Caleb Dengu Presentation Gabon

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Caleb Dengu Presentation Gabon ...


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    CFC/FAO China Workshop Opportunities and Challenges in the World Markets for Fruits and Tropical


    Vision for Development of the Horticulture Sector in Developing


    Statement by Caleb Dengu First Project Manager

    Common Fund for Commodities th29 November 2007, Guangzhou, China

Trade Promotion Centre, Ministry of Agriculture

    FAO Representatives


    Invited Guests

    Ladies and Gentlemen:

     I delighted that finally this workshop is taking place today. It allows us to share our

    experiences and opportunities in the Commodity Sector. Let me take this opportunity to thank the

    people who have organized this event and the Government of China for providing us this tranquil

    environment to conduct our business. Before I get into the day’s business allow me to give you a

    brief background about the Common Fund for Commodities. As you may already be aware, the

    Fund started operations in 1991 after all countries ratified the CFC Agreement.

     The Common Fund for Commodities is an Intergovernmental Financial Institution

    established within the framework of the United Nations with a specific mandate to support

    developing commodity dependent countries in their efforts to improve and diversify their

commodity production and trade, thereby increasing their export earnings as well as sustain their

    real incomes. It is the only International Financial Institution in the world dealing exclusively with

    commodities. Currently 106 countries are Members of the Common Fund six Institutional

    Members like the European Community and the African Union.

    The mission of the Common Fund for Commodities is to address the underlying causes of under-development of the commodity dependent countries including supply capacity problems,

    difficulties with effective participation in value chains, lack of diversification of their production

    and export base. It seeks to bring about structural transformation and to enable these countries and

    their populations to derive maximum benefits from the opportunities afforded to them by the

    emerging positive international economic environment.

    The Common Fund has recently developed the Third Five-Year Action Plan which would make every effort to contribute towards the achievement of the poverty reduction targets and

    objectives of the Millennium Development Goals (MDGs). More specifically, the Fund will aim

    at achieving the following objectives in the Third Five Year Action Plan:

    - to improve access to markets and reliability of supply for primary products and the

    processed products thereof;

    - to introduce price and supply risk management schemes;

    - to expand processing of primary products in developing countries with a view to

    promoting their industrialization and increasing their earnings through moving up

    the value addition chain including processing, packaging for the consumer markets;

    - to improve the competitiveness of commodities and enhance the cost effectiveness

    of commodity production;

    - to improve marketing chain including financing services, storage, distribution and

    transport systems;

    - to improve market structures in the field of commodities of export interest to

    developing countries and to address market failures;

    - to scale-up the impacts of improved production, processing and marketing

    techniques by disseminating them to the widest possible beneficiaries;

    - to broaden the range of exportable commodities and their respective chains;

    - to encourage the corporate social responsibility of multinational and national

    companies engaged in the commodity sectors; and

    - to highlight the importance of commodities in economic development and the

    concerns of commodity producers.

    The Common Fund supports projects that contribute to reducing the economic imbalance between developed and developing countries. These projects should assist in making commodity

    chains efficient and assist with diversifying commodity production and trade. We also seek to

    improve quality and productivity in a sustainable way. It is our aim to develop predictable

    conditions in the commodity trade.The Common Fund finances projects through grant finance,

    loan finance or a combination of both grant and loan finance. For further information on role and

    operations of the Common Fund you can visit our website


I have outlined the mandate of the Fund but I would like to discuss the Vision of the Fund with

    regard to the horticulture sector and how this vision can be realised. Our vision is “To see small

    farmers (i.e. less than 5 hectares) becoming the dominant suppliers of fruits and vegetables

    to world supermarkets and owning part of the supply chain”

    How can that be achieved? Let me first examine the features of the market structure for fruits and vegetables.


Literally everyone on the planet earth consumes fruits and vegetables but some communities

    consume more because of their income levels. Thus the effective demand we are targeting is based

    in major urban centres and more wealthy countries. The markets for fruit and vegetables are driven

    by the following factors.

    (a) Lifestyles There is a green movement in the world which is promoting the green

    revolution. A number of people now eat fruits and vegetables or are vegetarian by


    (b) Health Consideration Every health consultant tell us to exercise and to eat fruits

    and vegetables in order to keep our weight in check. One in every two women in

    the OECD countries watch their weight because they want to prevent or minimise

    the occurrence of diseases like diabetes and obesity.

    (c) The good taste of fruits and vegetables People enjoy fruits and vegetables and are

    willing to enjoy and pay for the experience.

Market Structure

The consumers get their fruits and vegetables through supermarkets, open air markets, corner

    shops and wholesalers.


In the developed countries and in major urban centres supermarkets are the major distribution

    channel for fruits and vegetables. The tight working schedules do not allow the people time to go

    to traditional markets for fruits and vegetables. It should also be noted that fruits and vegetables

    contribute an average of 35% of profits yet they are only 10-12% of total turnover of major

    supermarkets. Thus in the fruits and vegetable section the supermarkets still have the scope and

    capacity to mark-up 100-200%. Major supermarkets already arrange their supermarkets such that

    customers will start with the fruits and vegetable section when the customer still has the full

    shopping budget at his disposal.


The wholesalers buy fruits and vegetables from farmers and export companies for supply to

    supermarkets. Thus supermarkets do not contract directly with the farmers but go through a

    number of wholesales who undertake to supply certain quantities and qualities in a given week.

    When the wholesalers receive the orders from supermarkets they then approach growers to supply

    them fruits and vegetables on specific dates. Programming is important because once a


wholesalers has promised to supply on specific date they cannot not delay for a week because

    someone else has already been given next week supply. Timing is of the essence.

The wholesalers also deliver to the vendors who sell in the traditional fruits and vegetable markets.

    There are markets in all major towns and there are also corner shops in all residential areas. These

    are still important channel of distribution.

What are the challenges and opportunities for the small farmers located in developing


In order to supply these markets the following are essential factors.

    (a) Logistics How to move produce from the farm gate to the supermarket.

    (b) Cold Chain How to maintain the temperature at required level from farm gate to

    supermarket. You should note that quality does not improve after harvest, it can

    only deteriorate hence we need to maintain quality until the dinning table.

    (c) Organisation of Producers The producers should be organised so that they are

    able to produce break-even volumes of known quality during the same period. The

    supply capacity will depend on the organisation and management. The producers

    need access to inputs, labour, land and credit.

    (d) Quality Assurance, Certification and Traceability Supermarkets take heavy

    insurance in case a consumer buys poisoned or toxic products. The supermarkets

    will be held responsible by various food safety regulations therefore they want to

    know the suppliers, varieties, chemicals used and the general hygiene at the farm.

What is the competitive advantage of the small producers located in the Developing


    (a) Climate Tropical fruits and vegetables can only be grown naturally in the tropics.

    If produced in North America or Europe they have to be in green houses using

    power for heating thereby increasing the cost of production.

    (b) Cost Structure The cost of land is lower than in OECD countries, cost of labour,

    cost of power and cost of water make it expensive to grow outside the tropics.

With these critical competitive forces what remains the main challenge is the organisation and

    management of farmers. Technology need to be introduced in the organisation and management of

    farmers. Technology has brought unprecedented wealth in the last decade but farmers have not

    been able to access the fruits of human progress. Let the journey start today.


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