Summary for Research Report 2

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Ever since recognizing the potential that underutilized species may hold as drivers of agricultural diversification and rural growth was recognized, efforts have been undertaken to improve the capacity of farmers to market such crops. The assumption was that markets can play a key role in fulfilling that potential.

A series of value-chain analyses for the following species: rambutan (Nephelium lappaceum, this report), beli and wood-apple (Aegle marmelos and Limonia feronia, report forthcoming) were thus undertaken by the International Centre for Underutilised Crops (ICUC) in Sri Lanka. A research method for agro-enterprise development designed by the World Bank was used.

The study raised the following key issues for the Sri Lankan rambutan subsector:

Production capacity

• Total production and extent of cultivation has been continuously increasing for the last 11 years. This trend is expected to continue due to the identification of off-seasonal production sites and the crop’s high profit rate per hectare.
• Product seasonality and short shelf life are seen as the biggest problems faced by the sector. Increased R&D efforts focusing on the processing and freezing of rambutan as well as on developing off-seasonal production through management are therefore strongly encouraged.
• Total production and land extent have been continuously increasing since the mid 1990s. This trend is expected to continue due to the identification of off-seasonal production sites and the crop’s high profit rate per hectare.
• The sector has a relatively balanced mix of professional estate growers and homegarden producers.
• Quality and coverage of the extension system is weak and inequitable. This resulted in poor transfers of information and technology between the Agrarian Department and rural farmers; and low technology adoption rates by the small-scale sector. Training extension officers, encouraging farmer-led workshops, demonstrations as well as local initiatives could serve as a possible remedy.
• Vertical integration of producers varies from weak to average. No sub-contracting arrangements exist between input suppliers, farmers and/or buyers. Production is highly scattered and fragmented and decisions by chain actors are taken on an ad hoc, autonomous basis, resulting in a failure of coordination and poor production planning. Linking farmers to retailers and exporters via various sub-contracting arrangements could serve to alleviate this problem.
• Access to capital for small-scale producers is difficult. Technological upgrading and sector growth are thus impeded. Group lending and guided micro credit loan schemes could possibly be developed here.

Product

• Even though great varietal diversity exists, the presence of a wide range of varieties and local sub-varieties is seen as a major concern. Crop marketing is rendered difficult as consumers are not always aware of what they buy.
• There is no processing of rambutan taking place on a commercial scale.
• Product dehydration is seen as a major problem. This results in fruit shrinkage and browning, which are considered to be a major threat to fruit quality.
• Poor cultivation techniques and post harvest handling contribute to large losses and low product quality. Inadequate tree/land management, plucking techniques, packaging, storage and transportation are seen as the main problems. The study showed that losses can be cut significantly and product quality raised by encouraging small scale farmers to adopt better, yet simple, cultivation practices.

Markets and Product Distribution

• Local and international demand for Sri Lankan rambutan is strong.
• Sri Lankan rambutan is internationally competitive in terms of price and quality.
• Colombo and Kandy represent the two major domestic end markets. Illegally set-up vendors next to roadsides, campuses and bus stations represent major sales outlets for the domestic market. Legalizing sales outlets and creating direct marketing opportunities for farmers could thus strengthen the distribution process and help improve the bargaining position of producers.
• The domestic market predominates. Most rambutan is sold in the domestic market, only a fraction is exported (i.e. mainly to the Gulf countries).
• Distribution happens mainly via intermediaries. The dominance of the intermediaries is seen as a major issue.
• Strategies for market/product development and supply chain management are lacking. This is due to a high degree of fragmentation within the chain. Linking farmers to exporters via sub-contracting arrangements, identifying direct sales outlets for farmers to set up farm shops in big cities and granting temporary selling permits to some vendors are therefore recommended.

Pricing

• Price fluctuations are mainly seasonal. Peaks are reached at the onset of the season in July and steadily decrease until the end of the season in August/beginning September.
• Quality, variety, size and color play a key role in determining fruit prices.
• High seasonality & short shelf life lead to precipitated selling by producers. This results in a glut, thus lowering farm gate prices. Developing producer clusters and cooperatives could help strengthen the bargaining power of producers, encourage more price setting behavior on their behalf and help coordinate and smoothen supplies.
• Direct price competition is low and price setting behavior by intermediaries can be observed.

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