Bananas and Food Security - Bioversity International

Asie/Pacifique - Asia/Pacific : J.M. Yorobe
The marketing costs include only the cash costs incurred by the middlemen in
loading, unloading, transport and boat fares for those selling in Metro Manila, plus
packaging materials, ripening agents and stall rent. For all banana types, marketing
costs were high for assembler-shippers and ASWRs due to expenses incurred in the
transport of the product to Metro Manila. For assembler-shippers buying Saba from
farmers and selling to wholesaler-retailers, marketing costs amounted to PHP15.97 per
100 fingers, PHP2.03 lower than selling to retailers. Wholesaler-retailers and retailers
had lower costs, as expenses were limited to hauling and packaging.
For all banana types, profit was larger for wholesalers-retailers and retailers than for
other traders. Retailers selling to consumers can realise profit as much as PHP67.00 per
100 fingers. The high rate of profitability at this level compensates for the higher risks
assumed due to over-ripening and wastage. It should be noted that these traders
reportedly incurred the highest product losses. While profitability was modest for AS and
ASWR, the amount excludes the cash earned through the ”five-five” counting method
which could generate PHP24 additional profit per 100 fingers.
Marketing efficiency
Although signs of monopolistic pricing were not apparent as no small group of farmers or
traders exercised control over the banana supply, other forms of market exploitation
were observed that may lead to some degree of inefficiency in the marketing system. In
general, farmers are free to sell to any buyer although some continue to patronise a few
middlemen for reasons of good relations and better terms and conditions of sale. The
hierarchical structure among traders and between farmers and traders tied by credit
does not reflect any exercise of monopoly power but rather facilitates the transactions
and ensures that buyers obtain adequate volumes of bananas.
While these observations remain consistent with the notion of perfect competition,
some practices exist that can reduce the overall efficiency with which bananas are
marketed in the area. Grading is not properly standardised and relies heavily on the
judgement of the buyer. This puts farmers and other traders at a disadvantage. The use of
the “five-five” counting method has been widely criticised as substantial profits are made
by traders selling to wholesaler-retailers and retailers. Moreover, price differentials were
exceptionally high for those whose marketing costs were least, with margins way beyond
the level of costs incurred. While traders exploit economies of scale in transportation
and increase profit through larger traded volume, costs remain high due to the bad
condition of roads and the non-existent post-harvest facilities in the area.
To determine the pricing and spatial efficiency of the banana market, a model
developed by Ravallion (1986) was used for testing market integration:
P ft =a 1 +a 2 P f t-1 +a 3 (P wt - P wt-1 ) + a 4 P wt-1 +a 5 X + ε t
where:
P ft = banana farm price at time t;
P wt = banana wholesale price in the reference market (Metro Manila) at time t
X = area devoted to bananas (Mindoro Oriental)
ε t = error term
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