of return (gross added value) 654,500 MGA

Average turnover per producer 680,000 MGA

Average production per producer 850 kg (average number of trees hard to estimate: about 5)

Total production per year Yield: 7.4 t per ha (average area per producer estimated at 20

Markets Mainly the export market, 10% on the domestic market

Critical points Techniques, collectionStrengths Buoyant market, increasing exports

Weaknesses Strong organization of collectors to the disadvantage of farme

Opportunities Farmers organizations and PPRR support, high European de

Threats International competition, compliance with quality and quant

Support bodies Rural Development Support Project, PPRR, Tamitave Horticu


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3.Profile of lychee producers

Category Characteristics Constraints Strategies

Vulnerable

A few trees Lack of

technical andfinancial

resources,

collectors

Development of the fair-trade

label, collection at the MarketAccess Centre or organized

directly with the exporter

Training, renew

raising on fair structured farm

With potential

Small orchards Lack of

financial

resources,

collectors

Development of the fair-trade

label, collection at the Market

Access Centre or organized


Training, rene

raising on fair

Advanced

Developed

orchards

Collectors Development of the fair-trade

label, collection at the Market

Access Centre or organized


Awareness-rai

in capacity to n


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4. Operating account Operating account of an improved commodity chain on 1 hectareLYCHEE modern crop

Year 0 Year 1 Year 2 Year 3

OPERATIONS Unit U. cost No. Cost No. Cost No. Cost No. Cos

Installation Clearing M/D 1,600 20 32,000 0 0

Planting marking out M/D 1,600 20 32,000 0 0 Drilling M/D 1,600 3 4,800 0 0

filling in M/D 1,600 3 4,800 0 0

Sowing M/D 1,600 5 8,000 0 0

Planting M/D 1,600 3 4,800

Seedlings piece 200 45 9,000 0 0

Maintenance Pruning M/D 1,600 0 10 16,000 10 16,000 10

fertilizerapplication M/D 1,600 0 2 3,200 3 4,800 5

Mowing M/D 1,600 0 0 10 16,000 10

Fertilizing organic manure t 12,00 20 240,000 0 0

NPK kg 1,400 150 210,000 0 75 105,000 150 2 Dolomite t 200,000 10 2,000,000 0 0

Urea kg 1,400 0 25 35,000 50 70,000 100 1

Harvesting Harvesting M/D 1,600 0 0 0 1

placing inbaskets M/D 1,600 0 0 0

Baskets M/D 1,600 0 0 0

COSTS Labour MGA 86,400 19,200 36,800

Inputs MGA 2,459,000 35,000 175,000

Total MGA 2,545,400 54,200 211,800

PRODUCE yield per ha t 0 0 0

Total MGA 0 0 0

RESULT-

2,545,400 -54,200 -211,800 3

GROSS PROFIT


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OPERATING ACCOUNT OF AN IMPROVED COMMODITY CHAIN (Serge Maro)

20 eight-year-old trees (about 400 kg per tree)

MAINTENANCE Unit Unit cost MGA

Cleaning M/D 2,000

Mulching M/D 2,000

Pruning M/D 2,000

Irrigation (in case of drought) M/D 2,000

Surveillance M/D 2,000

TOTAL MGA

HARVESTING

Purchases (baskets etc.) piece 600

Harvest labour M/D 20,000

Travel M/D 10,000

Ravinala leaves piece 20,000

Van hire trip 400,000

Red card, licence, ristourne(communal export tax) MGA 300,000

TOTAL MGA

SALES

kg 1,000

PROFIT MGA


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5.Analysis of the commodity chain: decision tree

ProductionoLand

Lychee trees on the east coast are not maintainedApart from producing fruit, the trees have a social and territorial

function, and are not viewed purely in terms of production and trade

oInputsSeedlings

Supply of seedlings is insufficient, with few suppliers

Plant propagation by layering is poorly understoodPlant protection

Farmers make very little use of pharmaceutical products toprotect their crop

These products are very expensive

Farmers have little knowledge of the crops pests and diseases,

and of how to combat themPost-harvest processing

Many operators fail to respect EurepGAP standards

Ripeness of fruit is sometimes poorly assessedProductivity

Trees are poorly maintained, with a loss in yields; they are notpruned after harvesting and grow too high and it is impossible

to harvest from high branches

Some zones are harvested too late (e.g. Anjahambe withproduction at the end of December) for the international market

There are serious competitors in terms of produce quantity andquality (South Africa, Indonesia, Brazil)

Fertilizer applications are needed to increase yields

MarketingoMarketing system

Local

Local markets account for very small volumes and are stillinsignificant

Selling prices vary greatly from one year to another and duringthe same season

International

Importers fix the price

Collectors, who are intermediaries between the producer andexporter, reduce the price to the producer (increasing their own

profit)

There are many other producing countries and their volumesand productivity are very high; the quality of their produce is

also recognized

oThe produce

Requirements with regard to quality are gradually being met(EurepGAP)

FinancingoFarmers have difficulty in accumulating capital

2007-case_study_Litchi-PPRR-Eng

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