A Value Chain Analysis of Apple from Jumla

Transcription

1 A Value Chain Analysis of Apple from Jumla MINISTRY OF AGRICULTURE & COOPERATIVES DEPARTMENT OF AGRICULTURE

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3 Foreword Apple is one of the key fruits with potential to generate income and employment in the high mountain districts of Western Nepal, especially with road constructions gaining pace in these areas. However, a systematic value chain analysis for apple was not yet carried out till date to diagnose constraints and identify the opportunities. We are pleased to report that this knowledge gap has been filled and that this information can now be shared with a wider audience. The study analyses the existing situation of apples in terms of their geographical spread, area coverage and production. It provides a good understanding on the value chain of apple and its constraints that need to be overcome to realise its potential contribution to pro-poor impact. Finally, it provides specific value chain solutions and recommendations to the actors involved in this specific value chain, and to the District Agriculture Development Office (DADO) Jumla, SNV Nepal and other interested organisations on possible interventions to realise enhanced production, income and employment for the rural poor. As the DADO Jumla, SNV Nepal and other organisations started facilitating and supporting the Jumla apple farmers in a more structured way from 2008 onwards, already quite some positive changes have taken place in the value chain, which are also described in this report. It is encouraging that prices for the farmers have more than doubled since, that the Jumla organic apple is starting to get a name in the market. While the present publication will be of immediate value to implement programme activities for the further development and promotion of the apple value chain in Jumla, it will also be useful for government policy makers, planners, and extension workers at both central, regional and district levels to develop the apple sub-sector in other potential districts of Nepal. January 2011 Vijay Kumar Mallik Director General Department of Agriculture Hans Heijdra Country Director SNV Nepal

4 Acknowledgement Firstly, we would like to express our gratitude to all the apple growers, farmers, traders, private sector, development organisations and governmental organisations in Jumla who gave their valuable time for interviews, as well as to those who actively participated in multi-stakeholder workshops in Khalanga, Jumla and Kathmandu. We are very grateful to Mr. Suresh Kumar Verma, Joint Secretary and Chief of the Planning Division of Ministry of Agriculture and Cooperatives (MoAC) for his encouragement and moral support to carry out this study. We would also like to acknowledge Mr. Ram Prasad Pulami, former Regional Director of Regional Directorate of Agriculture, Mid-West for his moral support and feedback. Several staff of SNV in Nepal have contributed to this value chain analysis and finalising it into this report. Special thanks for their efforts go to Dr. Pradeep Tulachan, Monisha Rajbhandari, Chandra Regmi, Chhabi Lal Paudel, Padam Bhandari who undertook the analysis in Thanks also to Solution Consultants Pvt Ltd which provided useful information on the national apple market dynamics. Ananta Ghimire and Rik van Keulen updated the analysis to include the latest insights and developments and finalised it into this up-to-date publication. Although a lot of analysis work was already done in 2008, by including the interventions and various lessons learned, we hope this becomes a more useful and interesting publication. Mr. Dila Ram Bhandari, DADO Jumla has been involved and cooperated throughout the study. Without his efforts this study would not have been successful. Finally, we are very thankful to Keshab Datta Joshi, West Portfolio Coordinator of SNV in Nepal who took the initiative for this study, and constantly facilitated and supported it. The views expressed in the publication are those of the value chain analysis team and not necessarily of SNV and the Department of Agriculture. Similarly, the findings, interpretations and conclusions herein are those of the author(s) and do not necessarily reflect the views of SNV or the Department of Agriculture. SNV Netherlands Development Organisation Nepal

5 Abbreviations APP AEC AFE AP&MDD CSP CSIDB DADO DCCI DDC DFID DoA EIG-CM FDD FNCCI ha HH HVA-IB IEDI IFAD JAPC JAPEC JHRF KAC KFC LARF m.a.s.l. MDGs MEDEP MoAC MSMEs MT NARC NGO NHPC NRP OCN OWF PIE REAP SEDA SHCC SNV VCA VCD VDC WUPAP WV Agricultural Perspective Plan Agro-Enterprise Centre Action for Enterprise Agribusiness Promotion and Marketing Development Directorate Community Support Project Cottage and Small Industries Development Board District Agriculture Development Office District Chamber of Commerce and Industry District Development Committee Department for International Development Department of Agriculture Education for Income Generation and Conflict Mitigation Project Fruit Development Directorate Federation of Nepalese Chambers of Commerce and Industry Hectares Households High Value Agriculture-Inclusive Business Pilot Project Industrial Enterprise Development Institute International Fund for Agricultural Development Jumla Apple Processing Centre Jumla Agricultural Producers and Entrepreneurs Cooperative Jumla Horticulture Research Farm Karnali Apple Company Karnali Fruit Cooperative Local Agricultural Resource Farmers Metres above sea level Millennium Development Goals Micro Enterprise Development Programme Ministry of Agriculture and Cooperatives Micro Small Medium Enterprises Metric Ton Nepal Agricultural Research Council Non-Governmental Organisation Nepal Horticulture Promotion Centre Nepalese Rupee Organic Certification Nepal Organic World & Fair Future Pvt. Ltd. Production, Income and Employment Rural Enterprise Assistance Programme Sustainable & Equitable Development Academy Small Holder Cash Crops SNV Netherlands Development Organisation Value Chain Analysis Value Chain Development Village Development Committee Western Upland Poverty Alleviation Project World Vision

6 Summary Apple is one of the agricultural products with a good potential in the mountainous districts of Mid- and Far-Western Nepal. In contrast to the other districts, apples were already introduced in Jumla in the 1970s. But it was only since 2006 when the Surkhet-Jumla road the Karnali Highway was opened as a seasonal road that the people of Jumla suddenly saw apple production as one of the major, or even the major income source for the near future. Since 2008, farmers have been planting more than 100,000 saplings per year. Operating apple nurseries has become a lucrative and fully commercial business. According to the DDC Household Survey of 2008, nearly 10,000 households were already engaged in apple production in 2008, producing together more than 1800 MT. The production will increase year by year, because in 2008 most trees (70%) were still in a non-fruiting stage. On top of this, farmers are expanding their orchards large scale. Although a large part is already being blacktopped, the Karnali Highway is still a seasonal road, and remains closed during the monsoon season, which is also the harvesting season. Therefore, nearly all apples exported out of the district need to be flown out by air, which is the single most important factor impeding increased apple sales. Possibly only 10% is sold, while the rest is used for household purpose or remains on the trees. With this oversupply, farmers logically have not invested in orchard management like pruning, use of manure, pest control, etc. Jumla declared itself an organic district in 2007, and in 2009, the District Agricultural Development Office initiated organic certification of apples for three Village Development Committees, with support of organisations like SNV Nepal and World Vision. Also nursery improvements, pruning, professional apple packaging materials, grading and market linkage with wholesalers were promoted from 2009 onwards. One major success was the apple price increase in Jumla from NRP 10/kg in 2008 to NRP 35 and NRP 25/ kg for organic certified and non-certified respectively. Partially, this was also caused by high prices in the apple market in general. In 2010, the prices went down respectively to NRP 30 and 26/kg for grade A the first year with price differentiation for different grades. Progress has also been made on the organisational side. In 2009 the three certified farmer groups undertook joint marketing, and in 2010, nine Jumla cooperatives did so under the umbrella of the Jumla District Cooperative Federation. A major factor in this development was not just the price increase in the year before, but also a change in the agricultural policy, as for the first time only cooperatives were allowed to apply for the air transport subsidy. Although progress has been made, still more needs to be done if apple is to become the major agriculture sub sector and the major source of income for Jumla and surrounding districts. The Jumla apple will need to compete with the Chinese and Indian apples, which now have a market share of nearly 90% and 10% each in Nepal. One way to create a niche is to further promote the Jumla apple as organic, with or without certification. The price premium received by producers for their organic certified apple still is not sufficient to cover the extra costs coming with organic certification. Various improvements still need to be made. Modern high-yielding varieties need to be introduced, those which will do well in Jumla from the perspective of organic production, dry area with little irrigation, less required chilling hours because of climate change, etc. Nurseries must be able to provide disease free saplings and provide advice to farmers. Commercial supply of bio-pesticides and bio-fertilisers through agro-vets and also piloting of home-brewed bio-pesticides are necessary for pest control, which will even become more urgent with the climate change. Further promotion of pruning, irrigation, compost making lack of available bio-mass being a problem here, and handling of apples during the harvest, especially on-farm, to avoid bruises are important to be able to supply large apples with good appearance for which most consumers are looking for. Well trained Local Agricultural Resource Farmers could be a way to provide on farm advice and services. Further on, strong cooperatives or other forms of producer organisations are needed to manage post-harvest and marketing activities. Although the price increase in 2009 was a great success, still marketing is not sufficiently working in favour of the Jumla apple farmers. Margins upstream are high, limiting sold volumes and still many consumers with an interest in organic apples cannot find the Jumla apple. Linkage to more wholesalers would widen the distribution network, increase sales and should especially reach those consumers who want to pay a premium for organic products.

7 Table of Contents Abbreviations 6 Summary 7 1. INTRODUCTION OBJECTIVES, METHODOLOGY & LIMITATIONS Objectives Methodology Limitations SELECTION OF THE APPLE VALUE CHAIN Comparison of Value Chains from Jumla Jumla Apple in a National Perspective JUMLA APPLE VALUE CHAIN Value Chain Map Nursery Management and Input Supply Apple Production Harvesting and Post-Harvest Management Trade and Marketing of Jumla Apples Organic Certification Apple Processing Trend of Apple Production Income Generation Social Inclusion and Gender NATIONAL APPLE MARKET DYNAMICS Market Shares of Suppliers Physical Apple Flows in Kathmandu Description of Market Actors ENABLING ENVIRONMENT AND SUPPORTING AGENCIES District Development Committee District Agriculture Development Office Jumla Apple Processing Centre NARC Jumla Horticulture Research Station District Chamber of Commerce and Industry NGOs and Projects Ministry of Agriculture and Cooperatives VALUE CHAIN CONSTRAINTS AND OPPORTUNITIES FUTURE VISION AND RECOMMENDATIONS Towards Sustainable Solutions Future Vision of the Jumla Apple Value Chain Recommendations 48 ANNEX A: References 50 ANNEX B: VDC-wise Apple Production Data 51 ANNEX C: Cost/Benefit Calculation 53

8 1. INTRODUCTION Nepal is predominantly an agrarian society: the agricultural sector provides employment opportunities to 66 per cent of the total population (MOAC Web site, 2008) and contributes about 36 per cent to GDP. Presently, production of deciduous fruits (apple, pear, peach, plum, apricot and walnut) in Nepal is limited compared to tropical fruits. As a result substantial quantities are imported to meet domestic demand. However, there appears to be tremendous potential for further development of deciduous fruits in Nepal and for import substitution as also mentioned in the Agricultural Perspective Plan and the first Three Years Interim Development Plan. Among deciduous fruits, apple is the most important crop in terms of area, production and household economy in remote mountain districts. But most production units are small and often located in isolated and inaccessible areas where infrastructure such as roads, irrigation and storage facilities are inadequate or completely lacking. With the present increasing trend in the connectivity (road network) in remote high mountains and inaccessible districts such as Mustang, Jumla and Kalikot, there is a great potential for increasing area and productivity of these fruit crops. In view of the significant potential contribution of the apple sub-sector in terms of enhanced production, income and employment of rural poor in high mountains, SNV in Nepal and District Agricultural Development Office (DADO) in Jumla decided to jointly undertake this value chain analysis of apple. 8

9 2. OBJECTIVES, METHODOLOGY & LIMITATIONS 2.1 Objectives This apple value chain analysis aims to: a) Provide a sufficient contextual analysis of apple in Nepal and especially from Jumla District in terms of present status (geographical distribution, area coverage and production) and future potentials. b) Provide a concise picture of the entire value chain of Jumla apple in order to identify the constraints and opportunities that can be exploited for promoting income and employment for the rural poor of Nepal. Because of the time between the actual analysis and this publication, this report also provides some of the results already achieved by the interventions in 2009 and 2010 which followed the analysis. New insights and lessons learned have also been included. 2.2 Methodology SNV Nepal utilised and adapted the value chain development approach developed by Action for Enterprise. 1 First the apple value chain was selected from a range of possible products and crops by using various criteria to select the most potential product from Jumla. Also on the basis of literature study, the apple sub-sector in Jumla was compared with other deciduous fruits and other districts. This is described in chapter 3, which shows that the apple value chain from Jumla is indeed an important deciduous fruit crop for Jumla and even from a national perspective. For the actual value chain of apple from Jumla, the methodology involved the collection and review of existing literature and secondary data on apples, followed by primary analysis through various checklists and rapid survey questionnaires, interviews and group discussions at various levels and functions of the apple value chain. Three multi-stakeholder workshops were conducted during the analysis: twice in Kathmandu (16 May 2008 and 1 August 2008 with a total of 48 participants) and once in Khalanga, Jumla s district headquarters (14 June 2008 with 50 participants). These workshops have helped in verifying and deepening the value chain constraints and opportunities analysis, and finding potential solutions and suitable service providers. 2.3 Limitations Due to constraints of resource and time, the data and information collected and analysed in the report cannot provide sound statistical insights into the different parts, levels and functions of the value chain. Thus, the results rather provide a qualitative picture of various functions and actors at various levels in the chain, where possible elaborated with quantitative data. This value chain analysis also provides a snapshot of the current situation. While Jumla is an upcoming apple production district, new developments and changes are to be expected. By incorporating interventions taken on the basis of this VCA, results and lessons learned of the last two years, it provides a clearer picture and more understanding in which direction this value chain is developing itself. 1 Action for Enterprise, Value Chain Programme Design: Promoting Market-based Solutions for MSMEs. 9

10 3. SELECTION OF THE APPLE VALUE CHAIN This chapter gives a justification for the selection of the Jumla apple value chain for analysis and for the following interventions supporting its development. 3.1 Comparison of Value Chains from Jumla REAP of IEDI 2 did a rapid sub-sector assessment conducted from 28 December 2005 to 3 January 2006 in Jumla district. 3 In a multi-stakeholder workshop the following potential products were identified: 1) bee-keeping, 2) wool processing, 3) potato, 4) poultry, 5) seed production, 6) apple, 7) herbal processing, 8) beans, 9) seabuckthorn, 10) vegetable production, 11) angora rabbits, 12) dhatelo (Prinsepia utilis), 13) walnut, 14) guchhi chyau (Morchella sps.). A prioritisation matrix was used to narrow down the sub sectors, using market demand and potential to increase rural income as the main criteria for further selection. Table 1: Prioritisation matrix Increase in rural income High Medium Low potato apple honey seabuckthorn poultry, herbal processing vegetables, beans angora rabbit, Walnut, wool guchhi chyau, dhatelo processing seed production Low Medium High Market demand Prioritised products with high market demand and high potential to increase rural income were considered: 1) honey, 2) apple, 3) vegetable production, 4) beans, 5) poultry, and 6) herbal processing. The latter related to extraction of essential oils from herbs through distillation. The next ranking exercise focused on market demand and growth potential, potential for increase in income, social inclusion and potential for employment generation were considered as criteria for ranking of sub sectors using scores. Table 2: Ranking sub sectors Criteria Proposed sub sectors honey apple vegetable/beans Market demand and related growth potential (weighted 3 ) Potential for increase in income (weighted 2 ) Social inclusion (weighted 2 ) Potential for employment (weighted 1 ) Total This led to the following ranking: 1) apple, 2) honey 3) vegetable production. Because of the requirement of high value - low weight due to transport by air, the report also suggested to develop apple-based products. In 2007, the Surkhet-Jumla road was opened as a seasonal road, which even more increased the expectations from the apple sub-sector. 2 IEDI: Industrial Enterprise Development Institute. REAP: Rural Enterprise Assistance Programme, a project of IEDI (phased out in 2008). SNV Nepal provided advisory services to REAP. 3 REAP, 2006, Rapid Sub-sector Assessment Report Jumla. 10

11 3.2 Jumla Apple in a National Perspective Apple is a deciduous fruit and is grown successfully in mid and high mountainous areas from the East to the Far West of the country. Sub-humid and dry temperate areas in the mountains with elevations ranging from m.a.s.l. are considered most suitable for high quality apple production. The rain shadow or low rainfall areas are located in the Western and Mid Western mountainous regions. Some low chilling apple cultivars are being grown at low altitudes, as low as 1200 m.a.s.l. Total of 54 districts grow apple, however, there are only 12 major apple producing districts mainly from high mountain regions (see Table 3). The data for Jumla does not correlate well with that of the DDC Jumla household survey of 2008 (see later in the report), it gives an indication about how districts compare. Also one has to take in consideration that the production is very scattered, a considerable part not with much commercial value and only consumed locally. Only Jumla and Mustang have an organised export to major towns in Nepal. Table 4 also shows that apple is the leading deciduous fruit, while Table 5 shows that apple has a potential to contribute to poverty reduction in the poorer parts of Nepal. Table 3: Area (ha.), production (MT) and share (%) of major apple producing districts of Nepal (2006/07) District Area (ha.) % Production (MT) % Jumla Mustang Solukhumbu Kalikot Dolpa Rukum Rasuwa Sindhupalchowk Humla Mugu Bajhang Baitadi Total Table 4: Area and production of deciduous fruits in Nepal (2006/07) Deciduous fruits Area (ha.) % Production (MT) % Apple Pear Walnut Peach Plum Total Table 5: Area (ha.) and production (MT) of apple by development regions of Nepal (2006/07) S. No. Development Regions Area (Ha) Production (Mt) 1 Eastern 536 4,707 2 Central 587 5,107 3 Western 587 5,407 4 Mid Western ,902 5 Western 509 4,428 Table 3, 4 and 5 are based on: Statistical Information on Nepalese Agriculture 2006/2007. Ministry of Agriculture and Co-operatives, Agribusiness Promotion and Statistics Division. Kathmandu, Nepal, and DADO Jumla. 11

12 4. JUMLA APPLE VALUE CHAIN This chapter begins with an overview of the whole value chain of the Jumla apple in a value chain map. The rest of the chapter focuses on the functions and the primary value chain actors, which are the private sector actors making this value chain function. This chapter ends with paragraphs on organic certification, apple processing, trends in apple production, income generation and social inclusion aspects of the apple production in Jumla. Organisations which support the further development of the value chain, covering the whole range of government, business membership organisations, (I) NGOs and projects but which do not get involved in the apple business directly are described in the next chapter. 12

13 4.1 Value Chain Map Figure 1 illustrates the value chain map of various actors involved in the Jumla apple value chain, from input suppliers and producers at the bottom all the way to the final consumers. On the left, various functions are shown of these primary value chain actors, while on the right-side the various service providers or support organisations can be seen. Especially, the government support organisations have a strong role in determining the enabling environment through policies, subsidies, etc. Chart 1: Value chain map for Jumla apples (as per situation of 2010) Function Primary actors Support organisations enabling environment Consumption Final consumers in major towns and Jumla district Retail Apple retailers regional and national markets Apple retailers Jumla market MoAC Wholesale Apple importers Export Kathmandu-based wholesalers Terai-based regional wholesalers Kalimati Fruits & Vegetable market, Fruit Business Association AP & MDD Collection, grading, packaging, processing Production Karnali Apple Company Cooperatives District apple traders Apple processors Local/village traders (I)NGOs/ Projects: SNV WV CSP EIG-CM FDD RDA-MW JAPC DADO- Jumla Input supply Apple farmers OCN NHPC NARC- JHRS Agro-vets, JAPEC Private apple nursery owners 13

14 Box 1: A success story of a nursery owner in Jumla 5 Mr. Govinda Bahadur Rawat, a Chhetri farmer is a successful apple nursery farmer in Jumla. During the year 2007, he raised 20,000 apple saplings in 5 ropanis of land and he sold 19,000 apple saplings earning Rs 380,000. From these earnings, he planned to send his son and daughter to college, to buy a solar panel for light, to purchase a colour TV and to send his youngest son to a boarding school. 4.2 Nursery Management and Input Supply Apple nursery owners There are a total of 32 registered apple nurseries. Most registered nursery owners are organised in a Fruit Nursery Association since February However, more than double the numbers of apple nurseries have not been registered and many of them are supported by NGOs and INGOs. During 2005, the private registered nurseries in Jumla produced a total of 103,000 apple saplings. During 2007 those private nurseries receiving DADO subsidies sold a total of 96,800 apple saplings and earned cash income of NRP 1,934,000. They sold 11,000 to Kalikot, 4500 to Dolpa, 6000 to Bajhang, 6000 to Rolpa and 61,700 in Jumla itself. In 2009, just two nurseries in Talium VDC together produced 60,000 saplings. See Box 1 for a success story of an apple nursery operator. This evidently indicates that there is an increasing trend of cultivating more apple trees in the western region. For several years apple saplings were sold at NRP 2, with the NRP 18 subsidy from DADO, the apple nursery received NRP 20 for their saplings. But when the Surkhet-Jumla road (Karnali Highway) opened in 2007, still as a seasonal road, this came as a surprise to many and from 2008 onwards people started buying unsubsidised saplings, with prices even going up to NRP 25 per sapling. DADO-Jumla continued subsidising saplings but these saplings were reserved only for the poorest farmers. Major challenges for the nurseries are related to improving the quality of their saplings : 1) Most nursery owners are not aware which varieties they have in stock: some are early varieties, some late; some are self-polinising while others need polinisers to polinise them. Nursery owners are not able to advise farmers, nor do most of the latter have much idea about these issues. 2) Currently the nurseries do not have access or possibilities to supply new and improved varieties: they are mostly the same varieties which entered Jumla in the 1970s and 1980s. 3) Nurseries could well be contributing to the spread of diseases, especially when the saplings are produced within existing orchards. 4) Most common rootstock is the edimel and surkilo plant (both wild apples, the latter is without thorns), but some farmers (estimated at 5%) try to save on the edimel seed costs which are collected from the forests and have a price of 5,000-6,000/- per kilo. Use of modern apple varieties as rootstock can lead to root rot DADO Jumla, Agricultural Programme and Statistics.

15 In 2009, DADO-Jumla, SNV and Jumla Agricultural Producers and Entrepreneurs Cooperative (JAPEC) organised trainings for registered nursery owners on the above and on the Department of Agriculture Nursery Guidelines, but more needs to be done to really increase the quality of sapling supply. It is hoped that the Fruit Nursery Association will expand their influence over the many still not registered nurseries. Increased monitoring by DADO-Jumla would be another way towards quality production of saplings. Box 2: Nursery registration Till 2007, a farmer interested to establish an apple nursery in Jumla had to go all the way to the Department of Agriculture in Kathmandu to obtain a permit spending at least NRP 25,000-30,000 on travel and board, thus creating barriers for entry. Now the nurseries can be registered at the Cottage and Small Industries Development Board (CSIDB) office in Jumla after being recommended by DADO-Jumla. Other input suppliers Only a few private input suppliers are in place for supply of other types of inputs (e.g. organic pesticides, good quality sprinklers, and other inputs). These agro-vets need to be trained in delivery of organic services as farmers regularly seek their advices. Otherwise these agro-vets will remain a major opponent to the DDC s decision of 2007 to declare Jumla an organic district. In 2009, DADO-Jumla provided the contract to Jumla Agricultural Producers and Entrepreneurs Cooperative (JAPEC) for distributing apple saplings to poor farmers, but this is JAPEC s only activity related to apple production. It has been involved in the marketing of high value agriculture commodities such as carrot, cauliflower and potatoes. It also supplies agro-inputs to local farmers especially to farmers who are growing fresh vegetables and vegetable seeds. Box 3: Shifting from chemical to organic inputs Organic Certification Nepal (OCN), Nepal s only national certification agency at least till end 2010, found in 2009 that till a few years ago the 3 or 4 agro-vets of Jumla s district headquarters used to be stocked for two thirds with chemical inputs, for mainly rice and vegetable production. In 2009, chemical inputs for agriculture were not available on the shelves and had been replaced by veterinary inputs. A few bio-inputs could be found, but according to the agro-vets there was no demand, nor could they give sufficient advice on their use. The only thing which is selling well for apple production is Bordeaux paste, which is allowed by most organic certification systems if used on a limited scale. Training agro-vets on organic production will be necessary to support and improve Jumla s organic apple production. 15

16 4.3 Apple Production Here the focus is on the practices of apple producers and their constraints to improve production. As explained, apple production is increasingly becoming popular among Jumla farmers and now apple is being produced in all the VDCs of Jumla. Varieties There are about 10 varieties of apples being cultivated in Jumla mostly the Delicious varieties: Red, Royal and Golden Delicious which constitute approximately 70% of the total production. The rest includes Jonathan, Chocolat, Torikulu and Macintosh varieties. Cultivation practices While some apple trees are grown on fertile and irrigable lowlands, most have been planted on the slopes with low soil fertility and little irrigation. With the large amount of degraded slope land, this is not per se a bad development, but of course it will not automatically lead to improved production. Apple is mostly inter-cropped with beans and wheat, but also with soya beans, potatoes, buckwheat, etc. Even before announcing Jumla an organic district in 2007, pesticides were only used by the larger famers, an estimated 5%, and mainly limited to Rogar a pesticide against sucking insects, like Woolly Aphid and San Jose Scale. The average annual cultivation cycle looks as follows: Table 6: Annual cultivation practices S.N. Month Activity 1. June-July Sapling planting 2. Jan-Feb Pruning & manure application 3. March-April Weeding 4. April-June Irrigation 5. Aug-Sept Harvesting The present apple orchard management is very poor. One of the reasons is that farmers do not have adequate knowledge on when or how to efficiently irrigate, fertilise, and prune their apple trees. Many also complain that there are inadequate services of apple experts in Jumla and that a big campaign is needed to promote improved technologies to apple growers. But very important factors for the farmers indifference, often worded by the farmers as we are too lazy, are : 1) Most of the produce can currently not be sold and people are waiting for the Karnali Highway to be improved which would boost sales. In the mean time they do not see enough incentive to invest too much in orchard management except for planting more saplings (area expansion). 2) Till 2010, there was also no price differentiation between different grades: whatever the quality or size, the price remained the same; around NRs. 10/- per kilo in 2007 and Even an attempt to differentiate prices per grade by the traders in 2008, was protested by the farmers, who mostly have preferred a cost-minimising strategy till now. 16 In 2010, for the first time a price differentiation was agreed. Grade A received NRP 30 and 26 for organic certified and non-certified respectively and grade B received NRP 24 and 22 respectively (prices at the Jumla airport). Although an important factor was the request of the wholesaler for high quality, also the pruning competition held in three VDCs made farmers more aware and enthusiastic. Unlike before, now more and more apple farmers can be heard discussing the status of each others orchards and that pruning had had a considerable effect on the apple size. Grading is still a matter of size and of course of appearance. There is still no difference in price between the different varieties or the time of supply (early or late varieties).

17 Climate Two important climatic factors for a good production are sufficient chilling hours in the winter (snowfall) and sufficient rains during the flowering season in April. Because of lack of these two, the 2009 apple production was at least reduced by 50%. As the Indian apple suffered the same problems, this led to high apple prices in August. This also raises questions about the impact of climate change. The expected climate change less winter rain or snow and more unpredictable starts of the monsoon (starting date) will probably lead to less chilling hours, dryer spring seasons and more pests. This could mean that Jumla would need to import varieties which require less chilling hours, or only start new orchards at higher altitudes. Irrigation will become more important, which is now virtually lacking. Pest management or pest resistant varieties will become increasingly more important. Pest management will not be as easy for organic production as for conventional production. Diseases and pests The common diseases reported are: Stem Black, Powdery Mildew, Scab, Nectaria Twig Blight, Alternative Twig Blight, Peppery Bark/Pink Disease. Similarly, some of the common pests reported are: Woolly Aphids, San Jose Scale, Stem Borer, Root Borer, and Bark Borer. The common diseases reported are: Stem Black, Powdery Mildew, Scab, Nectaria Twig Blight, Alternative Twig Blight, Peppery Dark/Pink Disease. Similarly, some of the common pests reported are: Woolly Aphids, San Jose Scale, Stem Borer, Root Borer, Bark Borer. Labour During peak agricultural seasons, the wage rate for both male and female is around NRP per day plus three meals. However, during off-seasons, women tend to get slightly lower wages than males. Now, only large farmers are employing wage labourers, but this is expected to increase once sales increase when the Karnali Highway will become an all-weather road. 17

18 Organic production Another important factor which has limited quality production is that the declaration of Jumla as an organic district was not sufficiently combined with awareness and knowledge on organic-permitted growth stimulants (like Servo oil to be sprayed to increase apple size and shininess), bio-fertilisers, compost making and bio pesticides. Half of the organic matter (dry weight) of Farmyard Manure is currently pine needles, which increases acidity and lowers nutrient availability, but currently there is little other unused biomass available. Increased soil fertility is not only good for production but also a requirement for organic certification. Taking Jumla s current low soil fertility levels into account, OCN advised extensive use of cradle pits in orchards which gather moisture and organic matter. In a similar manner, NARC-Jumla advised to have one compost pit per ropani and to massively grow beans around the apple trees and use the plants as green manure after the bean harvest. Whether organic certified or not, increasing apple quality will require a large scale, structured campaign to increase quality and quantities of composting. Organisation of producers Till 2009 apple producers in Jumla were hardly organised and are selling apple independently: therefore, they did not have much bargaining power for better prices. They also did not have direct contact with major apple wholesalers in urban markets and depended on apple sales to local traders. Due to the organic apple certification initiative by the DADO Jumla and the High Value Agriculture-Inclusive Business Pilot Project (HVA-IB pilot project) 6, more formal organisation of farmers became necessary to receive group certification as this reduces costs compared to certification of each individual farmer: three organic apple producer groups were initiated in 2009 (Kartikswami Organic Group, Malika Organic Agriculture Production Group and Janachetana Organic Group). For the marketing in 2009, these three groups organised an apple management committee which signed a contract with the DCCI-Jumla sub-committee (about seven Jumla apple traders) for supply of organic certified apple. Box 4: Karnali Fruit Cooperative The Karnali Fruit Cooperative started up from discontentment that DADO transport subsidy only went to traders, not to the farmers. After initiation it was found out that DADO, by law, can only give subsidy to individual companies, not to cooperatives, so it still couldn t benefit from the subsidy. The cooperative was set up in a very inclusive manner and soon had 167 members: more than 30% were Dalits, membership fees could be paid in apples (in kind), big and small apple farmer members supply an equal amount to sell collectively - only if there is still space left over, larger farmers could contribute more. In its second year, it transported 10 MT through Surkhet to Kathmandu s Balaju Industrial Area s cold store. Out of it, 70% got damaged on reaching Kathmandu, due to long transportation time and bad packaging, and the cooperative ended up with a loss of NRP Also members were blamed of providing low quality apples, while trying to sell their better apples elsewhere. They had tried to make a business plan before hand, but reality turned out totally different. After this bad experience the cooperative has remained inactive. Then in 2010, with the change in DoA s subsidy on transport and packaging material, formation of cooperatives became an urgent matter. As per the new directive only cooperatives would be able to receive the subsidy, and not organisations like the DCCI, which received the subsidy in The above farmer groups largely merged with existing cooperatives which were either inactive or only did saving and credit activities. Another six cooperatives, not active in the apple sub-sector before the new directive, also joined the marketing activities of the three cooperatives and collaborated under the umbrella of the District Cooperative Federation. They did not join in the organic certification activities. These nine cooperatives represented around 460 active commercial apple producers in 2010 and accounted for about half of total apple export from Jumla. The other half is exported by non-organised farmers. Although no data exists about them, quite likely this part exists out of more farmers, each exporting fewer apples Implemented by SNV Nepal and the local NGO Surya Social Service Society. IFAD provided programme funding for the project.

19 4.4 Harvesting and Post-Harvest Management Harvesting Jumla apple producers do not have much knowledge on the appropriate techniques for proper picking, grading and packing. Apples are harvested in a most haphazard manner including shaking the tree and picking from the ground. Without grading they are transported to Jumla airport, in dokos and bags. The latter is especially a role for women. One of the challenges to improve harvesting is that damage to the apple often only becomes visible after a few days, especially when it arrives at the heat of the Terai, the bruises quickly become visible. Grading Grading was done by the traders usually two grades depending on size alone for export to the Terai till In 2009 grading (A, B, C, D) was introduced but without price difference. In 2010, this was done by the earlier mentioned nine cooperatives which collaborated under the umbrella of the District Cooperative Federation Jumla. It was agreed to only export A and B grades. Grade A received NRP 30 and 26 for organic certified and non-certified respectively and grade B received NRP 24 and 22 for organic certified and noncertified respectively. There are no grading standards for apple in Nepal, and the definition of the different grades is based on mutual understanding between the stakeholders. As nearly all apples are transported by plane, which is also a challenge because flights get rather unpredictable in the monsoon weather, grading, pricing and packaging all happen close to the Jumla airport. Sometime Golden Delicious, a late variety, gets packaged separately. The district headquarters traders will use the apples other than grade A, B and C for processing or for the local market. When there are no flights available to transport the apples to Nepalgunj or Surkhet, from where the transport can continue by road, also A and B grades start flooding the local market. Packaging Till 2008, traders had not properly prepared themselves by bringing packaging material before the monsoon starts. A lot of losses occurred due to improper packaging: old boxes were used without any wrapping or separation material and a considerable amount got damaged. Often the bruises only started to show after a few days, especially when the apples arrive in the heat of the Terai. Due to collaborative efforts from DADO-Jumla, DDC, DCCI-Jumla, World Vision, SNV Nepal, various new developments took place in A total of 285 farmers were trained in improved harvesting and post-harvest management, investment was made into improved packaging (boxes and foam nets/wrappers). Grading also improved, although price differentiation was initially resisted by the farmers and only took place in People s vision has widened of what is necessary (and possible) to be competitive in the market. In 2010, even the nine cooperatives managed to organise and pay for packaging material from Nepalgunj, which can be seen as a strong proof of increased local capacities. 19

20 Storage Traditionally farmers stored apples inside the house in cool dark rooms. Now some improved zero-energy apple stores (rooms) have been developed, but without proper humidity and temperature control, these stores can only extend the commercial life span of apples with one or two months. The road access problem would be greatly minimised if proper storage would exist. Unfortunately the nearest cold storage is in Kohalpur in the Terai. Jumla currently does not have sufficient electricity supply for its current needs, let alone the local micro-hydro power that can manage an energy-consuming cold store. The current zero-energy storage (cellar stores) allows for storage, but still causes losses which often outweigh possible price increases. Another issue is that the Jumla apple does not have a long keeping quality. Although this needs further research, probably there is due to shortage of a certain micro-nutrient in the soil, possibly Calcium. 4.5 Trade and Marketing of Jumla Apples Harvesting already starts during the monsoon and makes transport over the Karnali Highway impossible. This makes costly air transport the only option, but the same weather makes flights very unpredictable. There is also considerable competition between cargo and passengers, especially before Dashain as many non-jumlis want to go home for the holidays. If the road opens early, transport by tractor becomes possible increasing district headquarters apple prices. For example, in 2008 the prices increased from NRs. 10/- to 20/- but with losses of up to 50% due to the bad road conditions. The 232 km Karnali Highway opened as barely a track in This has greatly increased the perceived future perspectives for the Jumla apple sector. The World Bank is supporting the blacktopping of the first 132 km (up to Khidkijiula) which is expected to be completed by the end of Improvement of the next part is expected to start in But the chances of landslides blocking the road during monsoon will remain large for the years to come. Those 10% apples which do reach the market outside Jumla largely serve the cheaper market segments in the Terai: poor management, all the way from orchard management to packaging and transport, make these relatively small and often bruised apples less attractive. Nevertheless, in comparison to Chinese and Indian apples, Jumla apples are widely recognised as tasty and crunchy apples in Nepal, but size, colour and general condition have a big influence on consumer choices. The different marketing or trade modalities are currently in operation in Jumla: 1) Large apple producers who bring their produce to Surkhet and Nepalgunj themselves. 2) Growers especially in Jumla s Sinja belt who collect from other farmers as well and send the produce to the Terai. 3) District headquarters traders with a storage at the Jumla airport who either a) rent orchards and organise the harvest themselves, or b) buy at the airport from farmers. 4) For the first time in 2010, nine Jumla cooperatives did joint marketing under the District Cooperative Federation. 20

21 The third category took the largest volume in 2009, while the fourth category took the largest volume in 2010, increasing the area of influence of the apple producers (vertical integration). The transport and packaging subsidies provided by the DADO form part of the profits (for transport NRP 7 in 2009 and 75% on transport and on boxes in 2010). As the subsidy is provided on reimbursement basis, it was quite a surprise that the nine cooperatives managed to collect sufficient working capital internally to bridge the gap between actual payment of transport and boxes and the reimbursement later in the form of subsidy. Another significant feat by these cooperatives in 2010 was management of air transport, not an easy task seen the competition for air transport and the monsoon weather limiting flights. Due to these flight problems, marketing apple and the coordination between different actors is not easy. Every year a few metric tons of apples loose their marketability while waiting for flights for too long, increasing the costs for the traders or cooperatives. Table 7: Transport costs Route Mode of transport Transport cost (NRP) per kg Jumla-Nepalgunj/Surkhet Air 21/- (excluding possible transport subsidies). Jumla-Surkhet Truck/tractor 4/- Nepalgunj/Surkhet-Jumla Air 82/- (Excess luggage) 55/- (Cargo separate) 42/- (Charter) Surkhet-Jumla Truck/tractor 8/- to 24/- depending on the volume After agreeing on a deal with actors in Jumla, wholesale traders from elsewhere collect their apples in Surkhet or Nepalgunj and put their product on night buses to various destinations, where they sell to retailers. Before the market linkage interventions of HVA-IB pilot project, most apples were sold in the Terai, from Naryanghat to the West. With the project larger volumes started reaching Kathmandu. The year 2009 saw high prices early in the harvest season, which helped the farmers make a good deal with the DCCI-Jumla (NRP 35/kg), but early September the Chinese apples arrived on a large scale after which the apple price in Kathmandu dropped sharply. On the basis of this experience, the above mentioned pilot project argued for a pricing system for Jumla apples based on the general apple market price in Kathmandu, for example agreeing on the apple price in Jumla as a percentage of the general apple market price in Kathmandu and with a certain minimum price also included. But in 2010, the Jumla cooperatives had little interest in such a system: they preferred a fixed price and left the risks (and possible gains) for the wholesaler. Box 5: Karnali Apple Company The Karnali Apple Company (KAC) was supported by a USAID/AEC project from 1996 to The project also linked Jumla apple traders with apple traders in Bangladesh by supporting the visit of Bangladeshi traders to Jumla, in order to convince them that Jumla apples were superior to Indian apples. The project also organised an exposure visit of apple farmers and traders to Himachal Pradesh in India and even provided management support to KAC. KAC exported 12 MT of apples to Bangladesh in one year. Apples got damaged as airplanes did not arrive on time and also farmers did not bring their best quality apples. KAC bought at NRP 16/kg from Jumla farmers and sold at a price of NRP 50/kg in Bangladesh. Of the 50 MT delivered, only 14 MT was suitable for export. It rented a cold store in Biratnagar to deliver to Bangladesh which demanded 50 MT per week, which KAC could not deliver, after which the Bangladeshis lost their interest. One important impact of this project was on the price: before this project the price of apple was only NRP 2/kg in Jumla, while afterwards the price settled at NRP 10/kg (up to end 2008). 21

22 Box 6: Issues for future consideration Two issues which are worth considering for the near and distant future: Although politically difficult to change, the current transport subsidy is actually not promoting increased availability of air transport. It does increase the profit margins for cooperatives and possibly also profit sharing towards members, but as airplane companies do not receive any extra margin from this subsidy it will not stimulate them to bring their planes to Jumla at the cost of other destinations. Although there were substantial subsidies involved for transport and packaging to achieve the current level of competitiveness, the impact of the opening of the road during the harvesting period is still unclear. Traders will enter Jumla with trucks and possible even with cheaper wage labourers from the Terai and they will try to make deals with individual farmers to rent their orchards. Hopefully the cooperatives will cover more and more apple producers and will have sufficient capacity to bargain with incoming traders in a collective manner. The cooperatives should make sure that they have other advantages to offer to incoming traders than volume alone (e.g. good storage facilities, a cargo terminal), otherwise it might be too easy for traders to break this collectiveness and start dealing with individuals which could drive down the apple price. 4.6 Organic Certification At least 95% of Jumla apples are organic by default, as the marketing opportunities for Jumla apples have been limited and only a few larger farmers are willing and capable to invest into expensive chemicals. The 10% of the total apples which did reach the market outside Jumla was mostly used to serve the cheaper market segment in the Terai: poor management, all the way from orchard management to packaging and transport, made these relatively small and often bruised apples less attractive. This was rather unfortunate, as usually organic products serve the top-end markets. With this in mind, the HVA-IB pilot project, implemented by SNV Nepal, and DADO-Jumla agreed to support organic certification in 2009 and Later World Vision and other organisations also agreed to contribute. In 2009 three organic apple producer groups were formed in Mahat, Kartikswami and Patmara VDCs respectively: these 207 farmers went through various trainings and were inspected by Organic Certification Nepal (OCN) in August 2009 and were certified Organic in Conversion. OCN is a Nepali certification agency which applied the Government of Nepal s Organic Guidelines for this certification. These guidelines were only approved in May 2009, and the certification of Jumla apples was probably its first successful application. Also marketing was supported with posters, banners and certified organic in conversion stickers for each apple to create demand and trust among consumers. In a similar manner, Photo : Certificates provided by OCN to the three producer groups after certification. 22