Major Issues of Reducing Post-Harvest Losses from Farm Gate to

Report
Major Issues of Reducing PostHarvest Losses from Farm Gate
to Storage
Tony Shih-Hsun Hsu
National Taiwan University
Aug. 5, 2013
1
OUTLINE
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Major Trends in Agriculture
Issues on Returns to Scale
Supply Chain Management
Issues on Agribusiness: The Quiet Revolution
in Staple Food Value Chains
• Issues on Sustainability: Cost/Benefit Analysis
• Agricultural Policies on Reducing Losses: A
Food Value Chain View
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MAJOR TRENDS IN AGRICULTURE
3
During the first ten years of the 21st Century, we
have witnessed a rapid transformation in the
face and practice of agriculture, one of the
oldest enterprises in human civilization. Among
the major new developments or trends are:
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Commercialization
• Agricultural production is merging with
agribusiness, food supply chain management,
and operating at ever-increasing scales with
greater efficiency and profit.
• Agriculture is moving from labor intensive
toward more capital intensive enterprise.
5
Globalization
• Trade and exchange of products are becoming
even more active.
• Treaties such as WTO, FTA, TPP and RCEP are
having far-reaching effects on the agriculture.
• Multi-national companies with international
production and marketing are becoming the
key players.
6
Science and Technology
• Science- and technology-driven agriculture is
critical for survival and success.
• Biotechnology, in particular, will be part of the
solution to deal with issues such as food safety,
food shortages, etc.
7
Environmental Protection
• Excessive use of chemical fertilizers and agrochemicals are increasingly problematic to the
environment.
• The larger scale of crop and animal production
today has a negative impact on land, air, and
water quality.
• Solutions to these problems— new regulations
and environmentally-friendly technologies—are
not only increasing in demand, but also becoming
a necessity for sustainable agricultural
development.
8
Energy production
• With oil price increase and increasing concern
about global climate change, governments,
industries, and research institutes around the
world have stepped up research to decrease the
use of fossil fuels and to invest in clean, renewable
energy sources, including bio-ethanol, bio-diesel,
biogas, and biomass.
• For the production of these bio-fuels, the
agricultural system—with its scale, infrastructure,
and logistics—is uniquely qualified to offer costeffective solutions.
• This will be a new and vital aspect of agriculture in
the 21st Century.
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Major Issues of Reducing food loss/waste are
embedded in the trends in agriculture
• Food loss refers to the decrease in edible food
mass at the production, post-harvest and
processing stages of the food supply chain, mostly
in developing countries.
• Food waste, a symptom of developed countries'
consumer lifestyles, refers to the discard of foods
at the retail and consumer levels.
• This food wastage represents a missed
opportunity to food security and comes at a steep
environmental price.
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ISSUE ON RETURNS TO SCALE
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According to Thomas Reardon’s Research past
10 years on China, Bangladesh, India,
Indonesia, Philippines, Vietnam
On eve of Green Revolution, debate in these
countries on development path to choose:
a) large-farm development path
– with supporters saying large estate farms = fast
development
– supporters saying (1) there are no good
technologies for small farms; (2) and small farms
won’t adopt new technologies
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b) “small farm development path”
With supporters saying
• Green Revolution provides technology that
makes small farmers as or more productive
than large estate farms
• small farm path fits “land scarce, labor
abundant” situation
• failure of big collective farm (early) path of
China
• small farm path promotes “broad-based rural
income growth”
Via local production linkages
Via local consumption linkages
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c) All six countries adopted “small farm
development path” starting with the Green
Revolution in the 1970s to now:
• massive investments in rural infrastructure
• massive investments in wholesale markets
• massive investments in agriculture R&D and
extension
• gradually gave land control rights to small
farmers as incentive to invest long-term
• liberalized food markets to create incentive
for small farmers to invest and modernize
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SUPPLY CHAIN MANAGEMENT
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Segmentation of Production
• Production is “sliced and diced” into separate
fragments.
• “Global value chain” - The possibility of slicing
up and optimizing value chain activities
among multiple companies and various
geographical locations
• In these chains, core activities are organized as
separate but coordinated phases.
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Segmentation of Production
• Food supply chain: farmers, farm input
suppliers, traders, mills, cold storages, and
retailers
• With specialization in specific tasks and their
close integration into a highly coordinated
business model, these chains of related
activities result in the creation of more “added
value” than the sum of the value of the
constituent parts and processes.
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Segmentation of Production
• Today’s most integrated value chains combine
two interlinked business models: a demand
chain and a supply chain
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Schematic presentation of a value chain
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Definition of Supply Chain
“All activities involved in sourcing and
procurement, conversion, and all logistics
management activities. Importantly, it also
includes coordination and collaboration with
channel partners, which can be supplies,
intermediates, third-party service providers, and
customers.”
- Council of Supply Chain Management
Professionals (CSCMP)
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Definition of Supply Chain
• Coordinating the timely operation of industrial
networks is a complex exercise, involving the
provision of logistic services and supported by
advanced information and decision system
(e.g., infrastructure services).
• Outsourcing v.s. Insourcing
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• With specialization in specific tasks and their
close integration into a highly coordinated
business model, these chains of related
activities result in the creation of more “added
value” than the sum of the value of the
constituent parts and processes.
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Vertical Integration
• Vertical integration is about corporate strategy
and relates to the “make” or “buy” decision
companies invariably face.
• While outsourcing is an example of the “buy”
approach (act of purchasing from an external
supplier), vertical integration involves an
“insourcing” or “make” option (choice of
producing an item or keeping a specific
activity internally).
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Vertical Integration
• Reduced operational costs and better
coordination of the supply chain are the key
benefits sought by vertically integrated
enterprises.
• Vertical integration can be achieved not only
through direct ownership, but also by means
of contracted relationships (at “arm’s length”)
with suppliers.
• Outsourcing and “Market failure”
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An example of vertical integration
27
Innovation and Best Practices
in Agricultural ProductionThe Case of DouNan Farmers’ Association in
Chinese Taipei
28
Business Weekly Cover’s Story
• 15 young farmers constitutes
the farming team
• Each can earn 3 million NTD
(100,000 USD) per year
Business Weekly
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Case Study DouNan Farmers’ Association (FA)
• Total Population: 47,000
• FA members:
9,107
• safety labeling system demo in 2003.
Yunlin
County,
DouNan
Town
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Custom Farming Team in DouNan
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Innovations and Policies
1. Innovations in farming system
– Satellite System
– Supply Chain Management
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Strategic planning to add product values
Modernization in Post-harvest Processes
Adopting Good Agricultural Practices (GAP)
Zero post-harvest losses with recycling
2. Policies
– “Small Landlord & Big tenant” Program
– Encourage old farmers to retire early
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Satellite System (1/2)
• Concept: In a district with agricultural structure of satellite
system responsible for marketing and planning.
farmer
farmer
Custom
farming team
farmer
Products
Planning
Farmer’s
Association
Process
Storage
Package
Marketing
Market
Information Super market
Export
farmer
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Satellite System (2/2)
Tenant farmer
Field Managers
(6 people)
Lease Land
Sales Group
Custom Farming
Machinery operator
inform (6 people)
Manage
Farmers’ association
harvest (3 people)
Cultivate
Sale
Domestic
Supermarkets
landlord
landlord
Management
Production
Foreign Market
landlord
1. Responsible for
leasing farm land.
2. Monitoring crop
growth, Traceability
Marketing
1. Till, fertilize, sow,
harvest with
mechanical power
2. Efficient soil
conservation practices
1. Use cold storages to
provide off-season
products for better price
2. Direct marketing to
reduce transaction costs
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ISSUE ON AGRIBUSINESS:
THE QUIET REVOLUTION IN STAPLE
FOOD VALUE CHAINS
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Issues of Reardon’s research on the 6
countries:
• What progress have they made in
“small farm modernization”?
• What progress have they made in
developing supply chains from small
farms to domestic market (95% of the
food market in Asia), especially the
rapidly growing cities (urban areas are
75% of food market in Asia) and export
markets?
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Summary of findings based on detailed
survey evidence
• In past 10 years in the 6 countries
• large sample surveys in all segments of
food supply chains (farmers, farm input
suppliers, traders, mills, cold storages,
and retailers)
• nearly 10,000 farmers and supply chain
actors surveyed
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Found surprising findings:
 rapid and widespread modernization AND
diversification of small farms
rapid modernization of food supply chains ..
… upstream from farm: in supply of inputs and
services to farms,
… downstream, services after the farm-gate, in
wholesale, processing, and retail
… with small farms benefited, “sandwiched”
between the modernizing upstream and
downstream
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1) Rapid modernization of small farms
(1-3 hectares)
• Rapid Commercialization of small farms 
shifted from subsistence farms to “small
commercialized farms”
- selling 70-90% of output
small farms rapidly becoming “small
businesses”
• Rapid Intensification of small farms  Shifted
into high use of new varieties, purchased
seed, fertilizer, pesticide, herbicide
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• Rapid mechanization of small farming: rapid
shift to high use of farm machinery to free
labor from grain farming to higher income
activities (horticulture, rural nonfarm jobs)
- very rapid increase in rental of machines
- very rapid development of “farm machine
services small enterprises: rice harvest services;
mango sprayer-traders
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2. Rapid Diversification of Small Farms
• Small farmers: “climbing the value ladder”!
• Shifting from rice/wheat  into vegetables,
fruit, fish, livestock, dairy, grams/pulses (Earn
4-8 times more than in rice farming)
• Shifting from low-quality rice  high quality
rice (50-100% higher returns) (Vietnam, China)
• Shifting from just farm income  to farm +
rural nonfarm income (now 50% of farm
household incomes)
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3) Quiet Revolution in food supply chains:
upstream + downstream from farms
• Mainly “grassroot” revolution: small/medium
enterprises
• Driven by private sector (not government
intervention)
• Emergence of 1000’s of small enterprises in
input and services supply
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• Rapid spread of “cold storages”
• Rapid modernization of wholesale markets
and traders!
• Rapid modernization of rice mills
• Spread of supermarkets in all 6 countries
Supply chain development important because
it forms 50-70% of food costs to consumers
Very few post-harvest losses!
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ISSUE ON SUSTAINABILITY
- COST/BENEFIT ANALYSIS
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Abundance of Agricultural Residues Availability
Cane
Wood, driftwood, shavings
Rice
Forestry
Fruit and vegetable
Palm
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Biomass Refinement Logistics
• Collection and transportation of available biomass
?????
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Agricultural and Industrial Application of
Biomass Briquette
Dehydrated food
Electricity Generation
in furnace
Greenhouse
energy
supply & CO2
Livestock feed
and bedding
Biomass
Transport
Biomass
Briquette
Pulverize
Mushroom
cultivation
Activated
charcoal for
organic
soil additive
Sugar
fermentation
Health Food
Storage
Hydration
High yield
biomass pulp
Organic
Cultivation
and
refinement
Versatile
paper
products
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Biomass Dryer
Oil Palm Waste
Biomass Crusher & Dust Remover
Palm EFB
Press & Broker
Mobile Briquette System
Briquette Machine Feeding System
Shredded size
Forest Waste
Wood Waste
Broker
Biomass Briquette
Biomass Boiler
Sugar Cane
Bagasse From
Sugar Mill
Stover Shredder
Briquette Packing &
Consumer Produce
Rice Straw, Grass
Counter Pressure Turbine & ORC
Biomass Power Generator
Stover Balling
Corn Stover
Industrial Park User
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Baling and Shredding on Site
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Mobile Production of Biomass Briquettes
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Biomass Briquettes for Different Applications
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Biomass
Briquette
Processing
Factory
Boiler
Biomass
Recycling
Field & Rice Mill
Biomass
Collection
Electricity
& Ash
Production
Ash Fertilizer for
Production
Rice Mill
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Role of Government: IMPORTANT
a) According to Reardon’s research, in all 6
countries (except grain in India) government
role in direct intervention is VERY SMALL
- tiny role in input supply
- tiny role in crop marketing
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b) In all 6 countries the role of government as
“enabling farmers and grass-roots private
sector” is VERY LARGE
• agricultural research: seed varieties
• roads
• ports
• electricity grids
• permitting cell phone expansion
• information and extension
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AGRICULTURAL POLICIES ON
REDUCING LOSSES
- A FOOD VALUE CHAIN VIEW
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• Reasons for food losses and waste: financial,
managerial and technical limitations in
harvesting, storage and cooling , packaging
and marketing
• Need to help increase efficiency in reducing
food losses and waste through well supply
chain management
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• Reducing logistic costs
– Reducing supply chain barriers could increase
world GDP over 6 times more than removing all
tariffs (Source: “Enabling Trade: Valuing Growth
Opportunities”, WEF-WB Report 2013)
– Investments in infrastructure, transportation, food
industries and packaging industries are also
required.
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• Agricultural prices and CPI
– Prices and value added
• Over-production due to government
inappropriate policies
• Population aging and low fertility rate
• Adaptions in response to Climate Change
• Integrated approach for Economy, Environment,
and Energy (3E) problems
– one way to address the haze problem
– Incentives for collecting agricultural residues and
loss/waste for biomass use
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• Power of agribusiness entrepreneurship
– Profit maximization and cost minimization
• Policies taking care of interests of all
stakeholders and enhancing the role of publicprivate partnership (PPP) along the entire food
supply chain
• Quantitative assessment and large sample
survey
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Many thanks for Listening

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