WORKING PAPER

DEPARTMENT OF AGRICULTURE AND JAPAN INTERNATIONAL COOPERATION AGENCY

Formulation Team on the Drafting of the Strategic Agribusiness Development Plan

COMMODITY SITUATION REPORT: DURIAN

Prepared by

JOSE ULYSSES J. LUSTRIA, ACQUILYN E. MORILLO, AND ALDRIN G. NACIONAL

November 2009 ____________________ Mr. Lustria is OIC-Chief, Public Investment Program Division (PIPD), Planning Service, Department of Agriculture. Ms. Morillo and Mr. Nacional are Technical Assistants at the PIPD.

TABLE OF CONTENTS

I. A. B. II. A. 1. 2. B. 1. 2.

OVERVIEW ............................................................................................................. 1 Background ............................................................................................................... 1 Contribution to the Economy ..................................................................................... 2 SITUATIONAL ANALYSIS ................................................................................... 2 Production ................................................................................................................. 2 World Production ................................................................................................ 2 Domestic Production ........................................................................................... 3 Supply and Demand................................................................................................... 6 Supply ................................................................................................................. 6 Demand ............................................................................................................... 7 a) b) C. 1. 2. 3. 4. 5. D. 1. 2. 3. E. F. World demand (exports). ................................................................................. 7 Domestic demand. ........................................................................................... 7 Input Supply Subsystem ....................................................................................... 8 Production Subsystem.......................................................................................... 9 Marketing Subsystem ......................................................................................... 10 Processing Subsystem ........................................................................................ 12 Support Subsystem ............................................................................................. 13 Prices....................................................................................................................... 13 World Prices ..................................................................................................... 13 Domestic Prices................................................................................................. 13 Price Formation ................................................................................................ 14 SWOT Analysis ....................................................................................................... 14 Problem Tree Analysis ............................................................................................ 15 SUMMARY, ISSUES AND RECOMMENDATIONS ......................................... 16 REFERENCES ...................................................................................................... 22 ANNEXES.............................................................................................................. 23

Value Chain System .................................................................................................. 7

III. IV. IV.

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LIST OF FIGURES

Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure

1 2 3 4 5 6 7 8 9

. . . . . . . . .

Percentage share of top producing provinces in durian production (in MT), 2008... Annual percentage share of top producing provinces in durian production (in MT), 1998-2008. ... Volume of durian production (in MT) and area harvested (in Hectares), 1998-2008. Durian Yield (in MT/Ha), 1998-2008. . Value of durian production (in Million Pesos), 1998-2008. . Agribusiness system of durian. . On farm costs in durian production. . Distribution flow of durian. .. Marketing channels of durian in Davao city and districts. ... Farm gate price of durian, 1998-2008... Problem tree analysis of durian industry. .

3 4 5 5 6 8 9 11 12 14 15

10 . 11 .

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LIST OF TABLES NSIC registered durian varieties. . Durian production seasonality in the Philippines, Thailand and Malaysia. Supply and utilization account of durian (in MT), 1998-2008.. Issues and recommendations in the durian industry. ....

Table Table Table Table

1 2 3 4

. . . .

1 3 7 17

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LIST OF ANNEXES

Annex Annex Annex

1 2 3

. . .

Gross value output of selected fruits (At constant prices), 1998-2008. Updated average costs and returns of durian production (in PhP/Ha), 1998-2008.... Case report on Rosario Farm

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I. OVERVIEW A. Background Durian (Durio zibethinus Murray) is an exotic fruit popularly known as the King of Tropical Fruits. It is one of the most highly valued and most desired among the seasonal fruits in Southeast Asia because of its unique taste and nutritional value. It is high in carbohydrates, calcium, phosphorous, and ascorbic acid. As a versatile crop, durian can be grown in a wide range of agro-climatic conditions (GMA-HVCC, ____). It has been regarded as a priority crop under the agricultural development program because of its popularity and huge potential in the international market. The Durian, a native of the rainforests of Malaysia and Indonesia, is a tall tree reaching as high as 40m in the jungle rainforest or in semi-orchard. Seed trees may take 8-10 years to fruit. Grafted durian grows to 15 - 20m tall and fruits in 5 to 6 years. The fruit is green to brown in color, pendulous, round to oblong in shape and is completely covered with strong sharp thorns. It is a capsule which splits into five parts when ripe and each segment contains brown seeds covered with thick, firm, creamy and yellow pulp with a strong and very distinctive aroma (Cunningham, 2000). Apart from being consumed fresh, it can be processed into candies, jams, pastilles, preserves, blends or a flavoring for ice creams, cakes, pureed into fillings, for rolls and tarts and is being processed into chips. The edible parts of the fruit is also frozen or chilled and packed into polystyrene trays. Durian has several varieties. In the Philippines, a breeding program has resulted in a number of cultivars of local origin. The National Seed Industry Council (NSIC) registered durian varieties are shown in Table 1. Table 1. NSIC registered durian varieties.
REGISTRATION NUMBER NSIC 1995 Dr 01 NSIC 1995 Dr 02 NSIC 1997 Dr 03 NSIC 1997 Dr 04 NSIC 1997 Dr 05 NSIC 1999 Dr 06 NSIC 1999 Dr 06 NSIC 2000 Dr 07 NSIC 2000 Dr 08 NSIC 2000 Dr 09 NSIC 2000 Dr 10 NSIC 2000 Dr 11 VARIETY NAME ARANCILLO GD 69 ALCON FANCY LACSON UNO OBOZA DUYAYA DUYAYA SULIT NANAM LACSON DOS PUYAT UPLB GOLD OWNER/ ADDRESS

BPI-Davao NCRDC / Bago Oshiro, Davao City Angel Galang / MacArthur Highway, Matina, Davao City Alfonso and Conchita Abad / Los Amigos, Tugbok, Davao City Simeon Latayan / Lacson , Calinan, Davao City Alfonso and Conchita Abad / Los Amigos, Tugbok, Davao City Severino Belviz / Museum Rd., Calinan, Davao City Severino Belviz / Museum Rd., Calinan, Davao City -do-doBPI-Davao NCRDC / Bago Oshiro, Davao City -doDept. of Horticulture, UP Los Baos, College, Laguna

(Source: BPI, 2009)

B. Contribution to the Economy The contribution of durian has been increasing but has remained relatively small. For the period 1998 to 2008, durian recorded an average contribution of 0.60 percent to total value of agricultural crop production and an average contribution of 0.29 percent to total value of agricultural sector output, increasing from PhP 593 million to PhP 1,050 million (see Annex 1). In general, fruits contribute significantly to the economy in terms of employment, income and foreign exchange generated through various activities; production, processing and marketing in the fruit industry. Many of the fruit species such as Durian are classified as multipurpose tree species that provide important ecological/environmental functions such as biodiversity, soil erosion control, and greening effect in both upland and lowland areas.

II. SITUATIONAL ANALYSIS A. Production 1. World Production a) Major producing countries. The concentrations of durian production in commercial scale are in Thailand, Malaysia, and Indonesia. The Philippines and other Southeast Asian nations also produce durian commercially, but at much smaller levels and mostly for domestic markets. It is difficult to calculate the exact production estimates of producing countries with the lack of updated figures (Cunningham, 2000). b) Productivity and competitiveness. The main producers of durian are Thailand and Malaysia. Indonesia has been exporting significant volumes, while the Philippines and other Asian countries produce durian at a small scale, mostly for domestic markets. Major importers of durian are Asian countries as well. The Philippines has a relatively low durian production and very low per capita consumption. However, if the Philippines can increase the production of good quality fruits rapidly, it can compete with other exporting countries. The Philippines have the following advantages: 1) closer to potential markets such as mainland China, Taiwan, Hong Kong, Japan, and South Korea; 2) increasing demand in Europe, Canada, and USA; and 3) different production seasons with major competing countries such as Thailand and Malaysia. The Philippines can tap the market originally supplied by other durian-producing countries according to seasonal harvest (Eusebio & Anit, 2003). Availability of durian is affected by short harvest seasons, typically only two to three months, although smaller harvests are also reported during other months of the year. Thai and Malaysian production is highest between June and July, although exports are also reported during other months (mostly immediately preceding or following this period). Production in the Philippines is mainly August to October, as shown in Table 2.

Table 2. Durian production seasonality in the Philippines, Thailand and Malaysia. April Thailand Malaysia Philippines (Source: Eusebio & Anit, 2003) May June July August Sept Oct

2. Domestic Production a) Major producing provinces by volume of production. Durian is mainly cultivated in Mindanao, particularly in Sulu and the Davao region. In 2008, production is lead by Davao del Sur, as shown in Figure 1.

Figure 1. Percentage share of top producing provinces in durian production (in MT), 2008. (Source: BAS, 2009) For the period 1998-2008, the average percentage share of Davao del Sur in production accounts to 5.68 percent (Figure 2). There is an evident increase in share to total production from 2007 to 2008, wherein the share accounts to 2.87 percent and 41.82 percent respectively. On the other hand, for the same period, Sulu, registered the greatest average percentage share to total production with share of 39.30 percent from 1998 to 2008, exhibited by consistent high production before 2008.

Figure 2. Annual percentage share of top producing provinces in durian production (in MT), 1998-2008. (Source: BAS, 2009) b) Volume, area planted, and Productivity. There are variations in the production volume trend of durian, exhibiting an average rate of 7.83 percent from 1998 to 2008, despite consistent area expansion, as shown in Figure 3. A substantial 51 percent increase in 2007 production is evident. As reported by BAS, production surge was brought about by increase in harvest in Zamboanga, good fruiting performance in northern Mindanao, increase in number of bearing/mature trees in the Davao region, area expansion in SOCCSKSARGEN and good harvest due to favorable weather in CARAGA. However, production decreased in 2008 due to excessive rains (BAS, 2009). Further, Figure 4 shows that yield has been decreasing from 6.02 MT/Ha in 1998 to 2.80 MT/Ha in 2008.

Figure 3. Volume of durian production (in MT) and area harvested (in Hectares), 1998-2008. (Source: BAS, 2009)

Figure 4. Durian Yield (in MT/Ha), 1998-2008. (Source: BAS, 2009)

c) Value of Production. Durians contribution to the economy has been gradually increasing from 1998 to 2008 as shown in Figure 5. There was a growth surge in 2007 with production value of Php1495.70 million, which is evidently greater than the annual average production value of PhP 819.29 million from 1998-2008. The gradual increase in production value is due to the increase in production despite fluctuating nominal price.

Figure 5. Value of durian production (in Million Pesos), 1998-2008. (Source: BAS, 2009)

B. Supply and Demand 1. Supply The supply and utilization account in Table 3, presented the countrys durian production as primarily for local consumption. The volume of production is relatively low for the country to export. There has been no durian importation from 1998 to 2008. On the average, net food disposable accounts for 94 percent of the gross supply. Reports on processed durian, are not currently available. To provide such information, further primary data gathering is necessary.

Table 3. Supply and utilization account of durian (in MT), 1998-2008.

Supply
YEAR PRODN
Imports

Utilization
Gross Supply Exports Seeds Feeds & Waste Processing Total Net Food Disposable Per Capita Grams/ Kg./Yr. Day

1998 29,063 1999 26,693 2000 25,764 2001 27,037 2002 31,638 2003 39,817 2004 40,907 2005 47,296 2006 48,465 2007 73,250 2008P 51,399 P - Preliminary data

29,063 26,693 25,764 27,037 31,638 39,817 40,907 47,296 48,465 73,250 51,399

1,744 1,602 1,546 1,622 1,898 2,389 2,454 2,838 2,908 4,395 3,084

27,31 25,09 9 24,21 1 25,41 8 29,74 5 37,42 0 38,45 8 44,45 3 45,55 8 68,85 7 48,31 5 2

0.37 0.34 0.32 0.33 0.37 0.46 0.47 0.52 0.52 0.78 0.53

1.01 0.93 0.88 0.90 1.01 1.26 1.29 1.42 1.42 2.14 1.45

(Source: BAS, 2009) 2. Demand a) World demand (exports). In 2008, the country exported a total of three MT of fresh durian to France, Kuwait, Saudi Arabia and United Arab Emirates. The durian supply and utilization account of BAS does not reflect export data prior 2008, both in fresh and processed form. The main market for durian is in Asia. Thailand, Malaysia and Indonesia, the main producers, are also the main consumers of the fruit. The main export markets are Singapore, Hong Kong and Taiwan. Lesser amounts are exported to North America and Europe, where it is consumed by members of the Asian population there. It is generally unknown to the nonAsian population (Cunningham, 2000). b) Domestic demand. Durian produce are mostly for domestic consumption. From 1998 to 2008, the average annual per capita consumption was 0.45 kgs., which range from 0.32 kilograms in 2000 to 0.78 kgs. in 2007. As elaborated by Cunningham (2000), consumption of durian in the Philippines is supply-led. Durian is a popular fruit and is relatively expensive. The fact that consumers in Davao are prepared to pay PhP 60/kg or more for durian and that only 30% of the gross weight may be consumable is an indication of its popularity. All produce brought to the market clears without any problems. There are recurring reports of unavailability of product. Given the popularity of the fruit in the Philippines there is little doubt that consumption would increase if it was more widely available. There is also scope for reducing prices thus making the product more affordable for a larger potential market. C. Value Chain System Generally, durian is characterized by a value chain, depicting farm production as its core and a system showing the commodity flow from farm (seed) to shelf. Based on the Durian Strategic Action Plan in 2002, the agribusiness system is presented in Figure 6.

Figure 6. Agribusiness system of durian. (Source: DA-SAP, 2002) 1. Input Supply Subsystem a) Seeds and seedlings. In the Philippines, it is recommended to use three-year old planting material or Large Planting Material (LPM) since durian can be difficult to establish and the survival rate of LPM is much higher than one-year old seedlings. The use of LPM shortens the gestation period of the plant. Commercial durian varieties are propagated vegetatively. This is done by either grafting or budding. Rootstocks used vary but increasing efforts are being made to identify rootstocks which are resistant to Phytophtera palmivora, a soil borne fungus which is the most serious pathogen of durian and the major cause of premature death in seedlings and trees. In Thailand, Chaynee variety is used and there are good reports from Malaysia on the use of Durio lowianus. ATI (2008) estimated that cost of planting materials accounts to 36 percent of total cost of establishment for Durian without intercrop. b) Fertilizer and Pesticide. On the average, fertilizer and pesticides accounted to 14 percent of total on farm-costs for the period of 1998 to 2008.It is considered as a major cost driver and the increasing price of fertilizer is an absolute concern (BAS, 2009). c) Agricultural Machinery. In durian farms, agricultural machinery and equipment used are simple such as plow and harrow for land preparation. To remove nonproductive and disease-infected branches, pruning shear and pruning saw are utilized. Propping implements such as bamboo poles and polypropylene twine are used to prevent breaking and lodging while for harvesting, cushions are used to protect the fruit (ATI, 2008). d) Labor. Among all cost item, labor is considered a major cost driver accounting to 40 percent of durian on-farm costs. The primary cost which accounts to 29 percent of total on-farm cost is in the form of hired labor (paid in kind).

Figure 7. On farm costs in durian production. (Source: BAS, 2009) 2. Production Subsystem Durian production in commercial scale can be found in Thailand, Malaysia, and Indonesia. The Philippines and other Southeast Asian nations also produce durian commercially, but at much smaller levels and mostly for domestic markets. It is difficult to calculate the exact production estimates of producing countries with the lack of updated figures (Cunningham, 2000). Native durian trees have been grown in the province for years, wherein production is mainly small scale / backyard. Durian produce are mostly for domestic consumption. Native durian trees have been grown in the province for years, wherein production is mainly small scale / backyard. The durian trees are grown mixed with coconut, banana and other fruit trees (BAS, 1992). Two major operations are performed by farmers, which are crop care and harvesting. In crop care, old trees do not need inputs and much maintenance but newly planted trees or young trees need regular care and inputs until the tree reaches maturity. Farmers usually clear the undergrowth near the base of the trees. In harvesting, the most common practice is to wait for the fruit to drop, which is an indication that the fruit is ripe (BAS, 1992). a) As a guide to durian production, the government assists farmers by providing trainings on improved cultural management practices. It is recommended that a holistic approach must be applied in durian production. It was emphasized that two very important practices, water and nutrient management must be applied because of its stronger impact on the growth and fruiting of the tree. Basic requirements for growing durian must be set so that 9

the durian tree shall thrive best. It is necessary that the soil must be sandy loam or clay loam with soil pH of 5.5 to 6.5 that is rich, deep, well drained and had high organic matter. The environment must be moist. Areas with evenly distributed rainfall of 1,500 to 2,000 mm/year and free from strong winds are recommended. Also, an elevation not exceeding 800m and temperature of 25C to 30C are suggested. It must necessarily be ensured that the land is readily prepared, with suitable acidity, canal constructions and field lay-out. Further care and maintenance of the durian tree involves shading, mulching, irrigation, pruning, weeding and sanitation. Likewise, a holistic approach to proper plant nutrition, which can be achieved through balanced fertilization necessary for vegetable growth, reproduction and repair, are to be employed. In addition, flower and fruit thinning, propping and tying shall be employed for maintenance (ATI, 2008). b) The quality of durian is affected by the harvest and postharvest practices of the grower. A properly matured durian fruit commands a better market price. The indices to measure maturity of durian are as follows (ATI, 2008): 1. 2. 3. 4. 5. 6. 7. 8. 9. The tips of the spikes turn darker brown than the base of the spike. The spike tips also become slightly elastic and more flexible. The grooves between spikes expand and turn darker. The fruit stem becomes more stiff and flexible than unripe fruits. Change in husk color from green-brown to yellow. The sutures in the rind where the sections will split apart become more noticeable. The fruit has a hollow sound when tapped. When shaken the best fruits have a sound of something inside the fruit. The sap of the fruit stem is clear and sweet. In unripe fruits, it is thick, sticky and not sweet. 10. If a small window into the fruit is cut to check the fruit inside, the pulp is darker than unripe fruits. 11. The aroma is stronger. 12. The abscission zone in the fruit stem just above the fruit tends to bulge It is necessary to avoid bruising the fruit. A cushion must be provided to prevent fruits from dropping directly on the soil. Harvest shall be done on sunny days and at least a day after a heavy rain. Management practices after harvest must be employed from conduct of soil and leaf tissue analysis, to pruning, weeding, foliar spraying, fertilizer application and irrigation. In postharvest handling, fruits must be sorted on-farm to remove deformed, infected, and damaged fruits. It shall be delivered to packing house, must be inspected, and tagged. Disinfectants such as soap or chlorine are recommended. Fruits shall be dried and cleaned to finally weigh and pack. 3. Marketing Subsystem

From the major supply to the demand areas, fresh durian flows through a spatial network of buyers/sellers, wherein the three main components of the network are a) movements from farmers through the wholesaler to the traders within the supply area; b) shipment from the supply area port to the major demand areas in the country (NCR, Cebu); and c) handling/distribution to processors and types of traders and/or intermediate end-users within the demand areas.

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Figure 8. Distribution flow of durian. (Source: GMA-HVCC, ____). Figure 9 shows a more detailed marketing channel for durian in Davao City, one of the top producing provinces in the country From the production areas, the fruits are either picked up or are delivered by farmers to buyers in the trading centers or to traders in Davao City. The assembler delivers the fruits procured to the assembler/distributor and assembler/shipper in the trading center or assembler/distributor in the city. The assembler/distributor based either in the trading or market center both sell to transient traders, processors and consumers. Those based at the market center also sell to retailers. The assembler/shipper in the municipality ships directly to Manila and sells the rejects to consumers and processors. Aside from shipment to Manila, the assembler/distributor/shipper in the market center also sells to processors, consumers and transient traders (BAS, 1992).

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Figure 9. Marketing channels of durian in Davao city and districts.

(Source: BAS, 1992) 4. Processing Subsystem Food processing is one activity that strengthens the linkage between agriculture and industry. It enhances both upstream and downstream activities in the production-marketing chain. With agro-processed products, the value-added contribution of agricultural fresh produce is increased. At the same time, downstream activities are enhanced to more efficient utilization of agricultural inputs and machineries (Elazegui, 1998). As with other fruits, durian is processed when the fresh fruit market cannot absorb the excess supply or because of unmet quality fruit standards, that is why, most processors are durian farm owners. To absorb excess supply during harvest, durian is sometimes processed into frozen durian, durian chips, durian cake, sweet dried durian, French-fried durian, ice cream and candies. Processed durian products are mostly supplied to the domestic market, while frozen durian is not common among local consumers (EntrePinoy, 2008).

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Durian products are developed to create value-added products, prolong shelf life of durian, extend the marketing period, solve the odor problem (unlike fresh durian, durian products can be shipped by air), and reduce the cost shipment. To better understand the processing industry, please see the case report on one processor visited by the SADP team (Annex 3). 5. Support Subsystem Support for the fruit industry comes from, government, non government and private institutions. The DA through its GMA-HVCC banner program provides a comprehensive package which includes: a) b) c) d) e) f) g) h) i) j) Production Support Services; Market Development Services; Credit Facilitation Services; Irrigation Development Services; Other Infrastructure/ Post-Harvest Development Services; Extension Support, Education and Training Services; Research and Development; Regulatory Services; Information Support Services and Policy Formulation, Planning and Advocacy Services.

Various donor countries or agencies have also provided support both technical and financial assistance. D. Prices 1. World Prices World market price cannot be analyzed due to unavailability of data on world market prices. 2. Domestic Prices The farm gate price of durian in 2008, as shown in Figure 10, was PhP32.62/kg. In 1998-2008, the price was fluctuating with a recorded average farmgate price of PhP34.36. The lowest price was Php25.48 per kilogram in 1999 and hit its highest in 2000 at P54.93 per kilogram. Analysis on wholesale and retail prices cannot be provided due to lack of data.

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Figure 10. Farmgate price of durian, 1998-2008. (Source: BAS, 2009) 3. Price Formation Small farmers retailing at the supply level normally based their selling price on the perceived prevailing market price. The prevailing market price may have been learned through word of mouth. Small farmers are not too conscious of the price. Medium and large farmers are more price-conscious. They canvass price in prospective destinations before delivering to the location. Distributors often dictate the price but farmers could negotiate based on their canvass. Retailers, who sources from small farmers, have the freedom to name their price according to normally prevailing market price. E. SWOT Analysis The SWOT of the durian industry is as follows (GMA-HVCC, ___; PCARRD, 2003; DA-SAP, 2002 and SADP consultation and field visit, 2009): Strengths Availability of areas highly suitable to durian production, Availability of technical expertise and farm labor, and Availability of improved technologies on production, handling, and processing. Weaknesses High cost of production, Lack of efficient marketing system, Lack of farm-to-market roads, Poor technology transfer, Inaccessible credit facilities, Poor market information, and Inadequate postharvest facilities and technology access for processing.

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Opportunities Growing demand in local and export markets, Proximity to export markets , (Singapore, China, Japan, Hongkong, Taiwan and South Korea), The Philippines capacity to supply export demand at certain period of the year when supply in Thailand and Malaysia becomes scarce or limited, and Unmet demand for fresh and processed fruit. Threats

Presence of destructive diseases like Phytopthara, Drought (El Nio), and other calamities.

F. Problem Tree Analysis The problem tree (Figure 11) shows us graphically the linkages among the various problems in the durian industry. The SWOT analysis was used as a main input in its formulation.

Figure 11. Problem tree analysis of durian industry.

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III.

SUMMARY, ISSUES AND RECOMMENDATIONS

As one of the most highly valued and most desired seasonal fruit in Southeast Asia, opportunities abound the durian industry. It has been regarded as a priority crop under the Philippine agricultural development program because of its popularity and huge potential in the international market. Despite the relatively small economic contribution, durian production is expected to expand further. The consumption of durian is supply-led. It can be consumed fresh or can be processed. The Philippines can take advantage of the increasing demand in both local and export markets. To set foot in the export market, the yield and production of durian in the country must be improved. Increase utilization of superior and high yielding varieties, improved cultural management practices and postharvest technologies are necessary activities to facilitate development. Among the cultural management practices expected to contribute to the increasing yield include proper plant nutrition, irrigation, pruning, and control of pests and diseases. Moreover, technologies related to pre- and post- harvest treatments should be available to extend the shelf life of both fresh and minimally processed products. (Eusebio & Anit, 2003) Table 4 illustrates the issues and gaps in the durian industry. Accordingly, recommendations were also provided. Moreover, reviews on the existing programs formulated by the government to solve the concerns of the industry - from access to agricultural resources and services to market information - is imperative in strengthening its competence in dealing with the prevailing issues of the fruit industry. One good example is the Food Terminal Concept which is developed by DA. This concept is especially designed to develop market infrastructure of the industry by establishing chain of marketing facilities from farm to consumers and developing distribution centers (food terminal hubs) which are designated regional or provincial agroindustrial centers for proximity to value-adding and processing activities. Active involvement of LGUs, NGOs, private sector GOs, and joint-venture between any of the parties above is highly encouraged to operate the hubs so that trading system will be more efficient and transparent and market information will be more accessible to the agents of the market.

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Table 4. Issues and recommendations in the durian industry Supply chain/Element Issue/Gap I. Input Supply Subsystem Seeds and Seedlings, etc. Insufficient planting materials with high quality

Recommendation Development of new varieties, varietal improvement through biotechnology, accreditation of nurseries, and intensification of R & D through SUCs and other agrobased research and development institutions LGUs to establish scion groves in every municipality. Conduct of focused research and development for the development of Phytopthara-resistant varieties. Screening and testing of varieties for resistance to Phytopthara. Improvement of logistics; utilization of organic fertilizers; development of alternative means or product efficacy Lowering of tariff for agricultural input; government subsidy. Establishment of agricultural machinery and equipment standards Maximum utilization of family labor Mapping of areas suitable to durian to promote yearround supply and increase yield; implementation of crop zoning.

Variety

Limited supply of reliable scion groves Susceptibility of existing varieties to Phytopthara

Fertilizer and Pesticide

Increasing costs

Agricultural Machinery/equipment Labor Site Selection/ Crop Establishment

High tariff rates for imported chemical inputs. Need for standards in farm equipment Increasing cost of labor Durian plant is exacting in its soil and agro-climactic requirements, e.g. evenly distributed rainfall, typhoon -free areas. Growers operating in areas with long dry season realize low yield and profit

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II.

Production Subsystem Inconsistent supply; fragmented production Pest/ Disease Management Prevalence/existence of pests and diseases Expansion of production areas; integration of supply; policy/legislative work on issues such as public land access Strict quarantine regulation to prevent spread of pest and diseases and intensified information campaign about the threat of disease R, D and extension program aimed at developing an effective and efficient Integrated Pest Management (IPM) Strategies Limited awareness on control of Phytopthara disease which affects seedlings and mature trees. Non-adoption of production technology on fertilization, irrigation, pruning, etc. Information dissemination on control measures, e.g. sanitation, well-drained soil, use of large planting materials, etc. Intensification of technology information dissemination through model farms and conduct training on improved cultural methods; distribution of information technology materials Poor fruit quality: only about 50% of Development and implementation of Good Agricultural harvest meet requirements for export Practice Program to minimize pre-harvest defects and due to improper harvesting, disorders. inappropriate maturity index, mishandling and physiological defects due to poor weather, poor drainage and sanitation, nutrient deficiency, etc.

Cultural Practices

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III. Marketing Subsystem Inefficient marketing system Poor access to timely market information Difficulty in producing economic volumes due to fragmented and backyard planting/production. Lack of market promotion activities for small growers. Transport-high air freight cost; lack of refrigerated transport facilities. IV. Processing Subsystem Inadequate postharvest and processing facilities; need for standards in equipment Low awareness on proper postharvest handling Lack of awareness of importing countries standards Local standards are not harmonized with international standards Increase and improvement in processing and postharvest facilities (e.g., processing and packaging plants, peeling and cutting machines); utilization of biotechnology. Exploring of guarantee and credit facility for facilities improvement to meet quality and safety standards. Establishment of postharvest clinic to address postharvest related concerns in the area Conduct of capability building Compilation/updating of importing countries standards and dissemination of these information to processors Harmonization of local standards with market leaders like Thailand and Malaysia Improvement of logistics (to address high postharvest losses); establishment of trans-shipment facilities; revisit of the Food Terminal approach improvement of market intelligence, information systems and database improvement., particularly on price monitoring, supply and demand forecasting and analysis Promotion of production-marketing clusters

Market promotion program through trade fairs, exhibitions and missions. Establishment of cold chain systems in strategic areas

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 Limited access and high cost of product testing and quality/safety system certification services

Supplementing of Food Development Center testing services available only in Manila; upgrading of DOST regional testing laboratories to conform with the Codex guidelines for the assessment of the competencies of food testing laboratories. Need for government-sponsored accredited laboratory conducting complete food laboratory analysis Overhaul the food import and export inspection and certification systems to conform with Codex guidelines. To supplement FDC testing services available only in Manila, upgrading of DOST regional testing laboratories to conform with the Codex guidelines for the assessment of the competencies of food testing laboratories. Poor fruit quality: only about 50% of Development and implementation of Good Agricultural harvest meet requirements for export Practice Program to minimize pre-harvest defects and due to improper harvesting, disorders. inappropriate maturity index, mishandling and physiological defects due to poor weather, poor drainage and sanitation, nutrient deficiency, etc. Inherent perishability and short Application of wax coating to inhibit moisture loss. shelf-life (2-3 days under ambient Refrigerated storage/transport (15C to extend shelf life conditions) of the fruit to 15 days). Blast freezing and other technology. Insufficient supply and inconsistent strengthening of backward integration, quality of raw materials Expanded GMP and HACCP training program

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V.

Support Subsystem Inadequate support systems Provision of more support facilities such as ports, farmto-market roads, cold chain systems, irrigation facilities; also regulatory and food safety system (e.g., traceability, database/s); promotion of GAP and monitoring of compliance; accessible credit and crop insurance facilities; strengthening of the Research and Development-Extension system in the different levels of government, from national to local government level

Note: Issues and Recommendations were identified from (through) key informant interviews, secondary data, workshops, consultations and field visits

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IV. REFERENCES Agricultural Training Insitute (ATI). Department of Agriculture. (2008). A Guide to Durian Production: Economics of Durian. Brochure.IES Material Series No. 4-6. Knowledge Products Management Division. Bureau of Agricultural Statistics, Department of Agriculture (2009) Countrystat. Retrieved on September 2009 from <http://www.countrystat.bas.gov.ph> Bureau of Agricultural Statistics, Department of Agriculture (1992). Marketing and Information Needs Assessment for Davao City. Technical Report. Bureau of Agricultural Statistics, Department of Agriculture (1992). Marketing and Information Needs Assessment for Davao Norte. Technical Report. Bureau of Plant Industry, Department of Agriculture (2009). NSIC Registered Fruit Crops Varieties, CY 1995-2008. Cunningham, T. (2000). Durian Market Report. Project ALA - 97/68 Upland Development Programme in Southern Mindanao (UDP). Retrieved on December 2008 from <http://www.saveuplands.org/plugin/library/download.php?id=228> Department of Agriculture. (2002). Durian strategic action plan. April 2002. Elazegui, D.D. (1998). Food processing in the Philippines: Issues and challenges. Working paper no. 98-03. ISPPS, CPAF, UPLB.
Eusebio, J.E. and E. Anit. Philippine Council for Agriculture, Forestry and Natural Resources Research and Development. (2003). Industry Situationer: Durian. <http://maidon.pcarrd.dost.gov.ph/joomla/index.php?option=com_content&task=view &id=745>

EntrePinoy, (2009). Utilization and Processing of Durian Fruit. October 2006. Retrieved on October 2009 from <http//www.mixph.com/2006/10/utilization-and-processing-of-durian-fruit.html>. Food and Agriculture Organization-United Nations (2009). FAOSTAT. Retrieved on September 2009 from <http://www.fao.org> Ginintuang Masaganang Ani-High Value Commercial Crops (GMA-HVCC). Department of Agriculture Commodity profiles. Retrieved on October 2008 from <http://www.hvcc.da,gov.ph> Philippine Council for Agriculture, Forestry and Natural Resources Research and Development. (2003). Industry Profile: Durian. <http://www.pcarrd.dost.gov.ph/divisions/crd/cin/durian/industry%20status.htm>

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IV.

ANNEXES

Annex 1. Gross value output of selected fruits (At constant prices), 1998-2008.
1998 TOTAL AGRI OUTPUT TOTAL AGRI CROP OUTPUT 224,172 1999 245,874 2000 242,318 2001 253,131 2002 262,788 2003 272,011 2004 286,245 2005 292,581 2006 304,000 2007 318,068 2008 330,396
AVERAGE

275,599

110,733

129,268

120,249

124,046

126,035

129,250

136,181

137,305

143,699

151,559

157,543

133,261

VALUE OF PRODUCTION IN AGRICULTURE AT CONSTANT PRICES, 1998 - 2008, (IN MILLION PESOS) BANANA 6,252 8,181 8,824 9,056 9,442 9,610 10,080 11,274 PINEAPPLE 2,754 2,831 2,885 2,993 3,032 3,141 3,256 3,290 MANGO 6,307 6,297 6,167 6,392 6,950 7,244 6,947 7,058 CALAMANSI 216 908 922 927 923 923 913 1,024 PAPAYA 144 151 163 171 171 175 179 196 POMELO 66 68 65 61 64 61 58 57 DURIAN 593 545 526 552 646 813 835 966 MANGOSTEEN 17 16 15 16 16 16 16 17

12,162 3,374 6,589 1,003 211 55 990 15

13,396 3,710 7,341 1,028 220 54 1,496 15

15,551 4,065 6,338 1,018 245 52 1,050 3

10,348 3,212 6,694 891 184 60 819 15

SHARE TO TOTAL AGRI OUTPUT, 1998 - 2008, (IN %) BANANA 2.79 3.33 3.64 PINEAPPLE 1.23 1.15 1.19 MANGO 2.81 2.56 2.55 CALAMANSI 0.10 0.37 0.38 PAPAYA 0.06 0.06 0.07 POMELO 0.03 0.03 0.03 DURIAN 0.26 0.22 0.22 MANGOSTEEN 0.01 0.01 0.01 SHARE TO TOTAL AGRI CROPS, 1998 - 2008, (IN %) BANANA 5.65 6.33 7.34 PINEAPPLE 2.49 2.19 2.40 MANGO 5.70 4.87 5.13 CALAMANSI 0.20 0.70 0.77 PAPAYA 0.13 0.12 0.14 POMELO 0.06 0.05 0.05 DURIAN 0.54 0.42 0.44 MANGOSTEEN 0.02 0.01 0.01

3.58 1.18 2.53 0.37 0.07 0.02 0.22 0.01

3.59 1.15 2.64 0.35 0.07 0.02 0.25 0.01

3.53 1.15 2.66 0.34 0.06 0.02 0.30 0.01

3.52 1.14 2.43 0.32 0.06 0.02 0.29 0.01

3.85 1.12 2.41 0.35 0.07 0.02 0.33 0.01

4.00 1.11 2.17 0.33 0.07 0.02 0.33 0.00

4.21 1.17 2.31 0.32 0.07 0.02 0.47 0.00

4.71 1.23 1.92 0.31 0.07 0.02 0.32 0.00

3.71 1.17 2.45 0.32 0.07 0.02 0.29 0.01

7.30 2.41 5.15 0.75 0.14 0.05 0.45 0.01

7.49 2.41 5.51 0.73 0.14 0.05 0.51 0.01

7.44 2.43 5.61 0.71 0.14 0.05 0.63 0.01

7.40 2.39 5.10 0.67 0.13 0.04 0.61 0.01

8.21 2.40 5.14 0.75 0.14 0.04 0.70 0.01

8.46 2.35 4.59 0.70 0.15 0.04 0.69 0.01

8.84 2.45 4.84 0.68 0.15 0.04 0.99 0.01

9.87 2.58 4.02 0.65 0.16 0.03 0.67 0.00

7.67 2.41 5.06 0.66 0.14 0.05 0.60 0.01

(Source: BAS, 2009.)

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Annex 2. Updated average costs and returns of durian production (in PhP/Ha), 1998-2008.
ITEM CASH COST Fertilizer Organic Inorganic Pesticides Solid Liquid Other material inputs Hired labor Land tax Land rental Transportation of inputs Fuel and oil Food expense Repairs 1998 10,923 358 4,292 514 20 494 6 2,716 979 639 444 4 304 667 1999 10,606 321 3,846 574 22 552 5 2,918 989 477 474 4 318 680 2000 11,631 345 4,140 591 23 568 5 2,945 999 1,028 544 5 323 706 2001 12,237 411 4,931 615 24 591 6 2,947 1,009 621 607 5 338 747 2002 12,423 406 4,863 624 24 600 6 3,043 1,019 741 613 5 345 758 2003 13,921 507 6,077 625 24 601 7 3,195 1,029 724 634 6 353 764 2004 16,453 686 8,223 627 24 603 9 3,332 1,039 619 714 7 375 822 2005 18,942 853 10,228 626 24 602 11 3,526 1,049 513 845 8 399 884 2006 19,253 848 10,160 597 23 574 11 3,674 1,059 591 952 9 421 931 2007R 20,023 900 10,782 568 22 546 12 3,819 1,070 510 957 9 435 961 2008P 25,997 1,632 15,639 547 21 526 19 3,866 1,081 611 1,059 11 494 1,038

NON-CASH COST Hired labor (paid in kind) Landlord's share Harvester's share IMPUTED COST Operator/family labor Exchange labor Depreciation

37,606 14,969 416 22,221 11,833 2,679 170 524

28,750 16,081 310 12,359 10,232 2,878 182 576

38,719 16,234 668 21,817 16,582 2,903 184 634

26,764 16,240 403 10,121 12,204 2,904 184 697 1,426 6,993 51,205

30,456 16,769 481 13,206 13,736 3,002 190 767 1,431 8,346 56,615

32,305 17,374 470 14,461 14,014 3,152 200 844 1,666 8,152 60,240

29,785 18,118 402 11,265 13,453 3,287 208 928 2,060 6,970 59,691

29,701 19,172 333 10,196 12,940 3,478 220 1,021 2,439 5,782 61,583

30,928 19,979 383 10,566 14,081 3,625 230 1,123 2,446 6,657 64,262

33,668 20,766 330 12,572 13,554 3,767 239 1,235 2,573 5,740 67,245

31,293 21,023 395 9,875 15,763 3,814 242 1,359 3,472 6,876 73,053

Interest on operating capital 1,262 1,226 1,284 Rental value of owned land ALL COSTS 7,198 60,362 5,370 49,588 11,577 66,932

GROSS RETURNS

205,583 194,660 157,054 145,221 2.41 10.03

114,354 103,748 74,998 64,766 1.31 11.05

201,593 189,962 151,243 134,661 2.01 18.24

93,534 81,297 54,533 42,329 0.83 18.16 2,819 33.18

122,047 109,624 79,168 65,432 1.16 18.37 3,082 39.60

133,639 119,718 87,413 73,399 1.22 17.44 3,455 38.68

104,104

94,222

97,645

116,190

91,271

RETURNS ABOVE CASH COSTS 87,651 75,280 78,392 96,167 65,274 RETURNS ABOVE CASH AND NON-CASH COSTS 57,866 45,579 47,464 62,499 33,981 44,413 32,639 33,383 48,945 18,218 0.74 18.96 3,148 33.07 0.53 17.93 3,435 27.43 0.52 20.78 3,092 31.58 0.73 15.76 4,267 27.23 0.25 26.11 2,798 32.62

NET RETURNS

NET PROFIT-COST RATIO

Cost per kilogram (P)

Yield per hectare (kg) 6,020 4,488 3,670 Farmgate price (peso/kg) 34.15 25.48 54.93 R - Revised estimates, P - Preliminary estimates

(Source: BAS, 2009) 24

Annex 3. Case report on Rosario Farms. Farm Name: Sector: Principal Products and Services: Interviewee/s: Rosario Farms Fresh and processed fruits Fresh and processed durian Severino Belviz (Durian Council Chairman), Emmanuel Belviz and Mary Grace Belviz Agbisit Subd., Calinan, Davao City SADP Team June 08, 2009

Address: Interviewer: Date:

Nature of Business: Farm size:

Family Business 30 ha durian plantation (Total of 50 hectares; 20 ha planted with other fruit trees and vegetables) 156 durian trees/hectare

Year Started: Durian Varieties:

1988 Chanee and Monthong (Thailand) Arancillo, Kob (Cob), Puyat, Kimbangan D 101, D24, Duyaya (Reg. No. PSB 99-DR-06), Sulit (Reg. No. PSB 00-DR-07), Nanam (Reg. No. PSB 00-DR-08)

Peak of Harvest and Processing: High Demand: Annual Harvest Volume: Recovery rate: Variety for Processing:

Aug, Sep and Oct Dec, Jan, Mar, Apr, May 8-10 tons/hectare (good year) 30-40% Puyat

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Distribution:

- Davao Rosarios Fruit Stop Outlet (Bankerohan Public Market, Davao), Davao International Airport - Tacurong - General Santos City - Manila* - Visayas* *by order only

Processing Details: In the case of Davao, the popularity and profitability of durian attracted more growers. As a result, the market is flooded with durian during peak season. The surplus and high rate of perishability (short shelf-life) caused tremendous drop in prices. Rosario farms can reach about 20 percent surplus of unsold fresh fruit during peak season. To address this situation, the family resorted to processing fresh durian to minimally processed frozen durian which commands high price during off-season. Initially, this was a good strategy but it still cannot absorb the entire surplus. In 2001, product development of durian candies was started. Trial and error and innovative cooking methods were employed. In 2005, commercial production was started with starting volume of 500 - 1,000 packs of durian candy per month which now reaches 2,000-3,000 packs per month. Increasing competition in durian candy production pushed further developments. Other forms of products were made such as jam, tarts, dried durian ornament and ube candy. To acquire necessary technology on processing, Mary Grace Belviz, the fruit processing manager, attended seminars and acquired technical assistance from various government offices and private companies. Mechanization processes employed in durian processing involves use of carajay, cooker-mixer, molder and cutters. Hiring of employees on regular season requires 5 - 8 people and a cook. During peak season it reaches 15, most were wives or family members of farm workers and working students on shifting schedules. The pay depends on quantity output, usually they employ pakyaw system. Production quota is maintained with 800 -1,000 packs per week (3 mos. shelf life) or 120 packs per day. Durian sticks and cubes come in PhP 25/pack and PhP 50/pack packaging. Durian candy processing is assisted by DTI, DA and DOST. DTI provided technical assistance on Good Manufacturing Practices (GMP), DA with trainings on production, trade facts and market promotions, DOST through technical assistance for plant lay-out, product testing, food safety audit and labeling design. Also, assistance and semi-financing in the procurement of cooker mixer from DOST. Constraints and limitations on the processing business stem from limited access to laboratory food testing and packaging technology, which are too costly for cottage type business. Intervention of the government on accreditation of laboratories for complete (food) analysis was recommended. Likewise, establishment of incubation centers for processors.

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