EXECUTIVE SUMMARIES OF COUNTRY CASES CONDUCTED UNDER SEANAFES MARKETS FOR AGROFORESTRY TREE PRODUCTS 1.

CASHEW MARKETING IN WONOGIRI DISTRICT, CENTRAL JAVA, INDONESIA M. Parulian Hutagaol (Project Leader), Wayhu Andayani, Wayan R. Susila, and Herien Puspitawati Local authorities in Indonesia have been implementing the governments reforestation program since the early 1980s. Cashew nut tree cultivation has been heavily promoted under the program. For Wonogiri District of Central Java, Rejosari village in Jatisrono Sub-District has been selected as the centre for cashew production. After ten years of involvement, an average farm household in the village has between two and 50 cashew tress planted as fence trees. As a result, the size of cashew nut farming is directly related to the farm area, and the number of trees is more significant. The cashew nut is the most frequently used part of the cashew tree. The harvest season for the nuts normally lasts four months between July and October, which peaks in September. Harvest is done manually, usually by members of the household rather than hired labor, using bamboo poles to reach the mature fruits. Immediately after harvest, farmers process the fruits. Generally, the processing of cashew drupes into cashew kernels takes eight steps: (i) cleaning, (ii) soaking, (iii) roasting, (iv) shelling, (v) drying, (vi) peeling, (vii) grading, and (viii) packaging. All these steps have to be conducted with care to obtain good grade kernels. Shelling of cashew is the most difficult step, because it could affect the quality of cashew nut. In the study area, shelling is a small-scale home industry and mainly done and managed by women. A household could produce about 161 kg of drupes per year. At IDR 7,000/kg, the average household can then expect to earn IDR 1.127 million, or about 13% of annual household income. However, these averages hide large variations in the number of cashew trees each farm has. Harvests actually range from 40 to 700kg, which equates to between IDR 280,000 to 4.9 million per year. Processing adds significant value to the cashew product. For every 1 kg of kernels that are produced, small processors make a profit of about IDR 7,500 over material and labor inputs. During the 120-day harvest season, the average small processor could earn an annual income just under IDR 7 million. Government figures show that the average annual farm income is IDR 8.6 million. Cashew processing therefore offers to boost income by over 75%. Although these figures are averages, it is clear that for production and processing households, changes in the profitability of cashew can have significant impact on family liquidity. A range of actors are involved in the cashew marketing in Wonogiri, including farmers, processors, village middlemen, sub-district middlemen, wholesalers, local retailers and consumers. Small-scale farmers are the main producers of the cashew drupes. Two types can be identified, based on their role in the marketing chain; those who run a processing business (farmers-cum-processors) and those who do not. Farmers who do not process the drupes into kernels are simply producers. For this type of farmers, there are three outlets for their drupes: i) the farmers-cumprocessors, ii) village middlemen with no processing business, and iii) village middlemen-cum-processors. Middlemen-cum-processors are villagers who buy cashew drupes from the producers. They may process them into cashew kernels themselves, or sell them to

the sub-district middlemen who then sell them to wholesalers-cum-processors for processing. Meanwhile, the village middlemen with no processing business who buy cashew drupes from the producers may then sell them to the sub-district middlemen. These actors either sell the drupes on to the wholesalers-cum-processors or to farmers-cum-processors. The market chain for the processed kernels is even longer and more complex than for the drupes. Almost all the cashew kernels from the district of Wonogiri are sold to other cities of Javas island, such as Jakarta, Yogyakarta, Semarang and Surabaya. Due to complexity of the chains and lack of data, the study presented only the calculation of profit margin enjoyed by a small sample of different marketing actors. Result of analysis shows that the highest margin goes to the village middlemen-cumprocessors, who earn about IDR 3,000/kg of kernels. The village middlemen got profit margin about IDR 2,000/kg. Meanwhile the farmers, sub-district middlemen and local retailer received the same amount of profit margin, i.e. IDR 1500/kg cashew kernels. In Wonogiri district, kernels are classified into three quality categories which focus on the physical integrity of the product (i.e., the percentage of broken kernels). The price difference between the higher and lower grades can be as much as IDR 1,000/kg (US $0.10/kg), which is equal to about 14-25% of the total value at current prices. However, the grading system ignores other qualities of the product in which buyers and consumers might be interested, e.g., moisture content, age, size, color or flavor, which could also affect pricing. The study revealed that the present packaging methods are far from sufficient to protect products from degradation of quality and quantity. The packaging of cashew kernels for transportation is minimal. The nuts are simply put into large plastic bags. Neither the size nor quality of these plastic bags are standardized or subject to regulation. The survey recorded that buyers often complained to the sellers about the quality of kernels on arrival, that what they received is not as good as they expected in the agreed contract. To date, there has been no effort in the study area to establish a reputed brand for cashews, and there has been no investment in promotion. Individual household producers and even middlemen traders are too financially limited and lacking in experience to tackle these issues. Although not balanced and perfect yet, a good partnership between men and women in carrying out most of the activities of the cashew nut business in Rejosari village was apparent during the study. It was observed, however, that there is unequalgender role on the accessibility and control as a collector trader and wholesale trader. On the other hand, there is equal gender role in the accessibility of control as a farmer and processor and even the accessibility of control for women in processing is more dominant than that of men. To enhance the contribution of the cashew nut business on the livelihood of the farm families in the village, the study recommended to (a) introduce improvements on the product quality standardization, packaging, branding and product promotion; (b) provision of more credit access for expanding scales of operation, (c) better pricing policies, (d) improvement in the productivity of existing cashew trees, and (e) improvement in the marketing bargaining strategies.

2. BAMBOO MARKETING IN LAOS Latsamy Boupha (Project Leader), Joost Foppes, Phongxiong Wanneng, Bouakhet Sayasouk, and Bouavieng Souphanthong, Like in any countries in Southeast Asia, bamboo is considered as an important non-timber forest product.in Laos. About 18,821.50 hectares of land in Laos are planted to bamboos. However, bamboo processing as a business activity in Laos is largely undeveloped. Its potentials to provide adequate income to both small farmers and medium-scale commercial processors and traders are not fully tapped due to some marketing constraints. This was the focus of the study conducted by a research team, primarily from the National University of Laos, commissioned by SEANAFE from (date) to (date). The study was conducted specifically in Santhong district in the municipality of Vientiane and in Phoukod and Kham districts in Xiengkhouang province. It had the following two general objectives, namely: 1) to analyze the market chain for a range of bamboo products in three bambooproducing/processing districts in Laos, and 2) to identify constraints in marketing bamboo products and recommend solutions to improve incomes of farmers and traders. The study revealed the following key constraints in the bamboo market chain in Laos: Poverty of the villagers. This forces the villagers to accept the lowest prices from buyers and also exposes them to engage in illegal and unsustainable activities for need of decent income. Effects of the quota system. This was particularly true in Sangthong District. The quota system has both positive and negative effects on farmers. The provincial government of Vientiene is trying to reduce bamboo trade in the areas as part of its forest protection policy. This aims to reduce the quota because of its longterm policy to phase out commercial harvesting of forest products in the Vientiane Capital area by 2010. The fact is, bamboo product remains the only alternative source of income for the poorest household in the area. The reduction of the quota for trade result in reduced village income from sales and reduced state income from taxes and may stimulate illegal trade. Limited market information and marketing skills. Farmers have limited knowledge of the prices and market channels for their bamboo products outside their districts. Being the source of market information in the district, the traders control the prices. The farmers are forced to sell their products at very low price to these traders. Low awareness on conservation practices. This was specifically true in Kham and Phoukood Districts. There is low level of awareness of conservation value in the management of trade in bamboo products at village and district level. Hence the bamboo supply has decreased. Multiple Taxation and other fees. In Sangthong District, farmers do not pay taxes and fee directly. However, traders and processors pay resources tax, rehabilitation fee, local administrative or service charges at village and district levels, and inspection value added taxes which give direct negative impact on bamboo price at the village level.

To address the abovementioned market chain constraints, the study recommended the following: 1. Educational institutions and research centers must conduct research on the sustainable and ecological effect of extracting bamboo culms shoots to the whole bamboo processing industry. 2. The government should developed and implement policies that would promote conservation and sustainable practices on bamboo extraction and trade. 3. The government should revise quota system based on data estimates of bamboo resources sustainable harvesting regimes 4. The government should provide technical and marketing assistances such as through conducting appropriate training courses. Such interventions must enable the villagers and collectors to form an association aimed at empowering in the management of bamboo processing and trade toward obtaining better share of profits and sustainable livelihood. 5. The government must develop, through appropriate agencies, a marketing information dissemination system readily accessible to farmers and traders. 6. The government should study current tax and other service fee polices being imposed to traders to benefit both the traders and farmers and enhance the growth of the bamboo processing industry.

3.

MARKET DEVELOPMENT FOR COCONUT-BASED AGROFORESTRY FARMS IN QUEZON PROVINCE, PHILIPPINES: A CASE STUDY Isabelita M. Pabuayon (Project Leader), Rowena D. Cabahug, Stella Villa A. Castillo, and Marlo D. Mendoza (University of the Philippines Los Banos)

This case study identified initiatives for market development of coconut-based agroforestry farms in Quezon province. Toward this end, it analyzed the market situation, production-to-consumption system for major coconut products, price relationships and value-addition, and constraints and problems faced by the farmers and other market participants. It also looked into the extent of coconut logging due to concerns on the industrys long-term sustainability and possible threat to the environment. Despite the considerable economic potential of the coconut industry, small coconut producers in Quezon remain poor. This is due to low farm productivity resulting to small marketable surplus, low and highly fluctuating prices received, and limited value-addition and marketing options. They sell primary products such as husked nuts, copra and tree instead of lumber, mostly to local traders and on individual basis. Some farmers are producing coco wine and have started processing their nuts into virgin coconut oil, but their income is limited by inadequate access to favorable markets and limited product development. Poor and inconsistent product quality is evident in over-mature, cracked and uneven sizes of husked nuts; inadequately dried copra; and immature and still unproductive trees being cut for lumber. Supply of coconut is declining due to cutting of trees and inadequate replanting. Replanted trees have yet to reach their productive stage. Coconut-based enterprises involving value-addition and which have favorable markets are profitable, and there are many possibilities for improving farmers income. However, there are constraints and problems that relate to weak policy implementation; inadequate extension services for technology, entrepreneurial skills, credit, information and markets; weak farmers organizations, and limited infrastructure on farm-to-market roads. The market development needs are

primarily capital, technical and entrepreneurial skills, equipment and tools, and market access and information. Overall, what is needed is a strategic and comprehensive market development framework that considers the following elements: sustainability of the coconut resource base, enhanced market competitiveness, policy measures, and institutional support services. Specific strategies should include (1) effective implementation of the replanting program and policy guidelines on cutting of coconut trees and product standards for copra and VCO; (2) re-orientation of extension program for a holistic package of services on technologies, credit, information, markets, and entrepreneurial skills; (3) strengthening of FOs to enable them to undertake viable value-addition and various marketing options; and (4) improvement of farm-to-market roads and immediate use of existing market facilities in the area.

4.

MARKETING OF PARA RUBBER PRODUCTS OF SMALL-SCALE FARMERS IN NORTHERN THAILAND Charoon Suksem, (Chiang Mai University - Project Leader), Dr. Det Watcharachaiyingjareon (Naresuan University), Assist. Prof. Dr.Anan Pintarag (Maejo University), Dr. Kamol Namsomsuke (Chiang Mai University), Miss Piyamat Pattharin (Naresuan University), Mrs. Sawitri Soiraya (Naresuan University) and Miss Wipha Hinno (Naresuan University).

This study mainly focused on understanding the para rubber production and marketing system of small-scale farmers in 4 Northern provinces of Thailand, namely: Phitsanulok, Phetchabun, Chiang Rai, and Phayao. Since production and marketing of Para rubber in the northern Thailand is in its early stage of development and highly related to the production and marketing at the national level, the study also covered their features at the national level. Data collection was from both primary and secondary sources. Various related websites of both government and non-government agencies were major secondary sources. At the same time, documents, records and research papers from various government and non-government sectors such as Rubber Replanting Aid Fund, Rubber Research Institute, Rubber Association, etc were used to support and confirm. Fifty four small-scale Para rubber growers in the studied areas were randomly selected for the interview using designed questionnaire. The study also interviewed 6 traders at different stage in the marketing chain using rapid marketing appraisal technique (RMA). Additionally, 4 of the government officials and NGO at provincial level were interviewed using RMA technique. Data collected were mainly analyzed and synthesized using descriptive statistics. Margin at different stage in the market chain were computed. Analysis covered price trend at farm gate, wholesale and export level. Revealed comparative advantage was also be analyzed to explore competitiveness of Para rubber export from Thailand. Para rubber production system Para rubber industry of Thailand was established in 1900 (Department of Trade Negotiation, 2006). At the beginning, only processing of smoked sheet was adopted. The south region is the heart of rubber production in Thailand. It occupied about 95 percent of the total area. It is just only recently (since 2004) that Para rubber plantation has expanded in the northern and northeastern Thailand as a result of the governments Rubber Cultivation for Raising the Sustainable Income

to Farmers in the New Planting Area Phase 1 (2004-2006) program1 in 2003. Generally, rubber plantations in Thailand are dominated by the small holding farmers who cultivated four hectares or less (Office of Agricultural Economics). In 1998, Thailand produced 2.065 millions tons of rubber. It could export 1.84 million tons or rubber product to the world market and earned US$ 1.46 billion. The leading export markets for Thai rubber are Japan, the USA, China, Malaysia and South Korea. At present, Thailand owns about 2 million hectares of Para rubber plantation with total production of 2.8 million ton/year. In the year 2003, the Rubber Research Institute has promoted the 3 Para rubber clones to the farmers. These clones are high production of latex, high production of latex and wood and high production of wood. Among these various varieties of Para rubber, RRIM600 - the high production of latex clone occupied 80% of the total rubber plantation in Thailand. The field survey also revealed that almost 100 percent of Para rubber planted in the northern Thailand is RRIM600. At the national level, Rubber farmers produce field latex at farm level. Eighty three percent of them process field latex into air-dried sheet (ADS) 2. The remaining 17 percent of them sell field latex into the market. Still some farmers also sell their rubber residues or cup lump. The air-dried sheet was then processed into smoked sheet or Standard Thai Rubber (STR or rubber block) for the domestic industrial uses or export. The field latex may be processed in to concentrated latex or air-dried sheet middlemen or primary processing factory. On the other hand, the cup lump and rubber residues (sometime called rubber waste) would only be processed into the STR. The production of ribbed smoked sheet (RSS), STR, and concentrated latex were done the primary processing plants located mostly in the southern and the eastern regions of the country. As a new growing area, characteristics of Para rubber production in the north were similar to those in the southern and eastern regions. The rubber growers planted 0.65-21.04 ha. per household to Para rubber. Almost 50% of them owned rubber plantation of 1.62-3.24 ha. per household. Farmers in the north grew Para rubber mostly in the upland areas (orchard land and degraded forest area) under rain-fed condition. Still some of them grew in the lowland areas (paddy area). Some of them has just recently cultivated the crop and havent tapped the latex. Based on statistics in 2005, the harvested area of Para rubber in the north was about 11 percent of the total planted areas (16,479 ha.). Those farmers who tapped the latex would produce air-dried sheet (ADS) before selling into the market. Very few of them sold the produce in the forms of field latex or cup lump. Marketing system At the national level, Para rubber markets are more developed in the southern and eastern regions. In these regions, the rubber marketing system is characterized by many small local markets scattering around the production areas ranging from the village to provincial levels. The local markets linked to the rubber central markets. These rubber central markets located in Hat Yai of Songkhla, Punpin District of Surathanee, Chawang District of Nakorn Srithammarat, Chasoengsao and Rayong. Besides being centers for domestic transaction, these central markets linked closely with the world rubber market. The rubber products in these markets can move directly into the world market. However, important exporters usually base in Bangkok. At the same time, a strategically important export port of Para rubber produce is in Bangkok. It becomes the pseudo-center for Thai rubber export in concurrent with the Hat Yai CRM where export prices (FOB Bangkok and Hat Yai prices) are quoted. The local markets maybe established at the village, sub-district, district and provincial levels. The traders may be hawkers or traders at different levels. The
1 2

The policy set the target area of 1,000,000 rais (or 160,000 hectares) divided into 300,000 rai for the northern region and 700,000 rais for northeastern region, respectively.
It is also sometimes called un-smoked sheet (USS).

hawkers are traders who travel across the villages to collect rubber produce and sell them in the higher level of local markets. The size of rubber traders increase at higher the level of local rubber market. The Rubber Central Market (RCM) has been established in Thailand several years ago. It has been developed by the Rubber Research Institute of Thailand (RRIT) into an auction market since 1991. The first open market or rubber central market was at Hat Yai district, Songkla province. Later they have been expanding to Surathanee and Nakorn Srithammarat in the south and to Chasoengsao and Rayong in the east. The first 3 open markets have their own storehouses at capacity of 16,000 tons each. They served both the farmers and private sectors. Sometimes they also serve the rubber market intervention project of the government. Besides, these three central markets also provide marketing information i.e. rubber prices and their trends. Among these RCMs, the Hat Yai Rubber Central Market was the most important one. It lays down rules, regulations, and grades of all rubber products brought to it. It also monitors quality according to international standards. Rubber rejected by the rubber central market is sold in informal town markets, where it is generally reprocessed. In addition, there is also another type of rubber central market organized by the Office of the Rubber Replanting Aid Fund (ORRAF) or by local private groups. The selling of rubber products in this market does not require the product at time of selling. Traders and growers who want to sell the products just send the price, volume, and product specifications to the market for auction. Transaction of the product will be done after the agreement from the auction process. Therefore, this central market is sometime referred to as the rubber paper market. Buyers and sellers in this type of rubber central market are well informed on price and the market conditions. There was number of paper markets operated in southern and eastern regions. However, the operations of these markets were not consistent. Their operations were up and down depending on market situation. They were functioning when the domestic price of Para rubber was very low. Para rubber market in the north was in the process of development. Currently, it followed the national marketing system. There were local markets established in certain villages in the concentrated producing areas. The traders were the hawkers who travel across villages to buy rubber products from the growers. There was no primary processing factory in the region. The rubber products were then transported to Rayong province for processing into ribbed smoked sheet, STR (rubber block) or concentrated latex. World rubber market and roles of the Thai government In general, there are 3 forms of world rubber trade, the commodity market, direct trade and counter trade. At present, more than 70 percent of natural rubber trade in the world is the direct trade. Among the world rubber exporting countries, Thailand occupied the world number one. It is followed by Malaysia and Indonesia. Since Thailand, Malaysia and Indonesia were the world large producers of rubber, the three governments have agreed to establish the International Rubber Organization (ITRO) in 2004. The main target was to raise the rubber price for growers in the three nations. Since the establishment of this organization coupled with better marketing information, the Thai rubber price had been steadily increasing. The local rubber price has registered the highest level (above 90 baht/kg or about 2.4 US$/kg) in 2006. This record has never been surpassed in the history of Thai rubber industry. However, some rubber traders claimed that the soar in rubber price might not necessarily due only to the establishment of ITRO. They pointed that the increasing price of energy also contributed to such increase. A committee established by the Ministry of Agriculture and Cooperatives and the Thai Rubber Association announces official rubber (Hat Yai and FOB Bangkok) prices daily through radio, newspapers as well as the internet. Usually, the large and well-equipped Para rubber growers could access to these marketing prices through

the well-developed telephone system. The word of mouth system plays key role for information dissemination among small Para rubber growers in the rural areas. Most of the rubber growers were thus well informed and up-to-date about the marketing prices. Value chain of Para rubber in the north Rubber growers in Northern Thailand specifically sell air-dried sheet rubber products. However, the study also found the selling of field latex and rubber residues at farm level. These rubber products were then processed into ribbed smoked sheet (RSS), rubber block (STR) and concentrated latex for industrial uses and export. This study analyzed the value chain of RSS, STR and concentrated latex. Three levels of the value chain i.e., farmer, primary processor and exporter were considered. The results of the study showed that the three participants in each chain would receive almost the same level of profit per kilogram of rubber product (0.68-0.95 US$/kg). The rubber growers get the highest benefit (about 0.95 US$/kg for the producing ADS) followed by primary processors (0.87 US$/kg for processing the RSS) and the exporters (0.78 US$/kg for exporting the RSS).

5. CASHEW NUTS SUPPLY CHAINS IN VIETNAM: A CASE STUDY IN DAK NONG AND BINH PHUOC PROVINCES, VIETNAM Phou Dang Hai (Project Leader Nong Lam University), Vo Hung (Tay Nguyen University), Le Thanh Loan (Nong Lam University) Cashew nuts have been identified as one of Vietnams eight key products for export from 2006-2020. According to the Vietnam Cashew Organization (VINACAS), the country now has 380,000 hectares of cashew trees under cultivation, 130,000 hectares of which are newly established plantations. The Ministry of Trade has recognized the contribution of this sector to the national economy. However, small scale cashew farmers, especially those from the ethnic groups, are still getting low prices for their products. They are also at risk from price fluctuations. Hence, a team of researchers from Nong Lam University in Ho Chi Minh City and Tay Nguyen University studied the cashew nut supply chain in Vietnam from November 2005 to August 2006. Data was collected from two cashew nut producing provinces in Vietnam, namely: Dak Nong and Binh Phuoc, in April-May 2006. These months coincided with the harvesting season of cashew nuts. Thus, the team was able to capture the real situation of cashew nut transaction in the study sites. Although cashew nuts contribute significantly to Vietnams economy, the findings of the study showed that the incomes of small scale farmers, especially the ethnic people, were still considerably low. This was due to the long market chain and price fluctuation of cashew nuts. In addition, small-scale farmers suffer from unfavorable biophysical and socioeconomic conditions, thereby constraining the marketing of cashew nuts at better price. The interactions between farmers and other actors in the cashew nut supply chain were also found to be dominated by the middle man at different levels. Farmers are thus forced to sell their products at lower prices. This situation benefited the middlemen, while the farmers remained in debt. The study also found that production scale did not affect the farm gate price of cashew nuts. On the other hand, favorable market conditions and the type of ethnic groups where the farmers belong were found to have significant effects on

cashew nut farm gate price. Kinh farmers got 507 VND per kg higher than the farmers belonging to the ethnic minority. In the study, households bargain position was characterized by three aspects, namely: selling time; type of buyers, and rationale of choosing buyers. On the selling time, the fact that farmers decide when to sell their cashew nut indicates their temporary inducements and thus reveals their bargaining position. About 45% of the farmers sold their cashew nuts during harvest due to lack of storage and drying facilities. Similarly, 42% of transactions happened among farmers who were in debt and/or in need of money for their production, consumption and investment. In these two cases, farmers had no choice but to sell the cashew nuts at the lowest price. Meanwhile, farmers were found to get market price information from two sources. The first source was from dealers and/or farmers neighbor. Price information from this source appeared to be biased and unfavorable to farmers. Hence, information was unreliable and posed risks to production, and lowers incentives to invest in cashew nut cultivation. The second source was the media e.g. television, radio, and newspaper. The price information from these sources is reliable and fair to farmers. Unfortunately, farmers access to these sources was low. This indeed reflects the lack of market consultations and government policies with regards to market price information for cashew nuts. The study also revealed that the minimal number of buyers also resulted in low market price of cashew nuts. Meanwhile, other factors such as size of area being cultivated, amount of transactions, and gender did not affect market price of cashew nuts. The study recommended that public services and polices related to the development of cashew nut market should give more support to disadvantaged farmers. This support can be in the form of working capital and adequate access to market. Moreover, support for the improvement of cultivation practices to increase productivity and quality of cashew nuts should also be prioritized by the government. In the context of Agroforestry development and education in Viet Nam, findings in this study can serve as a useful reference and sources of teaching and training materials. However, the findings should be presented considering the culture, economy and resources available of the study site. Further research should likewise focus on the coping and decision-making strategies of farmers with regards to cashew farming.