The nation's banana glut has caused quite a stir. According to media reports over the last few days, there is also a glut of oranges and milkfish, leaving many farmers wondering when poor sales will perk up.
Slow sales for agricultural products is a serious problem year round. Its root cause is that over the years, government agencies responsible for agricultural policy have not devoted themselves to establishing a system for managing the transportation and sale of agricultural products that clearly distinguishes among the different kinds of produce. This has become especially apparent in recent years, during which time the government has simply purchased excess supply, fostering dependency on the government when business is bad. Either that or officials return to their old practice of making television appearances eating agricultural goods to temporarily appease farmers. However, these are only piecemeal measures which have no real long-term effect.
Other countries like the US, Canada, Japan and EU countries have adopted a supply management strategy to prevent surpluses from gutting prices. This strategy includes production management, market supply and exports.
When managing production output, Canada has an agricultural marketing association to regulate local production. For example, it regulates the number of chickens permitted at each egg farm, thereby controlling national egg production.
Taiwan also once had a system to restrict production, during the 1960s and 1970s, when the nation exported mushrooms to Europe. Farms were only allowed to produce a certain quantity of mushrooms per ping (3.3m2) of land.
Another example was when the former Taiwan Provincial Tobacco and Wine Monopoly Bureau controlled tobacco production by putting quotas on the prices of different grades of tobacco and land used for tobacco cultivation. However, agricultural administration agencies have not continued to use these successful models to manage production and sale of other agricultural products. Its success came from a contracted production system between producers and distributors. This has been successfully adopted by large companies such as the Taiwan branch of Thai poultry conglomerate Charoen Pokphand Enterprise's in its successful application of contract farming, under which it buys products from local farms and markets them itself.
As for regulating market supply, the success of the US government's directives for agricultural product marketing is a model example. These directives adopt standards for market quantity, and include the following measures.
First, transport bans on specified holidays. Just as butchers in Taiwan are forbidden to slaughter pigs on the 15th day of each lunar month, the US government bans transport of agricultural products from the place of production to markets during the Christmas and New Year's holidays.
Second, the processing of surplus produce: the directive regulating the transportation and sale of agricultural goods primarily focuses on classification and standardization. That is, only produce meeting certain criteria can be brought to the marketplace, while other produce will be stored in freezers for processing later. In Taiwan, processing is only considered at times of production surplus -- for example, during winter -- while US regulation means that a certain amount of agricultural produce will always be set aside for processing.
Third, there is seasonal storage: Just like in Taiwan, the harvest season for sweet onions grown in the US state of Georgia begins in mid-April and ends in mid-June. Sweet onion growers usually begin to store their harvest at the end of May and put them up for sale during the Christmas holiday. This allows them to avoid underpricing their produce during the harvest season and raise the prices after the storage period.
Fourth, the adoption of biotechnology to delay harvest, which in the US has been particularly successful in growing apples.
The successful implementation of these transport regulations depends on a number of preconditions. They require the existence of a good cooperative association production and marketing committee as well as a concentrated, complete production and marketing plan within each area of production. The main characteristic is that local growers and distributors jointly direct and put up the funds for the operation of the regulations. The US Department of Agriculture and state governments are only responsible for supervising the system and do not provide any financial aid. At present, a large proportion of fruit, vegetables and nuts in use are distributed under this system. The Sunkist oranges and Washington apples that the Taiwanese are so familiar with also rely on the successful operation of this system.
Taiwan's bananas, oranges and milkfish fulfill the requirement of being concentrated in a certain production area. However, whether Taiwan has good production or distribution cooperative associations, not to mention a good distribution program, is still an open question. In fact, farmers' associations can no longer direct operations to the same extent they used to. Agricultural cooperatives in Taiwan are still regulated by the Cooperative Society Law (合作社法) which defines them as non-profitable organizations.
The farmer's associations and cooperatives that used to be the main force behind marketing and distribution in the past are now powerless when faced with slow sales. Instead, they expect the government to purchase their surplus yields or subsidize their losses. The Taiwan Provincial Fruit Marketing Cooperative, which used to excel in helping Taiwanese farmers export fruit, in particular bananas to Japan, now seem incapable of dealing with the surplus issue.
I hope that the government's agricultural agencies would be able to meet slow sales by looking to past successful production and distribution systems, such as contract and export management. They should also consider the special character of domestic agricultural production and marketing organizations, such as farmers' associations and cooperatives, and discuss distribution mechanisms for agricultural produce such as the Canadian agricultural marketing organization and the US' transport directive in order to reinvigorate Taiwan's agricultural producers and distributors.
I hope that by this time next year, we will no longer see government officials eating bananas on TV or civil servants being forced to buy bananas.
Huang Wan-tran is a professor in the department of Logistics and Management at the Chungchou Institute of Technology and the institute's academic vice president.
Translated by Marc Langer, Daniel Cheng and Perry Svensson
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