STRUCTURE, CONDUCT AND PERFORMANCE OF THE MARKETING SYSTEMS MARGINS AND SEASONAL PRICE VARIATIONS OF SELECTED FRUIT AND

VEGETABLES IN BALOCHISTAN, NWFP, NORTHERN AREAS AND AZAD JAMMU AND KASHMIR

Social Sciences Division

Dr. Muhammad Sharif

PAKISTAN AGRICULTURAL RESEARCH COUNCIL Islamabad

FOREWORD
It is a famous proverb that a successful farmer has one eye on his plow and other on the market. This implies that marketing carries equal importance as the production process does. In Pakistan, right from independence, there are strong public interventions in the marketing of staple food grains while laissez faire type of approach has been adopted in the marketing of fruit, vegetables and live animals. However, gradually it was learnt that horticultural crops, for which the Pakistans diverse agro climatic are well suited, can play an important role in achieving high agriculture sector growth rates along with favourable employment and income. Horticultural crops play an instrumental role in Pakistans economy by improving the income of the rural people. Cultivation of these crops is labor intensive and as such they generate lot of employment opportunities for the rural population. On the other hand, Pakistan enjoys a good position in the production of many horticultural crops like 4th in dates, 5th in mangoes and 11th in citrus. Moreover, in future the demand for high value agricultural products is expected to increase at quite higher rates induced by various factors like population growth, rising urbanization, developments in food processing and preservation technologies, high income elasticities of these products and better connectivity of producers with distant markets and consumers. Very few studies have been conducted on fruit and vegetables marketing in Pakistan and are therefore inadequate to guide public policy. Moreover these studies covered only large provinces like Sindh and Punjab. The information on structure, conduct and performance of various fruit and vegetables was generated by PARC for Punjab and Sindh provinces during early 2000s but no such information was available for NWFP and Balochistan provinces, Northern Areas and AJK. Gathering such information for these areas would result in complete countrywide information on marketing of fruit and vegetables in Pakistan. The study in hand broadly confirmed the earlier findings on marketing of fruit and vegetables in other provinces of Pakistan. This study explored some useful findings e.g. (i) Fruit growers usually avoid self marketing, as they seriously lack in marketing information and linkages with other markets. (ii) Study area markets are poorly interlinked with other markets of all scale. Similarly, (iii) traders do not care much for product quality from nutrition and freshness perspectives. Moreover, the study concluded that minimizing transport costs, improvements in packing, fast disposal of commodities, easy access to formal credit sources and transformation of market information are vital for efficient marketing system. This study identified some technical and socioeconomic constraints to fruit and vegetables marketing in the study area. Some useful suggestions are proposed before closing the document to address the issues involved in the existing production, marketing and distribution for horticultural crops in the country. It is hoped that this report will be useful reference point and inspiration for researchers, educationists, policy makers and everyone involved in the development of this sector. Dr. Muhammad Sharif and the group of scientists who worked under his leadership did a tremendous job for assessing structure, conduct and performance of marketing system of fruit and vegetables in the neglected ecologies of the country. This work has also generated valuable information and needs acclamation. Dr. Iftikhar Ahmad Chairman PARC ii

PREFACE
Horticulture is a vital sub sector of Pakistan agriculture. It is an important source of livelihood for a substantial segment of rural and urban dwellers and also valuable source of foreign exchange earnings for the country. Demand of horticultural products, especially of fruit and vegetables, has recently increased due to rising income levels, developments in transport and roads infrastructure, changing rural-urban population composition and penetration of global food chains in developing countries. In policy circles, policy planners and development practitioners also giving special attention to horticultural crops for making it an effective source of growth in the agriculture sector of Pakistan. The present study was designed to complete countrywide information on structure, conduct and performance of horticultural crops in the country. Hence, a detailed investigation of the efficiency of the marketing system and quantify the marketing margins of producers and other market intermediaries as well as to suggest ways to improve share of horticulture growers in the retail price to enhance income of the growers of Balochistan, NWFP, Northern areas and Azad Jammu & Kashmir. The markets, market actors, marketing channels and market intermediaries are quite competitive and efficient in delivering services in relation to volume of produced available to them in their respective areas, as well as in terms of price and non-price competition at the farm level between contractors and producers. Farmers generally lack in capital and/or access to credit, lack of knowledge and expertise in marketing lead growers to rely on the contract-harvesting system in fruit whereas vegetables marketing is preferably carried out by self-marketing. It was observed that the higher competition was among the buyers and seller, the determined price was close to the optimum price. The fruit and vegetables commission agents with in a market do have intense competition for capturing business. Besides, offering better price to the stakeholders, the dealing reputation of the intermediary matters a lot in creating business competition and price determination. Perishable and short duration commodities gave more shares to producers/farmers in consumer price and vice versa. So marketing efficiency does links with producers and consumers satisfaction. Similarly, an intermediary if get greater share in consumer price may invest more. High prices directly linked with higher transportation cost and quality and freshness is directly linked with packing and packaging. I hope this exercise will provide useful complementary information on structure, conduct and performance of the existing marketing system of selected fruit and vegetables in the study area to all the stakeholders of the horticulture sector. This research report should be of a great significance to anyone interested in how horticulture sector can be developed for resource poor and food insecure farming communities in the country.

Dr. Iftikhar Ahamd Director General, NARC

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ACKNOWLEDGEMENT
The author has initiated the efforts to achieve the goals of the project. However, it would not have been possible without the support and help of many individuals working in the satellite institutes of Social Science Division, PARC. The author wishes to express his sincere thanks to the team of social scientists of National Agriculture Research Center, Islamabad, Technology Transfer institutes at Balochistan, NWFP, Northern Areas and Azad Jammu & Kashmir for their help at various stages of literature collection and review, conducting field work for generating first hand information on fruits and vegetables marketing systems in Balochistan, NWFP, Northern Areas and Azad Jammu & Kashmir. Dr. Waqar Malik Ex. Member Social Sciences (PARC) also deserves special gratitude and thanks for his encouragement, motivation, valuable comments and suggestions during planning and implementation. I wish to express profound indebtedness to Dr. Iftikhar Ahmad, Director General, NARC for providing patronage, inspiration, and guidance in conducting and accomplishment of research study on structure, conduct and performance of marketing system margins and seasonal price variation of selected fruit and vegetables in Balochistan, NWFP, Northern Areas and Azad Jammu & Kashmir. I deeply appreciate the technical support provided by Dr. Umar Farooq, CSO, SSD; Nadeem Akmal, SSO, NARC; and Sajid Ali, SO, SSD in synthesizing this report. I am highly indebted to Nadeem Akmal, Husnain Shah and Waqar Akhtar from SSI, NARC; Syed Nisar Ali Shah, Muhammad Ishaq and Abdul Hassan from Technology Transfer Institute, Tarnab, Peshawar; and Ghulam Sadiq Afridi from Technology Transfer Institute, Azad Jammu & Kashmir for their relentless efforts in conducting field work, data entry and analysis for this study. Cooperation from fruit and vegetables growers, contractors, commission agents, wholesalers, retailers, exporters and consumers involved in the assembly, wholesale and terminal markets in Balochistan, NWFP, Northern Areas and Azad Jammu & Kashmir are also acknowledged. This study would have not been completed without the guidance of Dr. Iftikhar Ahmad, Chairman PARC who has provided an opportunity to work on such an important national endeavor.

The Author

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ACRONYMS
ADP AEZs AJK C.A. DMMA FFS GDP GoP KARINA MARS MMA NAs NGOs NWFP PARC PCO PHDEB R&D SCP WTO Asian Development Bank Agri. Ecological Zones Azad Jammu & Kashmir Commission Agent Deconstructing Marketing Margin Analysis Farmer Field Schools Gross Domestic Product Government of Pakistan Karakorum Agricultural Research Institute for Northern Areas Mountain Agriculture Research System Marketing Margin Analysis Northern Areas Non-Governmental Organizations North West Frontier Province Pakistan Agricultural Research Council Public Call Office Pakistan Horticulture Development and Export Board Research & Development Structure- Conduct- Performance World Trade Organization

TABLE OF CONTENTS
FOREWORD .................................................................................................................................. ii PREFACE ...................................................................................................................................... iii ACKNOWLEDGEMENT ............................................................................................................. iv ACRONYMS .................................................................................................................................. v LIST OF TABLES .......................................................................................................................... x LIST OF FIGURES ...................................................................................................................... xii CHAPTER 1 ................................................................................................................................... 1 INTRODUCTION .......................................................................................................................... 1 1.1. Background ......................................................................................................................... 1 1.2. Research Problem ............................................................................................................... 1 1.3. Objectives ........................................................................................................................... 4 1.4. Organization of the Report.................................................................................................. 4 CHAPTER 2 ................................................................................................................................... 5 THEORETICAL FRAMEWORK AND METHODOLOGY ........................................................ 5 2.1 Introduction ......................................................................................................................... 5 2.1.1 Marketing theory..................................................................................................... 5 2.2 Role of Marketing and Markets .......................................................................................... 6 2.3 Classification of Markets .................................................................................................... 7 2.3.1 Assembly market .................................................................................................... 7 2.3.2 Wholesale markets .................................................................................................. 7 2.3.3 Terminal market ...................................................................................................... 7 2.3.4 Marketing efficiency analysis ................................................................................. 8 2.4 Review of Empirical Research............................................................................................ 8 2.4.1 Review of domestic marketing research on horticultural crops .............................. 8 2.5 Structure, Conduct and Performance (SCP) Model .......................................................... 11 2.6 Research Design and Implementation .............................................................................. 15 2.6.1 Survey design ........................................................................................................ 15 2.6.2 Fieldwork .............................................................................................................. 16 2.6.3 Longitudinal data collection ................................................................................. 16 2.6.4 Cross sectional data collection .............................................................................. 17 2.6.5 Producers survey.................................................................................................. 17 2.6.6 Market survey ....................................................................................................... 17 2.7 Analytical Techniques ...................................................................................................... 17 2.7.1 Structure, conduct and performance (SCP) model used for this study ................. 18 2.7.2 Working Structure, conduct and performance (SCP) model for Pakistan ............ 18 2.7.3 Market efficiency .................................................................................................. 21 2.7.3.1 Marketing marginal analysis ........................................................................... 21 2.7.3.2 Absolute margin ............................................................................................... 21 2.7.3.3 Marketing costs................................................................................................ 22 2.7.3.4 Net margin ....................................................................................................... 23 2.7.3.5 Deconstruction of marketing marginal analysis ............................................. 23 CHAPTER 3 ................................................................................................................................. 24 CHARACTERISTICS OF SAMPLE MARKET INTERMEDIARIES ....................................... 24 3.1 Introduction ....................................................................................................................... 24 vi

3.2 Characteristics of Sample Fruit & Vegetable Growers and their Farms .......................... 24 3.3 Characteristics of Sample Farms, Market Access, and Information Sources for Sampled Fruit and Vegetable Growers ........................................................................................................ 24 3.4 Characteristics of Sample Fruit and Vegetable Contractors/Beoparies ............................ 30 3.5 Characteristics of Sampled Fruit and Vegetables Commission Agents............................ 33 3.6 Characteristics of Sampled Fruit and Vegetables Wholesalers ........................................ 35 3.7 Characteristics of Sampled Fruit and Vegetables Retailers .............................................. 37 3.8 Characteristics of Sampled Fruit and Vegetables Consumer ............................................ 40 3.9 Conclusion ........................................................................................................................ 40 CHAPTER 4 ................................................................................................................................. 41 SUPPLY AND DEMAND FOR SELECTED FRUIT ................................................................. 41 AND VEGETABLES ................................................................................................................... 41 4.1. Introduction ....................................................................................................................... 41 4.2. The Condition of Nature and Economy ............................................................................ 41 4.3. Basic Facilities in the Study Area ..................................................................................... 42 4.3.1. Research and development ................................................................................... 42 4.3.2. Processing and refrigeration ................................................................................. 43 4.3.3. Transportation (highway and air transportation) .................................................. 43 4.3.4. Market and communication .................................................................................. 44 4.3.5. Institutional constraints ......................................................................................... 44 4.4. Supply of Selected Fruit and Vegetables in the Study Area ............................................. 45 4.4.1. Supply of selected fruit in the study area .............................................................. 46 4.5. Supply of Selected Vegetables in the Study Area ............................................................ 47 4.6. Demand of Selected Fruit and Vegetables in the Study Area ........................................... 47 4.7. Public Policy ..................................................................................................................... 49 4.7.1. Influence of WTO ................................................................................................. 49 4.7.2. Government policy................................................................................................ 49 4.7.3. Policy and regulatory constraints .......................................................................... 49 4.8. Conclusions ....................................................................................................................... 50 CHAPTER 5 ................................................................................................................................. 51 MARKET STRUCTURE ............................................................................................................. 51 5.1. Introduction ....................................................................................................................... 51 5.2. Market Types .................................................................................................................... 51 5.2.1. Road side markets ............................................................................................................. 51 5.2.2. Assembly markets ............................................................................................................. 51 5.2.3. Wholesale markets ............................................................................................................ 52 5.2.4. Terminal markets .............................................................................................................. 53 5.3. Market Actors ................................................................................................................... 54 5.4. Marketing Channel............................................................................................................ 60 5.5. Relationship between Market Intermediaries in Marketing Channels in the Study Areas 65 5.6. Barriers to Entry in the Market ......................................................................................... 66 5.7. Export of Fruit and Vegetables ......................................................................................... 67 5.8. Conclusion ........................................................................................................................ 67 CHAPTER 6 ................................................................................................................................. 69 MARKET CONDUCT ................................................................................................................. 69 6.1. Introduction ....................................................................................................................... 69 vii

6.2. 6.3. 6.4. 6.5. 6.6.

Research and Development/Development of New Products ............................................ 69 Investment in New Technology ........................................................................................ 70 Behavior of Traders .......................................................................................................... 71 Competition of Traders in the Market .............................................................................. 73 Formation of Prices among Traders .................................................................................. 75 6.6.1. Formation of prices among traders of markets in Balochistan ............................. 75 6.6.2. Formation of prices among traders of markets in NWFP ..................................... 75 6.6.3. Formation of prices among traders of markets in Northern Areas ....................... 76 6.6.4. Formation of prices among traders of markets in AJK ......................................... 76 6.7. Marketing Strategies ......................................................................................................... 77 6.7.1. Marketing strategies in Balochistan ...................................................................... 77 6.7.2. Marketing strategies in NWFP.............................................................................. 78 6.7.3. Marketing strategies in Northern Areas and AJK ................................................. 78 6.8. Conclusions ....................................................................................................................... 78 CHAPTER 7 ................................................................................................................................. 81 MARKET PERFORMANCE ....................................................................................................... 81 7.1. Introduction ....................................................................................................................... 81 7.2. Seasonal Price Fluctuations .............................................................................................. 81 7.2.1. Seasonal price fluctuations of selected fruit in the study area .............................. 81 7.2.2. Seasonal price fluctuations of selected vegetables in the study area .................... 83 7.3. Market Efficiency ............................................................................................................. 85 7.3.1. Marketing marginal analysis (MMA) of selected fruit ......................................... 85 7.3.2. Deconstruction of marketing marginal analysis (DMMA) of selected fruit ......... 87 7.3.3. Marketing marginal analysis (MMA) of selected vegetables ............................... 88 7.3.4. Deconstruction of marketing marginal analysis (DMMA) of selected vegetables 91 7.4. Market Effectiveness ........................................................................................................ 91 7.4.1. Geo-figureical distribution .................................................................................... 91 7.4.2. Consumers evaluation to fruit and vegetables quality ......................................... 94 7.4.3. Information services.............................................................................................. 94 7.4.4. Credit services ....................................................................................................... 95 7.5. Conclusion ........................................................................................................................ 95 CHAPTER 8 ................................................................................................................................. 97 SUMMARY, CONSTRAINTS AND STRATEGIES .................................................................. 97 8.1. Summary of Findings ........................................................................................................ 97 8.1.1. Market structure .................................................................................................... 97 8.1.2. Market conduct ..................................................................................................... 98 8.1.3. Market performance .............................................................................................. 99 8.2. Horticultural Development Constraints .......................................................................... 100 8.2.1. Production constraints of horticulture development ........................................... 100 8.2.2. Post-harvest handling constraints of horticultural development ......................... 101 8.2.3. Domestic marketing constraints of horticultural development ........................... 101 8.2.4. Institutional constraints of horticultural development ........................................ 102 8.2.5. Policy and regulatory constraints of horticultural development ......................... 102 8.2.6. Export constraints of horticultural development................................................. 103 8.3. Horticultural Development Strategies............................................................................. 104

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8.3.1. Reorientation of subsistence horticulture to sustainable commercial horticultural farming ............................................................................................................................ 104 8.3.2. Re-orientation of research and development services ........................................ 105 8.3.3. Reform of agricultural education, research and extension.................................. 105 8.3.4. Improving efficiency, productivity and competitiveness.................................... 105 8.3.5. Encouraging public and private partnership and private sector investment ....... 106 8.3.6. Capacity building of chain stakeholders of horticulture sector .......................... 107 8.3.7. Policy and regulatory framework for the promotion of horticulture sector ........ 107 8.4. Suggestions for Further Research ................................................................................... 109 8.4.1. Investment appraisal analysis of fruit and vegetables products industries ......... 109 8.4.2. How efficient and equitable fruit and vegetables value chains are with respect to competitiveness, inclusiveness, scalability and sustainability ........................................ 109 8.4.3. Impact of WTO on fruit and vegetables export .................................................. 109 REFERENCES ........................................................................................................................... 110 APPENDIX -1 ............................................................................................................................ 115 APPENDIX -2 ............................................................................................................................ 116

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LIST OF TABLES
Table 2.1: Marketing channels of different fruit and vegetables in Pakistan ................................. 9 Table 2.2: Distribution of marketing margins of market intermediaries in fruit & vegetables .... 10 Table 2.3: Elements of structure, conduct and performance ........................................................ 14 Table 2.4: Modified elements of structure and performance ........................................................ 14 Table 2.5: Selected fruit and vegetables on the bases of acreage in the study area ...................... 16 Table 2.6: Distribution of sample size for fruit marketing in the study area ................................ 16 Table 2.7: Distribution of sample size for vegetables marketing in the study area ...................... 16 Table 2.8: Characterization of existing SCP marketing system for selected fruit in Pakistan ..... 19 Table 2.9: Characterization of existing SCP marketing system for selected vegetables .............. 20 Table 2.10: Modified elements of structure, conduct and performance in sample areas .............. 21 Table 3.1: Socio-economic profile of the sample selected fruit growers ..................................... 25 Table 3.2: Socio-economic profile of the sample selected vegetables growers ........................... 26 Table 3.3: Landholding, market access, power and information source for fruit growers ........... 27 Table 3.4: Land holding, market access, power and information source for vegetables growers 29 Table 3.5: Characteristics of sample fruit contractors in the study area ....................................... 31 Table 3.6: Socio-economic characteristics of sample vegetables beoparies ................................. 32 Table 3.7: Socio-economic characteristics of sample fruit commission agents ........................... 33 Table 3.8: Socio-economic characteristics of sample vegetables commission agents ................. 34 Table 3.9: Socio-economic characteristics of sample fruit wholesalers ....................................... 36 Table 3.10: Socio-economic characteristics of sample vegetables wholesalers ........................... 37 Table 3.11: Characteristics of the sample selected fruit retailer ................................................... 38 Table 3.12: Characteristics of the sample selected vegetables retailer ......................................... 39 Table 3.13: Characteristics of the sampled fruit and vegetables consumers ................................ 40 Table 4.1: The condition of nature and economy in the study area .............................................. 41 Table 4.2: Institutional constraints emerging from lack of basic facilities in the study area ....... 45 Table 4.2: Institutional constraints emerging from lack of basic facilities in the study area ....... 45 Table 4.3: Areas under different fruit tree in the study area (000 hect and 000 tons) ............... 46 Table 4.4: Areas under different fruit tree in the study area (hectares and tons) .......................... 47 Table 4.5: The condition of nature and economy in the study area .............................................. 48 Table 5.1: Market types for selected fruit (% farmers) in the study area ..................................... 53 Table 5.2: Market types for selected vegetables (% farmers) in the study area ........................... 54 Table 5.3: Factors affecting low productivity of fruit and vegetables in the study area............... 55 Table 5.4: Fruit selling systems practiced by sample farmers (% farmers) in the study area ...... 56 Table 5.5: Vegetables selling systems practiced by sample farmers (% farmers) ........................ 56 Table 5.6: Post-harvest handling issues of selected fruit and vegetables in the study area .......... 59 Table 5.7: Issues of domestic marketing selected fruit and vegetables in the study area ............. 60 Table 5.8: Apple Marketing Channels in study area..................................................................... 61 Table 5.9: Grapes, Citrus, Plum, Cherry, Walnut and Mango Marketing Channels .................... 62 Table 5.10: Apricot Marketing Channels in Balochistan and Northern Areas. ............................ 63 Table 5.11: Tomato, Potato and Peas Marketing Channels in study area. .................................... 63 Table 5.12: Lady Finger and Onion Marketing Channels in study area ....................................... 64 Table 5.13: Carrot, Cauliflower and Brinjal Marketing Channels in study area .......................... 64 Table 5.14: Barriers to entry of intermediaries in the market in study area ................................. 66 x

Table 6.1: Average quantities of fruit dealt during the season by pre-harvest contractors .......... 72 Table 6.2: Average quantities of vegetables dealt during season by pre-harvest contractors ...... 72 Table 6.3: Mean quantities of fruit traded by sample commission agent (t/season) ............... 72 Table 6.4: Mean quantities of vegetables traded by sample commission agent (t/season) ....... 72 Table 6.5: Mean quantities of fruit traded by sample wholesaler (t/season) .......................... 73 Table 6.6: Mean quantities of vegetables traded by sample wholesaler (t/season).................. 73 Table 6.7: Mean quantities of fruit traded by sample retailers (t/season) ............................... 73 Table 6.8: Mean quantities of vegetables traded by sample retailers (t/season) ....................... 73 Table 6.9: Market competition of among fruit and vegetables market intermediaries ................. 74 Table 6.10: Factors affecting price determination (% role) for different fruit in NAs and AJK .. 74 Table 6.11: Price determinations of fruit growers (%) ................................................................. 76 Table 6.12: Price determinants between growers and fruit contractors ... number (%) ................ 77 Table 7.1: Mean sale price (Rs./kg) of fruit at different intermediary levels by season ............... 82 Table 7.2: Mean sale price (Rs./kg) of vegetables at various intermediary levels by season ....... 84 Table 7.3: Profit (Rs./kg) distribution among market intermediaries for selected fruit ............... 86 Table 7.4: Itemized marketing margin by different market intermediaries for fruit .................... 89 Table 7.4: Itemized marketing margin by different market intermediaries for fruit .................... 89 Table 7.5: Profit (Rs/kg) distribution among market intermediaries for vegetables .................... 90 Table 7.6: Itemized marketing margins of market intermediaries for selected vegetables .......... 93 Table 7.7: Consumers perceptions about quality and price for fruit and vegetables ................... 94

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LIST OF FIGURES
Figure 2.1: Two different SCP frameworks .................................................................................. 11 Figure 2.2: Structure Conduct Performance Framework .............................................................. 13 Figure 2.3: Structure Conduct Performance Framework .............................................................. 18 Figure 5.1: Relationship between traders and flow of products, funds and information .............. 66

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CHAPTER 1 INTRODUCTION
1.1. Background

Notwithstanding its declining share in GDP, agriculture is still the single largest sector, contributing 21 percent to GDP and employing 44 percent of the workforce (GoP, 2008). The sector is even more vital from perspective of creating employment opportunities, particularly in the rural communities, where an estimated 95 percent of the total employed population is attached directly or indirectly to agriculture (ADB, 2004). Government of Pakistan has declared Horticulture as one of the priority areas for the future development in agriculture sector, not only because the demand for fresh produce, both in domestic and international markets is increasing, but also it offers high returns and multiple job opportunities compared to other competing crops (PHDEB, 2007). The area under fruit & vegetables (including potato) crops is about 1.212 million hectares, with fruit sharing almost 69% and vegetables 31% during 2006-07 (GoP, 2007). During the same year, country produced about 11.73 million tones of fruit and vegetables, in which fruit shared 6.011 million tons (51%) and vegetables (including potato) 5.720 million tons (49%). Horticultural crops contributed about 12.2% to the national agricultural GDP (PHDEB, 2007). Pakistan exported about 0.561 million tones of Fruit and vegetables produce (4.78%) during 2006-07 and earned foreign exchange of US$168.71 million (GoP, 2007). On a comparative basis the fruit trees are perennial and involve less management and labor, compared to vegetables, which are more intensive and require high labor and inputs. Pakistan produces about 11.73 million tones of fruit and vegetables, of which 20-40 percent goes waste (PHDEB, 2007).

1.2.

Research Problem

Research always begins from some problems or researchable issue (Sharif, 2004). The objective of a researcher is to find the the solution of the problem through the construction of a theory which may help solve the problem; for example, by explaining the unexpected, unexplained observations (Samad, 1990). In this context, the first step towards destination is to define and conceptualize the problem. This section begins with the importance of the research problem followed by the study objectives. There are growing concerns about the low productivity of horticultural crops in the country as compared to developed and developing countries, especially in comparison to our neighbors (PHDEB, 2007). In terms of production of horticultural crops, Pakistan stands at the positions of 4th in case of date, 13th in case of mango, 19th in case of citrus, 35th in case of apple, 32nd, 35th and 41st in case of potato, onion and tomato respectively. Yield gap ranges from 16 tones (mango) to 485 (tomato) tones per hectares. This signifies a need to identify the factors responsible for this low productivity. Therefore, one of the objectives of the study is to determine

the technical and socioeconomic constraints in the marketing system, which has an impact on the expansion of its production and marketing in Balochistan, NWFP, Northern Areas, and AJK. A typical marketing chain involves buyers (including harvesting contractors in fruit and local traders in grains and cotton), commission agents, wholesalers and retailers. Marketing of fruit and vegetables are carried out exclusively by private sector. It is commonly believed that these products are highly perishable in nature. The quality of these commodities begins to deteriorate in few moments after harvest and continues throughout the marketing process. The entire distribution process is geared towards rapid marketing. Generally, the producers share in consumers expenditure is not only low, but also fluctuates according to the commodity perishability and degree of collusion among marketing intermediaries (Iqbal, 1989). In fact, government has left marketing and export of horticultural products to the private sector. The distribution channel may vary from direct sale to consumers (which is rare) to a more complex market structure involving, producers, contract buyers, commission agents, wholesalers and retailers. The distribution channel gets more complicated when the wholesaler sells to another wholesaler or a processor and retailer to another retailer thus creating cost inefficiencies in the marketing system. In general farmers do not have bargaining power and thus their share in retail price is not only low but also fluctuates according to the commodity, its perishability and the degree of collusion among the marketing intermediaries (Khushk and Smith, 1996). In Pakistan, marketing of fruit and vegetables is becoming more important because quantity of these commodities is expanding as the urban population is growing. Increasing in international trade makes more complicated marketing systems. Marketing functions including grading, packing and information are important to facilitate exports. Processing is another issue associated with the exports of fruit and vegetables in the country. The problems of export marketing of horticultural products are different from the domestic ones. This is because products differ in size and degree of perishability. They need a high degree of professionalism and care during transport and require very precise packing and grading standards. Some of the fruit and vegetables which enter the international trade are citrus, mango, date, potato, chilies and onion, etc. They all require specific post-harvest treatments, types of packaging, phytosanitary treatments and care during transport. They all have unique market requirements in terms of maturity, size, color, taste, shape, and popularity of the variety (Khushk and Sheikh, 2004). The ground problems in the marketing of perishable products like fruit and vegetables are more serious, because: a) the conditions of the road and the design of the transport vehicles not conducive to the nature of product handled; b) intermediaries face different types of corruptions during commodities transport and their marketing; c) the general sanitary conditions in the markets are also very poor; d) packaging varies from jute bags to wooden crates, which are nonstandardized, unattractive, not re-useable and often difficult to handle; e) cold storage facilities are also very poor and affect quality of produce stored; f) common problems in cold storage are ammonia leakages, poor insulation, frequent power breakdown and use of untrained labour; and, g) no agency is involved in providing marketing outlook to different stakeholders, therefore, market intermediaries manage communicating market information by their own sources. Agricultural marketing research gained popularity with studies investigating the nature of market competition (Bateman, 1976). Efforts made to improve the standard of agricultural marketing 2

research led to empirical observations about the agricultural industry. The resulting analytical framework became known as "market structure research". Later (Bain, 1968) introduced research with analytical tools which gained popularity as "market research analysis". Specially, the structural approach centers on identifying market characteristics as a means of analyzing marketing efficiency. In such analysis, market structure determines market conduct and consequently, market performance (i.e., employing the structure-conduct-performance model (SCP), derived from industrial organization theory, in analyzing market performance). This school focuses on the behavior of functionally similar firms and the influence the horizontal relationships between these firms has on market performance (Scarborough and Kydd, 1992). The first and main element of these is market structure. It provides a base, which may be used to assess the performance of an agricultural marketing system. The main components of this framework are market "Structure", "Conduct" and "Performance". The review of literature revealed that in Pakistan, like other developing countries, marketing functions are performed in a traditional way and markets for agricultural products may not function efficiently (Sharif, 2004). There are generally great differences between prices paid by consumer and those received by producers (Toaha, 1974; Qureshi, 1974; Sattar et al. 1976; Siddiqui, 1977, 1979; Memon 1978; Khan 1980; and Mohy-ud-din, 1991). It is generally perceived that marketing agents exploit producers and consumers by charging a fixed and high margin on their investment (Ali, 2000). However, the perceptions might be false because: (i) marketing margins in the off-season are lower than margins in the peak season; (ii) price variability is generally lower at the retail or wholesale level than at the farm gate; (iii) correlation between prices paid by agents and marketing margins was found to be negative, implying that when agents pay higher prices, they have to reduce their margin, mainly by reducing their profit (Sharif, 2004). He further stated that these factors indicate that marketing agents do in fact adjust their margins, which helps to reduce price variation. However, no rigorous analysis is available on the rate of return on investment made by marketing agents in Balaochistan, NWFP, Northern Areas and AJK. Therefore, one of the objectives of the study is to quantify the market margins of producers and other market intermediaries; and assess ways and means to improve the producer's share and consumers surplus in the study areas. In addition, there are popular views among the economists of the country that there are some other problems, which may reduce the efficiency of the marketing systems (Sharif, 2004). These problems are: (i) the long chain of market intermediaries' results in high marketing cost; (ii) the inefficient information system; (iii) inadequate physical facilities; and (iv) the monopolistic power of a few traders. Therefore, there is a need to conduct detailed investigation to examine the efficiency of the marketing system and quantify the marketing margins of producers and other market intermediaries and suggest an appropriate way to improve the share of producers in the retail price to enhance the income of the growers of Balochistan, NWFP, Northern Areas, AJK. Detailed information is required to guide growers, consumers, market traders and policy makers. Information on marketing cost and margins is required to understand the role that price play. Producers and consumer price differentiation enhance income of the farmers and consumers and take care of their satisfaction.

1.3.
i. ii.

Objectives
To study the existing structure, conduct and performance of the marketing systems of selected fruit and vegetables in Balochistan, NWFP, Northern Areas, and AJK; To determine the technical and socioeconomic constraints in the marketing system, which have an impact on the expansion of its production and marketing in Balochistan, NWFP, Northern Areas, and AJK; To quantify the market margins of producers and other market intermediaries; and assess ways and means to improve the producer's share and consumers surplus in Balochistan, NWFP, Northern Areas, and AJK, and To develop policy recommendations for efficient marketing system to safeguard the interests of producers as well as consumers; and to enhance output and exports of fruit and vegetables in Balochistan, NWFP, Northern Areas, and AJK.

iii.

iv.

1.4.

Organization of the Report

The report is organized into eight chapters. Chapter-1 introduces the problem in hand wherein the importance of the study is outlined. Chapter-2 discusses theoretical and conceptual framework. The characteristics of sample intermediaries are covered in Chapter-3. The supply and demand for selected fruit and vegetables is delineated in chapter-4. The market structure for selected fruit and vegetables in the study area is discussed in chapter-5. Chapter-6 pertains to the market conduct for selected fruit and vegetables in the study area. The performance of market for selected fruit and vegetables in the study area is described in chapter 7. The summary of findings and recommendations in chapter-8 complete this report.

CHAPTER 2 THEORETICAL FRAMEWORK AND METHODOLOGY

2.1 Introduction

In this chapter, some of the basic concepts will be defined and subsequently review the relevant literature concerning the analysis of agricultural markets will be discussed. The second part of this chapter will present the methodology that will be applied to analyze the structure, conduct and performance of selected fruit and vegetables in Balochistan, NWFP, Northern Areas and AJK. 2.1.1 Marketing theory In empirical literature, numerous versions of the definition of marketing are available. Crosier (1975) reviewed more than 50 definitions of marketing. Variation in the definition of markets does not necessarily indicate differences in activities, but rather differences in view points (Eid, 1978). The definitions from Alexander (1960), Kotler (1988), Baker (1983), Kayanak (1986), Bartels (1986) and Bezvan (1953) are relatively more cited. However, the definition from Kohls and Uhls (1980) seems most appropriate in our context. They defined marketing as The series of activities involved in making available services and information which influence the desired level of production relative to market requirements, and the movement of product (or commodity) from the point of its production to the point of final consumption. Food and agricultural marketing means the movement of agricultural produce from the farm where it is produced to the consumer or manufacturer. This includes physical handling and transport, initial processing and packing to simplify handling and reduce wastage, grading and quality control to simplify sales transactions and meet different consumers requirements and holding over time to match concentrated harvest seasons with the continuing demand of consumers. Agricultural marketing also includes the marketing of agricultural inputs. It is important to recognize the overall role that marketing can play in a developing economy, for marketing per se can be regarded as a vital factor for development (Holton, 1953). Drucker (1958) points out that marketing promotes development by creating standards and encouraging the entrepreneurial spirit. Bartels (1986) also points out that consumer behaviour and attitudes can be changed by marketing techniques. The introduction of new marketing ideas, and the improvement in the presentation and quality of products, will raise consumer expectations and lead to further demand for even better and better products, along with improvements in packaging, retail facilities and so on. Producers are, in effect, forced into a competitive position to meet such demands. The pursuit of higher standards and the increases in demand have cumulative impacts. In the past, so many attempts have been made by the development economists to keep abreast of the producers/entrepreneur regarding the philosophy of markets and marketing systems but the credit goes to the father of Development Economics, Smith (1976) who opened a new era in 5

The wealth of Nations, by stating the theory of division of labor and thus inculcated the concept of specialization of human activities, the ability to mass produce and the need to exchange products and to develop the value of money mechanism to facilitate an exchange system. This concept has widened the range of economic activities in the form of processing, packing, storage, transportation, credit and advertisement etc. Advertisement is the crux of marketing or salesmanship, which was futile before 1900. The 1910-1920 was a decade of over-production witnessed by Europe and USA. Gluts of production posed new multi-dimensional challenges which helped in provoking new ideas how to market over-production to earn reasonable profit. Naturally, out-flow of other disciplines like packing, advertising, transportations and selling had become a pre-requisite condition. No doubt, this concept provided sound footing to verify the validity of theoretical structure of marketing, even then, it was harsely criticized by Hallbert (1965), Rodger (1969) and Baker (1993) that the marketing theory lacks validity as is observed in physical sciences. Despite this, such a state of affairs, Halbert (1965) and Baker (1991) proclaimed that marketing borrowed most of the tools from the business disciplines such as economic laws, social and behavioral sciences and from methodological sciences such as mathematics and quantitative techniques.

2.2

Role of Marketing and Markets

Marketing is also one of the important components in economic development to integrate and mobilize economic activities (Drucker, 1958). Galbraith and Holton (1956) linked performance of marketing function as a developmental tool, which Abbott (1986) paid much attention to marketing at planning stage as an integral part of agricultural economic approach covering physical assets, price and market information (market intelligence). Bateman (1976) laid much emphasis on investigating the nature of market competition. Research in agricultural marketing has opened a new vista for agro-based industries, which is known as market structure research, while Bain (1968) attached much importance to market research analysis. The structure conduct performance model has been framed to view and analyze all sorts of activities related to market performance, which Scarborough and Kydd (1992) focused on functional relationships between firms. However, the net product of the work is Structure, Conduct and Performance of the markets. Research with analytical tools introduced by Bain (1968) gained popularity as market research analysis. Market structure lays on organization of a market, nature of competition and price behavior within market (Bain, 1968). Similarly, market conduct studies price policy of firms, aims to pursue and methods applied to charging price quantity to be produced and sale promotion cost incurred. The end product of all these activities is the interaction, adaptation and coordination of a seller in the market. Scherer and Ross (1990) added research and development commitment, investment in production facilities and legal tactics market performance mostly depends on behavior of sellers and buyers taking into account the parameters like price, output, production, selling cost etc. (Bain, 1968 and Sosnick, 1964). In developing countries government and policy makers have joined hands to gear the potential role of marketing in economic development (Kanyak, 1986; Kazgan, 1988). Efficient use of scarce resources is the key of success to capture national and international markets. To go ahead 6

Timmer et al. (1987) very vividly described three marketing aspects i.e. marketing function, markets and price formation and suggest that their proper and timely application would yield better results in any case. To enter into a market is a difficult approach unless enterprisers have complete information and knowledge about any particular market.

2.3

Classification of Markets

Markets are the places where the buying-selling activities are performed in order to transfer the title of ownership from one party to the other. In the marketing process, the nature and extent of different activities varies in different ways like time, place, infrastructure etc. In the following paragraphs, the markets are classified on the basis of market place and nature of trade activities. 2.3.1 Assembly market Assembly markets are often situated close to farms, generally in small towns, where farmers bring major portion of the marketable surplus. Shopkeepers, traders, and retailers participate as buyers in these markets. Most of the transactions involve small quantities of agricultural produce. Traders in assembly markets are not approved by any government agency, although in some cases town committees (created by the provincial government) charge an entry fee from traders. Usually, these traders maintain no systematic record of transactions. The price formation process is simply based on direct negotiation between traders and the farmers. Since the quantities involved are small, a farmer may not mind small price differentials (compared to wholesale markets). However, for larger quantities farmers prefer to go to wholesale markets, or at least try to compare price with those markets before selling the produce. Recently, due to better farm to market road links and transport facilities and availability of larger quantities of marketable surplus, farmers are encouraged to take their produce to the wholesale markets. In the sample citrus area, the assembly markets are almost non-existent. 2.3.2 Wholesale markets Wholesale markets are usually located in a district or a major sub-division town. These markets are the main assembly centers for the fruit and vegetable surplus of surrounding areas. Wholesale markets have better storage, transport, communication and working conditions than the assembly markets. In these markets permanent offices and auction traders having official permission for their activities built floors. Almost every trader (commission agent) has sufficient space in the market to store produce for sometime (free of cost) or for longer periods on nominal charge basis. Also there is easy access of transport, which makes it convenient both for growers and market traders to move agricultural produce from one market to another. In the study area, the wholesale markets are present at tehsil level. 2.3.3 Terminal market Terminal markets are generally situated in large urban centers. The Lahore and Karachi markets are the best examples of this kind of markets in Pakistan. Most of the marketable surplus of agricultural commodities is ultimately routed to these markets. Foreign trade is another reason for the adequate flow of marketable surplus to this market. Traders in terminal markets are 7

usually wholesalers, who supply agricultural products to processing industries and retailers and shopkeepers. The majority of traders are buying agents, who buy from other wholesale markets through their agents or directly when the produce is brought there from other regions. This market is well equipped, with traders who are well established and mostly dependent on supplies from growers and other wholesale markets. They have access to all modern facilities for approaching their agents in lower level markets. Many traders have their own goods transport companies. Telephone, cellular phones, and telegraph services are easily available to them. The market of Bhalwal cannot be strictly called as terminal market because the export quality citrus does not enter into wholesale market of the area. It is rather directly shipped from factory gate to Karachi for onward transport to various destinations by sea. Although majority of the Kinnow processing factories are located in Bhalwal tehsil, dry port facility is not available. 2.3.4 Marketing efficiency analysis Besides ensuring the efficient allocation of resources, an efficient marketing system ensures optimum returns to the producers, processors and market intermediaries for their services rendered. The efficiency of marketing system can be better understood by analyzing the marketing structure and conduct, and market margins of the present marketing channels (Scarborough and Kydd, 1992; Adekanya, 1982; Thakur, 1973; Hays and McCoy, 1977). Studies pertaining to marketing margin market integration analyses are reviewed below;

2.4

Review of Empirical Research

As title shows, this section deals with reviewing the findings of the empirical work in production and marketing research. The review of marketing research is further subdivided into the studies related to the developing world and Pakistan. 2.4.1 Review of domestic marketing research on horticultural crops In Pakistan, very little research has been done on domestic marketing of fruit and vegetables and what so ever is available is highly superficial. Hence the existing literature is highly inadequate to guide the policy makers. What so ever is available is briefly reviewed and tabulated in Tables 2.1 and 2.2. It was found that majority of the fruit producer sell the harvesting rights of the output to the contractors while vegetables are mainly marketed through assembly and wholesale markets. In other words, no pre-harvest contractor is involved in vegetable marketing (Table 2.1). Regarding the marketing margins of different intermediaries, producers were found earning a margin of 0.95 5.00 rupees/kg, contractors as 1.55 8.75 rupees, commission agent as 0.09 1.37 rupees, wholesalers 0.82 2.5 rupees and retailers as 1.3 6.25 rupees/kg. The lowest margins were obtained in case of banana and highest for mango. The lowest variation in marketing margins per unit quantity handled was observed as producers ends and highest at contractors. In case of vegetables, the producers were found earning a margin of 3.06 14.02 rupees/kg, commission agents as 0.28 0.82 rupees, wholesalers 0.73 1.75 rupees and retailers as 1.06 2.93 rupees /kg. The lowest margins were obtained in case of onion and highest for tomato (Table 2.2).

From market integration perspective, Nada and Swarup (1979) are of the view that agricultural markets in general are reasonably well integrated, however, there is a lack of evidence in case of fruit crops, which are perishable, bulky and localized in production. They estimated correlation coefficient for spatial integration of Delhi and other four terminal markets was estimated at 0.80 for Royal Delicious variety and <0.50 for other varieties. Ali (2000) categorically delineated on the ground problems in the marketing of perishable products like fruit and vegetables in Quetta. In domestic marketing, the conditions of the road and the design of the transport vehicles not only increase product spoilage ratio but also increases transport cost. The market places are congested and filthy causing many obstructions to market operations as well as increase commodity losses. Similarly, the packaging varies from jute bags to wooden crates, which are non-standardized, unattractive and difficult to handle. Table 2.1: Marketing channels of different fruit and vegetables in Pakistan Authors Khushk 1997; Siddiqui, 1977,1979; Memon, 1978; Khan, 1980 Khushk and Smith, 1996; Khushk 1997 Khushk et al., 2002 Khair et al. 2002 Lashari et al., 2003 Region/Country Commodity Sindh, Pakistan Mango Output disposal pattern / marketing channels More than 85% of fruit is transported from assembly to terminal markets.

Sindh, Pakistan

Mango

90% of the farmers sell harvesting rights of the crop to contractors 95% of the farmers sell harvesting rights of the crop to contractors About 80% of the producers market their produce through pre-harvest contractors. Vegetables are marketed through assembly, wholesale and terminal markets. Producer contractor commission agent pharia/ stallholder/hawker consumer (1) Producer contractor commission agent wholesaler retailer consumer (2) Producer commission agent wholesaler retailer - consumer Overall 80 percent farmers sold phalsa to pre-harvest contractors while farmers who sold phalsa to per-harvest contractors were more large size farm (43.8%). Overall 61 percent farmers sold papaya to pre-harvest contractors while 39 percent farmers performed marketing themselves

Sindh, Pakistan Balochistan, Pakistan Sindh, Pakistan

Guava Kaja Apple Vegetables (tomato, onion, chillies) Citrus Mango Kulu Apple

Mohy-ud-din, Punjab, Pakistan 1989 Bashir et al. Balochistan, 2001 Pakistan

Memon et al. 2006

Sindh, Pakistan

Phalsa

Lashari & Khushk 2006

Sindh, Pakistan

Papaya

Table 2.2: Distribution of marketing margins of market intermediaries in fruit & vegetables
Province Authors Fruit: Lashari et al. 1995 Khushk et al. 1996 Khushk et al., 2003 Khushk et al. 2000 Khushk et al., 1998 Bashir et al. 2001 Mohy-ud-din 1992 Commodity Producer Marketing Margins (Rs./kg) Contractor Commiss. WholeAgent saler 8.12 7.12 4.88 8.75 5.41 1.94 0.25 0.30 0.62 0.47 0.34 8.64 5.41 8.37 5.76 4.76 5.92 3.70 1.55 27.0 6.30 2.88 1.07 0.62 3.15 0.32 1.50 3.65 (Processor) 1.00 1.00 0.88 1.37 1.00 1.22 0.09 0.10 0.12 0.11 0.10 0.10 1.21 1.00 1.30 1.00 0.76 1.05 0.23 0.09 4.0 1.03 0.73 0.82 0.54 0.82 0.59 0.28 0.89 0.31 0.59 0.82 .082 1.29 2.12 1.06 1.35 0.20 0.20 0.17 0.20 0.21 0.19 1.00 1.06 2.50 1.53 0.94 2.00 1.23 0.96 2.0 1.87 0.87 1.70 0.73 1.70 0.82 0.50 0.41 1.13 0.49 0.90 1.01 0.80 0.35 1.60 0.30 .056 0.75 1.52 1.37 1.41 Retail

Sindh Sindh Sindh Sindh Sindh Balochistan Punjab

Khushk et al., 2001 Memon et al. 2003 Khsushk et al. 2004

Sindh Sindh Punjab Sindh

and

Mari et al. 2002 Memon et al. 2006 Lashari & Khushk 2006 Vegetables: Lashari et al. 2002 Khushk and Lashari, 1999 Khushk et al., 2001 Lashari, et al.2003 Siddique 1977

Sindh Sindh Sindh

Mango Mango Mango Dates Guava Apple Kinnow F.Early Malta Mitha Other Overall Mango Guava Dates Mango Guava Date Citrus Banana Phalsa Papaya

4.12 4.12 3.18 5.00 3.53 4.75 5.00 3.53 4.75 3.47 2.06 4.75 2.82 0.94 12.0 5.80 3.40 5.76 3.06 5.76 5.29 0.81 0.70 3.38 0.66 1.11 0.49 6.61 039 6.90 1.36 1.19 3.71 14.02 5.99 6.94

3.41 3.41 3.12 2.75 2.82 2.61 0.43 0.38 0.47 0.51 0.36 0.43 4.14 2.82 2.82 4.76 4.06 2.82 6.23 1.30 9.0 5.53 1.22 1.82 1.06 1.82 2.06 0.57 0.22 2.24 0.29 0.38 0.70 2.23 0.21 0.81 0.71 0.56 1.60 1.55 2.93 2.24

Sindh Sindh Sindh Sindh Sindh

Onion Tomato Onion Tomato Tomato Potato Onion Chillies Rice Potato Onion Chillies Rice Chillies Onion Potato Onion Chillies Potato Tomato

Memon 1978

Sindh

Khan, 1980

Sindh

Khushk, et al. 2004

Punjab+Sind Sindh Punjab Punjab+Sind

Source:- Sharif, et al., 2004; Khushk, et al., 2008

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Size grading is mainly practiced in case of fruit and vegetables. On farm storage is poor causing shortening of storability. On the other hand, cold storages are inefficient and affect quality of produce stored inside. The method of stacking inside the cold stores is poor and suffering from problems like ammonia leakages, poor insulation, frequent power breakdown and untrained labour further adds to the problem. Daily information is need for efficient planning of the business while no agency exists to perform this job. The market intermediaries manage communicating market information by their own sources. Credit availability problems are also a big obstacle in the expansion of fruit and vegetable marketing business. Market intermediaries face various types of corruptions during transport, which add to the direct costs of marketing.

2.5

Structure, Conduct and Performance (SCP) Model

SCP framework is one of the important analysis methods in industrial organization theory (CAET, 2003). Mason and Bain (30s & 50s), founded traditional analysis framework in industrial organization theory: Market Structure-Market Conduct-Market Performance. This implies that market structure determines manufacturer conduct and manufacturer conduct determines market performance. Also market structure, market conduct and market performance were connected with national public policy in this aspect and as a result the system of industrial organization theory has been standardized, which made industrial organization theory become an independent economic subject whose basic characters is experience research i.e. utilizing cases and metric ways to analyze & validate logic relations among SCP (Mason and Bain -30s & 50s). Since 1970, many scholars like V. Stigler H. Demsetz in Chicago school in allusion to the deficiency of unilateral causality in SCP one after another utilized intensive economy theories to analyze industrial organization, pay attention to bidirectional interactive relations among structure conduct and performance, put research emphasis on market conduct and put forward a lot of new industrial organization theories (CAET, 2003). He further stated that those scholars changed original unilateral and static analysis framework among SCP and founded bidirectional and dynamic analysis framework .Economists put different theories, such as exchange cost theory property right theory principal Agent theory public choice theory and so on into research of enterprise behavior and introduced econometrics game theory and information economics into industrial organization that made it become the main analysis ways ,which formed new industrial organization theory, and drove the development of new industrial economics. Lutz (1994) developed two different SCP frameworks which are reproduced in Figure 2.1.
Figure 2.1: Two different SCP frameworks

Determinstic Model Structure

Dynamic Model Structure

Conduct

Conduct

Performance Source: Lutz, 1994 11

Performance

Lutz (1994) argued that SCP framework begins to analyze from three aspects: market structure, market conduct and market performance that affect and promote reciprocally. The brief description of these three aspects is derived from Lutz (1994) and reproduced it here. Market structure: It is the most basic concept and research motif and it reflect groundwork and environment in market economy operation. It ways showing form and character of market relation among enterprises in industry, includes relation and character in quantity, scale, share and benefits allocation among b u ye r s se l l er s b u ye rs and sellers and existing buyers and sellers and those who maybe plan to go into market and determined competition form by above. In other words, those market main bodies in given market whose status, function and proportion relation in market exchange and exchanging commodities character in market, formed market structure in given industry. Those relations among market main bodies in real market can be given expression to market competition and monopoly. According to degree of market competition and monopoly, market structure can be divided into four types, namely perfect competition market, monopoly competition market, oligopoly monopoly market and perfect monopoly market. Degree of market centralization, degree of product difference and obstacle of market entry and exit can affect market structure --- Lutz (1994). Market conduct: It is that in order to make more profits and increase market proportion every market actors adopt diversified strategic decision conduct on the basis of market supply and demand condition and consideration of relation with other actors. It reflects the running process and mode of market economy and it is the middle part that connects market structure and market performance. Market conduct chiefly includes the following aspects: fixing price conduct whose basic character is market actors control and influence price, non price conduct whose basic contents are R&D, forming product difference and promotion and enterprise adjustment conduct whose characters are property right and enterprises scale change --- Lutz (1994). Market performance: It is a study that deals with the state of reality which is achieved by a given industry under a given market structure in the formation of p r i c e o u t p u t c o s t profit product quality variety and the technological progress as well as job opportunities, etc. It substantially reflects the running efficiency of various market actor main body. Research starts with two basic aspects: one is directly or indirectly describing and evaluating market performance, the other is to study relation among SCP and to look for factors that influence market performance so as to explain the reason --- Lutz (1994). The SCP model used by CAET (2003) is presented in Figure 2.2. When we utilize the SCP framework, in a short time we can regard the market structure as fixed. Market structure situation is the objective gist that decides enterprises management and competitive tactic and in great degree it leads or even decides the market conduct of various actors in industry. The same effect of market performance lies on situation of all actors management. In a word, in a short time market conduct is the direct cause that decides market performance while market structure is the basic factor that restricts market conduct. In a long term, market structure is changing, the change is the result of change of market conduct and sometimes change of market performance may directly make market structure change. Also actors behavior could directly influence market performance --- Lutz (1994).

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Figure 2.2: Structure Conduct Performance Framework

BASIC CONDITIONS Supply Demand

Structure

Conduct

Performance
Price Fluctuation

Market Type

New Product R&D Market Efficiency

Type and Quantity of Participants

Development of New Technology

Market Function

Public Policy Source: CAET, 2003

WTO Policy

Craene and Viaene (1995) applied the structure, conduct and performance model to analyze the performance of meat product wholesaling in Belgium. The structure is related to the number of firms, the entry and exit barriers and the degree of product and price competition. Good conduct within a marketing system implies that the different firms respond to each others marketing activities, rather than one firm controlling and leading the marketing decision. The conduct is related to the price policy, product claims and product differentiation. A sufficient number of firms and good decision-making result in a reasonable level of prices and profit. The performance is a measure of the output-price relationship and the degree of innovation and investment especially in R&D --- (Craene and Viaene, 1995). The indicators of structure, conduct and performance used by them are summarized as under: Structure: (i) number of firms and size of firms (ii) entry and exit barriers (iii) degree of product and price competition Conduct: (i) free movement of prices (ii) no price discrimination (iii) no collusion between firms (iv) truthful product claims (v) meaningful product differentiation Performance: (i) optimal output available at minimal price (ii) reasonable levels of profit (iii) encouragement of innovation (iv) reasonable levels of investment Luu Thanh Duc Hai (2003) conducted the study on the organization of the liberalized rice market in Vietnam. The elements of structure, conduct and performance used by him are presented in Table 2.3: 13

Table 2.3: Elements of structure, conduct and performance Elements of structure - Intermediaries involved in the marketing system - Barriers to entry and exit - Buyer and seller concentration - The assortment of product quality - Distribution of market information - Structure of marketing channels - Price formation process - Rules and/or regulation that coordinate market exchange Elements of conduct Elements of performance Conduct with respect to: - Effectiveness of supplied - Buying services; product - Selling suitability in relation to - Transport consumer preferences - Storage - Efficiency of supplied - Negotiation services - Processing + Rate of profit in relation - Information to marketing costs and - Finance/risks bearing price margins (arbitrage in - General trading strategies time, space and form). that traders conducted in + Transaction cost analysis order to follow market (market searching; rules and increase negotiating and concluding marketing efficiency a contract; enforcing a (reduce transaction costs) contract) + Analysis of price differences and seasonal price function + Market integration - Dynamic analysis of the market process

Nam et al., (2006) conducted the market structure and market channel analysis of orange in Vietnam. The elements of structure and performance used by them are presented in Table 2.4. Table 2.4: Modified elements of structure and performance Elements of structure - Intermediaries involved in the marketing system - The existences of entry and exit barriers - The assortment of product quality - The distribution of market information - Price formation process - Rules and/or regulations that coordinate market exchange Elements of performance - Effectiveness of marketing channels; supplied services; product suitability in relation to consumer preferences - Value-added and value created analysis to identify where the economic value is created within a value chain - Analysis of price differences and seasonal price fluctuation

Overtime development in the structure, conduct and performance studies reviewed above show that in later studies, the dynamic aspects of SCP has been intensively studied. In the later studies, more emphasis has been laid upon the indicators of these three aspects of marketing, recognizing that market performance directly depends upon the market conduct and market conduct in turn depends upon the market structure. This also implies that in order to achieve better market

14

performance, its conduct should be improved first so that it is able to generate signals for establishment of more efficient marketing structure.

2.6

Research Design and Implementation

In order to provide some feasible measures and suggestions for the development of fruit and vegetables industries in Balochistan, NWFP, Northern Areas and AJK, SCP framework has been adapted for studying the industrial economics aspect of this study. In order to develop feasible measures and suggestions, the survey design, sampling frame, field work and analytical techniques used in this study are briefly described in the following sub-section: 2.6.1 Survey design The aim of the survey was to assess the structure, conduct and performance of the marketing system, margins and seasonal price variations of selected fruit and vegetables in Balochistan, NWFP, Northern Areas and AJK. Keeping in view the time and financial resources, it was impossible to compile information from the whole population of growers and market intermediaries. Therefore, a representative sample of the targeted population was used to draw inferences. On the basis of more acreage under selected fruit in the major producing districts of the provinces and Northern Areas and AJK were selected as the study area. The sampling units were producers, contractors, commission agents, wholesalers, retailers and consumers of selected fruit and vegetables. The information of sampling frame, sample size and field work is given below: Sampling Frame and Sample Size: A sampling frame is a list of all sampling units available for selection at a given stage of the sampling process (Barnet, 1991). The sampling frame for fruit and vegetables producers consist of a list of growers of selected commodities in the selected districts was prepared during the informal survey. Poate and Daplyn (1993) suggested that a sample size of 60 is generally regarded as the minimum requirement that will yield a sufficient level of certainty for decision-making. Rodriguez, et al (1995) selected 50 producers and 50 market intermediaries to collect information regarding expected prices of sheep and goats in Balochistan. Hugar and Hiremath (1984) selected 120 producers to study the efficiency of alternative channels in the marketing of vegetables in Belguam city, India. Keeping in view the previous studies, 50 to 100 sample sizes were sufficient to achieve the objectives of this study. The three major fruit and three to four major vegetables grown in the study areas were selected on the basis of acreage and presented in Table 2.5. The sample size for selected fruit and vegetables marketing is presented in Table 2.6 and Table 2.7 respectively. The total sample size for fruit and vegetable growers and market intermediaries was 1849 and 1273 respectively. Thus total sample was 3122 respondents from the study area. The distribution of sample size by selected fruit and selected vegetables in Balochistan, NWFP, Northern Areas and AJK is presented in annexure 1(1.1 1.4) respectively.

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Table 2.5: Selected fruit and vegetables on the bases of acreage in the study area
Balochistan Apple Grapes Apricot Tomato Lady finger Carrot Cauliflower Apple Plum Citrus Nil Nil Nil Nil NWFP Northern Areas Selected Fruit Apple Cherry Apricot Selected Vegetables Tomato Potato Peas Onion AJK Apple Walnut Mango Tomato Lady finger Brinjal Onion

Table 2.6: Distribution of sample size for fruit marketing in the study area
Provinces Balochistan NWFP Northern Areas AJK Overall Producers 297 233 237 307 1074 Contractors 66 31 22 37 156 C.Agents/W.Sellers Retailers 48 102 29 18 27 30 16 34 120 184 Consumers 100 80 60 75 315 Total 613 391 376 469 1849

Table 2.7: Distribution of sample size for vegetables marketing in the study area
Provinces Balochistan Northern Areas AJK Overall Producers 178 197 193 568 Contractors 88 15 22 125 C.Agents/W.Sellers Retailers 84 144 20 40 21 36 125 220 Consumers 100 60 75 235 Total 594 332 347 1273

2.6.2 Fieldwork Primary data were collected through surveys of selected fruit and vegetables producers, market intermediaries and consumers. The fieldwork also involved gathering data on fruit prices and market activities. In direct observation, emphasis was placed to identify production and marketing problems and evaluate key informants views of the structure and operation of the marketing system against what was actually observed in the field. 2.6.3 Longitudinal data collection Secondary data can help to determine internal consistency and it also provides a quick insight into trends and relationships. Such data can also be crosschecked with different sources of related data, through interviews with market key informants and knowledgeable observers. For this study secondary data has been collected using various statistics bulletins of Federal and Provincial Bureau of Statistics and various issues of Economic Survey of Pakistan regarding the area and production under fruit and vegetables in the study areas.

16

2.6.4 Cross sectional data collection In this study separate interview schedules were designed for producers and other market agencies including contractors, commission agents, wholesalers, retailers and consumers to cover all aspects of the study. The interview schedules were written in English but questions were asked in the local language from the sample respondents. The interview schedules were pre-tested before the formal survey. Due to the absence of producers records regarding farm activities, data collection has depended on a combination of methods which rely on memory recall for basic information such as labor use, wages, input costs, marketing charges and output costs. Interviews with both producers and other market agencies were carried out soon after the marketing, in order to reduce the recall period. 2.6.5 Producers survey Producers were assured absolute privacy, interviews were held in places of their choice. Most of the interviews were held at the farm or in the farmers house. The interview usually started with an introduction about the background of the researchers, the objectives of the study and the way in which the respondent was chosen. 2.6.6 Market survey Local markets in the selected districts and fruit market at Quetta (Balochistan), Peshawar (NWFP), Gilgit (Northern Areas) and Muzaffarabad (AJK) were selected. Main focus had been given to understand the market structure and operation of these markets. Market traders including contractors, commission agents, wholesalers and retailers were interviewed. The interview was also supplemented with topic-focused discussion and specific question from a structured questionnaire. The interview was held with each market intermediaries in confidence in his office/shops/selling place. After answering their questions, they enquired to know why the scientists would like to study marketing of fruit and vegetables. The survey investigators informed the respondents about the economic importance of the fruit and vegetables as well as the role of marketing of these commodities. Additional information was also collected through personal observation. Sufficient time was spent during various visits to markets.

2.7

Analytical Techniques

As mentioned above, the study was carried out through a primary survey of producers and market intermediaries to examine the efficiency of the marketing system in Balochistan, NWFP, Northern Areas and AJK. For this project, a combination of the analytical techniques (SCP model and marketing marginal analysis) was used to assess the major fruit and vegetables production potential and the efficiency of the marketing system in the Balochistan, NWFP, Northern Areas and AJK. The brief description of both SCP model for assessing fruit and vegetables production potential and marketing efficiency through marketing marginal analysis is briefly presented in the following sub-section:

17

2.7.1 Structure, conduct and performance (SCP) model used for this study SCP framework has been widely applied to analyze real actual industries like some agricultural enterprises in national economy. Practice indicates SCP framework is a kind of effectual industry analysis. The model of CAET (2003) has modified and adapted for Pakistan is presented in Figure 2.3. SCP model has been adapted from CAET (2003) and is reproduced here.
Figure 2.3: Structure Conduct Performance Framework

BASIC CONDITIONS Supply Demand

Structure
Market Types

Conduct
Development of a New Product Investment in Technology Behavior of Traders in the Market Competition of Traders in the Market Formation of Prices among Actors of Market

Performance
Price Fluctuation

Type of Market Actors Characteristics of Market Actors Marketing Channels

Market Efficiency

Market Effectiveness

Public Policy Source: Adapted with modification from CAET, 2003 The above SCP model was used for analyzing the fruit and vegetable marketing systems in Balochistan, NWFP, Northern Areas and AJK. 2.7.2 Working Structure, conduct and performance (SCP) model for Pakistan The above review of the SCP analysis shows that great degree of variation exists in the models designed for carrying out SCP studies. Therefore, we have to develop a working model for ourselves keeping in view the Pakistani situation. In Pakistan the market structure varies by not only the commodity groups but also for individual commodities. In our study, considering variation among fruit and vegetables, we have defined the following models:

18

Table 2.8: Characterization of existing SCP marketing system for selected fruit in Pakistan
Elements Apple Structure Market types Conventional Active market players Contractors Com. Agents Marketing channel Conventional Buyers intensity Minimum at production place Sellers intensity Minimum at production place Conduct Production R & D Almost NIL Marketing R & D Almost NIL Facilitation to Almost NIL producers Cross-intermediary Average to competition high Price determination Negotiation + method Auction Performance Output management Distant marketing, Storage at various places Price communication Limited to farmers, high among intermediaries Marketing margins Competitive Grapes Conventional Contractors Com. Agents Conventional Minimum at production place Minimum at production place Almost NIL Almost NIL Almost NIL Plum Conventional Contractors Com. Agents Conventional Minimum at production place Minimum at production place Almost NIL Almost NIL Almost NIL Cherry Special Producers Beoparies Special Negligible production place Negligible production place Almost NIL Almost NIL Almost NIL Low + Auction Walnut Dry fruit Producers Beoparies Dry fruit at Negligible production place at Negligible production place Almost NIL Almost NIL Almost NIL Low Apricot Special Contractors Com. Agents Special at Negligible at production place at Negligible at production place Almost NIL Almost NIL Almost NIL Low Citrus Conventional Contractors Com. Agents Conventional Minimum at production place Minimum at production place Almost NIL Almost NIL Almost NIL High Mango Conventional Contractors Com. Agents Conventional Minimum at production place Minimum at production place Almost NIL Almost NIL Almost NIL High +

Average to Average high Negotiation + Negotiation Auction Auction

Negotiation + Negotiation Auction Auction Distant marketing, Distant Storage at marketing various places

+ Negotiation + Negotiation Auction Auction

Distant marketing, Minimum storage Limited to Limited to Limited to Limited among Limited among Limited among farmers, high farmers, high farmers, high farmers and farmers and farmers and among among among intermediaries intermediaries intermediaries intermediaries intermediaries intermediaries NonNonNonCompetitive Competitive Competitive competitive competitive competitive Distant marketing Distant marketing Distant marketing

Distant marketing, Storage at various places Limited to farmers, high among intermediaries Competitive

Conventional:- Orchards Dry Fruit:- Orchards

Other cities commission agents Wholesalers Retailers Processor Other city commission agent Wholesaler Dry fruit shops/retailers

19

Table 2.9: Characterization of existing SCP marketing system for selected vegetables
Elements Tomato Structure Market types Conventional Active market players Producer, Beoparies, Com. Agents Marketing channel Conventional Buyers intensity Negligible at production place Sellers intensity Average to low at production place Conduct Production R & D Highly limited Marketing R & D Highly limited Facilitation to Limited inputs producers and marketing support Cross-intermediary Average to competition high Price determination Negotiation + method Auction Performance Output management Distant marketing, Storage at various places Price communication Good among farmers and intermediaries Marketing margins Highly Competitive Potato Conventional Producer, Beoparies, Com. Agents Conventional Negligible at production place Average to low at production place Highly limited Highly limited Limited inputs and marketing support Average to high Negotiation + Auction Distant marketing, Storage at various places Good among farmers and intermediaries Highly Competitive Onion Conventional Producer, Beoparies, Com. Agents Conventional Negligible at production place Average to low at production place Lady finger Conventional Producer, Com. Agents Conventional Average at production place Low at production place Carrot Conventional Producer, Com. Agents Conventional Average at production place Low at production place Highly limited Highly limited Highly limited Low Auction Peas Conventional Producer, Com. Agents Conventional Average at production place Low at production place Highly limited Highly limited Highly limited Low Auction Brinjal Conventional Producer, Com. Agents Conventional Average at production place Low at production place Highly limited Highly limited Highly limited Low Auction Cauliflower Conventional Producer, Com. Agents Conventional Average at production place Low at production place Highly limited Highly limited Highly limited Low Auction

Highly limited Highly limited Highly limited Highly limited Limited inputs and marketing Highly limited support Average Negotiation Auction + Low Auction

Distant marketing, Storage at various places Good among farmers and intermediaries Highly Competitive

Localized to Localized to Distant near distance near distance marketing marketing marketing

Localized to Localized to near distance near distance marketing marketing

Good among Good among Good among Good among Good among farmers and farmers and farmers and farmers and farmers and intermediaries intermediaries intermediaries intermediaries intermediaries Competitive Competitive Competitive Competitive Competitive

Conventional:- Orchards Dry Fruit:- Orchards

Other cities commission agents Wholesalers Retailers Processor Other city commission agent Wholesaler Dry fruit shops/retailers

20

Table 2.10: Modified elements of structure, conduct and performance in sample areas Structure Market types Performance Market suitability in relation to marketing costs Market players/intermediaries Formation of Prices among Analysis of price differences involved Actors of Market Barriers to entry and exit Competition of Actors Profit margins of different intermediaries Information sharing system Investment in R&D Seasonal price fluctuations Structure of marketing Trade volume of different Effectiveness of marketing channels intermediaries channels Intermediaries relationship Behavior of traders in the Deconstruction of marketing market margins analysis 2.7.3 Market efficiency Market efficiency was assessed through computing marketing marginal analysis, absolute margin, breakdown of consumers rupee, marketing costs, net margin. The procedure of assessing marketing efficiency for selected fruit and vegetables in the study area was derived from Khushk and Sheikh, (2004) and deconstruction marketing margin was derived from Ali (ed) 2000 and reproduced in the following sub-sections: 2.7.3.1 Marketing marginal analysis Marketing margins are the differences between prices at two market levels. Marketing margins was examined on the basis of data obtained on prices at different stages of marketing chain. Marketing margins had been calculated through computing the absolute margin or price spread, which is essentially the same as the difference between the prices paid and received by each specific marketing agency. Marketing margins have been calculated through computing the absolute margin or price spread, which was essentially the same as the difference between the prices, paid and received by each specific marketing agency (Khushk and Sheikh, 2004). The following formula was used to compute percentage-marketing margins as earned by each market intermediary in the marketing of farm products (Khushk and Sheikh, 2004): Mm = (Ps x 100)/ Sp Where Mm indicates the marketing margins earned by a specific agency, Ps stands for price spread availed by that agency and Sp represents sale price of the same agency for the same commodity. 2.7.3.2 Absolute margin Absolute margin was the difference between sale prices of two or more than two agencies for equivalent quantity of selected fruit and vegetables (Khushk and Sheikh, 2004). Farm retail price 21 Conduct Transaction costs associated

spread or absolute margin refers to the difference between the retail price and the price received by the farmers for an equivalent quantity of farm products. The following formula was used to calculate the absolute margin (Khushk and Sheikh, 2004): Am = Sp Pp Am = Absolute Margin Sp = Sale Price Pp = Purchase Price Breakdown of consumers rupee: Breakdown of consumers rupee is a phrase applied to the manner in which a consumers one rupee expenditure on a particular commodity is divided among the marketing agencies and producer. It shows that portion of a consumers rupee which goes to the producer, or is earned by various marketing agencies such as contractors, commission agents, wholesalers and retailers. This was calculated by expressing the net margin of a specific agency as a proportion of the retail price. The following formula was used to determine the breakdown of consumers rupee. Bder = Ps / Rp Where Bder stands for breakdown of consumer rupee spent on specific commodity, Ps indicates price spread and Rp represents retail price. 2.7.3.3 Marketing costs Marketing costs were the expenditure incurred by various market intermediaries from the time when commodity leaves the farm until it reaches the consumers (Khushk and Sheikh, 2004). Such costs were necessarily incurred to create form, time, place and possession utilities in the products to make them marketable. Marketing costs indicate the actual expenses of a marketing agency including fixed and variable costs. These costs were incurred by the producers and other marketing intermediaries and have impact on prices as well as on the margins of the market intermediaries. The major cost components include grading, packing, loading, unloading, transportation, commission charges and market taxes. These costs were computed on a per crate basis. Each marketing agency was inquired about the amount it spent per crate and the cost of each agency was calculated by using the following formula (Khushk and Sheikh, 2004): MC = As / qh Where MC stands for marketing cost of a specific unit quantity, As for actual amount spent and qh represents quantity handled. All marketing costs were calculated in this way except for commission charges. To calculate commission charges, the following formula were used: Cc = (Sp x Rc) / qm Where Cc stands for commission charges Sp denotes sale proceeds of marketed commodity Rc represents rate of commission and qm quantity marketed.

22

2.7.3.4 Net margin The net margin of a specific agency was the net earnings, which it earns after paying all marketing costs. Net earnings of various market agencies involved in the marketing of fruit and vegetable were computed with the following formula (Khushk and Sheikh, 2004): Nm = Ps - Mc Where Nm stands for net margin, Ps indicates the price spread availed by the specific agency and Mc represents marketing costs incurred by the same agency. 2.7.3.5 Deconstruction of marketing marginal analysis Marketing efficiency of selected fruit and vegetables was also assessed through deconstruction of marketing marginal analysis. The purpose of deconstructing marketing margin is to know what component of marketing activity is absorbing the greater share of consumer rupee. The deconstructing marketing margin gives the information what component of marketing activity is vital or absorbing the greater share of consumer rupee.

23

CHAPTER 3 CHARACTERISTICS OF SAMPLE MARKET INTERMEDIARIES

3.1 Introduction

Market traders are the main participant of fruit and vegetables market who are directly involved in the business. Six types of market intermediaries are; farmers, contractors, commission agents, wholesalers, retailers and consumers. The information on the socio-economic characteristics of sample market intermediaries was collected during the survey and is briefly described in the this chapter

3.2

Characteristics of Sample Fruit & Vegetable Growers and their Farms

The socio-economic characteristics of sample growers of selected fruit are presented in Table 3.1. The average age of the sample farmers ranged from 36-48 years in Balochistan, from 41-49 years in NWFP, 36-50 years in Northern Areas and 43-49 years implying that relatively senior members of farm families were operating the farming business. This observation is quite similar to other socio-economic studies conducted in Punjab (Sharif, 1986). The sample fruit growers had more than 20 years of fruit farming experience in the study area. The average formal education of the respondents was around 9 to 11 years of schooling for all fruit. The average family size was found to be largest in Baluchistan followed by NWFP, AJK and NAs; however, more than 70 percent of the respondents were having joint family system in the study area (Table 3.1). On the other hand, the socio-economic characteristics of sample growers of selected vegetables are presented in Table 3.2. The average age of the sample farmers ranged from 37-43 years in Balochistan, 36-43 years in Northern Areas and 44-49 years implying that relatively senior members of farm families were operating the farming business. The sample vegetables growers had more than 18 years of vegetables farming experience in the study area. The average formal education of the respondents ranged from 9-11 years of schooling for all vegetables. The average family size was found to be largest in Baluchistan followed by NAs and AJK. More than 50 percent of the respondents were having joint family system in the study area (Table 3.2).

3.3

Characteristics of Sample Farms, Market Access, and Information Sources for Sampled Fruit and Vegetable Growers

The information on land holding, market access, power and information sources for fruit growers are presented in Table 3.3. The average operational holding for apple, apricot and grapes growers 24

was 20, 31 and 4 acres of land in Baluchistan, for apple, citrus and plum was 4.97, 10.0 and 2.31 acre in NWFP, for cherry, apricot and apple growers was 2.81, 3.13 and 2.50 acres in Northern areas and 2.6, 3.0 and 4.2 acre for walnut, apple and mango growers in AJK respectively. Table 3.1: Socio-economic profile of the sample selected fruit growers
Characteristics Age (Years) Education (Years) Balochistan Farming experience (Years) Fruit & veg. experience Family size (#) Family system (% joint) Age (Years) Education (Years) NWFP Farming experience (Years) Fruit & veg. experience Family size (#) Family system (% joint) Age (Years) Northern Areas Education (Years) Farming experience (Years) Fruit & veg. experience Family size (#) Family system (% joint) Age (Years) Education (Years) AJK Farming experience (Years) Fruit & veg. experience Family size (#) Family system (% joint) Source: Survey Results 2007 Apple Apricots 36.20 11.15 17.38 13.43 26.30 91.7 Grapes 47.9 9.7 28.8 24.3 30.70 94.4 Citrus Plum Cherry Walnut Mango

39.35 9.67 20.33

20.00
24.38 81.6 41.00 8.00 20.00 20.00 13.74 77.38 50.49 5.87 22.37 15.68 9.50 53.16 47.34 6.96 22.44 18.82 10.24 70

49.10 10.48 26.23 14.95 14.82 83.58

46.0 8.0 21.0 12.0 10.0 55.60

49 7.50 25.00 21 10.40 67

47.47 8.67 26.95 17.90 14.28 80.60 --

43 6.91 20.66 17.77 10.44 62

47.0 7.0 19.0 15.0 10.0 64.6

The average yield of apple, apricot and grapes was 2.34, 0.51 and 0.74 maunds per tree, for apple citrus and plum was 0.89, 16.25 and 2.25 maunds per tree, and for walnut, apple and mango were 1.7, 1.3 and 5.0 maunds per tree respectively in Baluchistan, NWFP and AJK (Table 3.3). For fruit, rented tractor was the major power source and its use ranged from 48-65% in Baluchistan, 55-96% in NWFP, 50-72% in NAs and 7-78% in AJK. Distance from the input market ranged from 0.20-4Km in Baluchistan, 8-11 Km in NWFP, 8-23 Km in NAs and 4.6-6.0 Km in AJK.

25

Table 3.2: Socio-economic profile of the sample selected vegetables growers

Characteristics Age (Years) Balochistan Education (Years) Farming experience (Years) Fruit & veg.experience Family size (#) Family system (% joint) Age (Years) Northern Areas Education (Years) Farming experience (Years) Fruit & veg.experience Family size (#) Family system (% joint) Age (Years) Education (Years) AJK Farming experience (Years) Fruit & veg.experience Family size (#) Family system (% joint) Source: Survey Results 2007 Tomato 43.18 9.50 20.85 18.93 26.43 86.70 38.98 09.81 17.77 14.53 286.68 50 44.26 8.54 19. 38 9.1 9.18 50 Lady finger 42.00 9.64 19.58 18.09 24.30 72.10 Carrot 37.38 10.69 18.00 16.49 23.38 92.90 Cauliflower 42.04 9.74 24.15 23.12 36.44 83.30 Onion 41.55 09.77 17.23 15.50 84.05 48 50.3 5.73 25.1 22.9 Peas Potato 43.24 09.34 20.90 17.65 91.13 59 Bringal

36.65 05.57 19.28 11.50 73 78

49 (14.6) 8 (2.7) 26.73 (13.7) 19 (16.4) 10 (5.6) 47

49.25 6.48 25.82 16.82 9.62 55

9.32 64

The information on land holding, market access, power and information sources for vegetables growers are presented in Table 3.4. The average operational holding for tomato, lady finger, carrot and cauliflower growers was 25.03, 26.19, 33.65 and 37.52 acres of land in Baluchistan, for tomato, onion, peas and potato was 14.74, 11.03, 13.52 and 13.26 acre in NAs, for tomato, lady finger, onion and brinjal growers was 4.27, 11.54, 2.20 and 15.75 acres in AJK. Rented tractor was the major power source and its use ranged from 14-41% in Baluchistan, 11-95% in NAs and 30-73% in AJK. Distance from the input market for vegetables growers ranged from 0.5-5.0 Km in Baluchistan, 15-28 Km in NAs and 5.6-56.5 Km in AJK. Agriculture extension offices were located in the range of 7-12 Km in Baluchistan, and 3-8 Km in AJK. The major sources of flow of agriculture information of sample vegetable growers were personal contact with market dealers followed by radio and telephone/mobile (Table 3.4).

26

Table 3.3: Landholding, market access, power and information source for fruit growers
Items Apple Apricots Operational holding (acre) 20.24 30.66 Mean # of trees/area/kanal 1003.92 315.6 Yield (Maund/tree/kanal) 2.34 0.51 Power source (%): Bullock 2.0 4.00 Own tractor 38.0 48.00 Rented tractor 60.0 48.00 Input market (km) 00.65 00.20 Food grain market 26.60 10.33 Fruit and vegetables market 48.33 170.00 Agri. extension office 22.28 10.67 Information (%): Extension 8.30 10.00 Dealer 47.20 50.00 Market 11.10 20.00 No information 12.70 20.00 Radio/TV 6.0 -Phone/mobile 16.7 -Operational holding (acre) 4.97 Mean # of trees/area/kanal 416 Yield (Maund/tree/kanal) 35.50 Power source (%): Bullock 5.15 Own tractor 3.35 Rented tractor 91.60 Maket access (mean dis km 8.42 Input market (km) 13.51 Food grain market 11.69 Fruit and vegetables market 9.15 Agri. extension office 10.98 Information (%): Extension 28.52 Dealer 32.20 Market 11.90 No information 28.38 Radio/TV 0.00 Radio 0.00 Operational holding (acre) 2.81 3.13 Power source (%): Bullock 44.03 13.92 Own tractor 6.33 13.80 Rented tractor 50.64 71.91 Maket access (mean dis km 29 Grapes Citrus 4.12 700.00 0.74 00.00 35.00 65.00 3.92 11.56 70.00 10.00 8.30 33.30 25.00 18.30 -12.80 10.03 401 650 25.00 20 55.0 11.00 9.58 8.11 10.87 15.53 0.00 1.50 0.00 88.00 0.00 10.50 Plum Cherry Walnut Mango 2.31 345 90.00 2.80 1.40 95.80 9.43 8.94 10.08 36.65 8.41 0.00 0.00 0.00 68.0 18.0 14.00 2.50 11.11 8.33 55.56 -Balochistan
NWFP

27

Items Input market (km) Food grain market Fruit and vegetables market Agri. extension office Dealer Market No information TV+Radio Phone/mobile Operational holding (acre) Mean # trees/area/kanal Yield (Maund/tree/kanal) Power source (%): Bullock Own tractor Rented tractor Input market (km) Food grain market Fruit and vegetables market Agri. extension office Information (%): Extension Dealer Market No information TV+Radio Phone/mobile

Apple Apricots Grapes Citrus 8.12 22.78 13.84 36.71 7.65 25.32 29.87 7.60 15.19 17.59 34.91 -36.72 54.78 10.00 17.60 3.79 10 3.0 61 1.28 68 3 16 5.2 4.5 3.1 2 31 13 4 42 4 2 -

Plum Cherry Walnut Mango 13.23 35.42 13.89 15.51 55.83 13.89 -2.6 4.2 35 29 1.69 4.96 79 7 -1 9 7 78 4.6 6.1 3.8 5.8 4.6 4.3 3.8 6.0 26 38 6 9 6 7 52 34 4 3 1 3

AJK

28

Table 3.4: Land holding, market access, power and information source for vegetables growers
Items Tomato Lady finger 26.19 33.30 27.50 25.00 00.50 5.00 79.17 10.00 8.10 16.20 24.30 5.50 -11.54 1.13 16.80 11 22 67 8 5.65 7.60 2.72 8 8 2 2 7 17 Carrot C.flower Onion 33.65 11.10 29.00 19.60 3.26 8.75 10.67 7.00 8.30 16.70 16.70 27.70 2.80 37.52 33.30 13.00 14.10 5.00 5.00 49.86 11.64 -22.20 33.30 16.70 -11.03 5 3 89 15.42 -18.65 -42 37 9 4 -2.20 3.27 23.27 24 50 7.99 9.39 29.38 6.40 50 30 13 2 7 Peas 13.52 2 0 95 17.36 -17.77 -42 33 18 3 -Potato 13.26 87 0 11 28.29 -28.08 -28 26 -24 --Brinjal 15.75 0.71 18.52 25 2 73 8.00 5.65 7.60 2.72 4.00 50.00 15.00 20.00 15.00

Operational holding(acre) 25.03 Power source (%): Bullock 22.20 Own tractor (%) 30.40 Rented tractor (%) 41.30 Input market (km) 00.50 Food grain market (Km) 1.00 Fruit and vegetables market 28.50 Agri. extension office (Km) 7.00 Information (%): Extension 10.00 Dealer 14.00 Market 34.00 No information 28.00 TV+Radio 2.00 Operational holding(acre) 14.74 Power source (%): Bullock 6 Own tractor 2 Rented tractor 90 Maket access (mean dis km) Input market (km) 17.48 Food grain market Fruit and vegetables market 17.53 Agri. extension office Information (%): Dealer 48 Market -No information 21 TV+Radio 17 Phone/mobile -4.27 Operational holding (acres) Mean # trees/area/kanal 2.09 Yield (Maund/tree/kanal) 13.02 Power source (%): Bullock 58.00 Own tractor 12.00 Rented tractor 30.00 Maket access (mean dis km) Input market (km) 56.5 Food grain market 45.46 Fruit and vegetables market 34.37 Agri. extension office 6.47 Information (%): Extension 42.00 Dealer 8 Market 2 No information TV+Radio 4 Phone/mobile 6

AJK

Northern Areas

Balochistan

29

3.4

Characteristics of Sample Fruit and Vegetable Contractors/Beoparies

Contractors and contracting scenario were found differently in different regions of the study. The information on the characteristics of sample fruit contractors is presented in Table 3.5. The average age of the sample contractors ranged from 26-48 years in Baluchistan, 34-43 in NWFP, 34-40 in NAs and 24-40 in AJK, implying that experienced family members of contractors families were running business. On average, the contracting experience of sample fruit contractors ranged from 7-15 in Baluchistan, 13-15 in NWFP, 5-10 in NAs and 12-23 in AJK. The average formal education of sample contractors ranged from 1.25-3 years of schooling in Baluchistan, 6-11 in NWFP, 10-12 in NAs and 6-9 in AJK. The sample fruit contractors obtained credit from the commission agent for running their business. The proportion of sample contractors obtaining credits highest in Baluchistan (100%), followed by NWFP (60-75%), AJK (25-66%). and NAs (29-44%) The commission agents selected the contractors for loaning the contract business on the basis of their good repute, honesty and long working relation. Information regarding the family background of the contractors show that mostly the contractors belonged to the farm family i.e., they themselves were involved in the farming and aware of all the farm activities (Table 3.5). Beoparies involved mainly in vegetable marketing rather than contractors like in fruit. The information on characteristics of sample vegetable beoparies is presented in Table 3.6. The average age of the sample beoparies ranged from 38-44 years in Baluchistan, 33-39 in NAs and 36-41 in AJK, implying that experienced family members of beoparies families were running business. On average, the contracting experience of sample vegetable beoparies ranged from 8-10 in Baluchistan, 7-8 in NAs and 6-10 in AJK. The average formal education of sample beoparies ranged from 2-8 in Baluchistan, 9-10 in NAs and 6-8 years of schooling in AJK. The sample vegetable beoparies also obtained credit from the commission agent for running their business in NAs and AJK. The proportion of sample beoparies obtaining credits was higher in AJK (40-60%) than NAs (20-60%). The commission agents selected the beoparies for loaning the contract business on the basis of their good repute, honesty and long working relation. Information regarding the family background of the beoparies show that mostly the beoparies belonged to the farm family i.e., they themselves were involved in the farming and aware of all the farm activities (Table 3.6). Beoparies were mostly local residence of the areas. They purchased the vegetables and after picking and packing the produce, then sold in the district or in other provincial markets. The beoparies purchased the vegetables from those growers whom were economically not sound or have no information about the markets. Majority of the vegetables growers sold the produce themselves. The intermediary is considered as king pin in physical movement of produce from fields to markets (Table 3.6).

30

Table 3.5: Characteristics of sample fruit contractors in the study area

Characteristics Age (years) Education (years) Contract Exp. (Years) Farm Family (%) Contractor Family(%) Credit obtained (%) Selection criteria: (%) - Good repute - Honest - Long working relation Own/mobile (%) PCO (%) Age (years) Education (years) Contract Exp. (Years) Farm Family (%) Contractor Family(%) Credit obtained (%) Selection criteria: (%) - Good repute - Honest - Long working relation Own/mobile (%) PCO (%) Age (years) Education (years) Contract Exp. (Years) Farm Family (%) Contractor Family(%) Credit obtained (%) Selection criteria: (%) - Good repute - Honest - Long working relation Own/mobile (%) PCO (%) Age (years) Education (years) Contract Exp. (Years) Farm Family (%) Contractor Family(%) Credit obtained (%) Selection criteria: (%) - Good repute - Honest - Long working relation Own/mobile (%) PCO (%) Apple 43.25 3.00 7.00 50.00 50.00 100.00 25.00 50.00 25.00 25.00 75.00 38.67 6.06 12.83 78.00 22.00 66.00 56.00 17.00 28.00 95.00 10.00 35.25 11.50 4.75 58.0 42.0 28.6 28.57 42.86 28.57 72.0 28.0 40.09 7.18 12.36 82 18 46 45 27 27 15 85 Apricots 26.00 00.00 15.00 50.00 50.00 100.00 NA 50.00 50.00 50.00 50.00 40 10 10 67.0 33.0 33.3 33.3 50 16.67 76 24 Grapes 47.50 1.25 15.00 NA 100.00 100.00 20.00 50.00 30.00 NA 100.00 Citrus Plum Cherry Walnut Mango -

Balochistan

34.00 11.00 14.80 60.00 40.00 60.00 40.00 40.00 20.00 50.00 50.00 -

42.62 8.54 15.31 94.0 6.0 75.00 25.00 31.25 18.75 15.00 70.00 -

NWFP

34 10 08 78.0 22.0 44.4 22.2 44.5 33.3 79.0 21.0

Northern Areas

38.7 6.06 12.8 78 22 66 56 17 28 5 95

23.75 9 23 74 26 25 50 25 25 60 40

AJK

Source: Survey Results 2007

31

Table 3.6: Socio-economic characteristics of sample vegetables beoparies

Regions Tomato Okra
38 6 10 80 20 30 70 -

Carrot C. flower Brinjal Onion

40 8 10 80 20 30 70 44 2 8 80 20 30 70 60 30 10 34 10 08 80 00 20 649 262196

Peas Potato
39 10 07 60 00 40 17235 553256 3 60 38 02 60 100 -

Age 45 Education (Years) 4 Business exp. (Yrs) 10 Business type (%): - Sole 80 - Partner 20 Communic. facility (%) Telephone 30 Mobile 70 Email Contacts in other mkt. (%) Age (Years) 33 Education (Years) 09 Business Experience 08 Family background (%) - Farm family 80 - Contractor family 00 - Both 20 Vegetable purchased - Purchase quantity 1837 (mounds)/Beopari - Purchase amount (Rs.) 995871 - Vegetable quality (%) grade50 A 45 grade-B 05 grade-C Credit obtained for the business (% reported) 20 Access to telephone facility (%): Own phone 100 41 Age (Years) 6.25 Education (Years) Vegetables contracting 14.25 experience (Years) Family background (%) - Farm family 30 - Contractor family 30 - Both 40 Credit obtained for the business 60 (% reported) Criteria for the selection of commission agent - good repute 50 - honest 30 - long working relation 20 Access to telephone facility (%): Own phone 40 PCO 100

Northern Areas

Balochistan

20 100 -

36.40 8.25 6.50

AJK

40 40 20 40

50 30 20 60 100

32

3.5

Characteristics of Sampled Fruit and Vegetables Commission Agents

The information on the characteristics of the commission agent is presented in Table 3.7. Commission agent is an important member of fruit marketing system of Pakistan. He has a permanent place of business in the fruit market. He has a platform to conduct auction, and to do packing and repacking of products. The commission agent is a typical marketing middleman, who has a paternalistic relationship with the producers, contractors on the one hand and with the wholesalers and retailers on the other hands. Table 3.7: Socio-economic characteristics of sample fruit commission agents
Regions
Age Education (Years) Business exp. (Yrs) Business type (%): - Sole - Partner Communic. facility (%) Telephone Mobile
Contacts in other mkt. (%)

Apple Apricots Grapes Citrus Plum Cherry Walnut Mango

42.33 2.00 22.00 NA 100 100 100 100 42.00 10.00 7.00 80.00 20.00 100.00 80.00 10.00 100.00 45 11 11 100 -100 100 60 65 9 15 67 33 83 42.00 2.33 22.30 NA 100 100 100 100 44.50 2.00 23.50 50.00 50.00 100 75 100

Balochistan

27.00 10.00 12.50 50.00 50.00

27.00 10.00 12.50 50.00 50.00

Age Education (Years) Business exp. (Yrs) Business type (%): - Sole - Partner Communic. facility (%) Telephone Mobile Email
Contacts in other mkt. (%)

42 11 10 80 20 80 20 100

39 12 13 75 25 100 100 40

NWFP

100.00 100.00 100.00 100.00 0 50.00 100.00 100.00

Age Education (Years) Business exp. (Yrs) Business type (%): - Sole - Partner Communic. facility (%) Telephone Mobile Email
Contacts in other mkt. (%)

Northern Areas

42 10 7 80 20 100

57 10 12 60 40 40

Age Education (Years) Business exp. (Yrs) Business type (%): - Sole - Partner
Contacts in other mkt. (%)

AJK

33

The commission agent, the most common and active of all the middlemen, is an important intermediary. He is a vital link in the marketing system. He generally accepts the produce on consignment and sells to wholesalers and retailers. He deducts his commission at the rate of 6 to 8 percent; other charges include, costs of transportation, labor charges etc. In every market its number varies depending upon the size of the market and its location. The average age of the sample commission agent ranged from 42-45 years in Baluchistan, 27-42 in NWFP, 39-45 in NAs and 42-65 in AJK. On average, the business experience of sample fruit commission agent ranged from 22-24 in Baluchistan, 7-13 in NWFP, 10-13 in NAs and 7-15 in AJK. The average formal education of sample commission agent ranged from 2-3 in Baluchistan, 8-10 in NWFP, 11-12 in NAs and 9-10 years of schooling in AJK. Table 3.8: Socio-economic characteristics of sample vegetables commission agents
Regions
Age Education (Years) Business exp. (Yrs) Business type (%): - Sole - Partner Communic. facility (%) Telephone Mobile Email Contacts in other mkt. (%) Age Education (Years) Business exp. (Yrs) Business type (%): - Sole - Partner Communic. facility (%) Telephone Mobile Email Contacts in other mkt. (%) Age Education (Years) Business exp. (Yrs) Business type (%): - Sole - Partner Communic. facility (%) Telephone Mobile Email Contacts in other mkt. (%)

Tomato Okra
50.80 2.60 26.50 60.00 60.00 100 100 NA 100 34.00 11.00 07.75 100 00 100 100 00 50.80 2.60 26.50 60.00 40.00 100 100 NA 100

Carrot C. flower Brinjal Onion

50.80 2.60 26.50 60.00 40.00 100 100 NA 100 50.80 2.60 26.50 60.00 40.00 100 100 NA 100

Peas Potato

34.00 11.00 07.75 100 00 100 00 81.0 7.66 10.25 100 75 75 0 25 100

34.00 11.00 07.75 100 00 100 100 00

34.00 11.00 07.75 100 00 100 100 00

Balochistan

Northern Areas

81 10 45 100 -

81 10 45 100 -

AJK

34

Majority (50-80%) of the commission agent was solely operating the business and responsible for whole of the activities and only a few were having partners. All the commission agents involved in trade had telephone facilities and contacts in other markets (Table 3.7). The information on the characteristics of the commission agent for vegetables is presented in Table 3.8. The average age of the sample commission agent is 51, 34 and 81 years in Baluchistan, NAs and AJK. On average, the business experience of sample vegetable commission is 27, 8 and 45 years in Baluchistan, NAs and AJK. The average formal education of sample commission agent is 3, 11 and 10 years of schooling in Baluchistan, NAs and AJK. Majority of the commission agent were solely operating the business and responsible for whole of the activities and only a few were having partners. All the commission agents involved in trade had telephone facilities and contacts in other markets (Table 3.8).

3.6

Characteristics of Sampled Fruit and Vegetables Wholesalers

The information on the characteristics of sample fruit and vegetables wholesalers is presented in Table 3.9 and Table 3.10. The wholesaler is important intermediary in the marketing channel. He purchases the produce from the commission agent and sells to retailers. He also some time grades and repacks the produce. In other words the wholesalers operate between the commission agent and the retailer. The wholesaler operates exclusively in the market and works closely with commission agents. Sometimes he may withhold the stock to create shortage and manipulate prices. The improvements in packing also help him in getting higher price. Some wholesalers purchases apple from contractors through commission agents and sell to other markets after washing and cleaning or packing. The mean age of the sample fruit and vegetable wholesaler was ranged from 29-44 years with 17 to 25 years of business experience of wholesale market. These wholesalers of fruit and vegetable are located with the commission agents in the markets and deal the large volume of fruit and vegetables. Majority (100 %) of sample wholesalers dealing all fruit and vegetables purchased from contractors through commission agent. The sample wholesalers sold 33.30 to 90 percent of the fruit and vegetable at wholesale price and the remaining at retail price. Majority of the wholesalers had own telephone for communication.

35

Table 3.9: Socio-economic characteristics of sample fruit wholesalers

Regions
Age (Years) Education (Years) Business experience (Yrs) Location Location Business qty (ms 90 days) Purchasing through CA (%) Purchasing from CA Age (Years) Education (Years) Business experience (Years) Location Business qty (ms 90 days) Purchasing through C.A (%) Purchasing from com agent Age (Years) Education (Years) Business experience (Years) Location Business qty (ms 90 days) Purchasing through C.A (%) Purchasing from com agent Age (Years) Education (Years) Business experience (Years) Location Business qty (ms 90 days) Purchasing through C.A (%) Purchasing from com agent

Apple Apricots Grapes Citrus Plum

9.00 2.00 17.00 Market 4104 100 NA 90.00 10.00 37 10 9 Market 25 75 Yes Yes 40 8 12.00 Market 100 NA 90.00 10.00 32.00 3.00 26.00 Market 3780 100 NA 80.00 20.00 31 4 12.00 Market 100 NA 90.00 10.00 29.00 2.00 17.00 Market 2160 100 NA 33.30 66.70 31.00 31.25 9.00 9.00 9.00 9.00 Market Market 25 25 75 75 Yes Yes Yes Yes

Cherry Walnut Mango

38 9 15.00 Market 100 NA 90.00 10.00 -

NWFP

Balochistan

37 10 9 with C.A Large volume 25 75 Yes Yes

35 6 9.00 Market 100 60.00 40.00

Northern Areas

22.00 4.00 15.00 Market 100 50 40. 10.00

AJK

36

Table 3.10: Socio-economic characteristics of sample vegetables wholesalers

Regions
Age (Years) Education (Years) Business experience (Years) Location Business qty (ms 90 days) Purchasing through C.A (%) Purchasing from com agent Selling at wholesale price Selling at retailer price Age (Years) Education (Years) Business experience (Years) Location Business qty (ms 90 days) Purchasing through C.A (%) Purchasing from com agent Selling at wholesale price Selling at retailer price Age (Years) Education (Years) Business experience (Years) Location Business qty (ms 90 days) Purchasing through C.A (%) Purchasing from com agent Selling at wholesale price Selling at retailer price

Tomato
43.75 1.50 24.50 Market 8135 100 NA 66.70 33.30

Okra
43.75 1.50 24.50 Market 1504 100 NA 66.70 33.30

Carrot C. flower Brinjal

43.75 1.50 24.50 Market 2416 100 NA 66.70 33.30 43.75 1.50 24.50 Market 2416 100 NA 66.70 33.30 -

Onion
33.75 4.00 28 Market 100 NA 36.70 13.30

Peas Potato
30.75 2.50 24.50 2000 100 54.70 23.30 50.75 1.50 35.00 Market 1416 100 NA 66.70 34.30

Balochistan

43.75 1.50 24.50 Market 2416 100 NA 66.70 33.30

23.75 2.00 40.00 Market 100 NA 36.70 34.30

13.75 5.00 20.00 100 45.70 12.30

Northern Areas

43.75 1.50 24.50 Market 2416 100 66.70 20.30

3.7

AJK

Characteristics of Sampled Fruit and Vegetables Retailers

The last intermediary in marketing channel is the retailer. Generally, there are three types of retailers i.e. shopkeeper, carrier (pushcart/street hawker) and small pharias operating at the market. The retailers are the last link between the producers and their consumers. The information on the chrematistics of sample retailers for fruit and vegetables is presented in Table 3.10 and Table 3.11. The retailers characteristics were found different at different regions of the study. The average age of the sample fruit retailer ranged from 26-27 years in Baluchistan, 36-41 years in NWFP, 32-33 years in NAs and 35-41 years in AJK. On average, the business experience of sample fruit retailer ranged from 8-10 in Baluchistan, 9-21 in NWFP, 4-9 in NAs and 9-10 years in AJK.

37

Table 3.11: Characteristics of the sample selected fruit retailer

Characteristics Age (Years) Education (Years) Business exp. (Years) Location Balochistan Apple Apricots Grapes Citrus 26.00 26.00 26.40 9.00 7.00 7.00 8.00 10.00 10.00 Mandi, Mandi, Mandi, bazaar and bazaar and bazaar and bus/wagon bus/wagon bus/wagon stop stop stop 2.46 2.03 0.58 50.00 Yes 41.00 4.00 9.00 Mandi, bazaar and bus stop Small quantity 100 100 Yes 100 Yes Plum Cherry Walnut Mango -

Business quantity (Mounds/day) Purchasing from wholesaler (%) Selling at retailer price Age (Years) Education (Years) Business exp.(Years) Location

33 09 05 Market, bazaar and bus -

Yes 32.20 34 4.36 09 7.0 09 Market, Market, bazaar and bazaar and bus stop bus stop Age (Years) 35 Education (Years) 7 Business exp. (Years) 9 Location Mandi, bazaar and bus/wagon stop Business quantity Small (Mounds/day) quantity Purchasing from 100 wholesaler (%) Selling at retailer price Yes Source: Survey Results 2007 Northern Areas AJK

Business quantity (Mounds/day) Purchasing from wholesaler (%) Selling at retailer price Age (Years) Education (Years) Business exp.(Years) Location

36.33 36.33 5.00 5.00 21.17 21.17 Mandi, Mandi, bazaar and bazaar and bus stop bus stop Small Small quantity quantity 100 100 Yes Yes

NWFP

--

41 38 4 6 9 10 Mandi, Mandi, bazaar and bazaar and bus/wagon bus/wagon stop stop Small Small quantity quantity 100 100 Yes Yes

The average formal education of sample retailer ranged from 7-9 in Baluchistan, 4-5 in NWFP, 4-9 in NAs and 4-7 years of schooling in AJK. Majority of the fruit retailers were solely operating the business and responsible for whole of the activities (Table 3.10). All the sample retailers purchased their fruit from wholesalers and sold those fruit at retail price, while sample retailers purchased their vegetables from beoparies and farmers through commission agents. The average age of the sample vegetable retailer for Baluchistan was 37 years, 33 years in NAs and 30-44 years in AJK. On average, the business experience of sample vegetable retailer in Baluchistan 38

was 12 years, ranged from 1-15 years in NAs and ranged from 8-18 years in AJK. The average formal education of sample vegetable retailer was 10 years in Baluchistan, 4.7-10 years in NAs and 7-8 years in AJK. (Table 3.11). Table 3.12: Characteristics of the sample selected vegetables retailer
Characteristics Tomato Age (Years) Education (Years) Business experience (Years) Location 36.64 9.00 12.36 Lady finger 36.64 9.00 12.36 Carrot 36.64 9.00 12.36 Cauliflower 36.64 9.00 12.36 Onion Peas Potato Bringal

Mandi, Mandi, Mandi, Mandi, bazaar bazaar and bazaar and bazaar and and bus/wagon bus/wagon bus/wagon bus/wagon stop stop stop stop Business quantity Small Small Small Small quantity (Mounds/day) quantity quantity quantity Purchasing from 100 100 100 100 wholesaler (%) Selling at retailer Yes Yes Yes Yes price Age (Years) 33 33 33 33 Education (Years) 10 10 10 10 4.7 Business 09 09 09 09 experience 7.0 (Years) Location Market, Market, Market, Market, bazaar and bazaar and bazaar and bazaar and 19.0 bus/wagon bus/wagon bus/wagon bus/wagon stop stop stop stop Business quantity 1.30 1.30 1.04 1.64 15.0 (Mounds/day) Purchasing from 80 80 80 90 10.0 wholesaler (%) Selling at retailer Yes Yes Yes Yes 64.6 price Age (Years) 34 44 30 Education (Years) Business experience (Years) Location 7 11 7 18 Mandi, bazaar and bus/wagon stop Small quantity 100 Yes Mandi, bazaar, bus/wagon stop Small quantity 100 Yes 8 8 -

Balochistan

Northern Area

44 7 18

Mandi, bazaar, bus/wagon stop Business quantity Small (Mounds/day) quantity Purchasing from 100 w.saler (%) Selling at retailer Yes price

Mandi, bazaar and bus/wagon stop Small quantity 100 Yes

Source: Survey Results 2007

AJK

39

3.8

Characteristics of Sampled Fruit and Vegetables Consumer

Consumers were interviewed for their socioeconomic characteristics and per capita consumption of selected fruit and vegetables. Every day consumers make number of decision to buy fruit and vegetable for household consumption. The mean age of the consumers was 65, 43, 33 and 47 years in Baluchistan, NWFP, NAs and AJK. The average household size for Baluchistan was 8 for NWFP, 9 for NAs and 6 for AJK. The main sources of income were government servant and business in the study area. It was also noticed that in the study areas most of the consumers bought fruit and vegetables from retail shop and very few from wholesalers. In terms of education, most of the consumers had either primary or middle education in Baluchistan and in NWFP while in NAs and AJK majority of the consumers were highly educated (Table 3.12). Table 3.13: Characteristics of the sampled fruit and vegetables consumers
Items Baluchistan (Quetta) 65 8 30 40 30 55 15 30 N.W.F.P (Peshawar) 43 6.5 40 50 10 60 25 1 14 Northren Areas (Gilgit) 33 9 30 25 45 40 20 1 39
(Mean/Percent)

A.J.K (Muzafarabbad) 47 (12) 6 (2) 9 23 68 50 25 2 23

Age (Years) Family size (#) Education (%): - Primary -Middle - Higher Source of income (%): - Government servant - Business - Overseas - Others Source of purchase of fruit and vegetables (%): - Shop - Wholesale - Hawker

80 10 10

75 5 20

100 -

89 7 3

3.9

Conclusion

Studying socioeconomic characteristics of the market intermediaries is essential not only for seeking the structure and conduct of the market but also help in drawing conclusions for further expansion of the marketing surplus volume and development of the existing market. Sample fruit and vegetables growers are generally small and scattered in NWFP, NAs and AJK. Though all types of market intermediaries were less educated but they were well experienced in operating their business. The intermediaries were financially found sound but also get loan up to some extent from informal sources. The intermediaries were found equipped with communication sources for frequent contact with other counterparts in the study area.

40

CHAPTER 4 SUPPLY AND DEMAND FOR SELECTED FRUIT AND VEGETABLES

4.1. Introduction

This chapter is devoted to the description of supply and demand for selected fruit and vegetables in Balochistan, NWFP, Northern Areas and AJK. The brief description of the condition of nature and economy, supply and demand of selected fruit and vegetables and basic facility for marketing system in Balochistan, NWFP, Northern Areas and AJK is outlined in this chapter.

4.2.

The Condition of Nature and Economy

This section deals with the condition of nature and economy of Balochistan, NWFP, Northern Areas and AJK. The brief description of nature and economy of each study site is briefly narrated in Table 4.1: Table 4.1: The condition of nature and economy in the study area
Condition of Nature Mostly rangeland with arid climatic condition, ranging from temperate to tropical and sub-tropical. Balochistan The distribution of rainfall is very erratic, irregular and difficult to predict with periods of extreme drought. Annual rainfall in highland Balochistan ranges from 150 to 225 mm in the southern districts of Khuzdar and Kalat to 275 to 350 mm in the northern districts of Loralai and Zhob. Forest and Range land constitute 1.33 million hectares (13.08 percent) of the total area. Areas not available for cultivation is 3.90 million hectares (38.35 percent) and 1.21 million hectares (11.90 percent) are cultivable waste. Economy Largest province of Pakistan Having 34.7 million hectares area that account 43% of the total area of the country. Only 1.6 m hect (4.6%) is cultivated. Population of 7.5 million that represents 5% of the national population. Only about 2% of Balochistan is cultivated at any time due to scarcity of water. Only 30% of the area is irrigated out of cultivated area. Wheat, barley and pulses have a share of 82%, 99% and 43% respectively. Irrigated agriculture contributes 67% and 44% to the total production of fruit and vegetables respectively. With an area of 10.17 million hectares only 1.90 m hect (18.68%) is cultivated. Total numbers of farms in the province are 1.356 million, of which 37 percent are small farms (under 0.5 hectare), followed by 22% farms ranging from 0.5 to under 1.0 hectare and 19% ranging from 1.0 to under 2.0 hectares. Estimated population of NWFP is 23.31 million spreads over 24 districts and 47 tehsils.

NWFP

41

Northern Areas

Condition of Nature The climate of Northern Areas (severe in winter, cool spring and hot and dry summer) is ideally suited for cultivation of deciduous fruit trees and vegetables. Severe winter fulfills the chilling requirement, cool spring for fruiting and hot and dry summer for complete ripening and so far disease free.

AJK has 42.6 percent under forest and rangeland. Areas not available for cultivation is 42.5 percent and 1.9 percent are cultivable waste. The climate ranging from temperate to sub-tropical and tropical.

Economy Only one percent land of the NAs is cultivable, about 4% is occupied by forest and 23% are rangelands, mainly alpine pasture. The average family size is 11.2 person with 4.7 person engaged in agriculture. The average farm under cultivation is around 22.3 kanal (1.1 Hect). On the other hand average land holding of farmer is around 34.2 kanal (1.71 hect.). A variety of fruit and vegetables like apples, apricot, cherry, grapes, mulberry, walnut, almond, potatoes, peas, onion, tomatoes, okra, carrots, turnips, radish etc., are produced. Fruit have been planted over 10,638 hectares mostly in the form of irregular orchards in the crop fields and yards. Most of the produce is used for fresh home consumption and surpluses are either dried. The total area of AJK is 13297 square kilometers (1329000 hectares) of which the cultivated agricultural area is 172821 hectares (13 percent). Of the total cultivated area of 3.29 million acres, almost one third is subtropical in the, with fruit and vegetables grown on 2575 acres and 887 acres respectively. The main crops are mango, citrus, guava, vegetables and floricultural crops. Two third of cultivated area is in the temperate north, with 9,532 acres of fruit and 1,768 acres of vegetables. Apple, pear, stone fruit, vegetables, potato and flowering bulbs are main crops in this area. The total number of farms in the state is 277599, of which 97.6 percent are small farms, 1.8 percent medium farms and less than one percent large farms. The occupants of small farms cultivate nearly 90 percent of the total cultivated area, while medium and large farm holders cultivate less than 7 and 4 percent of it, respectively. Average size of small farm is 1.6 hectares, however, size of small farms may be 0.2 to 0.3 hectares or even less. Total population of AJK in 2002 was 3.271 million with a population density of 229 persons/square kilometers. Average household size was 7.2 persons.

4.3.

AJK

Basic Facilities in the Study Area

4.3.1. Research and development Balochistan: There are 20 fruit and vegetable research substations located in various parts of Balochistan. Beside there is one cold store at Quetta with a capacity of 600 tones. Another cold store has also been constructed at Loralai under the productivity enhancement program by agriculture department with a capacity of 600 tones. Although there are a number of institutions 42

for research and development works on different horticultural crops in Balochistan, but very limited new high yielding cultivars were developed. NWFP: There is a horticulture section in almost all of the research establishments located in every cropping zones of the province, involved in research pertaining to the horticultural crops of that particular zone. Crop variety evaluation, agronomic trials, fruit nurseries, vegetable (including potatoes) farming are their major activities. Northern Areas: Karakorum Agricultural Research Institute for Northern Areas (KARINA) is the only one research organization conducting research on different crops including horticultural crops. However, there is no specific research institute for horticultural crops. AJK: Fruit and vegetable section mainly deals with fruit culture, fresh vegetable, off-season vegetable production, vegetable seed production and cultivation of economical innovative crops, including condiments, spices, medicinal plants and floriculture. Crop variety evaluation, agronomic trials, fruit nurseries, vegetable (including potatoes) farming are their major activities. There are 7 fruit and vegetable research substations located in various Agri. Ecological Zones (AEZs). 4.3.2. Processing and refrigeration Balochistan:There is only one cold store at Quetta with a capacity of 600 tones and one grading machine with horticulture department in Quetta. In addition to these stores farmer store the produce in winter in their own house or in village where they can keep small quantities of their produce during winter season, under the FAO Outreach and Transfer of Fruit Technology project the ventilated cool stores concept has been introduced in the high plateaus of Balochistan (6000 feet above sea level) at Districts Ziarat, Muslim Bagh and Kalat. About 600 crates can be kept in each store. Besides, these low cost stores for onions and potatoes have been constructed on farmers field at Mastung and Kalat. NWFP: In NWFP fruit processing industries do exist, but not in the producing areas however cold storages and refrigeration facilities are limited only to big cities or towns. Beside this, the Food Technology sections of various research centers/institutes are actively involved in processing of fruit and vegetables and preparing different products. Northern Areas: There are no fruit processing and refrigeration facilities in Northern Areas. AJK: There are no fruit processing and refrigeration facilities in whole AJK. 4.3.3. Transportation (highway and air transportation) Balochistan: Both railway and air transportation facilities are available in Balochistan, mostly cherry is exported by air transportation to others provinces of the country. NWFP: The assembly and wholesale markets are distantly located from fruit producing areas. Highways are the only source of transportation of fruit within the province. However, farm to 43

market roads in NWFP are not well developed. Occasionally, inter-provincial transportation of fruit through train also practiced while air transportation in case of export to other countries. Northern Areas: Railway transportation facility is not available in the Northern Areas where air transportation facility is available in Northern Areas. AJK: Both railway and air transportation facilities are not available in AJK. 4.3.4. Market and communication Balochistan: There were three big regular fruit and vegetable markets exist in the whole Balochistan. There were one small private fruit and vegetable market in all districts of the province. In Quetta one terminal fruit and vegetable market is present where 295 commission agents are involved in fruit and vegetable marketing business. NWFP: Regular fruit markets exist in NWFP located in the big cities of the province where number of commission agents are in involved in fruit marketing. These markets are linked with markets of other provinces. A very well communication network exists in the province, except some of the hilly areas. In addition to this, majority of the stakeholders involved in fruit marketing have cell phone with them. Northern Areas: There is one market at Gilgit. There is well-organized communication network available throughout Northern Areas. AJK: There is no single regular fruit and vegetable markets exist in the whole AJK. There is one private fruit and vegetable market in Muzaffarabad where 18 commission agents are involved in fruit and vegetable marketing business. There is well-organized communication network available throughout AJK. In addition to this, majority of the people have cell phone facilities with them. 4.3.5. Institutional constraints The issues related to research and development, processing and refrigeration, transportation and marketing & communication in the study area have been discussed in the previous section. The non-existing and non-functioning of these institutions creates problems for all stakeholders of market chain of fruit and vegetables in the study area. The institutional constraints emerged from the non-functioning of these institutions are briefly presented in Table 4.2.

44

Table 4.2: Institutional constraints emerging from lack of basic facilities in the study area Balochistan Lack of coordination, linkages among agriculture research, education and extension. Week technical and professional capacity of agriculture research institutions Inadequate R&D infrastructure Lack of focus on value addition, diversification and market orientation Week extension services to guide the growers in modern management techniques Lengthy and conventional accounting system regarding late releases of budget to research and extension NWFP Existence of traditional research instead of demand driven research Involvement of R&D institutes in sale and marketing of consumer products non existence of regular markets Absence of publicprivate partnerships in areas of R&D and extension services Lack of focus on value addition, diversification and market orientation Northern Areas absence of research in specific crop product lack of capacity of agriculture department (extension) lack of horticulture business function lack of technical staff skills and financial resources in extension services no clear roles for public and private sectors in the development of horticulture development lack of coordination between the stakeholders of agriculture development non existence of producers and marketing association non existence of regular markets AJK disintegrated R&D system without proper research infrastructure shortage of technical staff lack of expertise and financial resources particularly in extension services non existence of regular markets Lack of focus on value addition, diversification and market orientation

absence of proper career structures which result into lack of motivation fro staff to work wholeheartedly

4.4.

Supply of Selected Fruit and Vegetables in the Study Area

The supply of selected fruit and vegetables includes trends of development of fruit and vegetables industries, the expansion of fruit and vegetables area, the sustained increase in fruit and vegetables production and basic facilities (research and development, processing, transportation, market and communication facilities). The information on supply of selected fruit and vegetables are presented in the following sub-sections:

45

4.4.1. Supply of selected fruit in the study area Balochistan constitute major portion in the total supply of so many fruit in the country. Kharif fruit includes apple, grapes, pomegranate, apricot, peach, pear, plum, almond, fig, cherry, pistachio and others. The total areas of selected fruit i.e. apple, apricot and grapes in Balochistan has increased as reported in 2005-06 were 102.80, 26.90 and 13.60 for apple, apricots and grapes respectively by 245 percent, 293 percent and 133 percent during the previous five years span. Similarly apple and apricot production has increased by 10 percent, 8 percent respectively while grapes production has decreased during the same period of time. Observing the fruit supply side of NWFP, area under apple decreased by 3 hectares (from 9302 hectares to 9299 hectares) while production increased by almost 25 thousand tones (from 101.69 thousand tones to 126.67 thousand tones). During the same period area under plum and citrus decreased by 188 (from 3653 hectares to 3465 hectares) and 304 hectares (from 4752 hectares to 4448 hectares), respectively, which also dropped production of plum by 6 thousand tones (from 39.19 thousand tones to 33.11 thousand tones) and citrus by 2 thousand tones (from 39.69 thousand tones to 37.65 thousand tones). In the Northern Area of Pakistan, the total number of trees is 54,02,562, of which 66% are bearing trees and the remaining non-bearing trees are 34% with a total production of 1,70,680 tons. Apricot alone has around 1.8 million trees with a production of more than 100,000 tons. The production of other selected fruit i.e. apple was found to be 15,449 tones and cherry with 1,862 tones. AJK also prevail the increasing trend with respect to number of trees and production for the selected fruit. Though this increase is very nominal but encouraging one (Table 4.3). Table 4.3: Areas under different fruit tree in the study area
Fruit 2001-02
Area Apple Apricots Grapes Apple Citrus Plum Apple Apricot Cherry 38.0 11.5 12.5 9.50 4.50 3.30 ---Prod 201.0 104.9 49.5 117.40 37.50 35.80 ---(000 hect and 000 tons)

2002-03
Area 101.5 26.5 12.6 9.00 4.30 3.60 ---Prod

2003-04

2004-05
Area 102.3 26.6 12.8 9.30 4.40 3.40 ---No of trees Prod

2005-06
Area 102.8 26.9 13.6 9.30 4.50 3.40 Prod

Area Prod Balochistan 101.9 223.8 220.3 26.5 187.7 187.7 12.8 48.4 48.4 NWFP 110.10 8.80 106.30 38.00 4.40 37.20 39.10 3.40 37.40 Northern Areas ---------AJK No of Tones trees

220.9 178.7 47.5

127.90 36.80 34.00 ---Tones

219.5 158.3 45.2

126.70 37.70 33.10

1.6 6.4 0.4

No of trees

15.4 107.3 1.0

Tones

Walnut Apple Mango

----

----

----

---

123.2 1063.3 28.0

3573 53294 726

123.5 1076.4 28.0

3581 53819 730

124.2 1082.6 28.5

3600 54023 737

46

4.5.

Supply of Selected Vegetables in the Study Area

Vegetables are grown in two different seasons: Kharif and Rabi. Varieties of vegetables are grown in the study area. Kharif vegetable includes ladyfinger, aquash (Tinda), brinjal, bitter gourd, battle gourd, pumpkin, lufa, long Melon, cucumber, pursilano, arum, beans, field vetch, lotus, and tomato. Rabi vegetable includes carrot, tomato, cauliflower, turnip, spinach, cabbage, sweet potato, peas, garden peas, kanol kohl, fennu greek, Among these vegetables, only eight vegetables (tomato, lady finger, carrot, onion, peas, brinjal, potato and cauliflower) were selected for this study. The area of tomato has been increased over the previous five years span in all the project regions. Similarly areas under carrot and cauliflower have also been increased. The tomato production has increased tremendously in all study regions both with respect to area and production. Similarly area and production of all other selected vegetables have also been increased in all regions of the study (Table-4.4). Table 4.4: Areas under different fruit tree in the study area
Fruit 2001-02
Area Tomato Okra Carrot Tomato Onion Peas Potato Tomato Okra Brinjal Prod (hectares and tons)

2002-03
Area Prod

2003-04
Area Balochistan Prod

2004-05
Area Prod

2005-06
Area Prod

2916 2779 1678

-------

22727 15673 29297

-------

3347 2340 2137

-------

26106 13517 37256

-------

3955 2768 2980

31112 16614 51867

4762 2882 3329

----

38411 17064 57823

----

5196 2877 3445

481 6.4 395 6483

42325 17138 59620 7853 107.3 1464 72660

Northern Areas -----AJK --

120 64 242

530 284 1129

118 65 243

521 299 1142

139 65 243

625 299 1142

4.6.

Demand of Selected Fruit and Vegetables in the Study Area

The quantity of sample fruit and vegetables consumed per individual per day used to summarize the status of fruit and vegetables consumption at a point in time in the study area. The information of annual per capital consumption of sample fruit and vegetables is given in Table 4.4. In Balochistan, the per capita consumption of apple, Apricots, grapes, tomato, lady finger, Carrot and cauliflower 3.18, 1.32, 1.08, 4.32, 0.96, 0.84 and 1.44 kg respectively. Using per capita consumption of sample fruit and vegetable as well as population of Balochistan during 2007, the estimated demand for apple, apricot, grapes, tomato, lady finger, carrot and cauliflower arrived at 25453, 10565, 8644, 34577, 7684, 6723 and 11526 tons respectively (Table 4.4). Deducting this demand from supply, surplus of apple, apricots, grapes, tomato, lady finger, carrot and cauliflower arrived 194047, 147735, 36556, 7748, 52897 and 12178 tons respectively,

47

for which the SCP model for marketing system and margin has to be carried out for Balochistan (Table 4.5). Data on consumption of selected fruit were not available and therefore per capita monthly consumption data of apple and citrus for rural areas was taken as a proxy for NWFP. In case of plum, the per capita monthly consumption data available for other fruit were taken to represent plum consumption. According to this, the per capita monthly consumption of apple, citrus and plum was 0.19, 0.16 and 0.32 kg respectively. Using per capita consumption of sample fruit and population of NWFP during 2005, the provincial demand for apple, citrus and plum was estimated to be 49.59, 17.40 and 27.84 thousand tones, respectively. Deducting this demand from supply (production within the province), surplus for marketing was arrived at 78.38, 19.42 and 6.11 thousand tones for apple, citrus and plum, respectively (Table 4.5). The information of annual per capital consumption of sample fruit and vegetables in AJK is given in Table 4.4. The per capita consumption of walnut, apple and mango for pickle, tomato, ladyfinger and brinjal is 0.09, 2.27, 0.20, 6.0, 2.0 and 1.5 kg respectively. Using per capita consumption of sample fruit and vegetable as well as population of AJK during 2003, the estimated demand for walnut, apple, mango for pickle, tomato, lady finger and brinjal arrived at 294, 7425, 654, 19626, 6542 and 4906 tons respectively. Deducting this demand from supply, surplus of walnut, apple and mango for pickle, tomato, lady finger and brinjal arrived 3306, 46598, 83, 19101, 6243 and 3764 tons respectively, for which the SCP model for marketing system and margin has to be carried out for AJK (Table 4.5). Table 4.5: The condition of nature and economy in the study area
Fruit & vegetable Apple Apricots Grapes Tomato Lady finger Carrot Cauliflower Apples Citrus Plum Walnut Apple Mango Tomato Lady finger Brinjal NWFP Annual per capita consumption (kg) 3.18 1.32 1.08 4.32 0.96 0.84 1.44 2.28 0.96 1.28 0.09 2.27 0.20 6.0 2.0 1.5 Population of 2006 8.00 8.00 8.00 8.00 8.00 8.00 8.00 21.75 21.75 21.75 3.27 3.27 3.27 3.27 3.27 3.27 Estimated demand (tons) 25453 10565 8644 34577 7684 6723 11526 49.59 17.40 27.84 294 7425 654 19626 6542 4906 Supply (tons) 2005-06 219500 158300 45200 42325 17138 59620 23704 127.97 36.82 33.95 3600 54023 737 Surplus for marketing (tons) 194047 147735 36556 7748 9454 52897 12178 78.38 19.42 6.11 3306 46598 83 19101 6243 3764

AJK

Balochistan

525
299 1142

48

4.7.

Public Policy

4.7.1. Influence of WTO After joining WTO, fruit and vegetables industry of Pakistan is facing many opportunities and challenges. Because of the changing peoples food structure and advocacy of healthy pollution free fruit and vegetables demand is emerging. At the same time the production of fruit and vegetables are getting weaker and the self-sufficient rate is dropping in Europe, America, Japan and other countries that will bring huge business chances to the horticultural export of Pakistan. This is helpful to the structural adjustment of horticultural industry in the country. 4.7.2. Government policy Government of Pakistan has prepared horticulture policy in 2007 with the vision of transformation of countrys horticulture into a vibrant, sustainable, market driven and export based industry. The main objectives are (i) achieve efficient and profitable production and marketing (ii) deliver appropriate quality and safe products in local and export markets (iii) enhance export competitiveness and value added (iv) develop an industry to be profitable for investors and operators. 4.7.3. Policy and regulatory constraints Although there are a number of institutions for research and development works on different horticultural crops in Balochistan, NWFP, Northern Areas and AJK, however, very limited new high yielding cultivars have been developed. Also there is no research and development facility for conducting research on controlled atmosphere storage and shipping of fruit and vegetables in the study area. Further the research on fruit and vegetables is not demand driven, and is often replicated time and again. The extension system in the study area remains ineffective, and whatever limited research and development work done is not properly transferred to end-users. Survey findings revealed that the constraints related to policy and regulatory framework create more hurdles in horticultural development strategy in the country. The region-wise issues related to policy and regulatory framework is summarized in Table 4.6.

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Table 4.6: Policy and regulatory constraints of horticultural development Balochistan inefficient and ineffective quarantine laws to check the entry of plants, seeds, flower bulbs, time barred insecticides/pesticid es, fertilizers and fruit and vegetables no participation of stakeholders in developing horticulture research program, policy and planning no system in place of monitoring and evaluation of research, extension and education in horticulture in Balochistan promotion of research/extension staff on seniority without regard to performance/hard work and number of research publications NWFP lack of well defined provincial horticultural policy non-identification of role of public and private sector in the development of horticulture and skill development lack of capacity of agriculture research and extension department in NWFP; iv) non existence of Horticulture Task Force on permanent basis non existence of producers and marketing associations as well as market committees non introduction of innovations in horticulture products and techniques lack of regulations and certification system in NWFP Northern Areas AJK absence of well absence of well defined Northern defined AJK areas Horticulture Horticulture policy policy lack of quarantine chick posts in all lack of quarantine chick posts in all entry points of AJK entry points of No legal framework Northern areas for marketing of pesticides No legal framework for marketing of non existence of pesticides any mechanism for monitoring of non existence of any mechanism for fertilizers quality monitoring of fertilizers quality non observance of regulations for seed production by seed producers and seed companies

4.8.

Conclusions

Nature is always kind to area and area people. Nature has bestowed unique characteristics to each area. The study area comprised of different regions with different characteristics ranging from temperate to sub-tropical and tropical with production of cherry and apple on one side and mango and citrus on another side. Very limited new high yielding cultivars have been developed despite the fact that there are number of institutions for R&D in the study area. The extension system in the study area remains ineffective, and whatever limited research and development work done is not properly transferred to end-users. 50

CHAPTER 5 MARKET STRUCTURE

5.1. Introduction

Market structure is the most basic concept and research motive, which reflects groundwork and environment in market economy operation. "Market structure is defined to be those characteristics of the organization of a market that seems to exercise a strategic influence on the nature of competition and pricing within the market (Bain, 1968). The most important elements of market structure are: (i) market types (ii) market actors (iii) marketing channels (iv) intermediaries relationship (v) the conditions for entry to the market (obstacle of market entry and exit), referring to the ease or difficulty with which new sellers may enter in the market and (vi) technical and socio-economic constraints. The description of these elements of market structure in Balochistan, NWFP, Northern Areas and Azad Jammu and Kashmir (AJK) is presented in the following sections:

5.2.

Market Types

Selected fruit and vegetables are sold through four types of markets namely roadside, assembly, wholesale and terminal markets in Balochistan, NWFP, Northern Areas and AJK 5.2.1. Road side markets Road side markets are situated near the farm or orchard on the road in Bolichstan, NWFP, Northern areas and AJK. These markets are situated close to farm gate. These markets are famous for selling cherry, Apple, Apricot and Plum in the study area in general and NWFP and Northern areas in particular. 5.2.2. Assembly markets Assembly markets are existed in all regions of study area. These markets are situated generally in small town/subdivision level where fruit and vegetables growers, contractors and beoparies bring their products. Shopkeepers, beoparies and retailers also participate as buyers in these markets where small quantities of fruit and vegetables are transacted. The shopkeepers and retailers buy small quantity of fruit and vegetables and sell it to the people in that area. The price is determined through direct negotiation between the beoparies and growers. Since the quantities involved are small, farmers may not mind small price differentials as compared to wholesale markets at district level.

51

5.2.3.

Wholesale markets

There are three regular wholesale markets in whole Balochistan, one each at Quetta, Nasir Abad and Loralai. Wholesale market at Quetta has better storage, transportation, communication and working conditions for both buyers and sellers than those in the assembly market in various cities of Balochistan. This wholesale market having more than 500 shops owned by a private entrepreneur who charged Rs.225000/- per shop from each commission agent.. Also there is easy access of transport, which makes it convenient both for growers and market traders to move agricultural produce from other markets. Commission agents provide lodging and boarding facilities to the contractors, producers and beoparies who bring their produce from long distances. In these wholesale markets arrangements are available to settle disputes over pricing, weighing of produce, commission charges and other market practices. Market participants include commission agents, wholesalers, retailers, shopkeepers, weighing men and brokers. In the province of NWFP, wholesale markets are located in the big cities. However, wholesale market at Peshawar has better storage, transportation, communication and working conditions for both buyers and sellers than those in the assembly market in various towns of the province. There is easy access of transport, which makes it convenient both for growers and market traders to move agricultural produce to other markets of the country or even Afghanistan. Commission agents provide lodging and boarding facilities to the growers, contractors and beoparies who bring their produce from long distances There is no well-developed market structure and system of wholesale markets in NAs. However, small wholesale markets exist particularly in Gilgit with very poor infrastructure. There are three private small wholesale markets in Gilgit city, which have no proper storage, transportation, and communication and working conditions for both buyers and sellers. In these small markets, market actors do business of fruit and vegetables that come from other parts of Pakistan. Wholesale markets of Gilgit were visited and compiled the information about them. Due to poor market infrastructure, lack of market information particularly to the growers the marketing system in NAs is highly inefficient. Due to small landholdings and small volume of the produce of both fruit and vegetables the growers have less bargaining power and mostly sold their produce through personal contacts mainly with the retailers and market agents who are mostly involved in the retail as well as whole sale business. The large contractors also collect the produce from these local markets and send to whole sale markets of Punjab mainly Islamabad and Lahore. There is no regular wholesale market in whole AJK. Two private wholesale markets, one at Muzaffarabad and one at Bhimber were visited and compiled the information about them. Wholesale market at Muzaffarabad has better storage, transportation, communication and working conditions for both buyers and sellers than those in the assembly market in various towns of AJK. This wholesale market having 18 shops owned by a private entrepreneur who charged Rs.18000/- per month per shop from each commission agent. There is no easy acces of transport. Also there is easy access of transport, which makes it convenient both for growers and market traders to move agricultural produce from other markets. Commission agents provide lodging and boarding facilities to the contractors and beoparies who bring their produce from long distances. 52

5.2.4.

Terminal markets

Terminal markets are generally located in large urban centers, like, Lahore, Rawalpindi, Peshawar, Quetta and Karachi. These markets are used for satisfying local urban consumption and remaining is exported to other provinces and/or abroad. These markets are well established and mostly depend upon the supplies of contractors and wholesale markets. It was observed that contractors are normally tied to supply the produce to the commission agents in the terminal markets. In these markets, the major players are: contractors, commission agents, wholesalers, retailers and exporters. The information on market types where growers sold their fruit and vegetables is presented in Table 5.1 and 5.2 The selected fruit list includes apple, apricot and grapes from Balochistan; apple, citrus and plum from NWFP; apple and cherry from Northern Areas; and apple, walnut and mango from AJK. In this way, apple was common among the study areas in Balochistan, NWFP, Northern Areas and AJK. Assembly markets were found playing major role in the marketing of this fruit. The assembly markets were having relatively dominant role in Balochistan and Northern Areas whereas in NWFP. Almost similar observations can be made for other selected fruit in their respective provinces (Table 5.1). This implies that the market types operating in fruit marketing business vary from one area to the other. The assembly markets are situated on the roadside where farmers bring their produce on daily basis and assemblers gather the product for onward siphoning to other regions of the country. Table 5.1: Market types for selected fruit (% farmers) in the study area
Market agents / Market Apple types Balochistan Assembly market 40 Wholesale market 24 Terminal market 36 NWFP Assembly market 65 Wholesale market 25 Terminal market 10 Northern Areas Assembly market 50 Wholesale market 28 Terminal market 22 AJK Assembly market 75 Wholesale market 15 Terminal market 10 Source: Survey Results 2007 Apricots 40 24 36 56 29 14 Grapes 60 20 20 -. -. -. -. -. -. Citrus -. 70 20 10 -. -. Plum 10 50 40 -. Cherry -. -. 65 15 20 -. Walnut -. 70 20 10 Mango -. -. -. -. 77 12 11

The selected vegetables list includes tomato, okra and carrot from Balochistan; brinjal, onion, peas and potato from Northern Areas; and tomato, okra, brinjal, onion, peas and potato from AJK. In this way, tomato and okra were common in Balochistan and AJK. It was found that in Balochistan the assembly marketing of vegetables was dominant for tomato, okra and carrot. In Northern Areas, assembly markets were dominant market types for marketing of brinjal and 53

onion but wholesale markets were dominant in marketing of peas and potatoes. In AJK, brinjal was mainly sold in the assembly market self-marketed but onion was sold through contractors or beoparies (Table 5.2). It can be concluded that market types are specific in the marketing of selected vegetables in the study area. Table 5.2: Market types for selected vegetables (% farmers) in the study area
Market agents / Market Tomato types Balochistan Assembly market 51 Wholesale market 48 Terminal market 0 Northern Areas Assembly market 76 Wholesale market 13 Terminal market 11 AJK Assembly market 52 Wholesale market 48 Terminal market 0 Source: Survey Results 2007 Okra 52 48 0 86 14 0 Carrot 39 54 7 -. C. flower 41 53 6 79 21 0 Brinjal Onion 55 45 0 18 72 9 Peas 80 20 0 Potato 80 18 2 -

5.3.

Market Actors

Fruit and vegetables markets are made up of different types of actors and exchange places. Actors are of two types. One refers to the organizers of the market who provided places, regulate the trade and administrate markets for fruit and vegetables circulation. The other relates to market traders taking part in the fruit and vegetables circulation from farmers to consumers. Organizers and managers of the market: Wholesale markets at Quetta, Nasirabad and Loralia districts of Balochistan are being run by the association of commission agents having office bearers namely President and General Secretary. There is market committee and regulations in the wholesale markets. Similarly wholesale markets in the NWFP province are being run by the association of commission agents having office bearers namely President and General Secretary. There is also a market committee which regulates the trade in wholesale market. No proper wholesale market exists in the Northern Area of Pakistan. The small whole sale markets such as in Gilgit are administered by two or three market agents who are also involved in local marketing of both fruit and vegetables. They buy from growers who come in these markets along with small scale suppliers. The products are sold to local shopkeepers and the contractors also purchase the produce to bring to the down country from these markets. Even the consumers may directly purchase from these markets sometimes. Wholesale market at Muzaffarabad and Bhimber are being run by the association of commission agents having office bearers namely President and General Secretary. There is no market committee and no regulations in the both wholesale markets. Market intermediaries: Market traders are the main participant of fruit and vegetables market who are directly involved in the business. Six types of market intermediaries are; producers, 54

contractors, commission agents, wholesalers, retailers and consumers. The characteristics of market intermediaries are briefly described in the following sub-sections Producers: Sample producers are geographically dispersed in various locations in Balochistan, NWFP, Northern Areas and AJK ecologies of Pakistan. Relatively senior members of farm families were operating the farming business. This observation is quite similar to other socioeconomic studies conducted in Punjab (Sharif, 1986). The sample fruit growers had 20-29 years of fruit and vegetable farming experience and they are getting low yields of both fruit and vegetables as already discussed in Table 3.3. Majority of the sample fruit and vegetables producers reported the main causes of low productivity of fruit and vegetable which are briefly presented in Table 5.3 Table 5.3: Factors affecting low productivity of fruit and vegetables in the study area Balochistan Non availability of healthy, disease free, true-to-type fruit plants Non availability of certified seed Decline of ground water due to drought Lack of knowledge & skills in crop management Injudicious use of chemicals NWFP Non-availability of proper seedlings Ignorance of cultural practices Non-technical picking & handling of horticulture Un-awareness about integrated crop & pest management Lack of capacity of farmers Lack of skill about value addition Northern Areas Lack of fruit plant nursery registration/ certification system No vegetable hybrid seed production AJK Non regulated seed and nursery system Non availability of better varieties Non availability of quality inputs Non availability of small tractors and equipments Extension staff have limited knowledge of good orchard management

Weak capacity in orchard management No access to biotechnologies for the promotion of horticulture products

Non-availability of quality inputs

Pre-harvest fruit and vegetables selling system: The information on fruit vegetables selling system practiced by sample farmer is presented in Table 5.4 and 5.5 respectively. The survey results reveal that pre-harvest contract, self marketing and selling to beoparies are the major prevailing selling system of fruit and vegetables in the study area. In the fruit sector pre-harvest contract selling is the dominant system wherein vegetables the self marketing following by selling to the beoparies were the major prevailing vegetable selling system in Balochistan. Many fruit producers (21-40%) sold their harvesting rights to their orchard to the contractors. The remaining major portion of fruit growers sold their produce directly in the market. In NWFP, majority of fruit producers (44-75%) sold their orchard harvesting rights to pre harvest contractors except in case of apple where the growers sold their produce directly in the market. Similarly, majority of fruit producers in Northern Areas (58-72%) and in AJK (48-73%) sold their harvesting rights to their orchard to the contractors. The remaining fruit growers sold their produce directly in the market (Table 5.4).

55

Table 5.4: Fruit selling systems practiced by sample farmers (% farmers) in the study area
Selling system Apple Balochistan Pre-harvest contractors 76.6 Self-marketing 21.3 Local/consumers 2.1 NWFP Pre-harvest contractors 51.2 Self-marketing 44.0 Local/consumers 4.8 Northern Areas Pre-harvest contractors 58.2 Self-marketing 41.8 Local/consumers AJK Pre-harvest contractors 54.0 Self-marketing 46.0 Local/consumers Source: Survey Results 2007 Apricots 72.3 26.7 1.0 38.0 62.0 Grapes 60.0 60.0 -. -. -. -. -. -. Citrus 76.6 14.9 10.5 -. -. Plum 59.7 40.3 -. Cherry -. 72.2 27.8 -. Walnut -. 48.0 52.0 Mango -. -. -. -. 73.0 27.0 -

In case of vegetables marketing, majority of sample growers (52 79%) sold their vegetable produce directly in the assembly or wholesale market in the study area (Table 5.5). In Northern Areas, tomato and onion are sold directly in the assembly or wholesale markets by the grower whereas peas and potato are sold to the contractors. In AJK, self marketing is dominant in case of vegetables whereas majority of vegetables growers (52-79%) sold their produce directly in the assembly or wholesale market in the study area (Table 5.5). Table 5.5: Vegetables selling systems practiced by sample farmers (% farmers)
Market agents / Market Tomato types Balochistan Contractors/Beoparies 15.0 Self-marketing 85.0 Local/consumers Northern Areas Contractors/Beoparies 11.0 Self-marketing 76.0 Local/consumers 13 AJK Contractors/Beoparies 44.0 Self-marketing 52.0 Local/consumers 4.0 Source: Survey Results 2007 Okra 21.0 79.0 14.0 86.0 Carrot 18.0 82.0 -. C. flower 100.0 78.0 22.0 Brinjal Onion 45.0 55.0 21.0 79.0 Peas 91.0 9.0 Potato 80.0 18.0 2.0 -

Contractors/Beoparies (Pre and Post-harvest handling of selected fruit and vegetables): In case of fruit marketing, the pre-harvest contracting of fruit orchard is dominant practice in the study area whereas vegetables are sold to beoparies/contractors before harvest and after harvest. The contractors perform key role where middlemen buy fruit produce from farmers before its maturity and sell it in the market. The contractor belongs to farming community who knows 56

local market very well. The contractor estimates the yield of the produce and expected costs for supervision, labor, transportation and marketing for a contract. They keep small quantity of total production for home consumption and the remaining is supplied to producers. It can be argued that contracting system plays major role in the marketing of fruit and vegetables. In the study area contracting out the fruit orchard is the most common practices. Fruit producers usually avoid the marketing of fruit, as they seriously lack in marketing information and linkages with the markets of other districts in the country. Moreover, fruit need careful handling, quick transport, sound packing, and timeliness of all operations if good prices are to be fetched. On the other hand, contractors keep close links with commission agents in the wholesale and terminal markets. They posses sound knowledge about the fruit production and marketing system. It was found that due to lack of information, producers dont take other important factors into considerations that may affect prices, such as current and expected supply and demand conditions. There are many factors, which lead the fruit growers to contract out the harvest of a fruit orchard. The most important reason was lack of knowledge of marketing. During the survey, it was observed that commission agents were biased towards growers in advancing loans rather than contractors. The commission agents do not extend short-term loans to growers to enable them to manage their orchard and to buy inputs and packing material in time. Growers access to institutional credit is limited. The second most important reason reported that commission agents do not want to transfer market price information to producers and provide other facilities such as, accommodation and telephone access at the market place. Therefore, producers have very little information about the marketing of their produce, and face a number of barriers to active participation in the process. The harvesting contract is mostly decided on the basis of mutual understanding between grower and contractor and written agreements are very rare. Majority of the growers contracted out their orchard for one year. The contract amount can be decided on per acre or per tree basis, but is mostly on per acre basis. Many contractors approach fruit growers seeking contracts by offering their bids. Fruit growers normally decide on a contract after meeting 6 to 7 contractors. Majority of growers selected the contractor who offered the highest price for their orchard and selected contractors who have a good reputation in respect of timely payment. This provides evidence that both price and non-price factor plays role in selecting a contractor. After harvesting, the handling operations of fruit and vegetables start. During the survey, it was observed that contractors hired unskilled labor for harvesting, handling and packing. Intensive labor is required for handling of fruit and vegetables which include collection of produce after picking, transportation from field to packing floor, cleaning, clipping the stem portion attached to the fruit and vegetables, spreading over mats for subsequent grading, assembly of crates, packing, trade marketing and loading of a truck. Involvement of unskilled labor in the process of handling of fruit and vegetables generate post-harvest losses. Grading: It is a common practice to obtain better prices and it starts before packing fruit in crates. The contractors designate experienced laborers for grading of fruit and vegetables. Usually, two grades are made: A and B grades. For special grade, top quality fruit and vegetables are selected and packed separately. B grade are usually sold in the open auction in the wholesale and terminal markets, and supplied in the inter-regional markets for sale. It was observed during

57

the survey that whenever un-graded produce of any variety were presented for sale there could not achieve a higher price than grade B produce. Packaging: During the survey, it was observed that fruit are generally packed in wooden crates where vegetables are packed in gunny bags. Both methods generate post-harvest losses to certain extent. Fresh fruit and vegetables are perishable commodities and require marketing immediately after harvest due to absence of on-farm storage facility. Once a crop is harvested, it is almost impossible to improve its quality. Losses of horticultural crops due to improper storage and handling can range from 10 to 40 percent. Transportation: Fruit and vegetables crates are mainly loaded on trucks to transport to interregional wholesale markets by road. Although, the rail network is quite extensively spread throughout the country, but it is not reliable and mostly fruit and vegetables are transported by road to the consumption centers. Due to high energy prices, the transportation cost of fruit and vegetables is becoming major cost in fruit and vegetables marketing. Horticultural processing requires extensive investment in machinery; idle time at a factory must be minimized and this cannot be achieved if produce supply is seasonal (Khushk and Sheikh, 2004). The processing of horticulture products in the study area is almost absent. However, the small proportion of horticulture products is being processed in the province of Punjab and Sindh. Popularization of horticulture product can generate value addition to the growers and other stakeholders. During the survey, post-harvest handling issues reported by different stakeholders are briefly given in Table 5.6. Table 5.6: Post-harvest handling issues of selected fruit and vegetables in the study area Balochistan
Contracting fruit orchard and vegetable Limited focus on post harvest Poor post-harvest handling technique Poor storage and handling facilities Non availability of proper packaging material and facilities in the production areas

NWFP
Contracting fruit orchard and vegetable Out-dated harvesting techniques which damage quality and increase the perishability. Non observing of grading, waxing and polishing Lack of cool chain Post-harvest losses

Northern Areas

AJK

Contracting fruit Contracting fruit orchard and vegetable orchard and vegetable Out-dated harvesting Little awareness and techniques training of modern harvest and post post harvested harvest handling, technologies not storage and implemented preservation unskilled, non technology. technical picking & Limited availability handling and high cost of lack of cool chain packing material high post-harvest losses Non-availability and high cost of packing material Absence of processing facility both in public and private sector

Domestic marketing of selected fruit and vegetables (Commission agents, wholesalers and retailers): Contractors/beoparies in case of contracting and growers in case of direct selling take their produce to commission agents which are the key player in the marketing chain. 58

Commission Agents: The commission agent is an important functionary in the distribution channel of agriculture produce at the market level. Usually, the commission agent acts as a selling agent on behalf of the producer or the pre-harvest contractor. Therefore, he resorts to obtaining the commission for the disposal of produce. In addition, the commission agents do provide a chance to the buyer and seller to come into contact. In the sample area most of the commission agents provide the place for overnight stay and entertain the seller with drinks and meals. They also extend credit facilities to the pre-harvest contractors with the condition that they will bring their produce at their shops. All of the commission agents were found to extend short-term loans to contractors with the condition that they later would bring their produce to them. With the onset of harvesting season, the contractors start bringing the produce for sale to the same commission agents. Therefore, while marketing of produce, the contractors do not obtain the sale revenues form the commission agents as he is already under debt. The commission agent only provides the contractor with any further necessary expenses including second and third installments for orchard owners any payment for labor and packing material. At the end of the season, the contractor visits the market and settles the seasons account with the commission agent. Auction: The commission agents take charge of the produce as soon as the fruit and vegetables reach the market. There are two types of auction namely (a) open auction and (b) secret auction. In an open auction, buyers offer open prices for a lot of offered for sale. During the open auction the producer or contractor can watch the auction and know exactly the price of their products. In the secret auction the commission agent covers his hand with a piece of cloth and the buyers touch and hand of the agent and indicates by their touch the price they are ready pay for the lot. The consignment is sold to the buyer offering the highest price but in this auction the producers and contractors do not know the actual prices of their produce. However, producers/contractors but must accept the price the commission agent reports. Socio-economic constraints: These constraints are emerged due to improper functioning of agents which are (i) Commission agents extend loan to the contractors (not to the horticulture producer) for bringing their produce to them and control the fruit and vegetables supply through contractors (ii) Fruit and vegetable growers contract out their orchards/vegetable produce to contractor/beoparies due to lack of market knowledge (iii) Commission agents do not transfer market information to growers which limits their ability to make timely decision to market their produce and (iv) Secret auctions at the level of commission agents go in favor of buyers rather than producer. These issues are common in Balochistan, NWFP, Northern Areas and AJK. Wholesalers: The wholesaler usually purchases fruit from the commission agents through open auction and sells to the retailers and consumers. He generally occupies a site or a place where buying and selling takes place at market terrace. After purchasing the produce, he takes the produce on his site, does some grading, standardization, and cleaning and then sells to the buyers. A wholesaler requires a license, space, experience, and contacts to enter the market. A license can be obtained with little difficulties and at a relatively nominal official cost, but may require bribing to officials of the market committee. In Punjab, it was found the wholesalers

59

were occupying all shops and no vacancies were available in the market to accommodate new wholesalers, therefore wholesalers are effectively monopolizing the market. Retailers: The retailer is a merchant who sells mainly to the ultimate consumers. Two types of retailers were generally found in case of all the fresh fruit are stallholders and hawkers. The stall holders possess their own or hired fixed business premises. Hawkers sell the fruit in baskets or handcarts and are usually mobile. When both types of retailers were interviewed in and around the cities of selected markets for the required information, it was found that possessing the license was not essential for retailers rather experience was more important (Mohy-ud-din, 1989). There are a large number of retailers and as a result each faces strong competition in buying and selling produce. Constraints in domestic marketing of selected fruit and vegetables: During the field survey, discussions and dialogues with all the stakeholders of marketing chain, the constraints facing the growers and market infrastructure for marketing selected fruit and vegetable are summarized in Table 5.7. Table 5.7: Issues of domestic marketing selected fruit and vegetables in the study area Balochistan
Limited knowledge of market trends Inadequate market information system Poor regulation of the market Limited focus on market Lack of access to refrigerator vehicles for highly perishable products

NWFP
Unawareness of producer of market trends Non regulated marketing system Bad condition of farm to market roads Traditional, outdated often inappropriate delivery mechanism of horticulture produce

Northern Areas
Poor producer awareness and knowledge of market trends No regulated markets Poor conditions of farm to market roads Non existence of Market Legislative system Lack of access to refrigerator vehicles for highly perishable products

AJK
Limited growers awareness of market trends Not regulated marketing system Bad condition of farm to market roads Traditional, outdated often inappropriate delivery mechanism of horticulture produce

Consumers: Consumers of the fruit and vegetables are urban buyers in Quetta, Peshawar, Gilgit and Muzaffarabad.

5.4.

Marketing Channel

Marketing channel is route or out let followed by the fruit and vegetables before reaching in the hands of final consumers (Khushk and Sheikh, 2004). It refers to means of fruit and vegetables circulating and link formed by various market intermediaries (CAET, 2003). Marketing channels for selected fruit and vegetables in Balochistan, NWFP, Northern Areas and AJK are briefly described in the following sub-sections: The marketing circulating links ranged 4-7 for the selected fruit and vegetables. These links have different circulating speed. Channels with more number of circulating links take long time to circulate products from farmers to consumers. For example, farmer to consumer link takes 60

quarter a day where farmer to retailer to consumer takes half a day. Other channels take more time for product circulation because circulating distances are more. The relationship among traders is loose. No written agreement exists and a few oral contracts observed. The information flow regarding supply, demand and price varies from actor to participants. Communication between growers and consumer or other market intermediaries are oral and limited. Table 5.8: Apple Marketing Channels in study area.
Farmer (1) Local Commission Agents (2) Local Wholesalers (3) Local retailers (3) Consumer Farmer (1) Distance Commission Agents (2) Distance Wholesalers (3)Distance retailers (4) Consumer Farmer (1) Preharvest Contractor (2) Local Commission Agents (3) Local retailers (4) Consumer Farmer (1) Preharvest Contractor (2) Distance Commission Agents (3) Distance retailers (4) Consumer Farmer (1) Local Commission Agents (2) Distance Commission Agents (3) Wholesaler/retailer (4) Consumer Farmer (1) Local consumers Farmer (1) Local wholesaler/retailer (2) Local consumer Farmer (1) Local commission agents (2) Local wholesaler/retailer (3) Local consumers Farmer (1) Contractor (2) Local wholesaler/retailer (3) Local consumer Farmer (1) Contractor (2) Local commission agent (3) Local wholesaler/retailer (4) Local consumer Farmer (1) Contractor (2) Inter-territory commission agent (3) Inter-territory retailer (4) Inter-territory consumer Farmer (1) Contractor (2) Inter-territory commission agent (3) Inter-territory wholesaler (4) Inter-territory retailer (5) Inter-territory consumer Farmer (1) Local consumers Farmer (1) Local Retailer (2) Local Consumer Farmer (1) Local Commission Agent/Wholesaler (2) Local Retailer (3) Local Consumer Farmer (1) Contractor (2) Local Retailer (3) Local Consumer Farmer (1) Contractor (2) Local Commission Agent/Wholesaler (3) Local Retailer (4) Local Consumer Farmer (1) Contractor (2) Inter-territory commission agent (3) Inter-territory wholesaler (4) Inter-territory retailer (5) Inter-territory consumer Farmer (1) Local consumers Farmer (1) Local wholesaler/retailer (2) Local consumer Farmer (1) Local commission agents (2) Local wholesaler/retailer (3) Local consumers Farmer (1) Contractor (2) Local wholesaler/retailer (3) Local consumer Farmer (1) Contractor (2) Local commission agent (3) Local wholesaler/retailer (4) Local consumer Farmer (1) Contractor (2) Inter-terri. commission agent (3) Inter-territory retailer (4) Inter-territory consumer Farmer (1) Contractor (2) Inter-territory commission agent (3) Inter-territory wholesaler (4) Inter-territory retailer (5) Inter-territory consumer Source: Survey Results 2007 AJK Northern Areas NWFP Balochistan

61

In terms of trading way, the majority of links are cash transaction between commission agents and wholesalers, pre-harvest contractors and commission agents as well as beoparies. Advance payments or purchase on credit system also exists. These different marketing links neither pushed forward nor promoted the development of fruit and vegetables industries in the study area. The apple marketing channels in Balochistan are briefly presented in Table 5.8. The marketing channels of grapes in Balochistan Citrus and Plum in NWFP, Cherry in Northern Areas and Walnut and Mango in AJK are given in Table 5.9. Table 5.9: Grapes, Citrus, Plum, Cherry, Walnut and Mango Marketing Channels
Farmer (1) Local Commission Agents (2) Local Wholesalers (3) Local retailers (4) Consumer Farmer (1) Distance Commission Agents (2) Distance Wholesalers (3)Distance retailers (4) Consumer Farmer (1) Preharvest Contractor (2) Local Commission Agents (3) Local retailers (4) Consumer Farmer (1) Preharvest Contractor (2) Distance Commission Agents (3) Distance retailers (4) Consumer Farmer (1) Local Commission Agents (2) Distance Commission Agents (3) Wholesaler/retailer (4) Consumer Farmer (1) Local consumers Farmer (1) Local retailer (2) Local consumer Farmer (1) Contractor (2) Local retailer (3) Local consumers Farmer (1) Contractor (2) Inter-territory commission agent (3) Inter-territory wholesaler/Retailer (4) Inter-territory consumer Farmer (1) Local consumers Farmer (1) Local retailer (2) Local consumer Farmer (1) Contractor (2) Local retailer (3) Local consumers Farmer (1) Contractor (2) Inter-territory commission agent (3) Inter-territory wholesaler/Retailer (4) Inter-territory consumer Farmer (1) Local consumers Farmer (1) Export Farmer (1) Local retailer (2) Local consumer Farmer (1) Local commission agent (2) Local retailer (3) Local consumers Farmer (1) Contractor (2) Local retailer (3) Local consumers Farmer (1) Contractor (2) Local Commission agent/wholesaler (3) Local retailer (4) Local consumers Farmer (1) Contractor (2) Inter-territory commission agent (3) Inter-territory wholesaler (4) Interterritory retailer (5) Inter-territory consumer Farmer (1) Local consumer Farmer (1) Local retailer (2) Local consumer Farmer (1) Contractor (2) Local retailer (3) Local consumer Farmer (1) Contractor (2) Inter-territory commission agent (3) Inter-territory retailer (4) Inter-territory consumer Farmer (1) Contractor (2) Inter-territory commission agents (3) Inter-territory wholesaler (4) Interterritory retailers (5) Inter-territory consumers Farmer (1) Local consumers Farmer (1) Local retailer (2) Local consumer Farmer (1) Contractor (2) Local retailer (3) Local consumers Farmer (1) Contractor (2) Inter-territory commission agent (3) Inter-territory wholesaler/Retailer (4) Inter-territory consumer Source: Survey Results 2007 Mango in AJK Walnut in AJK Cherry in Northern Areas Plums in NWFP Citrus in NWFP Grapes in Balochistan

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The apricot marketing channels in Balochistan and Northern Areas are given in Table 5.10. Table 5.10: Apricot Marketing Channels in Balochistan and Northern Areas.
Farmer (1) Local Commission Agents (2) Local Wholesalers (3) Local retailers (4) Consumer Farmer (1) Distance Commission Agents (2) Distance Wholesalers (3)Distance retailers (4) Consumer Farmer (1) Preharvest Contractor (2) Local Commission Agents (3) Local retailers (4) Consumer Farmer (1) Preharvest Contractor (2) Distance Commission Agents (3) Distance retailers (4) Consumer Farmer (1) Local Commission Agents (2) Distance Commission Agents (3) Consumer Farmer (1) Local consumers Farmer (1) Export Farmers (1) Local Commission agent/wholesaler (2) Local Retailer (3) Local Consumer Farmers (1) Local Commission agent/wholesaler (2) Inter-Territory Commission Agent (3) InterTerritory Wholesaler (4) Inter-Territory Retailer (5) Inter-Territory Consumer Farmers (1) Local Commission agent/wholesaler (2) Inter-Territory Commission Agent (3) InterTerritory Wholesaler (4) Inter-Territory Retailer (5) Inter-Territory Consumer Farmers (1) Contractor (2) Local Retailer (3) Local Consumer Farmers (1) Contractor (2) Local Commission Agent/Wholesaler (3) Local Retailer (4) Local Consumer Farmers (1) Contractor (2) Local Commission agent/wholesaler (3) Inter-Territory Commission Agent (4) Inter-Territory Wholesaler (5) Inter-Territory Retailer (6) Inter-Territory Consumer Farmers (1) Contractor (2) Inter-Territory Commission Agent (3) Inter-Territory Wholesaler (4) Inter-Territory Retailer (5) Inter-Territory Consumer Source: Survey Results 2007 Balochistan Northern Areas

The marketing channels of Tomato in Balochistan, Northern Areas and AJK and Potato and Peas in Northern Areas are given in Table 5.11. Table 5.11: Tomato, Potato and Peas Marketing Channels in study area.
Tomato in Balochistan Tomato potato and Peas in Northern Areas Tomato in AJK Farmer (1) Local consumers Farmer (1) Local retailer (2) Local consumer Farmer (1) Beopari (2) Local retailer (3) Local consumers Farmer (1) Beopari (2) Inter-territory commission agent (3) Inter-territory retailer (4) Local consumer Farmer (1) Beopari (2) Inter-territory retailer (3) Inter-territory consumer Farmer (1) Local consumers Farmer (1) Local retailer (2) Local consumer Farmer (1) Contractor (2) Local retailer (3) Local consumers Farmer (1) Local Commission Agent (2) Local retailer (3) Local consumers Farmer (1) Local Commission Agent (2) Inter-territory commission agent (3) Inter-territory retailer (4) Inter-territory consumer Farmer (1) Local Commission Agent (2) Inter-territory retailer (3) Inter-territory consumer Farmer (1) Local consumers Farmer (1) Local retailer (2) Local consumer Farmer (1) Beopari (2) Local retailer (3) Local consumers Farmer (1) Beopari (2) Inter-territory retailer (3) Inter-territory consumer

Source: Survey Results 2007

63

The marketing channels of lady finger in Balochistan and AJK and onion in Northern Areas and AJK are given in Table 5.12. Table 5.12: Lady Finger and Onion Marketing Channels in study area
Lady Finger in Balochistan Lady Finger in AJK Onion in AJK Onion in Northern Areas Farmer (1) Local consumers Farmer (1) Local retailer (2) Local consumer Farmer (1) Beopari (2) Local retailer (3) Local consumers Farmer (1) Beopari (2) Inter-territory retailer (3) Inter-territory consumer Farmer (1) Local consumers Farmer (1) Local retailer (2) Local consumer Farmer (1) Local commission agent (2) Local retailer (3) Local consumer Farmer (1) Beopari (2) Local retailer (3) Local consumers Farmer (1) Beopari (2) Local commission agent (3) Local retailer (4) Local consume Farmer (1) Local consumers Farmer (1) Local retailer (2) Local consumer Farmer (1) Local Commission Agent (2) Local retailer (3) Local consumers Farmer (1) Local Beopari (2) Local retailer (3) Local consumers

Farmer (1) Local consumers Farmer (1) Local retailer (2) Local consumer Farmer (1) Beopari (2) Local retailer (3) Local consumers Farmer (1) Beopari (2) Inter-territory commission agent (3) (4) Local consumer Farmer (1) Beopari (2) Inter-territory retailer (3) Inter-territory consumer Source: Survey Results 2007

Inter-territory

retailer

The marketing channels of carrot and cauliflower in Balochistan and brinjal in AJK are given in Table 5.13. Table 5.13: Carrot, Cauliflower and Brinjal Marketing Channels in study area
Farmer (1) Local consumers Farmer (1) Local retailer (2) Local consumer Farmer (1) Local commission agent (2) Local retailer (3) Local consumer Farmer (1) Beopari (2) Local retailer (3) Local consumers Farmer (1) Beopari (2) Local commission agent (3) Local retailer (4) Local consumer Farmer (1) Local consumers Farmer (1) Local retailer (2) Local consumer Farmer (1) Local commission agent (2) Local retailer (3) Local consumer Farmer (1) Beopari (2) Local retailer (3) Local consumers Farmer (1) Beopari (2) Local commission agent (3) Local retailer (4) Local consumer Farmer (1) Local consumers Farmer (1) Local retailer (2) Local consumer Farmer (1) Local commission agent (2) Local retailer (3) Local consumer Farmer (1) Beopari (2) Local retailer (3) Local consumers Farmer (1) Beopari (2) Local commission agent (3) Local retailer (4) Local consumer Carrot in Balochistan Brinjal in AJK Cauliflower in Balochistan

Source: Survey Results 2007

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The marketing channels for selected fruit and vegetables are presented in Annexure-2 (Figure 2.1 to Figure 2.24).

5.5.

Relationship between Market Intermediaries in Marketing Channels in the Study Areas

The market intermediaries established business relationship based on the product flow, information flow and flow of funds because of business contact. The fruit and vegetables products circulated from growers to ultimate consumers or through other market intermediary to consumer. The flow of funds is contrary to the flow of product; both trading parties of product exchange realized the flow of funds. The information circulates and flows mutually between consumer, contractors, wholesalers, commission agents, retailers and farmers. Among traders, there is mutual flow of information, products and funds. There is very limited flow of information to growers. Commission agents and preharvest contractors/beoparies do not feed back supply, demand and price information to farmers precisely and promptly so they are not guiding the farmers to produce the fruit and vegetables according to the requirements. The relationship between traders and flow of products, funds and information is also presented in figure 5.1.

FARMERS

Contractors/Beoparies

Flow of information Commission Agents/ Wholesalers Flow of funds

Product flow Retailers

Consumers
Figure 5.1: Relationship between traders and flow of products, funds and information

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5.6.

Barriers to Entry in the Market

The motion of barriers to entry plays an important role in market development and in defining examples of monopoly on market power (Khushk and Sheikh, 2004). For this study, we have defined the existing barriers to entry for new market intermediaries at each stage of the marketing chain of fruit and vegetables in the study area i.e. contractor, commission agent, wholesaler and retailers. The barriers to entry of intermediaries are summarized in Table 5.14. Table 5.14: Barriers to entry of intermediaries in the market in study area
No fixed criteria is used for entry and exit as a contractor Contacts with a commission agents and ability to get advance for contracting the orchard could enter the business. Majority of the sample contractor belong to rural area and are associated with the farming community. Established contractors possess a wide knowledge of production management and marketing practices, otherwise newly entry of contractors are facing problem of overestimating of orchard yield, delays in labour and packing material and delays in the harvesting, transportation and marketing process because they have to compete with well-established and experienced contractors. The combination of higher traded volumes and greater expertise may also enable an established contractor to absorb all production and market risk by guaranteeing payment of the agreed contract amount. This is one of main advantages of the contract system from the viewpoint of the grower. Other social factors such as ethnic background, social standing, and access to social networks are also particularly important as barriers to entry. License, registration with the market committee, space, initial capital and business experiences are major determinants for entry as a commission agent. At present lack of space in the market is a main factor restricting the entry of new competitors because wholesale and terminal markets had been constructed soon after the independence of the country Obtaining space in the market and having business contacts, experience and inheritance of a family business represent the major barriers to entry for commission agents. Whilst, having a sufficient amount of initial capital is a great asset, it is not necessarily a limiting factor restricting entry into the market. A wholesaler requires a license, space, experience and contacts to enter in the market. New entries are facing difficulties in obtaining trade license due to lack of space in the market. New wholesalers are thus faced with high barriers to entry including business contacts, experience and most importantly, product differentiation in buying and selling, which in turn, limits the number of new entrants into wholesaling. Wholesalers do not have access to institutional credit and therefore, buy produce from a commission agent on a credit basis Facing risk of unrecoverable loans, which remain outstanding against retailers and shopkeepers. There is a high risk of default in the case of retailers, because they are temporary in the market and after saving some capital often shift to another business or alternatively go bankrupt. Retailers do not require a license however, experience is more important for entry in the market. Due to large number of retailers generate strong competition in the buying and selling of produce. Retailers business involve small amount of capital to start the business. Retailers purchase produce from wholesalers on credit for one to two days on provision of guarantee. Social contact with local people and an honest reputation are the fundamental requirements for becoming successful retailers.

Contractor Commission Agent Wholesalers Retailers

Source: Survey Results 2007

66

5.7.

Export of Fruit and Vegetables

Survey findings showed that a very small proportion of horticultural produce (about 3.5%) is being exported. The region-wise export constraints of horticultural development strategy are identified in Table 5.15 below: Table 5.15: Export Constraints of horticultural development in Balochistan, NWFP and NAs Balochistan lack of orientation of production towards export market lack of quality testing and certification facilities time consuming export clearance procedure lack of storage and refrigerator transport facility

NWFP no grading and labeling of produce lack of orientation of production towards export market Non practicing of certification as EUROGAP, ISO 14000 or HACCP hazard analysis lack of cold storage at cargo high freight charges no facilitation for trade fairs and exhibition lack of support for international marketing

Northern Areas no WTO accredited laboratory for quality certification No use of certification system such as EUROGAP, ISO 14000 or HACCP hazard analysis Non practicing of certification lack of cold storage and no air cargo service high freight charges for horticultural produce no facilitation for trade fairs and exhibition lack of support for international marketing

5.8.

Conclusion

This chapter has assessed the structure of fruit and vegetables marketing system in Balochistan, NWFP, Northern Areas and AJK. Studying the type of markets, market actors, marketing channels and barriers to entry for market intermediaries suggest that the system is competitive and efficient to certain extent as evidenced by the number of market intermediaries, price and non-price competition at the farm level between contractors and producers. Selected fruit and vegetables are sold through four types of markets namely roadside, assembly, wholesale and terminal markets in Balochistan, NWFP, Northern Areas and AJK. There are three regular wholesale markets in whole Balochistan, one each at Quetta, Nasirabad and Loralai. Wholesale market at Quetta has better storage, transportation, communication and working conditions for both buyers and sellers than those in the assembly/wholesale markets in various cities of Balochistan. In the province of NWFP, wholesale markets are located in the big cities. However, wholesale market at Peshawar has better storage, transportation, communication and working conditions for both buyers and sellers than those in the assembly market in various towns of the province. There is no well developed market structure and system of wholesale markets in NAs. However, small wholesale markets exist particularly in Gilgit with very poor infrastructure. There are three small wholesale markets in Gilgit city, which has no proper storage, transportation, and communication and working conditions for both buyers and sellers. 67

There is no regular wholesale market in whole AJK. Two private wholesale markets, one at Muzaffarabad and one at Bhimber were visited and compiled the information about them. Wholesale market at Muzaffarabad has better storage, transportation, communication and working conditions for both buyers and sellers than those in the assembly market in various towns of AJK. Technical constraints faced by fruit and vegetables growers in the study area are (i) Nonavailability of quality inputs like certified seedlings and injudicious use of chemicals (ii) lack of knowledge and skills in orchard and vegetable management (iii) Non-technical post harvest handling (iv) limited knowledge of extension staff for orchard management and (v) lack of capacity of farmers. Lack of capital or resources of credit, competing demands for the producers management time, and lack of knowledge and expertise in marketing lead growers to rely on the contract-harvesting system where fruit and vegetables growers are being exploited. This is reinforced by the actions of commission agents who prefer to obtain supplies through number of contractors tied to them through loaning. Barriers to entry do exist at each stage in the marketing chain but appear most limiting for new commission agents. Socio-economic constraints are emerged due to improper functioning of commission agents which are (i) Commission agents extend loan to the contractors (not to the horticulture producer) for bringing their produce to them and control the fruit and vegetables supply through contractors (ii) Fruit and vegetable growers contract out their orchards/vegetable produce to contractor/beoparies due to lack of market knowledge (iii) Commission agents do not transfer market information to growers which limits their ability to make timely decision to market their produce and (iv) Secret auctions at the level of commission agents go in favor of buyers rather than producer. These issues are common in Balochistan, NWFP, Northern Areas and AJK. The marketing circulating links ranged 4-7 for the selected fruit and vegetables. These links have different circulating speed. Channels with more number of circulating links take long time to circulate products from farmers to consumers. For example, farmer to consumer link takes quarter a day where farmer to retailer to consumer takes half a day. Other channel takes more time for product circulation because circulating distances are more. The relationship among traders is loose. No written agreement exists and a few oral contracts observed. The information flow regarding supply, demand and price varies from actor to participants. Communication between growers and consumer or other market intermediaries are oral and limited. In terms of trading way, the majority of links are cash transaction between commission agents and wholesalers, contractors and commission agents as well as beoparies. Advance payments or purchase on credit system also exists. These different marketing links neither pushed forward nor promoted the development of fruit and vegetables industries in study area. For better conduct government should formulate policy for the development of horticultural sector on the following lines; (i) Horticulture should be given the status of industry, (ii) Horticultural Development Board should be created to streamlines the horticulture sector and (iii) A Horticultural Development Coordination Committee should be constituted with representation from major stakeholders to facilitate the implementation of the action plan. 68

CHAPTER 6 MARKET CONDUCT

6.1. Introduction

Market conduct refers to the pattern of behavior that enterprises follow in adapting or adjusting to the markets in which they sell or buy (Bain, 1968). Market conduct circles around mainly: the price policy of firms, the aims they pursue and methods they apply in establishing what price to charge, what output to produce and what sales promotion cost to incur? (CAET, 2003). Market conduct is that in order to make more profits and increase market proportion every market actors adopt diversified strategic decision conduct on the basis of market supply and demand condition and consideration of relation with other actors (CAET, 2003). Market conduct reflects the running process and mode of market economy which connects market structure and market performance and includes the following aspects: (i) fixing price conduct whole basic character is market actors control and influence price, (ii) non-price conduct whose basic contents are research and development (R&D) forming product difference and (iii) promotion and enterprise adjustment conduct whose characters are property right and enterprises scale change (CAET, 2003). The market structure determines market conduct. Different actors have different behaviours in fruit and vegetables marketing system. The information on new product development, investment in new technology, behavior of traders in the market, competition of actors in the market and formation of prices among actors of market will explain the market conduct for the selected fruit and vegetables in Balochistan, NWFP, Northern Areas and AJK.

6.2.

Research and Development/Development of New Products

Development of new products is the basic condition for the improvement of the market competitiveness and sustainable development of horticulture sector (CAET, 2003). There are seven fruit and vegetables adaptive research substations located in various agro-ecological zones in Quetta, Balochistan. They are not involved in basic research for varietals development of fruit and vegetables. Sample farmer planted old varieties of fruit and vegetables and adoption of these old cultivars limit the incentive for the producers to produce more quantities to earn maximum benefits. Therefore, the productivity of selected fruit (yield of apple, apricot and grapes are 2.34, 0.51 and 0.74 mounds per tree) and vegetables (yield of tomato, lady finger, carrot and cauliflower are 12.83, 7.10, 8.51 and 3.53 tonnes per acre) is very low which generate less marketable surplus. Moreover, disease and pest attack declines the price of the horticultural products. In order to produce large quantities of high quality and high grade fruit and vegetables strengthen its market competitiveness, and promote the development of fruit and vegetables sector, the development of the new varieties of fruit and vegetables need to be made in the directions of market in Balochistan. Public sector, private sector and market traders can contribute in the fruit and vegetables varietals development. Under the aegis of NWFP Research System, research on different fruit has been carried out at research stations located in various agro-ecological zones of the province. They are not only involved in basic research for varietal development but also adaptive research on different fruit 69

varieties has been conducted. In this regard, several fruit varieties have been released by the Provincial Research System in accordance with the climatic conditions of the province. These varieties have been planted by the growers and receiving better produce which in turn earn maximum profit. Therefore, the productivity of selected fruit i.e., yield of apple and plum were estimated at 35.5 and 90.0 kgs per tree while in case of citrus number of fruit per tree were 650. However, disease and pest attack declined the price of the horticultural products. Agriculture in the Northern Areas was primarily based on subsistence farming. Mountain Agriculture Research System (MARS), Department of Agriculture Northern Area started adaptive research in all the agro-ecological zones of NAs. They are not involved in basic research for varietal development of fruit and vegetables. Another research station, Karakuram Agricultural Research Institute for Northern Area (KARINA) under PARC located at Jaglote with three sub-stations in NAs also working on research of fruit, vegetables, field crops and livestock. The mountain agriculture offers good prospects for Organic produce having a growing niche market in countries, which are quality conscious. In order to produce large quantities of high quality and high grade fruit and vegetables strengthen its market competitiveness, and promote the development of fruit and vegetables sector, the development of the new varieties of fruit and vegetables need to be made in the directions of market in Northern Area. Discussions were held with Director Agriculture Research in Gilgit during the survey. It is realized that NAs has enormous potential in horticultural products. With the efforts of Agriculture Department and NGOs in NAs some efforts have been made to streamline the system and different interventions particularly at the producers levels have been introduced to enhance the production and link farmers with the marketing system but still lot of avenues in horticulture sector are still untapped that can be harnessed with the establishment of an efficient marketing system. There are seven fruit and vegetables adaptive research substations located in various agroecological zones in AJK. They are not involved in basic research for varietal development of fruit and vegetables. Sample farmer planted old varieties of fruit and vegetables and adoption of these old cultivars limit the incentive for the producers to produce more quantities to earn maximum benefits. Therefore, the productivity of selected fruit (yield of walnut, apple and mango are 1.7, 1.28 and 4.96 maunds per tree) and vegetables (yield of tomato, onion, lady finger and brinjal are 13, 23, 17 and 19 maunds per kanal) is very low which generate less marketable surplus. Moreover, disease and pest attack declines the price of the horticultural products.

6.3.

Investment in New Technology

Investment in new technology is the premise of technology innovation and an important guarantee of the sustainable development of industry (CAET, 2003). In recent years, Government of Balochistan has made little investment in producing, processing and storage of horticulture sector in order to increase the technological knowledge and additional value of the fruit products. No investment is made so far in the capacity building of stakeholders in fruit and vegetable planting techniques. To popularize the fruit and vegetable production techniques,

70

technical training to farmer has been imparted so far in Balochistan. Vegetable tunnel technology and storage facilities in Balochistan are very minor so far. Investment has been made in production, processing and storage of horticulture sector in order to increase the technological knowledge and additional value of the fruit products in NWFP. However, the extension agents and to somehow at the research stations capacity building programs have been arranged, especially for growers in orchard management techniques, while the rest of the stakeholders mostly remain unattended. In recent years, Government of Northern Areas has made little investment in producing horticulture sector in order to increase the technological knowledge and additional value of the fruit products, capacity building of stakeholders in fruit and vegetable planting techniques. To popularize the fruit and vegetable production techniques, investment in technical training to farmer, development of high tech fruit garden, vegetable tunnel technology and storage facilities should be made on early basis. Government of AJK also has made little/no investment in producing, processing and storage of horticulture sector in order to increase the technological knowledge and additional value of the fruit products. No investment is made so far in the capacity building of stakeholders in fruit and vegetable planting techniques. To popularize the fruit and vegetable production techniques no technical training to farmer has been imparted so far in AJK. No investment in the development of high tech fruit garden, vegetable tunnel technology and storage facilities in AJK so far. Efforts are urgently required for making public, private and market intermediarys investment in the research and development of horticultural sector in the study areas.

6.4.

Behavior of Traders

No information about the behavior of various market intermediaries was available from the study area. The behavior of various market intermediaries was assessed by the average quantities traded by them. The underlying reason of considering the quantity dealt with as a proxy of good behavior was that it is the intermediary who with its business attitude /deal with their client which increases the extent of production intensity of a commodity in the area, which ultimately also benefits him. The average quantities of fruit dealt by pre-harvest contractors show that the grapes dealers have played their role more than other fruit dealer in Balochistan, apricot dealers in Northern Areas and mango dealers in AJK (Table 6.1). In case of vegetables, potato and tomato dealers in Northern Areas while onion dealers in AJK have played more significant role (Table 6.2).

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Table 6.1: Average quantities of fruit dealt during the season by pre-harvest contractors

(t/season)
Regions Apple Apricots Grapes
24.35 145 117.48 -

Citrus
110 -

Plum
50 -

Cherry
294 -

Walnut
16.32

Mango
26.16

Balochistan 385 NWFP 90 Nothern Areas 13 AJK 7.68 Source: Survey Results 2007

Table 6.2: Average quantities of vegetables dealt during season by pre-harvest contractors

(t/season)
Regions Tomato Okra
100 40

Carrot C. flower Brinjal

75 110 20

Onion
26 21.52

Peas
150 -

Potato
690 -

Balochistan 200 Northern Areas 74 AJK 39 Source: Survey Results 2007

Regarding commission agents, the apple and apricot commission agents in Balochistan province dealt relatively higher quantities than other fruit commission agents in the study areas whereas the apricot commission agents in Northern Areas and AJK fall on the lower end (Table 6.3). In case of vegetables, the tomato, okra, carrot and cauliflower commission agents of Balochistan sold relatively higher quantities of vegetables than other vegetables commission agents in the areas whereas the peas commission agents in Northern Areas and brinjal commission agents of AJK were on the lower end (Table 6.4). Table 6.3: Mean quantities of fruit traded by sample commission agent
Regions Apple Apricots Grapes
70.25 4.2 41.40 (t/season)

Citrus
150 -

Plum
250 -

Cherry
1.7 -

Walnut
36

Mango
20

Balochistan 8835 NWFP 450. Northern Areas 5.2 AJK 12 Source: Survey Results 2007

Table 6.4: Mean quantities of vegetables traded by sample commission agent Regions Tomato Okra
5175 5.0

(t/season)

Carrot C. flower Brinjal

7369 9699 4.0

Onion
7.1 24

Peas
2.3 -

Potato
21.0 -

Balochistan 40018 Northern Areas 9.0 AJK 20 Source: Survey Results 2007

Considering wholesalers, the apple and apricot wholesalers of Balochistan dealt relatively higher quantities than other fruit wholesalers in the study areas whereas the walnut wholesalers of AJK fall on the lower end (Table 6.5). In vegetables, the tomato, okra, carrot and cauliflower commission agents of Balochistan sold relatively higher quantities of vegetables (Table 6.6).

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Table 6.5: Mean quantities of fruit traded by sample wholesaler

Regions Apple Apricots Grapes
201.60 3.5 103.68 -

(t/season)
Cherry
1 -

Citrus
300 -

Plum
100 -

Walnut
20

Mango
15

Balochistan 505.2 NWFP 250 Northern Areas 4 AJK 10 Source: Survey Results 2007

Table 6.6: Mean quantities of vegetables traded by sample wholesaler

Regions Tomato Okra
60.16 4

(t/season)
Peas
2 -

Carrot C. flower Brinjal

96.64 96.64 3

Onion
6 16

Potato
15 -

Balochistan 216.94 Northern Areas 7 AJK 15 Source: Survey Results 2007

Turning to the retailers, the apple retailers from Balochistan and Northern Areas dealt relatively higher quantities than other fruit retailers in the study areas whereas the walnut, retailers of AJK and apricot retailers of Northern Areas fall on the lower end (Table 6.7). In vegetables, the tomato retailers of Balochistan sold relatively higher quantities than other vegetables retailers in the study area, whereas the peas retailers of Northern Areas fall on the lower end of their vegetables business volume in the study area (Table 6.8). Table 6.7: Mean quantities of fruit traded by sample retailers (t/season)
Regions Apple Apricots Grapes
5.49 1.13 1.67 -

Citrus
9.5 -

Plum
3.2 -

Cherry

Walnut
1.1

Mango

Balochistan 17.70 NWFP 6.8 Northern Areas 18.5 AJK 1.8 Source: Survey Results 2007

0.85 -

2.0

Table 6.8: Mean quantities of vegetables traded by sample retailers (t/season)

Regions Tomato Okra
4.00 2.0

Carrot C. flower Brinjal

6.47

Onion
8.6 3.7

Peas

Potato
6.4 -

Balochistan 14.53 Northern Areas 5.8 AJK 2.7 Source: Survey Results 2007

6.47 -

0.8 -

1.6

6.5.

Competition of Traders in the Market

Although the perfect competition does not exist in real world, however, the higher the competition will be among the buyers and seller, the price determined shall be more close to the optimum price. In the study area, although the nature of competition among the stakeholders within the intermediaries varies by intermediary types, however, the pre-harvest contractors, traders or beoparies and retailers mostly belong to the same district or at the most same province. The fruit and vegetables commission agents with in a market do have intense competition for capturing business; they also have strong business links with the commission agents of other cities. 73

Table 6.9 below summarizing the nature of competition within intermediaries and the way they compete with one another. It was found that besides offering better price to the stakeholders, the dealing reputation of the intermediary matters a lot in creating business competition and price determination. More specifically, the condition of fruit setting after flowering and general crop condition till maturity of the fruit (ready for picking) determines the price of the fruit in the market (Table 6.10). In other words, if there is bumper crop season, then the price of the fruit may be relatively depressed compared to short production seasons. Table 6.9: Market competition of among fruit and vegetables market intermediaries
Competing actor
Fruit Contractors Beoparies

Competitor
Local and inter-territory fruit contractors Local and outsider vegetables beoparies All the local and other cities commission agents All wholesalers of the fruit and vegetables All retailers of the fruit and vegetables

Competition degree
Slightly intense (Balochistan, NWFP, AJK) to high (Northern Areas) Low to high depending upon the area planted under vegetables Low to high depending upon the area planted under fruit & vegetables Less intense compared to commission agents Relatively more intensity

Competition way
Price, dealing/payment and relations (previous social links) Price, dealing/payment and relations (previous social links) Price and services reputation record and reputation record and

Commission Agents Wholesalers

Retailers

Price, product quality/grade, dealing reputation with the commission agents Price, grading, location, dealing with consumers, etc.

Table 6.10: Factors affecting price determination (% role) for different fruit in NAs and AJK Factors Condition of the present fruit Last Year Produce experience Price prevailing in the area Highest price within contractor Condition of present + Last Year Produce Reputation of Contractor Total Cherry Apricot 59.26 11.11 7.41 7.41 3.70 11.11 100.00 n.a. n.a. n.a. n.a. n.a. Apple 63.04 17.39 10.87 8.70 100.00 64.00 9.00 21.00 7.00 100.00 Walnut n.a. n.a. n.a. n.a. n.a. n.a. n.a. 79.00 4.00 9.00 100.00 Mango n.a. n.a. n.a. n.a. n.a. n.a. n.a. 82.00 6.00 4.00 12.00 100.00

Northern Areas
65.38 17.31 9.61 3.85 3.85 100.00

AJK
Fruit condition Prevailing price in the area Highest price within contractors Last year price Total n.a. n.a. n.a. n.a. n.a.

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6.6.

Formation of Prices among Traders

6.6.1. Formation of prices among traders of markets in Balochistan There is regular market in Quetta and hence market committee is full authorities for price control constituted by government. In the market both parties (buyer and commission agent) determine the prices through auctions. The price determinants between growers of selected fruit and contractors are fruit condition, prevailing price in the area, highest price within contractors and last year price. Fruit condition is important price determinant in the fruit sector. Contract (Contract between growers and fruit contractors and growers and vegetables beoparies): In the study area contracting out the orchard of the selected fruit is the most common practice. Fruit growers usually avoid its marketing of fruit, as they seriously lack in marketing information and linkages with other markets. Moreover, fruit need careful handling, quick transport, sound packing, and timeliness of all operations if good prices are to be fetched. On the other hand, contractors keep close links with commission agents in the wholesale and terminal markets. They posses sound knowledge about the citrus production and marketing system (Sharif, 2004). Agreement for the leasing of fruit orchards is generally made at flowering stage. The contractors usually visit the potential contracting growers and inquire about the fruit orchard available in the area and last years output. After getting indications from growers about their interest of contracting out the garden, the contractor estimates the total farm output by counting the number of trees per acre and the average yield per tree. The producer has his own estimates as well, if estimates of farm output converge, then prices are negotiated. A lack of capital or resources of credit, competing demands for the producers management time, and lack of knowledge and expertise in marketing lead growers to rely on the contract-harvesting system. This is reinforced by the actions of commission agents who prefer to obtain supplies through number of contractors tied to them through loaning (Sharif, 2004). 6.6.2. Formation of prices among traders of markets in NWFP In market both the parties (buyer and commission agent) form the prices through auctions. However, price of the produce in the market depends on the quality of produce, its supply and demand. It was observed during the survey, that prices in the early and sometimes in the late seasons were high or when there is shortage of produce. The price between growers of selected fruit and contractors were based on orchard condition, prevailing price in the area, highest price offered by the contractors and last year prices. Contract (Contract between growers and contractors): In the study area, contracting out the orchard of the selected fruit was the most common practice. Fruit growers usually avoided marketing of fruit their selves except in the case of apple, because of lack of market information and poor linkages with other markets. Beside most of the growers were also unaware of handling, timely transportation, acceptable packing etc. On the other hand, contractors kept close 75

links with commission agents in the wholesale and terminal markets and possessed sound knowledge about production and marketing system (Sharif, 2004). During the survey it was revealed that agreement for leasing out fruit orchards was generally made at flowering stage. The contractors usually visited the area or the potential contracting growers (in most cases the last year growers) and inquired about the fruit orchard available in the area and last years output. Contractor estimates total farm output by counting the number of trees and the average yield per tree based on his experience. The producers also estimate farm output and then negotiated the price. Lack of capital and other resources, competing demands for the producers management time, and lack of knowledge and expertise in marketing leads growers to rely on contract-harvesting system. This is reinforced by the actions of commission agents who prefer to obtain supplies through number of contractors tied to them through loaning (Sharif, 2004). 6.6.3. Formation of prices among traders of markets in Northern Areas There is no regular market in Northern Area and hence no government intervention. In the market both parties (buyer and commission agent) form the prices through auctions. The information on price determinations between growers and fruit contractors is presented in table 6.11. The price determinants between growers of selected fruit and contractors are fruit condition, last year price experience, prevailing price in the area and highest price within contractors. Fruit condition is important price determinant in the fruit sector. Table 6.11: Price determinations of fruit growers (%) Factors Condition of the present fruit Last Year Produce experience Price prevailing in the area Highest price within contractor Condition of present + Last Year Produce Reputation of Contractor Total
Source: Survey Results 2006.

Cherry 65.38 17.31 9.61 3.85 3.85 100.00

Apricot 59.26 11.11 7.41 7.41 3.70 11.11 100.00

Apple 63.04 17.39 10.87 8.70

100.00

6.6.4. Formation of prices among traders of markets in AJK There is no regular market in AJK and hence no government intervention. In the market both parties (buyer and commission agent) form the prices through auctions. The information on price determinations between growers and fruit contractors is presented in table 6.12. The price determinants between growers of selected fruit and contractors are fruit condition, prevailing price in the area, highest price within contractors and last year price. Fruit condition is important price determinant in the fruit sector.

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Table 6.12: Price determinants between growers and fruit contractors ... number (%) Factors Fruit condition Prevailing price in the area Highest price within contractors Last year price Walnut 40 (79) 4 (8) 2 (4) 5 (9) Apple 33 (64) 5 (9) 12 (21) 4 (7) Mango 54 (82) 4 (6) 3 (4) 8 (12)

Contract (Contract between growers and fruit contractors and growers and vegetables beoparies): In the study area contracting out the orchard of the selected fruit is the most common practice. Fruit growers usually avoid its marketing of fruit, as they seriously lack in marketing information and linkages with other markets. Moreover, fruit need careful handling, quick transport, sound packing, and timeliness of all operations if good prices are to be fetched. On the other hand, contractors keep close links with commission agents in the wholesale and terminal markets. They posses sound knowledge about the citrus production and marketing system (Sharif, 2004). Agreement for the leasing of fruit orchards is generally made at flowering stage. The contractors usually visit the potential contracting growers and inquire about the fruit orchard available in the area and last years output. After getting indications from growers about their interest of contracting out the garden, the contractor estimates the total farm output by counting the number of trees per acre and the average yield per tree. The producer has his own estimates as well, if estimates of farm output converge, then prices are negotiated. A lack of capital or resources of credit, competing demands for the producers management time, and lack of knowledge and expertise in marketing lead growers to rely on the contract-harvesting system. This is reinforced by the actions of commission agents who prefer to obtain supplies through number of contractors tied to them through loaning (Sharif, 2004).

6.7.

Marketing Strategies

6.7.1. Marketing strategies in Balochistan With the improvement of income level, consumers are gradually strengthening the consciousness of nutrition and health care on consumption of fruit and vegetables. Consumers shift towards high value agriculture makes their demand for nutrition and health care fruit and vegetables products increase and consumer also have higher requests for the fruit and vegetables products on appearance and quality. The traders took marketing tactics to meet consumers demands. Product Strategies: Traders do not care for product quality in order to satisfy consumer demand for nutrition and health care fruit and vegetables products. Traders do care for grading as a grade-A B-C grade. Price Strategies: Traders form the price through negotiation according to the cost and market situation. The wholesalers price usually changes with fluctuation of the market but the

77

commission agents earn profit according to their commission charges whatever the prices high or low, although the income is low that risk is small and income is steady. 6.7.2. Marketing strategies in NWFP With improvement in consumers knowledge and consciousness of nutrition and health care and increase in the income level, there is a shift towards high value agriculture. Consumers demand for quality fruit and vegetable increased. Therefore to meet the demand and satisfy the consumers, traders adopt marketing tactics. Product Strategies: To meet the demand of various income groups, traders graded fruit accordingly as grade-A with best quality and acceptable shape and grade-B with comparatively lower quality and shape. Price Strategies: It was observed that traders form prices through negotiations and according to the cost incurred and market situation (glut or shortage). The wholesalers price usually changed with fluctuation in the market but contrary to this commission agents charged their commission charges whatever the prices were whether high or low. 6.7.3. Marketing strategies in Northern Areas and AJK With the improvement of income level, consumers are gradually strengthening the consciousness of nutrition and health care on consumption of fruit and vegetables. Consumers shift towards high value agriculture makes their demand for nutrition and health care fruit and vegetables products increase and consumer also have higher requests for the fruit and vegetables products on appearance and quality. The traders took marketing tactics to meet consumers demands. Product Strategies: Traders do not care for product quality in order to satisfy consumer demand for nutrition and health care fruit and vegetables products. Traders do care for grading as a grade-A and grade-B. Price Strategies: Traders form the price through negotiation according to the cost and market situation. The wholesalers price usually changes with fluctuation of the market but the commission agents earn profit according to their commission charges whatever the prices high or low, although the income is low that risk is small and income is steady.

6.8.

Conclusions

There are seven fruit and vegetables adaptive research substations located in various agroecological zones in Quetta, Balochistan. They are not involved in basic research for varietals development of fruit and vegetables. In order to produce large quantities of high quality and high grade fruit and vegetables strengthen its market competitiveness, and promote the development of fruit and vegetables sector, the development of the new varieties of fruit and vegetables need to be made in the directions of market in Balochistan. In NWFP, research on different fruit has been carried out at research stations located in various agro-ecological zones of the province. They are not only involved in basic research 78

for varietal development but also adaptive research on different fruit varieties has been conducted. In NA, Department of Agriculture Northern Area started adaptive research in all the agro-ecological zones of NAs. They are not involved in basic research for varietal development of fruit and vegetables. Another research station, Karakuram Agricultural Research Institute for Northern Area (KARINA) under PARC located at Jaglote with three sub-stations in NAs also working on research of fruit, vegetables, field crops and livestock. There are seven fruit and vegetables adaptive research substations located in various agroecological zones in AJK. They are not involved in basic research for varietal development of fruit and vegetables. In Balochistan, no investment is made so far in the capacity building of stakeholders in fruit and vegetable planting techniques. In NWFP, investment has been made in production, processing and storage of horticulture sector and value addition. However, the extension agents and to somehow at the research stations capacity building programs have been arranged while the rest of the stakeholders mostly remain unattended. In NA, Government has made little investment in producing horticulture sector and value addition. In AJK, Government made little/no investment in producing, processing and storage of horticulture sector. No investment is made so far in the capacity building of stakeholders also. Regarding the behavior of traders, the average quantities of fruit dealt by pre-harvest contractors show that the grapes dealers have played their role more than other fruit dealer in Balochistan, apricot dealers in Northern Areas and mango dealers in AJK. In vegetables, potato and tomato dealers in Northern Areas while onion dealers in AJK have played more significant role. Regarding commission agents, the apple and apricot commission agents in Balochistan dealt relatively higher quantities than other agents whereas the apricot commission agents in Northern Areas and AJK fall on the lower end. In vegetables, the tomato, okra, carrot and cauliflower commission agents of Balochistan sold relatively higher quantities than other agents whereas the peas commission agents in Northern Areas and brinjal commission agents of AJK were on the lower end. Considering wholesalers, the apple and apricot wholesalers of Balochistan dealt relatively higher quantities than other fruit wholesalers in the study areas whereas the walnut wholesalers of AJK fall on the lower end. In vegetables, the tomato, okra, carrot and cauliflower commission agents of Balochistan sold relatively higher quantities of vegetables. Turning to the retailers, the apple retailers from Balochistan and Northern Areas dealt relatively higher quantities than other fruit retailers whereas the walnut, retailers of AJK and apricot retailers of Northern Areas fall on the lower end. In vegetables, the tomato retailers of Balochistan sold relatively higher quantities than other vegetables retailers, whereas the peas retailers of Northern Areas fall on the lower end of their vegetables business volume. Competition of Traders in the Market: The higher competition was among the buyers and seller, the determined price was close to the optimum price. The pre-harvest contractors, traders or beoparies and retailers mostly belong to the same district or at the most same province. The fruit and vegetables commission agents with in a market do have intense competition for capturing business. Besides offering better price to the stakeholders, the dealing reputation of the intermediary matters a lot in creating business competition and price 79

determination. Fruit condition is important price determinant in the fruit sector. Fruit growers usually avoid its marketing of fruit, as they seriously lack in marketing information and linkages with other markets. A lack of capital or resources of credit, competing demands for the producers management time, and lack of knowledge and expertise in marketing lead growers to rely on the contract-harvesting system. This is reinforced by the actions of commission agents who prefer to obtain supplies through number of contractors tied to them through loaning. On the other hand, contractors keep close links with commission agents in the wholesale and terminal markets. They posses sound knowledge about the citrus production and marketing system. Price Formation: There is no regular market in Northern Area, AJK and hence no government intervention. In the market both parties (buyer and commission agent) form the prices through auctions. The price determinants between growers of selected fruit and contractors are fruit condition, last year price experience, prevailing price in the area and highest price within contractors. Fruit condition is important price determinant in the fruit sector. Marketing strategies: Traders do not care for product quality in order to satisfy consumer demand for nutrition and health care fruit and vegetables products. Traders do care for grading as a grade-A B-C grade. The specifications for this grading is not uniform in all the study area and it is not documented anywhere. On the other hand, traders form the price through negotiation according to the cost and market situation. The wholesale price usually changes with fluctuation of the market but the commission agents earn profit according to their commission charges whatever the prices high or low, although the income is low that risk is small and income is steady.

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CHAPTER 7 MARKET PERFORMANCE

7.1. Introduction

Market performance deals with the state of reality achieved by a given industry under a given market structure in the formation of price, output, cost, profit product quality, variety and the technological progress as well as job opportunities, etc. (CAET, 2003). It substantially reflects the running efficiency of various market actor main bodies. Research starts with two basic aspects: one is directly or indirectly describing and evaluating market performance; the other is to study relation among SCP and to look for factors that influence market performance so as to explain the reasons (CAET, 2003). Markets can contribute to the development process in two ways. Firstly by providing a means to allocate resources ensuring, the highest value production and maximum consumer satisfaction. Secondly, and more controversially, they may stimulate growth, by promoting technological innovation in production and by providing incentives to develop new sources of supply, plus new markets and new methods of exploiting them (Scarborough and Kydd, 1992). Farmers decisions regarding production depend on the expected incentives and economic rewards generated which depend on the efficiency of the marketing system (Roberts, 1989). He further stated that an efficient marketing system is a mechanism for the efficient allocation of resources, which implies an efficient pricing system and the absence of monopolistic profits. The key question is that how well is the marketing system performing its role in transforming commodities in time, space and form through price signals? The price signals in the production and exchange process are commonly used to examine the competitiveness of the marketing system (Holmes, 1969). The key elements for assessing market performance envisaged in the methodology of SCP paradigm are; (i) the seasonal price fluctuation (ii) market efficiency (iii) market effectiveness. Following introduction, seasonal price fluctuation, market efficiency (market suitability, market marginal analysis and deconstructing marketing marginal analysis) and market effectiveness are discussed in the following sections.

7.2.

Seasonal Price Fluctuations

7.2.1. Seasonal price fluctuations of selected fruit in the study area Information on price fluctuation for selected fruit was collected on the basis of early, mid and late seasons. The sale price for all the market intermediaries were analyzed on the basis of different seasons to captures price fluctuations. The prices were collected weekly during the fruit harvesting season from assembly and wholesale markets and from different marketing channels. At the same time information on the retail price of selected fruit were collected from the retailers and shopkeepers of the same city. Simple analysis of mean prices of selected fruit on a per kg basis by stage of season in the study area is presented in Table 7.1. 81

Table 7.1: Mean sale price (Rs./kg) of fruit at different intermediary levels by season
Market Agencies
Apple: Producers C. Agents Wholesalers Retailers Apricot: Producers C. Agents Wholesalers Retailers Grapes: Producers Contractors C. Agents Wholesalers Retailers Apple: Producers Contractors C. Agents Wholesalers Retailers Citrus: Producers Contractors C. Agents Wholesalers Retailers Plum: Producers Contractors C. Agents Wholesalers Retailers Cherry: Producers Contractors C. Agents Wholesalers Retailers Apple: Producers Contractors C. Agents Wholesalers Retailers Walnut: Producers Contractors C. Agents Wholesalers Retailers Apple: Producers Contractors C. Agents W.salers/Retailers Mango: Producers Contractors C. Agents W.salers/Retailers

Early Season
19.48 7% 23.95 30.66 20.00 7% 20.00 28.00 11.60 39.00 7% 42.00 58.00 7.50 14.07 0.00 20.00 35.00 6.00 7.50 0.00 8.33 12.50 3.37 4.69 0.00 12.50 22.50 35.65 109.60 0.00 124.50 146.49 8.34 25.77 0.00 27.70 42.54 29.67 44.40 0.00 55.22 82.73 7.25 14.04 0.00 26.78 6.40 10.40 0.00 14.77

Mid Season
15.84 7% 21.52 25.00 18.00 7% 20.00 29.00 11.20 37.00 7% 40.00 56.00 9.00 12.80 0.00 25.00 40.00 6.00 7.50 0.00 8.50 12.50 3.95 5.15 0.00 10.67 27.50 33.42 102.39 0.00 118.46 138.36 8.34 19.83 0.00 21.56 33.69 31.88 46.30 0.00 57.37 87.56 6.38 12.48 0.00 22.40 6.40 11.03 0.00 15.54

Late Season
18.00 7% 28.94 35.00 21.00 00.00 22.00 29.00 10.70 35.00 7% 40.00 70.00 9.70 15.00 0.00 30.00 50.00 6.00 8.00 0.00 10.41 14.00 4.125 6.25 0.00 11.50 32.50 44.72 121.64 0.00 136.78 158.43 8.34 19.83 0.00 21.29 29.47 35.42 51.50 0.00 64.32 94.35 6.93 13.74 0.00 24.84 6.40 12.03 0.00 17.06

Whole Season
13.60 7% 24.64 31.66 20.00 00.00 23.00 29.00 11.00 37.00 7% 41.00 61.00 8.72 13.97 0.00 25.00 41.60 6.00 7.66 0.00 9.08 13.00 3.82 5.36 0.00 11.56 27.50 37.93 111.21 0.00 126.58 147.76 8.34 21.81 0.00 23.52 35.23 32.32 47.70 0.00 58.97 88.21 6.85 13.42 0.00 24.67 6.40 11.15 0.00 15.79

Source: Survey data 2006-07

AJK

Northern Areas

NWFP

Balochistan

82

7.2.2. Seasonal price fluctuations of selected vegetables in the study area Information on price fluctuation for selected vegetables was collected on the basis of early, mid and late seasons. The sale prices for all the market intermediaries were analyzed on the basis of different seasons to captures price fluctuations. The prices were collected weekly during the vegetables harvesting season from assembly and wholesale markets and from different marketing channels. At the same time information on the retail price of selected vegetables were collected from the retailers and shopkeepers of the same city. Simple analysis of mean prices of selected fruit on a per kg basis by stage of season in the study area is presented in Table 6.2 There are some difficulties in estimating the standard price of tomato, attributed to: a) varietals differences, b) grade differences, d) seasonal price variations, and c) price differences in consumption and production areas. Such problems have been resolved by collecting prices that may cover most of the above conditions. The prices of tomato were collected on a per kg basis. The prices were collected from local and wholesale markets and from different marketing channels. At the same time information on the retail price of tomato was collected from the same city from the retailers and shopkeepers. Simple analysis of mean tomato prices on per kg basis by stage of season is presented in Table 7.2. The results show that all the marketing intermediaries in tomato do not get substantial benefits from seasonal price variation in Balochistan and AJK, while all the market intermediaries in tomato marketing get significant benefits from seasonal price variation in Northern Areas. Results for okra reveal that all the marketing intermediaries fetch higher prices in early season as compared to mid and late season. Alternatively all the marketing intermediaries fetch higher prices in late season as compared to mid and early season in case of cauliflower. Onion harvesting occurs once due to bulk in quantity prices are less in early season. Results revealed that all marketing agencies in the onion marketing received highest prices at the end of the season in comparison to early and mid seasons. The results pointed out that pea producers benefited from seasonal price variation. The peas prices in early season were high at all marketing intermediaries levels but in the mid and end season was less. Majority of the potato producers sold their produce to the beoparies in Northern Areas. The results indicated that potato producers benefit from seasonal price variation. The potato price in late season was high at all levels of marketing intermediaries but in the mid season was less. Similarly brinjal price in early season was higher at all levels of marketing intermediaries.

83

Table 7.2: Mean sale price (Rs./kg) of vegetables at various intermediary levels by season
Market Agencies Tomato: Producers C. Agents Wholesalers Retailers Okra: Producers C. Agents Balochistan Wholesalers Retailers Carrot: Producers C. Agents Wholesalers Retailers Cauliflower: Producers C. Agents Wholesalers Retailers Tomato: Producers Contractors C. Agents/Wholesalers Retailers Onion: Northern Areas Producers Contractors C. Agents/Wholesalers Retailers Peas: Producers C. Agents Early Season 15.24 00.00 17.72 25.29 25.58 00.00 27.83 39.55 8.97 0.00 9.78 17.72 14.07 0.00 16.33 24.70 19.60 24.75 0.00 28.32 8.23 13.26 0.00 17.32 22.13 0.00 33.06 10.08 14.65 0.00 18.34 5.42 7.56 0.00 11.48 13.18 16.76 20.35 26.04 0.00 33.87 18.17 0.00 24.40 Mid Season 10.56 00.00 12.25 15.41 12.83 00.00 14.75 20.95 5.74 0.00 6.74 11.87 9.92 0.00 11.23 16.55 12.85 18.12 0.00 22.78 9.21 14.56 0.00 18.78 18.88 0.00 27.66 9.51 13.23 0.00 17.52 7.75 11.78 0.00 15.25 10.25 13.58 16.56 16.07 0.00 22.41 12.09 0.00 19.56 Late Season 13.07 00.00 15.77 21.35 19.25 00.00 21.56 26.42 7.05 0.00 8.45 15.05 12.33 0.00 14.19 21.78 8.94 14.41 0.00 17.56 11.68 16.67 0.00 21.22 31.85 0.00 41.56 12.57 16.74 0.00 20.24 9.25 14.63 0.00 18.69 14.56 18.21 23.84 18.37 0.00 25.35 14.25 0.00 21.40 Average 12.96 00.00 15.25 20.68 19.22 00.00 21.38 28.97 7.25 0.00 8.32 14.88 12.11 0.00 13.92 21.01 13.80 19.09 0.00 22.89 9.71 14.83 0.00 19.11 24.29 0.00 34.09 10.72 14.87 0.00 18.70 7.47 11.32 0.00 15.14 12.66 16.18 20.25 20.16 0.00 27.21 14.84 0.00 21.79

Wholesalers/Retailers Potato: Producers Contractors C. Agents/Wholesalers Retailers Onion: Producers Contractors C. Agents Tomato: AJK Wholesalers/Retailers Producers Contractors Retailers Okra: Producers C. Agents Brinjal: Wholesalers/Retailers Producers C. Agents Wholesalers/Retailers

Source: Survey data 2006-07

84

7.3.

Market Efficiency

To assess efficiency of the fruit and vegetables marketing system, Marketing Margin Analysis (MMA) and Deconstructing Marketing Margin Analysis (DMMA) were used. MMA helped in examining the extent to which prices are transmitted along the marketing chain and determined what price producers received. Indicators such as absolute cash margins have been calculated. DMMA helps to know what component of marketing activity is absorbing the greater share of consumer rupee. The absolute cash margin is essentially the same as the differences between the prices paid and received by each specific market agency. The net profit margin of a specific market intermediary is the net revenue after paying all marketing costs. The net profit margin of the selected fruit producers were calculated on a per kg basis as the sale price of the orchard less production costs. The net profit margins of contractors were calculated as sale price of fruit in the market minus purchase price and other marketing costs, whereas net profit margin of commission agents was calculated as commission on sale revenue minus regular expenses. Finally, the net profit margin of wholesalers and retailers were calculated as sale price minus purchase price and other marketing costs. 7.3.1. Marketing marginal analysis (MMA) of selected fruit

The efficiency of the marketing system has always been poor in Balochistan. Net profit of retailers was higher than other market intermediaries. In term of profit retailers were on top followed by wholesalers, contractors and commission agents in Balochistan and NWFP for all the selected fruit. But if we look the case of Northern Areas and also review of literature shows that the contractors receive the highest margin reflecting the fact that they bear the highest costs and risk among all market agencies. Same is true in case of cherry marketing; contractors receive the highest margin in Northern Areas. The commission agents face the risk of advance loans, which mostly remains outstanding against contractors. To estimate the margins of wholesalers was more difficult. The margin varied from one variety to another and one grade to the next. The margin of retailers was high in comparison to the commission agents and wholesalers. The contractors and retailers received the highest margin reflecting the fact that they bear the highest costs and most risk among all market agencies. The margin varied from one season to the next. The margin of contractors was high in comparison to other market intermediaries. But in case of dry apricot marketing in NAs producers received the highest margin due to self marketing and non perishability of the dry apricot followed by the retailers and contractors. Alternatively in term of profit, retailers were on top followed by wholesalers, contractors and commission agents in case of Walnut in AJK (Table 7.3).

85

Table 7.3: Profit (Rs./kg) distribution among market intermediaries for selected fruit
Market Agencies
Apple: Producers C. Agents Wholesalers Retailers Retail Price Apricot: Producers C. Agents Wholesalers Retailers Retail Price Grapes: Producers Contractors C. Agents Wholesalers Retailers Retail Price Apple: Producers Contractors C. Agents Wholesalers Retailers Retail Price Citrus: Producers Contractors C. Agents Wholesalers Retailers Retail Price Plum: Producers Contractors C. Agents Wholesalers Retailers Retail Price Cherry: Producers Contractors C. Agents Wholesalers Retailers Retail Price Apple: Producers Contractors C. Agents Wholesalers Retailers Retail Price Walnut: Producers Contractors C. Agents Wholesalers Retailers Retail Price Apple: Producers Contractors C. Agents W.salers/Retailers Retail Price Mango: Producers Contractors C. Agents W.salers/Retailers Retail Price

Sale price
13.60 (7%) 24.64 31.66 -20 00 23 29 -11.0 37.0 00.0 41.0 61.0 -8.72 13.97 0.00 25.00 16.60 -6.00 7.66 0.00 9.08 13.00 -3.82 5.36 0.00 11.56 27.50 -37.93 111.21 0.00 126.58 147.76 -8.34 21.81 0.00 23.52 35.23 -32.32 47.70 0.00 58.97 88.21 -6.85 13.42 0.00 24.67 -6.40 11.15 0.00 15.79 --

Absolute % share in cash margin consumer Rs

12.65 0.95 11.04 7.02 31.66 18.6 1.4 3 6 29 11.0 23.3 2.7 4.0 20.0 61 8.72 4.38 0.87 11.03 16.60 41.60 6.00 1.18 0.48 1.42 3.92 13 3.82 1.21 0.33 6.20 15.94 27.50 37.93 64.38 8.90 15.37 21.18 147.76 8.34 11.73 1.74 1.71 11.72 35.23 32.32 12.06 3.32 11.27 29.24 88.21 5.73 0.84 11.25 24.67 6.40 3.97 0.78 4.64 15.79 40 03 35 22 100 64.14 4.83 10.34 20.69 100 18.03 38.20 4.43 6.56 32.78 100 20.96 10.53 2.09 26.51 39.91 100 46.15 9.08 3.69 10.93 30.15 100 13.89 4.40 1.20 22.55 57.96 100 25.67 43.57 6.02 10.40 14.33 100 23.67 33.28 4.95 4.84 33.25 100 36.64 13.67 3.76 12.78 33.15 100 27.78 23.22 3.40 45.61 100 40.53 25.16 4.94 29.36 100

Marketing costs
8.94 0.94 1.11 2.30 -6.17 0.90 0.40 2.00 -2.5 12.24 1.50 1.25 5.08 -2.00 2.19 0.18 1.70 3.96 -0.90 0.51 0.30 0.40 1.70 -0.72 0.48 0.18 1.98 3.24 -7.38 36.23 1.87 6.92 5.08 -2.31 8.63 0.63 0.68 4.10 -6.29 11.22 0.79 3.60 7.62 -0.97 3.60 0.23 2.86 -0.45 2.68 0.19 1.23 --

Net profit margin

3.71 0.01 9.93 4.72 -12.43 0.5 2.6 4 -8.5 11.06 1.2 2.75 14.92 -6.72 2.19 0.69 9.33 12.64 -5.10 0.67 0.18 1.02 2.22 -3.10 0.73 0.15 4.22 11.76 -30.55 37.05 7.03 8.45 16.10 -6.03 4.84 1.12 1.02 7.62 -26.03 3.86 2.53 7.97 21.62 -5.88 2.96 0.61 8.39 -5.95 2.08 0.60 3.40 --

% profit margin
29.00 11.00 90.00 67.00 -67.00 36.00 87.00 67.00 -77.00 47.00 44.00 69.00 75.00 -77.00 50.00 79.00 85.00 76.00 -85.00 57.00 37.00 72.00 57.00 -81.00 60.00 45.00 68.00 74.00 -81.00 58.00 79.00 55.00 76.00 -72.00 41.00 64.00 60.00 65.00 -81.00 32.00 76.00 71.00 74.00 -86.00 52.00 73.00 75.00 -93.00 52.00 76.00 73.00 --

AJK

Northern Areas

NWFP

Balochistan

Source: Survey data 2006-07

86

7.3.2.

Deconstruction of marketing marginal analysis (DMMA) of selected fruit

The purpose of deconstructing marketing margin is to know what component of marketing activity is absorbing the greater share of consumer rupee. In case of the deconstructing marketing margin gives the information what component of marketing activity is vital or absorbing the greater share of consumer rupee. It was found that at commission agent level, profit and expenses on business management are major components. At wholesale level, the profit margin and market cost constitute major part of the price difference. At retailer level, the profit margin, opportunity value of labor and transport cost are the main elements in the distribution of gross margins earned. It can be concluded that the highest profit margins are fixed/earned by the contractors and retailers. Their transport expenditures are also high. The deconstructing marketing margin gives the information what component of marketing activity is vital or absorbing the greater share of consumer rupee. It was found that at contractor level, the profit margin, transport costs and marketing costs are the major components of the gross margin earned. At commission agent level, profit and expenses on business management are major components. At wholesale level, the profit margin and market cost constitute major part of the price difference. At retailer level, the profit margin, opportunity value of labor and transport cost are the main elements in the distribution of gross margins earned. It can be concluded that the highest profit margins are fixed/earned by the contractors and retailers. Their transport expenditures are also high. For grapes, it was found that at contractor level, marketing costs and transport costs are the major elements of the gross margin earned. At commission agent level, expenses on business management are the major component. At wholesale level, market cost constitutes major part of the price difference. At retailer level, opportunity value of labor and transport cost are the main elements in the distribution of gross margins earned. It can be concluded that material cost (packing) and transportation cost are the major items in the marketing of fruit in Balochistan. Therefore, efforts are required to design a policy to reduce the prices of materials and transportation for efficient fruit marketing. For cherry, it was observed that at contractor level, the profit margin, marketing costs and transport costs are the major elements of the gross margin earned. At commission agent level, expenses on business management and profit are major components. At wholesale level, the profit margin and market cost constitute major part of the price difference. At retailer level, the profit margin, opportunity value of labor and transport cost are the main elements in the distribution of gross margins earned. It can be concluded that the highest profit margins are fixed/earned by the contractors and retailers. Their transport expenditures are also high. In case of apple it was found that at contractor level, the profit margin, transport costs and marketing costs are the major components of the gross margin earned. At commission agent level, profit and expenses on business management are major components. At wholesale level, the profit margin and market cost constitute major part of the price difference. At retailer level, the profit margin, opportunity value of labor and transport cost are the main elements in the distribution of gross margins earned. It can be concluded that the highest profit margins are fixed/earned by the contractors and retailers. Their transport expenditures are also high. For apricot, it was found that at contractor level, the profit margin, transport costs and marketing costs are the major elements of the gross margin earned. At commission agent level, expenses on 87

business management and profit are major components. At wholesale level, the profit margin and market cost constitute major part of the price difference. At retailer level, the profit margin, opportunity value of labor and transport cost are the main elements in the distribution of gross margins earned. It can be concluded that the highest profit margins are fixed/earned by the contractors and retailers. Their transport expenditures are also high. For walnut, it was found that at contractor level, the profit margin, transport costs and marketing costs are the major elements of the gross margin earned. At commission agent level, expenses on business management and profit are major components. At wholesale level, the profit margin and management/handling constitute major part of the price difference. At retailer level, the profit margin, opportunity value of labor and transport cost are the main elements in the distribution of gross margins earned. It can be concluded that the highest profit margins are earned by the contractors and retailers. Their transport expenditures are also high. For apple, it was observed that at contractor level, the profit margin, transport costs and marketing costs are the major elements of the gross margin earned. At commission agent level, profit is major components. At wholesalers level and retailers, the profit margin transformation and marketing cost constitute major part of the price difference. It can be concluded that the highest profit margins are fixed/earned by the contractors and retailers. Their transport expenditures are also high. For mango, it was observed that at contractor level, the profit margin, marketing costs and transport costs are the major elements of the gross margin earned. At commission agent level, expenses on business management and profit are major components. At wholesale level, the profit margin and material cost constitute major part of the price difference. At retailer level, the profit margin, opportunity value of labor and transport cost are the main elements in the distribution of gross margins earned. It can be concluded that the highest profit margins are fixed/earned by the contractors and retailers. Their transport expenditures are also very high (Table 7.4). 7.3.3. Marketing marginal analysis (MMA) of selected vegetables These results imply that the net profit of retailers was higher than other market intermediary. In other words, in term of profit, retailers were on top followed by wholesalers, commission agents and producers for vegetable marketing in Balochistan. The marketing margin of producers was high in comparison to other market intermediaries in Northern Areas. But in case of onion marketing producers have the highest absolute marketing margin because they sell their produce after harvesting and knowing the price of produce in the market. The margin of retailers was high in comparison to the commission agents and contractors. In case of onion marketing producers have the highest absolute marketing margin because they sell their produce after harvesting and knowing the price of produce in the market. The margin varied from one season to another. The margin of retailers was higher than that of commission agents and contractors. Share in consumer rupees was calculated by expressing the absolute cash margin of the market agency as a proportion of the retail price of the onion. The percent share of producers and retailers was higher than that of other intermediaries. The net profit margin of the producers and retailers was higher as compared to other intermediaries. The retailers received the highest profit margin followed by commission agents, contractors and producers (Table 7.5).

88

Table 7.4: Itemized marketing margin by different market intermediaries for fruit
Market Agencies Apple: Transport Market/Material Output loss Management Labour cost Profit Apricot: Transport Market/Material Output loss Management Labour cost Profit Grapes: Transport Market/Material Output loss Management Labour cost Profit Apple:Transport Market/Material Output loss Management Labour cost Profit Citrus:Transport Market/Material Output loss Management Labour cost Profit Plum:Transport Market/Material Output loss Management Labour cost Profit Apple: Transport Market/Material Output loss Management Labor cost Profit Apricot: Transport Market/Material Output loss Management Labor cost Profit Cherry: Transport Market/Material Output loss Management Labor cost Profit Walnut: Transport Market/Material Output loss Management Labor cost Profit Apple: Transport Market/Material Output loss Management Labor cost Profit Mango: Transport Market/Material Output loss Management Labor cost Profit Contractors Rs/kg (%) ------------------------4.87 9.74 5.50 11.00 0.12 0.24 1.30 2.60 0.45 0.90 11.06 22.12 1.04 3.16 0.49 1.49 0.1 0.30 0.33 1.00 0.23 0.70 2.19 6.66 0.26 3.71 0.11 1.57 0.03 0.43 0.06 0.86 0.05 0.71 0.67 9.57 0.24 1.01 0.1 0.42 0.03 0.13 0.06 0.25 0.05 0.21 0.73 3.08 4.63 17.22 1.22 4.54 0.1 0.37 0.57 2.12 0.37 1.38 4.84 17.98 3.49 5.75 3.42 5.64 0.08 0.13 2.24 3.69 0.32 0.53 12.72 20.97 9.92 9.03 8.94 8.14 0.10 0.09 8.00 7.28 0.37 0.34 37.05 33.73 2.75 5.81 1.81 3.82 0.1 0.21 3.14 6.63 0.4 0.84 3.86 8.15 0.81 8.63 0.79 8.41 0.05 0.53 0.18 1.92 0.07 0.75 2.08 22.13 1.08 6.06 0.74 4.15 0.06 0.34 0.82 4.60 0.07 0.39 2.96 16.63 C. Agents Rs/kg (%) 0.00 00 0.34 1.75 0.00 00 0.25 1.28 0.35 1.80 0.42 2.16 0.00 0.00 0.32 3.08 0.00 0.00 0.25 2.40 0.33 3.17 0.50 4.81 0.00 0.00 0.50 1.00 0.00 0.00 0.80 1.60 0.20 0.40 1.20 2.40 0.00 0.00 0.05 0.15 0.00 0.00 0.09 0.27 0.04 0.12 0.69 2.10 0.00 0.00 0.05 0.71 0.00 0.00 0.09 1.29 0.04 0.57 0.30 4.29 0.00 0.00 0.04 0.17 0.00 0.00 0.08 0.34 0.03 0.13 0.18 0.76 0.00 0.00 0.19 0.71 0.00 0.00 0.31 1.15 0.12 0.45 1.12 4.15 0.00 0.00 0.49 0.81 0.00 0.00 0.69 1.14 0.17 0.28 2.66 4.39 0.00 0.00 0.60 0.55 0.00 0.00 1.10 1.00 0.17 0.15 7.03 6.40 0.00 0.00 0.08 0.14 0.00 0.00 0.54 0.97 0.17 0.30 2.53 4.53 0.00 0.00 0.07 0.75 0.00 0.00 0.09 0.96 0.02 0.21 0.60 6.34 0.00 0.00 0.10 0.56 0.00 0.00 0.08 0.45 0.05 0.28 0.61 3.43 Wholesalers Rs/kg (%) 0.18 0.93 0.33 1.70 0.15 0.77 0.30 1.54 0.15 0.77 9.93 51.13 0.08 0.77 0.12 1.15 0.05 0.48 0.10 0.96 0.05 0.48 2.60 25.00 0.25 0.50 0.50 1.00 0.10 0.20 0.25 0.50 0.15 0.30 2.75 5.50 0.25 0.76 0.79 2.40 0.27 0.82 0.27 0.82 0.12 0.36 9.33 28.38 0.06 0.86 0.13 1.86 0.07 1.00 0.08 1.14 0.06 0.86 1.02 14.57 0.23 0.97 0.67 2.83 0.46 1.94 0.37 1.56 0.25 1.06 4.22 17.82 0.18 0.67 0.22 0.82 0.08 0.30 0.12 0.45 0.09 0.33 1.02 3.81 0.74 1.22 2.22 3.66 0.12 0.20 1.12 1.85 0.22 0.36 5.40 8.90 0.74 0.67 3.53 3.21 1.24 1.13 1.24 1.13 0.17 0.15 8.45 7.70 0.13 0.23 0.53 0.95 0.18 0.32 2.29 4.10 0.17 0.30 7.97 14.26 0.46 4.90 0.23 2.45 0.22 2.34 0.18 1.92 0.15 1.60 3.40 36.25 0.46 2.58 0.31 1.74 1.76 9.88 0.18 1.01 0.15 0.84 8.39 47.10 Retailers Rs/kg (%) 0.40 2.06 0.75 3.86 0.15 0.77 0.30 1.54 0.70 3.60 4.72 24.30 0.35 3.37 0.75 7.22 0.05 0.48 0.20 1.92 0.65 6.25 4.00 38.46 1.25 2.50 1.75 3.50 0.20 0.40 0.80 1.60 1.08 2.16 14.92 29.84 0.71 2.16 1.35 4.11 0.17 0.52 0.56 1.70 1.17 3.56 12.64 38.44 0.42 6.00 0.68 9.71 0.05 0.71 0.34 4.86 0.21 3.00 2.22 31.71 0.87 3.67 0.97 4.10 1.13 4.77 0.63 2.66 0.58 2.45 11.76 49.66 0.75 2.79 1.35 5.02 0.18 0.67 0.59 2.19 1.23 4.57 7.62 28.32 0.88 1.45 0.59 0.97 0.09 0.15 1.45 2.39 2.89 4.76 18.68 30.79 1.12 1.02 1.45 1.32 0.17 0.15 0.59 0.54 1.75 1.59 16.10 14.66 1.33 2.38 1.78 3.18 0.17 0.30 0.61 1.09 3.73 6.67 21.62 38.68 0.46 4.90 0.23 2.45 0.22 2.34 0.18 1.92 0.15 1.60 3.40 36.25 0.46 2.58 0.31 1.74 1.76 9.88 0.18 1.01 0.15 0.84 8.39 47.10 Total Rs/kg 0.58 1.42 0.30 0.85 1.20 15.07 0.43 1.19 0.1 0.55 1.03 7.1 6.37 8.25 0.42 3.15 1.88 29.93 2.00 2.68 0.54 1.25 1.56 24.85 0.74 0.97 0.15 0.57 0.36 4.21 1.34 1.78 1.62 1.14 0.91 16.89 5.56 2.98 0.36 1.59 1.81 14.59 5.11 6.72 0.29 5.50 3.60 39.46 11.78 14.52 1.51 10.93 2.46 68.63 4.21 4.20 0.45 6.58 4.47 35.98 1.27 1.09 0.27 0.45 0.24 6.08 1.54 1.15 1.82 1.08 0.27 11.97 (%) 2.99 7.31 1.54 4.38 6.18 77.60 4.14 11.45 0.96 5.29 9.9 68.26 12.74 16.50 0.84 6.30 3.76 59.86 6.08 8.15 1.64 3.80 4.74 75.58 10.57 13.86 2.14 8.14 5.14 60.14 5.66 7.52 6.84 4.81 3.84 71.33 20.67 11.08 1.34 5.91 6.73 54.26 8.42 11.08 0.48 9.07 5.93 65.05 10.73 13.22 1.37 9.95 2.24 62.48 7.53 7.51 0.81 11.77 8.00 64.38 13.53 11.61 2.88 4.79 2.56 64.72 8.64 6.45 10.21 6.06 1.52 67.16

AJK

Northern Areas

NWFP

Balochistan

89

Table 7.5: Profit (Rs/kg) distribution among market intermediaries for vegetables
Market Agencies Tomato: Producers C. Agents Wholesalers Retailers Retail Price Okra: Producers C. Agents Wholesalers Retailers Retail Price Carrot: Producers C. Agents Wholesalers Retailers Retail Price C.flower: Producers C. Agents Wholesalers Retailers Retail Price Tomato: Producers Contractors C.A./W.salers Retailers Retail Price Onion: Producers Contractors C.A./W.salers Retailers Retail Price Peas: Producers C. Agents W.salers/Retailers Retail Price Potato: Producers Contractors C.A./W.salers Retailers Retail Price Onion: Producers Contractors C. Agents W.salers/Retailer Retail Price Tomato: Producers Contractors W.salers/Retailers Retail Price Okra: Producers Contractors W.salers/Retailers Retail Price Brinjal: Producers Contractors W.salers/Retailers Retail Price Sale price 12.96 0.00 15.25 20.68 -19.22 0.00 21.38 28.97 -7.25 0.00 8.32 14.88 -12.11 0.00 13.92 21.01 -13.80 19.09 0.00 22.89 -9.71 14.83 0.00 19.11 -24.29 0.00 34.09 -10.72 14.87 0.00 18.70 -7.47 11.32 0.00 15.14 -12.66 16.18 20.25 -20.16 0.00 27.21 -14.84 0.00 21.79 -Absolute cash margin 11.66 1.30 2.29 5.44 20.68 17.30 1.92 2.16 7.59 28.97 6.60 0.65 1.07 6.56 14.88 11.02 1.09 1.81 7.09 21.01 13.80 3.79 1.50 3.79 22.89 9.71 3.50 1.63 4.28 19.11 20.09 4.20 9.81 34.09 10.72 3.01 1.14 3.83 18.70 7.47 3.14 0.71 3.82 15.14 12.66 3.52 4.07 20.25 18.95 1.21 7.05 27.21 13.95 0.89 6.95 21.79 % share in consumer Rs 56.38 6.26 11.07 26.29 100 59.70 6.63 7.46 26.21 100 44.36 4.39 7.19 44.06 100 52.44 5.19 8.61 33.76 100 60.28 16.53 6.57 16.57 100 50.80 18.30 8.51 22.38 100 58.92 12.32 28.76 100 57.33 16.11 6.10 20.46 100 49.36 20.75 4.67 25.21 100 62.53 17.38 20.08 100 69.64 4.45 25.91 100 64.01 4.09 31.90 100 Marketing costs 6.18 0.24 0.38 1.13 -7.49 0.42 0.46 1.39 -4.52 0.14 0.32 1.48 -5.96 0.27 0.49 1.61 -4.78 1.93 0.22 0.68 -4.28 1.97 0.24 0.77 -13.55 0.84 2.16 -5.56 1.86 0.19 0.69 -3.56 1.55 0.17 0.69 -6.80 1.73 0.89 -7.82 0.20 1.89 -6.57 0.15 1.85 -Net profit margin 6.78 1.05 1.91 4.31 -11.73 1.50 1.70 6.21 -2.73 0.51 0.75 5.07 -6.15 0.82 1.32 5.49 -9.02 1.87 1.28 3.11 -5.43 1.53 1.39 3.51 -10.73 3.36 7.65 -5.16 1.16 0.95 3.14 -3.91 2.30 0.54 3.13 -5.87 1.79 3.18 -12.34 1.01 5.16 -8.26 0.74 5.10 -% profit margin 58 81 83 79 -68 78 79 82 -41 78 70 77 -56 75 73 77 -65 49 85 82 -56 44 85 82 -53 80 78 -48 38 84 82 -52 73 76 82 -46 51 78 -65 84 73 -59 83 73 --

AJK

Northern Areas

Balochistan

90

7.3.4.

Deconstruction of marketing marginal analysis (DMMA) of selected vegetables

Again deconstructing marketing margin for vegetable marketing helped to know what component of marketing activity is absorbing the greater share of consumer rupee. It can be concluded that vegetable managing and handling cost and material cost (packing) are the major items in the marketing of vegetables in Balochistan. In case of onion it was found that at contractor level, the profit margin, marketing costs and transport costs are the major elements of the gross margin earned. At commission agents/wholesalers level, expenses on business management and profit are major components. At retailer level, the profit margin and management cost constituted major part of the price difference. At retailer level, the profit margin, management and material costs are the main elements in the distribution of gross margins earned. Similarly for peas it was observed that at producer level, the profit margin, production (management), and marketing costs were the major elements of the gross margin earned. At commission agents level, expenses on business management and profit were major components. At retailers level, the profit margin, management and transport cost were the main elements in the distribution of gross margins earned. Also in case of potato it was found that at producers level, the profit margin, production (management), and marketing costs were the major elements of the gross margin earned. At commission agents level, profit and expenses on business management were major components. At retailers level, the profit margin, management and labor costs were the main elements in the distribution of gross margins earned. In AJK for all the selected fruit the profit margin, transport costs and marketing costs are the major components of the gross margin earned at contractors level. At retailers level, the profit margin, output loss and management costs are the main elements in the distribution of gross margins earned. At producers level, the profit margin, production (management) and marketing costs were the major elements of the gross margin earned. At commission agents level, profit and expenses on business management were major components. At wholesalers/retailers levels, the profit margin, management and transport cost were the main elements in the distribution of gross margins earned (Table 7.6).

7.4.

Market Effectiveness

Market effectiveness deals with the evaluation to service aim and prices. Evaluation to service aim deals with the geofigureical distribution, consumers evaluation to fruit and vegetable quality, information service and credit service 7.4.1. Geo-figureical distribution

91

The wholesale market for fruit and vegetables are categorized into small rural markets, primary markets at the district/sub-division level and central wholesale markets located in the major metropolitan areas. The distribution between rural assembly markets and primary wholesale markets is often not clear. The difference is that the primary wholesale markets are in permanent operations, rather than being seasonal in nature or dealing only specialized produce. There are three regular fruit and vegetable markets exist in Balochistan at all. Besides this every town/districts have small vegetable and fruit market. Wholesale market at Quetta has better storage, transportation, communication and working conditions for both buyers and sellers than those in the assembly market in various towns/districts of Balochistan. This wholesale market have a number of shops owned by a private entrepreneur i.e. commission agents. Retails markets in downtown Quetta and in all districts of Balochistan are also set up where consumers can buy all kind of fruit and vegetables. In NWFP, well established wholesale fruit market is located in big cities of almost every district. However, wholesale market at Peshawar has better storage, transportation, communication and working conditions for both buyers and sellers than those in the assembly market in locations. There is no single regular fruit and vegetable markets exist in Northern Areas at all. The wholesale and rural assembly markets did not exist in the Northern Areas. There are few traders in Gilgit, Skardu, Chilas and Khaplu with the title of commission agents. In fact they are not commission agents but relatively big traders with business connection down country. The local produce is offered to the retailers in small volumes by the farmers direct and due to the absence of markets and the marketing mechanism, farmers move from shop to shop in search of getting good prices acceptable to him (Iqbal, 2001). There is no single regular fruit and vegetable markets exist in wholesale AJK. Two private wholesale markets, one at Muzaffarabad and one at Bhimber exist. Wholesale market at Muzaffarabad has better storage, transportation, communication and working conditions for both buyers and sellers than those in the assembly market in various towns of AJK. This wholesale market having 18 shops owned by a private entrepreneur i.e. commission agents. Retails markets in downtown Muzaffarabad are also set up where consumers can buy all kind of fruit and vegetables.

92

Table 7.6: Itemized marketing margins of market intermediaries for selected vegetables
Market Agencies Tomato: Transport Market/Material Output loss Management Labor cost Profit Okra: Transport Market/Material Output loss Management Labor cost Profit Carrot: Transport Market/Material Output loss Management Labor cost Profit Cauliflower: Transport Market/Material Output loss Management Labor cost Profit Tomato: Transport Market/Material Output loss Management Labor cost Profit Onion: Transport Market/Material Output loss Management Labor cost Profit Peas: Transport Market/Material Output loss Management Labor cost Profit Potato:Transport Market/Material Output loss Management Labor cost Profit Onion: Transport Market/Material Output loss Management Labor cost Profit Tomato: Transport Market/Material Output loss Management Labor cost Profit Okra: Transport Market/Material Output loss Management Labor cost Profit Brinjal: Transport Market/Material Output loss Management Labor cost Profit Producers Rs/kg (%) 0.15 0.68 1.37 6.23 0.04 0.18 4.52 20.57 0.1 0.45 6.78 30.85 0.3 0.97 2.19 7.09 0.02 0.06 4.91 15.89 0.08 0.26 11.73 37.96 0.26 1.67 0.73 4.70 0.02 0.13 3.44 22.15 0.07 0.45 2.73 17.60 0.31 1.40 1.43 6.47 0.02 0.09 4.13 18.69 0.08 0.36 6.15 27.81 0.26 2.86 1.48 16.28 0.05 0.55 0.08 0.88 0.06 0.66 1.87 20.54 0.39 4.15 1.38 14.68 0.05 0.53 0.10 1.06 0.06 0.64 1.53 16.24 0.43 1.26 0.04 0.12 0.08 0.23 8.61 25.25 0.2 0.59 10.73 31.48 0.36 4.51 1.31 16.42 0.05 0.63 0.08 1.00 0.06 0.75 1.16 14.49 0.26 3.39 0.35 4.57 0.05 0.65 0.12 1.57 0.06 0.78 2.30 30.04 0.9 11.86 0.1 1.32 0.28 3.69 0.31 4.09 0.15 1.98 1.79 23.55 0.14 0.51 1.09 4.01 0.04 0.15 5.24 19.26 0.1 0.37 12.34 45.36 0.16 0.73 0.94 4.31 0.02 0.09 4.46 20.47 0.11 0.50 8.26 37.93 C. Agents Rs/kg (%) 0.00 0.00 0.05 0.23 0.00 0.00 0.17 0.77 0.03 0.14 1.05 4.78 0.00 0.00 0.08 0.26 0.00 0.00 0.29 0.94 0.05 0.16 1.50 4.85 0.00 0.00 0.04 0.26 0.00 0.00 0.09 0.58 0.02 0.13 0.51 3.28 0.00 0.00 0.06 0.27 0.00 0.00 0.17 0.77 0.04 0.18 0.82 3.70 0.00 0.00 0.07 0.77 0.00 0.00 0.11 1.21 0.04 0.44 1.28 14.10 0.00 0.00 0.08 0.85 0.00 0.00 0.12 1.28 0.04 0.43 1.39 14.76 0.00 0.00 0.24 0.70 0.00 0.00 0.54 1.58 0.06 0.18 3.36 9.86 0.00 0.00 0.06 0.75 0.00 0.00 0.09 1.13 0.04 0.50 0.95 11.93 0.00 0.00 0.04 0.52 0.00 0.00 0.10 1.30 0.03 0.39 0.54 7.02 0.00 0.00 0.00 0.00 0.00 0.00 0.18 0.66 0.02 0.07 1.01 3.71 0.00 0.00 0.00 0.00 0.00 0.00 0.13 0.60 0.02 0.09 0.74 3.41 Wholesalers Rs/kg (%) 0.00 0.00 0.08 0.36 0.07 0.32 0.17 0.77 0.06 0.27 1.91 8.69 0.00 0.00 0.11 0.36 0.07 0.23 0.21 0.68 0.07 0.23 1.70 5.49 0.00 0.00 0.08 0.52 0.07 0.45 0.13 0.84 0.05 0.32 0.75 4.81 0.00 0.00 0.13 0.59 0.08 0.36 0.21 0.95 0.07 0.32 1.32 5.97 0.11 1.21 0.13 1.43 0.06 0.66 0.21 2.31 0.17 1.87 3.11 34.22 0.11 1.17 0.15 1.60 0.06 0.64 0.26 2.77 0.19 2.02 3.51 37.31 0.42 1.23 0.31 0.91 0.28 0.82 0.89 2.61 0.26 0.76 7.65 22.44 0.09 1.13 0.12 1.50 0.06 0.75 0.24 3.01 0.18 2.26 3.14 39.32 0.10 1.30 0.12 1.57 0.09 1.17 0.23 3.00 0.15 1.96 3.13 40.82 0.00 0.00 0.20 2.64 0.30 3.95 0.25 3.30 0.14 1.85 3.18 41.97 0.39 1.43 0.18 0.66 0.28 1.03 0.78 2.87 0.26 0.96 5.16 18.97 0.42 1.93 0.18 0.83 0.25 1.15 0.73 3.35 0.27 1.24 5.10 23.40 Retailers Rs/kg 0.10 0.20 0.30 0.32 0.21 4.31 0.21 0.19 0.23 0.48 0.27 6.21 0.19 0.24 0.13 0.59 0.34 5.07 0.23 0.20 0.17 0.63 0.37 5.49 0.37 1.68 0.11 0.40 0.27 6.26 0.50 1.61 0.11 0.48 0.29 6.42 0.85 0.59 0.36 10.04 0.52 21.74 0.45 1.49 0.11 0.41 0.28 5.25 0.36 0.51 0.14 0.45 0.24 5.97 0.90 0.30 0.58 0.56 0.29 4.97 0.53 1.31 0.32 6.16 0.38 18.52 0.58 1.12 0.27 5.32 0.40 14.10 (%) 0.45 0.91 1.36 1.46 0.96 19.59 0.68 0.61 0.74 1.55 0.87 20.09 1.22 1.55 0.84 3.80 2.19 32.66 1.04 0.90 0.77 2.85 1.67 24.83 4.07 18.48 1.21 4.40 2.97 68.86 5.32 17.13 1.17 5.11 3.09 68.31 2.49 1.73 1.06 29.45 1.53 63.77 5.64 18.67 1.38 5.14 3.51 65.75 4.70 6.65 1.83 5.87 3.13 77.88 11.86 3.95 7.64 7.38 3.82 65.52 1.95 4.81 1.18 22.64 1.40 68.05 2.66 5.14 1.24 24.42 1.84 64.74

AJK

Northern Areas

Balochistan

93

7.4.2.

Consumers evaluation to fruit and vegetables quality

Majority of the sample consumers were not satisfied with the quality and price of fruit and vegetables consumed by them. The underlying reasons were ranked as higher price, low quality, both quality and price and non-freshness. Moreover, consumers think that new varieties of fruit and vegetables should be introduced to meet the requirement of the consumers (Table 7.7).
Table 7.7: Consumers perceptions about quality and price for fruit and vegetables Balochi stan Satisfaction with quality and price of fruit and vegetables (%): - Satisfied NW FP N As AJ K

Not satisf ied

30 70 60 20 6 10 4

24 76 55 30 10 0 5

52 48 68 12 20 0 0

16 84 41 29 11 16 3

Reasons for not satisfied (%): -

High price Low quality Not fresh High price + low quality Not affordable

Source: Survey data, 2007 Majority of the consumers 70%, 76%, 48% and 84% in Baluchistan, NWFP, NAs, and AJK respectively were not satisfied with the current marketing system prevailed in the study area. High prices of fruit and vegetables were the main reason behind the dissatisfaction of the consumer followed by low quality and freshness of the fruit and vegetables (Table 7.7). 7.4.3. Information services

Market committee for fruit and vegetable, Quetta collect price of fruit and vegetables on daily basis and adds transportation charges to fix the retail price for all fruit and vegetables. These prices are circulated to all retail shops to maintain price uniformity and keep the record. The commission agents and wholesalers also collect price information from the commission agents and wholesalers from all fruit and vegetable markets themselves. In NWFP market committee along with responsible government officials collect prices on daily basis from fix the retail price. These prices are circulated to all retail shops to maintain price uniformity and keep the record in the file. The commission agents and wholesalers also collect price information from the commission agents and wholesalers from other markets on their own in order to make necessary arrangements for supply to or otherwise. Assistant commissioner/Chairman Price control committee Gilgit collect price of fruit and vegetables information on daily basis from down country telephonically and adds transportation charges to fix the retail price for all fruit and vegetables. These prices are circulated to all retail shops to maintain price uniformity and keep the record in the file. Additional Deputy Commissioner Office, Muzaffarabad collect price of fruit and vegetables information on daily basis from Mansehra and Rawalpindi telephonically and adds transportation 94

charges to fix the retail price for all fruit and vegetables. These prices are circulated to all retail shops to maintain price uniformity and keep the record in the file. The commission agents and wholesalers also collect price information from the commission agents and wholesalers from Rawalpindi and Mansehra themselves. 7.4.4. Credit services

Credit plays an important role in the production of selected vegetables. All actors including in fruit and vegetable markets need money to pay for running the business of daily routine, casual hired labors and some other managing purposes. It was concluded that over 64 percent producers/contractors/Commission agents/wholesalers/retailers obtained credit to fulfill their money needs in the study area. Majority of the sample respondents had access to more than one credit source including both informal and formal sources. A very small percentage (6.30-20%) of growers gets credit from banks while the major portion was getting credit from relatives and friends. There is no credit service for the wholesalers and retailers. The credit services particularly for agricultural production and marketing are very scarce in the northern areas. Although the formal sector banks offer credit to farmers and other but the procedures are very tough with strong collateral conditions. The farmers in the face of very small landholding also do not qualify these conditions. Likewise, the market intermediaries such as retailers, wholesalers and other also could not avail these services. Therefore both the farmers and the businessmen rely on the informal credit services mainly from the relatives, friends. If the credit is advanced from the market intermediaries (roadside assemblers, contractors or retailers), that is also on the basis of their long business association and reputation. The NGO sector mainly AKRSP has also organized the communities and small loans are provided to the members of the community organization but still very high interest is charged on that. There is no credit service for the wholesalers and retailers.

7.5.

Conclusion

Having said all in the above description it may be concluded that high prices fluctuations noticed for fruit and vegetables in the study area. It is generally perceived that farmers are exploited and middleman fetch larger share in consumer price. Farmers may get the benefit of the season by planting early and late season varieties. Over the entire season of the produce about 23 percent of the price differences have been witnessed. Farmer share in consumer price also depends on the nature of the produce. Perishable and short duration commodities gave more shares to producers/farmers in consumer price and vice versa. So marketing efficiency does links with producers and consumers satisfaction. An intermediary if get greater share in consumer price may invest more. Decomposition of the market margin analysis reveals that transportation cost is the major cost item for contractors this why contractors get greater share. However, majority of the consumer are dissatisfied and hence one can conclude that marketing system in the study area is inefficient. But if we further investigate into the consumers dissatisfaction, higher prices and quality of the produce are the attributes. High prices directly linked with higher transportation cost and quality and freshness is directly linked with packing and packaging. 95

Wholesale markets are rarely found facilitating their backward clients in the study area. Market information play vital role in market integration and in the establishment of law of one price. Markets in the study area are poorly interlinked with other markets of all scale. Similarly nominal access to formal credit sources was found to all kinds of market intermediaries. It can be concluded that minimizing transport costs, improvement in packing of fruit and vegetable, fast interlink and transformation of market information and easy access to formal credit sources are vital for efficient marketing system.

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CHAPTER 8 SUMMARY, CONSTRAINTS AND STRATEGIES

This chapter covers summary of findings followed by horticultural development constraints and horticultural development strategies. The first section is devoted to salient findings on the selected fruit and vegetables marketing system. The horticultural development constraints are discussed in section 2. The proposed horticultural development strategies are presented in section 3. The suggestions for further research for the promotion of horticulture sector of the country in section 4 complete this chapter.

8.1.

Summary of Findings

The purpose of this exercise was to study the existing structure, conduct and performance of the marketing system of selected fruit and vegetables in Balochistan, NWFP, Northern Areas and AJK territories of Pakistan along with identifying technical and socio economic constraints to their marketing. The total sample size for fruit and vegetables growers was 1074 and 568 farmers; of contractors as 156 and 125; of commission agents/wholesalers as 120 and 125; of retailers as 184 and 220; of consumers as 315 and 235, respectively. In this way 3122 respondents were interviewed for this study. The fruit covered were apple, apricot, grapes, citrus, plum, cherry, walnut and mangoes. The vegetables chosen were tomato, okra, carrot, cauliflower, onion, peas, potato, and brinjal. Structure, Conduct and Performance (SCP) paradigm has been assessed for selected fruit and vegetables in the study area. Both qualitative and quantitative analyses were carried out to generate information pertaining to market structure (types of markets, market actors, marketing channels and barriers to entry for market intermediaries), market conduct (R&D, development of new products, investment in new technology, traders behavior, operation of marketing intermediaries, competition of traders in the market, formation of prices among traders and marketing strategies) and market performance (seasonal price fluctuation, market efficiency and market effectiveness) to assess the efficiency marketing system for selected fruit and vegetables in the study area. 8.1.1. Market structure Survey results of market structure revealed that the selected fruit and vegetables are sold through four types of markets namely roadside, assembly, wholesale and terminal markets in Balochistan, NWFP, Northern Areas and AJK. There is no well developed market structure and system of wholesale markets in Northern Areas. It was found that the markets, market actors, marketing channels and market intermediaries are quite competitive and efficient in delivering services in relation to volume of produced available to them in their respective areas, as well as in terms of price and non-price competition at the farm level between contractors and producers. Findings from analysis revealed that farmers generally lack in capital and/or access to credit, lack of knowledge and expertise in marketing lead growers to rely on the contract-harvesting system in fruit whereas vegetables marketing is preferably carried out by self-marketing. This is reinforced by the actions of commission agents who prefer to obtain supplies through number of 97

contractors tied to them through loaning. Barriers to entry do exist at each stage in the marketing chain but appear most limiting for new commission agents. Survey findings of the market structure also revealed that the commodity traveling time from producer to consumers ranged 4-7 days for the selected fruit and vegetables. Channels with more number of intermediaries take longer time. For example, farmers to consumer commodity transfer takes quarter a day where farmer to retailer to consumer takes half a day. Other channel takes more time because of longer distances. The relationship among traders is loose in general as no written agreement exists and a few oral contracts observed. The information flow regarding supply, demand and price varies from actor to participants. Communications between growers are oral and limited. In terms of trading way, the majority of links are cash transaction between commission agents and wholesalers, contractors and commission agents as well as beoparies. Advance payments or purchase on credit system also exists. These different marketing links neither pushed forward nor promoted the development of fruit and vegetables industries in study area. 8.1.2. Market conduct Findings from the analysis of market conduct revealed that the behavior of traders, based on the average quantities of commodities dealt by pre-harvest contractors show that the apple contractors have played their role more than other fruit dealer in Balochistan, cherry dealers in Northern Areas and mango dealers in AJK. In vegetables, potato and peas dealers in Northern Areas; okra and tomato dealers in AJK and Balochistan have played significant role. Regarding commission agents, based on the average quantities of commodities dealt shows that the apple and apricot dealers have played their role more than other fruit dealer in Balochistan and Northern areas, apple and plum in NWFP, and walnut dealers in AJK. In vegetables, tomato, okra and cauliflower in Balochistan; potatoes and tomatoes dealers in Northern Areas; onion and tomato dealers in AJK have played significant role. Analysis of market conduct also revealed that the apple and apricot wholesalers of Balochistan dealt relatively higher quantities than other fruit wholesalers in the study areas whereas citrus and apple in NWFP, apple and apricot in Northern Areas, and the walnut wholesalers of AJK fall on the lower end. In vegetables, the tomato and okra commission agents of Balochistan sold relatively higher quantities of vegetables, tomato and potatoes in Northern Areas, onion and tomato in AJK. Survey findings of market conduct show that the apple retailers from Balochistan and Northern Areas dealt relatively higher quantities than other fruit retailers whereas citrus and apple in NWFP, mango and walnut retailers of AJK, and apricot retailers of Northern Areas fall on the lower end. In vegetables, the tomato retailers of Balochistan sold relatively higher quantities than other vegetables retailers, onion and potato in Northern Areas, onion and tomato in AJK. Findings of market conduct also revealed that the higher competition was among the buyers and seller, the determined price was close to the optimum price. The pre-harvest contractors, traders or beoparies and retailers mostly belong to the same district or at the most same province. The fruit and vegetables commission agents with in a market do have intense competition for capturing business. Besides, offering better price to the stakeholders, the dealing reputation of the intermediary matters a lot in creating business competition and price determination. Fruit condition is important price determinant in the fruit sector. Fruit growers usually avoid self 98

marketing, as they seriously lack in marketing information and linkages with other markets. A lack of capital or resources of credit, competing demands for the producers management time, and lack of knowledge and expertise in marketing lead growers to rely on the contract-harvesting system. This is reinforced by the actions of commission agents who prefer to obtain supplies through number of contractors tied to them through loaning. On the other hand, contractors keep close links with commission agents in the wholesale and terminal markets. They posses sound knowledge about the citrus production and marketing system. There is no regular market in Northern Area, AJK and hence no government intervention. In the market both parties (buyer and commission agent) form the prices through auctions. The price determinants between growers of selected fruit and contractors are; fruit condition, last year price experience, prevailing price in the area and highest price within contractors. Fruit condition is important price determinant in the fruit sector. Traders do not care much for product quality from nutrition and freshness perspectives. They simply classify the output into grades A, B and C. The specifications of these grades vary by market and intermediary types and are also not documented anywhere. On the other hand, traders form the price through negotiation without considering for compensating due production costs and are only supply based. The wholesale price usually changes with fluctuation in the market supplies but the commission agents earn profit according to their commission charges. 8.1.3. Market performance Market performance was analyzed using marketing margin analysis and decomposition of the marketing margins of various marketing intermediaries. The findings from the analysis of market performance revealed that high seasonal price fluctuations were noticed for the selected fruit and vegetables in the study area. Over the entire season of the produce about 23 percent of the price differences have been witnessed. It is generally perceived that farmers are exploited and middleman fetch larger share in consumer price. Farmers may get the benefit of the season by planting early and late season varieties. Farmer share in consumer price also depends on the nature of the produce. Perishable and short duration commodities gave more shares to producers/farmers in consumer price and vice versa. So marketing efficiency does links with producers and consumers satisfaction. An intermediary if get greater share in consumer price may invest more. Decomposition of the market margin analysis revealed that transport cost is the major cost item for contractors that are why contractors get greater share. However, majority of the consumer are dissatisfied over quality of output delivered to them and hence one can conclude that marketing system in the study area is inefficient. High prices directly linked with higher transportation cost and quality and freshness is directly linked with packing and packaging. As according to modern theory marketing efficiency is the consumer satisfaction, then transportation cost and/or means of transportation must be studied for minimization and improvement in infrastructure and means of transportation. Similarly packing and packaging must be improved especially for perishable produce for consumer satisfaction. Wholesale markets are rarely facilitating client farmers. Market information play vital role in market integration and in the establishment of law of one price. Study area markets are poorly interlinked with other markets of all scale. Similarly nominal access to formal credit sources was found to all kinds of market intermediaries. It can be concluded that minimizing transport costs, improvements in packing, fast disposal of 99

commodities, easy access to formal credit sources and transformation of market information are vital for efficient marketing system.

8.2.

Horticultural Development Constraints

On the basis of survey findings of the study, the horticultural development constraints can be classified into six categories. These constraints are related to production, post-harvest handlings, domestic marketing, export of horticultural products, research and development institutions and policy and regulatory framework related to horticultural development issues. The brief description of each category of constraint is presented in the following sub sections. 8.2.1. Production constraints of horticulture development Survey findings revealed that the resources are not optimally allocated in the horticulture sector of study area which is reflected by the fact that horticulture growers obtain low yields of fruit and vegetables as compared to the potential yield. The absolute smallness of farmers generates socio-economic and technical constraints. The small farm sizes with limited financial resources are obstacles to improve the productivity and profitability of horticulture sub sector. The lack of capital, limited access to institutional credit and non timely availability of quality input lead growers to limit the use of fertilizers, pesticides and labor inputs in fruit orchard and vegetables fields. Technical constraints include non-availability of healthy, disease free, true-to-type fruit plants, limited availability of certified vegetable seed, non-availability of quality chemicals, and weak capacity in orchard management which converge at low productivity than the potential outputs of these commodities in the study area. Region wise production constraints of horticultural development strategies are briefly narrated here; Balochistan: i) Non availability of healthy, disease free, true-to-type fruit plants; ii) Non availability of certified seed of vegetables; iii) Decline of ground water due to drought; iv) Lack of knowledge & skills in modern horticultural crop management; v) excessive and injudicious use of chemicals; vi) breakdown and irregular supply of electricity in peak growing season; and vii) rising fuel prices for tractors and tube wells use. NWFP: i) Non-availability of proper seedlings; ii) Ignorance of cultural practices; iii) Nontechnical picking & handling of horticulture; iv) Un-awareness about integrated crop & pest management; v) Lack of capacity of farmers; vi) Lack of skill about value addition; vii) lack of access to technical innovations; and viii) production is not market driven. Northern Areas: i) Lack of fruit plant nursery registration/ certification system; ii) No vegetable hybrid seed production; iii) Weak capacity in orchard management; iv) No access to bio-technologies for the promotion of horticulture products; v) Non-availability of quality inputs; and vi) Non existence of research into new varieties leads to no addition of the gene pools of horticulture. AJK: i) Non regulated seed and nursery system; ii) Non availability of better varieties; iii) Non availability of quality inputs; iv) Non availability of small tractors and equipments; and v) Extension staff have limited knowledge of good orchard management.

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8.2.2. Post-harvest handling constraints of horticultural development The survey findings revealed that post-harvest handling issues include contracting out fruit orchard and vegetables, out-dated harvesting techniques, un skilled, non-technical harvester and handlers, lack of cool chains, high post-harvest losses, costly packing materials and absence of processing facilities at farm level. The region wise post-harvest handling constraints of horticultural development strategy are briefly described below; Balochistan: i) Contracting fruit orchard and vegetable; ii) Limited focus on post harvest; iii) Poor post-harvest handling techniques; iv) Poor storage and handling facilities; and v) Non availability of proper packaging material and facilities in the production areas.
NWFP: i) Contracting fruit orchard and vegetable; ii) Out-dated harvesting techniques which

damage quality and increase the perishability; iii) Non observing of grading, waxing and polishing; iv) lack of cool chain; and v) high post-harvest losses Northern Areas: i) Contracting fruit orchards and vegetables; ii) Out-dated harvesting techniques; iii) post harvested technologies not implemented; iv) unskilled, non technical picking & handling; v) lack of cool chain; vi) high post-harvest losses; vii) Non-availability and high cost of packing material; and viii) absence of processing facility both in public and private sector
AJK: i) Contracting fruit orchard and vegetable; ii) Little awareness and training of modern

harvest and post harvest handling, storage and preservation technology; and iii) Limited availability and high cost of packing material. 8.2.3. Domestic marketing constraints of horticultural development Findings of the study revealed that horticulture growers adopt strategy of contracting out their orchard at the flowering stage and sell out their standing vegetables fields to beoparies. The contract system provides economic advantages to the sample growers. It is also apparent that the growers face great difficulties in marketing their own produce. In assembly and wholesale markets, these growers are treated as temporary client without access to the credit and other facility extended to the contractors of the orchards and beoparies of the vegetables fields. Without adequate access to market information, growers also face price uncertainty. Due to institutional constraints, growers depend on high cost informal credit sources and advances from fruit contractors and vegetables beoparies. In this process by not marketing their own produce, the growers do not benefit from seasonal price variation particularly in the early and late season. The region-wise domestic marketing constraints of horticultural development strategies are presented below; Balochistan: i) limited knowledge of market trends; ii) Inadequate market information system; iii) Poor regulation of the market; iv) limited focus on market; and v) lack of access to refrigerator vehicles for highly perishable products NWFP: i) Unawareness of producer to market trends; ii) Non regulated marketing system; iii) Bad condition of farm to market roads; and iv) Traditional, outdated often inappropriate delivery mechanism of horticulture produce.

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Northern Areas: i) Poor producer awareness and knowledge of market trends; ii) No regulated markets; iii) Poor conditions of farm to market roads; iv) Non existence of Market Legislative system; and v) Lack of access to refrigerator vehicles for highly perishable products. AJK: i) Limited growers awareness of market trends; ii) Not regulated marketing system; iii) Bad condition of farm to market roads; and iv) Traditional, outdated often inappropriate delivery mechanism of horticulture produce. 8.2.4. Institutional constraints of horticultural development Analysis of study revealed that the issues related to research and development, processing and refrigeration, transportation and marketing & communication in the study area are non-existing and non-functioning of these institutions creates problems for all stakeholders of market chain of fruit and vegetables in the study area. The region-wise institutional constraints emerged from the non-functioning of these institutions are briefly presented here; Balochistan: i) Lack of coordination, linkages among agriculture research, education and extension; ii) Week technical and professional capacity of agriculture research institutions; iii) iii) Inadequate R&D infrastructure; iv) Lack of focus on value addition, diversification and market orientation; v) Week extension services to guide the growers in modern management techniques; and vi) Lengthy and conventional accounting system regarding late releases of budget to research and extension NWFP: i) Existence of traditional research instead of demand driven research; ii) Involvement of R&D institutes in sale and marketing of consumer products; iii) non existence of regular markets; iv) Absence of public-private partnerships in areas of R&D and extension services; and v) Lack of focus on value addition, diversification and market orientation Northern Areas: i) absence of research in specific crop product; ii) lack of capacity of agriculture department (extension); iii) lack of horticulture business function; iv) lack of technical staff skills and financial resources in extension services; v) no clear role for public and private sectors in the development of horticulture development; vi) lack of coordination between the stakeholders of agriculture development; vii) non existence of producers and marketing association; and viii) non existence of regular markets. AJK: i) disintegrated R&D system without proper research infrastructure; ii) shortage of technical staff; iii) lack of expertise and financial resources particularly in extension services; iv) non existence of regular markets; v) Lack of focus on value addition, diversification and market orientation; and vi) absence of proper career structure which results into lack of motivation for staff to work wholeheartedly. 8.2.5. Policy and regulatory constraints of horticultural development Although there are a number of institutions for research and development working on different horticultural crops in Balochistan, NWFP, Northern Areas and AJK, however, very few new high yielding cultivars have been developed. Also there is no research and development facility for conducting research on controlled atmosphere storage and shipping of fruit and vegetables in 102

the study area. Further the research on fruit and vegetables is not demand driven, and is often replicated time and again. The extension system in the study area remains ineffective, and whatever limited research and development work done is not properly transferred to end-users. Survey findings revealed that the constraints related to policy and regulatory framework create more hurdles in horticultural development strategy in the country. The region-wise issues related to policy and regulatory framework is summarized below; Balochistan: i) inefficient and ineffective quarantine laws to check the entry of plants, seeds, flower bulbs, time barred insecticides/pesticides, fertilizers and fruit and vegetables; ii) no participation of stakeholders in developing horticulture research program, policy and planning; iii) no system in place of monitoring and evaluation of research, extension and education in horticulture in Balochistan; iv) promotion of research/extension staff on seniority without regard to performance/hard work and number of research publications. NWFP: i) lack of well defined provincial horticultural policy; ii) non-identification of role of public and private sector in the development of horticulture and skill development; iii) lack of capacity of agriculture research and extension department in NWFP; iv) non existence of Horticulture Task Force on permanent basis; v) non existence of producers and marketing associations as well as market committees; vi) non introduction of innovations in horticulture products and techniques; vii) lack of regulations and certification system in NWFP. Northern Areas: i) absence of well defined Northern areas Horticulture policy; ii) lack of quarantine chick posts in all entry points of Northern areas; iii) No legal framework for marketing of pesticides; iv) non existence of any mechanism for monitoring of fertilizers quality; and v) non observance of regulations for seed production by seed producers and seed companies. AJK: i) absence of well defined AJK Horticulture policy; ii) lack of quarantine chick posts in all entry points of AJK; iii) No legal framework for marketing of pesticides; and iv) non existence of any mechanism for monitoring of fertilizers quality. 8.2.6. Export constraints of horticultural development Survey findings showed that a very small proportion of horticultural produce (about 3.5%) is being exported. The region-wise export constraints of horticultural development strategy are identified as under; Balochistan: i) lack of orientation of production towards export market; ii) lack of quality testing and certification facilities; iii) time consuming export clearance procedure; and iv) lack of storage and refrigerator transport facility. NWFP: i) no grading and labeling of produce; ii) lack of orientation of production towards export market; iii) Non practicing of certification as EUROGAP, ISO 14000 or HACCP hazard analysis ; iv) lack of cold storage at cargo; v) high freight charges; vi) no facilitation for trade fairs and exhibition; and vii) lack of support for international marketing.

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Northern Areas: i) no WTO accredited laboratory for quality certification; ii) No use of certification system such as EUROGAP, ISO 14000 or HACCP hazard analysis; iii) Non practicing of certification; iv) lack of cold storage and no air cargo service; v) high freight charges for horticultural produce; vi) no facilitation for trade fairs and exhibition; and vii) lack of support for international marketing.

8.3.

Horticultural Development Strategies

It is general perception that producers are exploited in the marketing chain as other middlemen in the consumer price fetch more shares. But this is generalized statement, there are other arguments too that leads to producers/growers exploitation. More efforts are made for consumer satisfaction and less attention being paid towards producers satisfaction. On the basis of this study following recommendations are extended for making the marketing system friendlier and facilitating for all marketing actors in the study area. 8.3.1. Reorientation of subsistence horticulture to sustainable commercial horticultural farming The average farm size and area allocated to fruit and vegetables at majority of our farms is quite low and overtime, their farm size shall further decline. These farmers have very small quantities of marketable surpluses. It is need of the time to make their small farmers viable for staying in high value agriculture business by transforming them from subsistence agriculture to sustainable commercial horticultural farms in Balochistan, NWFP, Northern Areas and AJK through;
Balochistan: a) Promotion of cooperative business and value creation enterprises, where possible.

These are more appropriate options for the economic viability of small farmers; b) review the regulatory framework for developing market for land and infrastructure; c) developing and strengthening market linkages; d) establishing rural business hubs for inputs provision to enhance timely access to quality inputs at competitive prices.
NWFP: a) training of entrepreneurs in the market dynamics; b) development of market

information services; c) streamlining and regulating the formation of market committees; d) establishing market cooperatives due to small holding of the farmers; e) gender encouragement/involvement in household canning and preservation of fruit produce; and f) monitoring of markets by the public sector organization and market committees.
Northern Areas: a) establish farmers organizations in the form of clusters for economies of scale

and value creation enterprises; b) development of market information services; c) streamlining and regulating the formation of market committees; d) establishing market cooperatives due to small holding of the farmers; e) gender encouragement/involvement in household canning and preservation of fruit and vegetables produce; and f) monitoring of markets by the public sector organizations and market committees.
AJK: a) establish cooperative farming due to small holding of farmers; b) review the regulatory

framework for developing market of land and infrastructure; c) developing and strengthening market linkages; d) establishing rural business hubs for inputs provision to enhance timely access to quality inputs at competitive prices; e) development of market information services; and f) streamlining and regulating the formation of market committees

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8.3.2. Re-orientation of research and development services Research and development in fruit and vegetables should be directed towards repositioning the horticulture sector vis--vis international and national market requirements in Balochistan, NWFP, Northern Areas and Azad Jammu and Kashmir through:
Balochistan: a) introduction of GAP to bring the horticultural production in the area at par with

WTO compliance; b) the production methods need to be changed to make it in line with both domestic and international market demands in order to achieve best prices of th e farmers produce; c) facilitating faster adoption of high efficiency irrigation systems for sustainable natural resource conservation and it is now a vital input for growing high value agricultural commodities; d) it is suggested to integrate farmers with processors, value addition sectors and exporters in order to accrue maximum returns.
NWFP: a) strengthening and reforming the agricultural research, extension, and education

system; b) introduction of demand driven research with focus on value addition and value creation of fruit.
Northern Areas: a) establishing and strengthening agricultural research and extension

departments; b) introducing demand driven research linked to value addition of fruit and vegetables; c) establishment of Northern Areas Horticultural Development Board; and d) strengthening coordination of Research and Development Organization;
AJK: a) integrating different components of agricultural Research and Development system

(research, extension and education); b) establishing demand driven research and development centers; and c) improving the advisory services by using efficient communication systems, allocating resources for better mobility of field staff and demonstrating new technologies in large blocks. 8.3.3. Reform of agricultural education, research and extension There is a need of reforms in agricultural education, research and extension in Balochistan through; a) Re-aligning research programs to be demand driven, cost effective and replicable under farmers condition by focusing on control of post-harvest losses, value creation and value addition; b) crop diversification in order to enhance producers profitability and sustainability; and c) integration of research, teaching and extension under one umbrella at the pattern of Land Grant Institution (LGI) of USA and is successfully replicated in some of the provinces of India. 8.3.4. Improving efficiency, productivity and competitiveness In order to compliance with the changing demand of consumers, WTO requirements and Sanitary and Phyto-sanitary measures, horticultural growers need to be more efficient, productive and competitive both in domestic and international market. This can be achieved in study areas through;
Balochistan: a) promoting value addition through improved agro-processing and market access

through innovations; b) promoting the adoption of GAP through improved extension services and demonstration farms; c) providing incentive-based introduction of quality standards and certification schemes for domestic and international markets; d) Promotion of products for niche markets based on comparative and competitive advantage; e) establishing business center for

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timely supply of quality inputs at affordable prices; and e) promote awareness about the dynamics and challenges of horticulture sector.
NWFP: a) human resource development for all stakeholders throughout value chains; b)

strengthening of existing farm services centers in terms of infrastructure for processing and canning by making it a hub of these activities; c) promotion of products for niche markets based on comparative advantage; d) provision of true to type and disease-free seeds of fruit plants sapling; and e) establishment of Maximum Permissible Residual Limit (MRL) laboratories to meet WTO requirements.
Northern Areas: a) promoting modern technologies to increase yields and to reduce post-harvest

losses; b) establish and implement quality standards and certification system- modern seeds/nursery certification system, introduction of fresh produce standards/grades, good agricultural practices (GAP); c) training in resource use efficiency, off-season production, self vs cooperative marketing, introducing cost sharing through government support on inputs and development of export opportunity; d) emphasis on value added processed products (seed industries, juice/pulping units, pickles, dry apricot etc), organic production and specialty crops for niche markets; e) developing modern market infrastructure, market information system and training in horticulture business management and marketing integrated to ecological condition; and f) promotion of new crops including cash crops.
AJK: a) promotion and demonstration of modern technologies; b) establishing standards and

certification system; c) emphases on value addition, processed products, promotion of organic product and specialty crops for niche markets. 8.3.5. Encouraging public and private partnership and private sector investment For coping the WTO requirement and SPS measurements, there is need to encourage the public private partnership and private sector investment in study areas through:
Balochistan: a) provide incentives and regulatory framework for establishment of private sector

wholesale markets; b) establishment of commission agents storage, cool chain and other logistic facilities; c) stimulate investment in horde business sector by encouraging public-private and private-private partnerships; and d) launch special schemes for promoting direct and indirect foreign/private investment
NWFP: a) provide government incentives to the private sector for improvement of its regulatory

framework; b) improvement of storage, cool chain and refrigerator vanes in potential areas of production; c) encourage the private sector investment in the horti-business; d) launch special schemes for promoting direct and indirect foreign/private investment; and provision of interest free loans for the development of modern horti-business enterprises in private sector
Northern Areas: a) provide incentives and reduce regulatory barriers to private sector for

improvement; b) improvement in the availability of storage, development of cool chains and provision of refrigerator vanes in potential areas of production; c) encourage the private sector investment in the horti-business; d) provision of soft loans for the development of modern hortibusiness enterprises in private sector; e) introduce schemes for the promotion of foreign/private investment; and f) establishment of Pakistan Horticultural Development Export Company ltd. regional office in Gilgit.

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8.3.6. Capacity building of chain stakeholders of horticulture sector Sustainable implementation of best horticultural production and management practices will be ensured through Farmer Field Schools (FFS) approach, which can provide capacity building to growers, women and children for addressing the need of productivity, quality improvement of commodities, reducing post harvest losses and value addition. By holding horticultural farmers field schools, following one village one facilitator concept in Balochistan, NWFP, Northern Areas and AJK can enhance capacity building of chain stakeholders. Facilitators will transfer knowledge and skills on the modern management to horticultural growers throughout the production season (appropriate selection of variety, optimal methods of plantation propagation, fertilization, irrigation and pruning). They will also provide knowledge to growers on allowable inputs (pesticide, fungicide and fertilizer). Knowledge on EUREPGAP pre- and post-harvest food safety certification scheme for fresh horticultural produce will also be disseminated. Horticultural growers will be updated on GAP, harvesting techniques by following maturity indices, proper harvesting tools/harvesting machine. Facilitators of Business Field Schools (BFS) will transfer knowledge and skills to harvesters, pickers and packers and transporters on best post-harvest handling techniques/tools, methods/harvesting machine, de-sapping and de-stemming techniques and proper handling and care of harvested produce. They will also impart knowledge/information/skills to transporter and packers on EUREPGAP or equivalent food safety certification standard to improve acceptability of fresh fruit and vegetables for export. Knowledge and skill transfer on modern processing, grading and packing techniques will be ensured by facilitators of BFS. Information on effective plan to comply with international standards for hygiene in packing facilities with particular emphasis on facility design, water quality, worker health and hygiene and training of workers will also be disseminated to packers in processing sector. Facilitators of BFS will also transfer knowledge/information on market development areas to the marketers. They will facilitate partnership (e.g. contract farming) among producers, packers and collectors, retailers (supermarkets, hyper markets and big bazaars) for distribution and marketing of fresh fruit and vegetables. 8.3.7. Policy and regulatory framework for the promotion of horticulture sector Federal, provincial and district governments should play their due role in performing their responsibility for the development of horticulture sector in the study area. Federal government should formulate national import-export policy to comply WTO requirements. Seed certification and registration of nurseries and vegetables seed production farms, formulation of quarantine rules and regulations and setting the standards and grades for the horticultural produce fall under the responsibility of the federal government. Provincial governments are responsible for the implementation of federal policies in their respective provinces and if required, they can develop their own policies, standards and grades for the promotion of horticultural production and export in the compliance of WTO requirements. District governments are responsible for managing extension activities, local marketing systems, monitoring of inputs and coordinating with provincial and federal governments in developing agricultural projects in general and horticultural projects in particular. Government is also required to facilitate the engaged stakeholders in horticulture business in getting credit from the banks and other financial institutions to easy terms and conditions as quickly as possible. The public sector institutions should also generate accurate and reliable data on post harvest losses of 107

horticulture commodities to ascertain the causes of losses at pre- and post-harvest stages. In order to facilitate faster changes in production, storage and marketing techniques, government is requested to award complete exemption of duties and surcharge on imported machinery like grading units, cold storage chambers, greenhouses, trickle irrigation accessories (like microtubes, mini sprinklers and bubblers) for interested businesses. Horticulture should be accorded to the status of an industry in Pakistan. Regulatory Policy Measures: The proposed regulatory policy measures for Balochistan, NWFP, Northern Areas and AJK are briefly described below:
Balochistan: a) registration of fruit plant nurseries and vegetables seed production fields will be

ensured by the government of Balochistan; b) government will ensure through legislation the quality and liability fruit plant and seeds from nurseries and fields and the truthfulness of labels on inputs like seeds, fertilizers and pesticides; c) government should provide incentives (grants, study tours and trainings) to the registered nursery men and input suppliers.
NWFP: Government should review the existing rules and regulations to identify conflicts and

distortions in the existing regulatory framework. Regulatory measures will include; a) revision of the Agricultural Produce Market Act 1939; b) revision of the Seed Act 1976 to make it compatible with present day needs; c) revision of Pesticide Act 1971; d) establishment of quality grade for major fruit in consultation with the Federal authority; and e) establishing legal framework to allow horticulture industry to develop in the best interest of the province producers and consumers.
Northern Areas: The government of Gilgit Baltistan should legislate for a) proper marketing of

chemicals; b) establishing a plant quarantine system at all major entry points to the Northern areas; c) boarder trade of horticultural products with China without discrimination and to encourage local trading; d) the government should regulate nursery sector thorough approved legislation and taking new measures including registration of nurseries and their working according to the nursery production protocols approved by the government and closure of unregistered nurseries.
AJK: The government of AJK should legislate a) for proper marketing of chemicals; b) for

establishing a plant quarantine system at all major entry points to the AJK; c) the government should regulate nursery sector thorough approved legislation and taking new measures including registration of nurseries and their working according to the nursery production protocols approved by the government and closure of un-registered nurseries. Production and Marketing Policy Measures: The proposed production and marketing of horticulture policy measures for Balochistan, NWFP, Northern Areas and AJK are as under: a) promotion of environmentally safe production practices and packing material; b) facilitate stakeholders involved in horticulture business in getting credit from banks, other institutions on easy terms and conditions and as quickly as possible; c) establishment and development of modern wholesale markets, cold storage facilities, grading facilities in the production areas; and d) availability of technical expertise to the private sector for the preparation of feasibility of any business related activities of horticulture sector Institutional Policy Measures: The proposed institutional policy measures for Balochistan, NWFP, Northern Areas and Azad Jammu & Kashmir are as under: a) re-organize the present horticulture research program from conventional to demand driven in view of the requirements 108

of domestic and foreign markets; b) availability of resources like land, budget, trained man power and other facilities for the establishment of full-fledged Ornamental Horticulture Research Section/Division in the existing research organizations; c) ensure the collection of accurate and reliable data on post-harvest losses for horticultural commodities and to ascertain the causes during pre-harvest stages which lead to post-harvest losses; and d) Minimize import and export regulations but not at the cost of quality and conditions set by WTO.

8.4.

Suggestions for Further Research

Some areas are hereby delineated where further research is still required.

8.4.1. Investment appraisal analysis of fruit and vegetables products industries A number of products can be produced from fruit and vegetables that are consumed throughout the year both in domestic market as well as abroad. There is a great demand of these products in European markets and in Middle East. However producers and exporters are unaware of processing of these products. Therefore, there is a need to undertake an investment appraisal analysis of fruit and vegetables processing industries and this information should be disseminated among all stakeholders. This will help boosting export of the country in value added products of fruit and vegetables. 8.4.2. How efficient and equitable fruit and vegetables value chains are with respect to competitiveness, inclusiveness, scalability and sustainability Value chains for fruit and vegetables are different from food grains. These are highly perishable commodities and there are issues of food safety both for domestic and international markets. There is a need to envision a complete agri-food system. Agricultural processors and retailers are scaling up very fast while farmers continue to be small and fragmented. The question of economic viability of small farmers arises. Under such scenario, whether small farmers (84%) will be competitive domestically and globally or will leave farming. For this it is important to study how efficient and equitable fruit and vegetables chains are with respect to competitiveness, inclusiveness, scalability and sustainability in Balochistan, NWFP, Northern Areas and AJK. 8.4.3. Impact of WTO on fruit and vegetables export The WTO measures and policies have created great concerns among developing countries. The policies and rules of WTO cover various subjects including environment, labor standards (e.g. Child labor), human rights etc. It is general perception that these rules and polices favor industrialized countries. Developing countries are unable to comply with these rules and policies which make WTO a controversial according to poor and developing countries. The economies of developing countries like Pakistan are generally not technology driven, therefore, all issues need to be discussed and evaluated in a holistic manner before laying down uniform policies for all economies. Agricultural exports of the country will be adversely affected if the country follows the WTO rules in holistic manner.

109

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APPENDIX -1
Appendix 1.1: Distribution of sample of selected fruit and vegetables in Balochistan
Respondents Producers Contractors C. Agents/WS Retailers Consumers Apple 102 22 16 34 75 Fruit Grapes 105 22 16 34 75 Apricot 90 22 16 34 75 Tomato 50 22 21 36 100 Vegetables Lady finger Carrot 58 35 22 22 21 21 36 36 100 100 Cauliflower 35 22 21 36 100

Appendix 1.2: Distribution of sample of selected fruit in NWFP

Respondents Producers Contractors Commission Agents Wholesalers Retailers Total Apple 84 9 6 4 6 109 Plum 72 17 4 4 6 103 Citrus 67 5 4 4 6 86 Total 233 31 14 12 18 308

Appendix 1.3: Distribution of sample of selected fruit and vegetables in Northern Areas
Respondents Producers Contractors/Beopari C. Agents Wholesalers Retailers Consumers Total Apple 82 07 05 05 10 20
119

Fruit Cherry 75 08 05 05 10 20
123

Apricot 80 07 05 05 10 20
127

Tomato 50 05 05 -10 20
90

Vegetables Onion Peas 44 52 05 -05 05 --10 10 20 20

84 87

Potato 51 05 05 -10 20
91

Appendix 1.4: Distribution of sample of selected fruit and vegetables in AJK

Respondents Producers Contractors C. Agents/WS Retailers Consumers Total Walnut 106 18 06 10 25
165

Fruit Apple 107 11 05 14 25

162

Mango 94 08 05 10 25
142

Onion 50 6 6 9 25
96

Vegetables Tomato Lady finger 50 58 6 5 6 5 9 9 25 25

96 102

Brinjal 35 5 4 9 25
78

115

APPENDIX -2
Appendix 2.1: Marketing Channel of Apple in Balochistan

Producer (100%) 77% Contractor (Local & Inter Territory) 32% 45% 3%

18%

Local C. Agent 27% 50% Local Wholesaler

Inter-territory Comm.Agents 75% Inter-territory Wholesalers 75% Inter-territory Retailers

23% Local Retailer

23% 2% Local Consumer

75% Inter-territory Consumer

116

Appendix 2.2: Marketing Channel of Apple in NWFP

Producer (100%) 51% 34% Contractor (Local & Inter Territory) 26% Local C. Agent 10% 60% Local Wholesaler 25% Inter-territory Comm.Agents 45% Inter-territory Wholesalers 45% Inter-territory Retailers 10%

50% Local Retailer

50% 5% Local Consumer

45% Inter-territory Consumer

117

Appendix 2.3: Marketing Channel of Apple in Northern Areas

Producer 100 %

20% Local CA /Wholesaler 15% 40% 10% Local Retailer 20 %

65 % Contractor

35% In-Territory CA

35% In-Territory Wholesaler 65% 35% In-Territory Retailer 35% Local Consumer In-Territory Consumer

118

Appendix 2.4: Marketing Channel of Apple in AJK

Producer (100%) Contractor (Local & Inter Territory) (60%)

15%

15%

10%

Local C. Agent

Inter-territory Comm.Agents 5% 30% Inter-territory Wholesalers 5% Inter-territory Retailers 10%

25% 25% Local Wholesaler/ Retailer 75% 5% Local Consumer

15% Inter-territory Consumer

119

Appendix 2.5: Marketing Channel of Apricot in Balochistan

Producer (100%) 73% Contractor (Local & Inter Territory) 23% 50% 5%

22%

Local C. Agent 15% 45% Local Wholesaler

Inter-territory Comm.Agents 70% Inter-territory Wholesalers 70% Inter-territory Retailers

30% Local Retailer

30% Local Consumer

70% Inter-territory Consumer

120

Appendix 2.6: Marketing Channel of Apricot in Northern Areas

Producer 100 % 70% Dry Apricot 10.2% 57.8% 30% Fresh Apricot 4.5% 25.5%

6.8%Dry Local CA /Wholesaler Contractor 3%Fresh

10.2% Dry 28.5% Fresh

1.5% Fresh

7%Dry Local Retailer 2%

58 %Dry In-Territory CA 58%Dry

30%Fresh 10%Dry

In-Territory Wholesaler 58%Dry In-Territory Retailer 58%Dry

Exported

Local Consumer

In-Territory Consumer

121

Appendix 2.7: Marketing Channel of Grapes in Balochistan

Producer (100%) 60% Contractor (Local & Inter Territory) 20% 40% 5%

35%

Local C. Agent 30% 55% Local Wholesaler

Inter-territory Comm.Agents 75% Inter-territory Wholesalers 75% Inter-territory Retailers

25% Local Retailer

25% Local Consumer

75% Inter-territory Consumer

122

Appendix 2.8: Marketing Channel of Citrus in NWFP

Producer (100%) Contractor (Local & Inter Territory) (76%) 60% Local C. Agent 14% 74% Local Wholesaler 16% Inter-territory Comm.Agents 30% Inter-territory Wholesalers 30% Inter-territory Retailers

14%

60% Local Retailer

60% 10% Local Consumer

30% Inter-territory Consumer

123

Appendix 2.9: Marketing Channel of Plum in NWFP

Producer (100%) 60% 35% Contractor (Local & Inter Territory) 20% Local C. Agent 10% 55% Local Wholesaler 40% Inter-territory Comm.Agents 55% Inter-territory Wholesalers 55% Inter-territory Retailers 5%

45% Local Retailer

45% Local Consumer

55% Inter-territory Consumer

124

Appendix 2.10: Marketing Channel of Cherry in Northern Areas

Producer 100 %

10% Local CA /Wholesaler 2% 10% 15% 5%

78 % Contractor

73% Local Retailer In-Territory CA

73% In-Territory Wholesaler 25% 73% In-Territory Retailer

73%

Exported (UAE)

Local Consumer

In-Territory Consumer

125

Appendix 2.11: Marketing Channel of Walnut in AJK

Producer (100%) Contractors (Local & Inter Territory) 16%

(Contractors = 51%, Assembly market= 32%)

Local Consumers (1%)

(83%)

Local Retailer

3%

80%

Inter-territory Comm. Agents 60% Inter-territory Wholesaler

20% 60% Inter-territory Retailer 20%

80% Local Consumer Inter-territory Consumer

126

Appendix 2.12: Marketing Channel of Mango in AJK

Producer (100%) Contractors (93%) Local Consumers (2%)

5%

Local Retailer

5%

88%

Inter-territory Comm.Agents

88%

10%

Inter-territory Wholesaler/Retailer

88%

Local Consumer

Inter-territory Consumer

127

Appendix 2.13: Marketing Channel of Tomato in Balochistan

Producer (100%) 15% Beopari/Contractor 5% 10% 30%

32%

Local C. Agent 5% 37% Local Wholesaler

Inter-territory Comm.Agents 45% Inter-territory Wholesalers 45% Inter-territory Retailers

32% 20% Local Retailer

52% 3% Local Consumer

45% Inter-territory Consumer

128

Appendix 2.14: Marketing Channel of Tomato in Northern Areas

Producer 75 % 100 %

Contractor 65 %

Local CA 15%

25 % 5%

In-Territory CA

10% 80 % Local Retailer 5% 5% In-Territory Retailer

5% 95 % Local Consumer In-Territory Consumer

129

Appendix 2.15: Marketing Channel of Tomato in AJK

Producer (100%) Local Consumers (1%) Beoparies (46%) (53%) Inter-territory Retailer (2%) Local Retailer (44%)

Inter-territory Consumer (2%)

Local Consumer (97%)

130

Appendix 2.16: Marketing Channel of Ladyfinger in Balochistan

Producer (100%) 21% 45% 21% Beopari

Local C. Agent

66% Local Wholesaler

66% 30% Local Retailer

96% Local Consumer 4%

131

Appendix 2.17: Marketing Channel of Lady Finger in AJK

Producer (100%)

(6%)

Beoparies (2%) (6%) Comm. Agents (8%)

(84%)

Retailer (98%)

Consumer (98%)

Local Consumers (2%)

132

Appendix 2.18: Marketing Channel of Carrot in Balochistan

Producer (100%) 18% 50% 18% Beopari

Local C. Agent

68% Local Wholesaler

68% 27% Local Retailer

95% Local Consumer 5%

133

Appendix 2.19: Marketing Channel of Cauliflower in Balochistan

Producer (100%)

20% 60%

Local C. Agent 10% 60% Local Wholesaler

Inter-territory Comm.Agents 30% Inter-territory Wholesalers 30% Inter-territory Retailers

50% 15% Local Retailer

65% 5% Local Consumer

30% Inter-territory Consumer

134

Appendix 2.20: Marketing Channel of Brinjal in AJK

Producer (100%) Local Consumers (1%) (12%) Beoparies (9%) (4%) Comm. Agent (16%) (5%) (78%)

Retailer (99%)

Consumer (99%)

135

Appendix 2.21: Marketing Channel of Onion in Northern Areas

100 % Producer 45 % Local CA 30% 45 % Local Beopari

75% 10 % Local Retailer 15%

100% Local Consumer

136

Appendix 2.22: Marketing Channel of Onion in AJK

Producer (100%) Local Consumers (2%) Beoparies (68%) 30%

Inter-territory Retailer (3%)

Local Comm. Agent (13%)

(52%)

Local Retailer (15%)

Inter-territory Consumer (3%)

Local Consumer (97%)

137

Appendix 2.23: Marketing Channel of Peas in Northern Areas

100% Producer 18 %

Contractor 10 % 17 % Local CA 5% 10 %

65

In-Territory CA

8 % 15 % 2% Local Retailer 75 % In-Territory Retailer

75 % 25 % Local Consumer In-Territory Consumer

138

Appendix 2.24: Marketing Channel of Potato in Northern Areas

Producer 15 % 100 %

Contractor 10 %

Local CA

3%

85 % 80%

In-Territory CA

5 13 % 2% Local Retailer 80 % In-Territory Retailer

80 % 20 % Local Consumer In-Territory Consumer

139