As in previous years, after a summer typhoon season in which fresh vegetables commanded prices of NT$100 per Taiwanese catty (600 grams), with the arrival of winter one hears reports from throughout Taiwan of vegetables such as head cabbage or garland chrysanthemum selling for NT$1 or NT$5 a catty. In the cold of winter, people love to tuck in to flavorsome hotpot with plenty of green vegetables, but for Taiwan's horticulturists, this time of year is the nightmare end of the vegetable price cycle. However, this winter saw a small exception. Early December was such a busy time for Chen Ching-shan, owner of Hsinhu Farm at Paochung in Yunlin County, that he didn't even have time to answer the phone. It was not until the middle of the month, when several freight containers loaded with cabbages had been shipped off to Singapore, that he could finally pause for breath. This was the first time that staple vegetables had been sold overseas from Taiwan during the low season for vegetable prices. But Chen, who is a member of the executive committee of the Taiwan Staple Vegetables Production Coalition, was not overexcited. "We need to work hard to expand the market, otherwise what will the other vegetable farmers do?"

Fresh vegetables can be exported too!

Over the past year, many market gardeners have been busy in a way reminiscent of the owners of small and medium-sized Taiwanese businesses in the past: running all over the world with briefcase in hand. Some of these "sodbusters" who people imagine spend their days in muddy fields under a burning sun have been off to Japan, Singapore, Hong Kong or Shanghai to sound out markets, promote products, talk business, and negotiate with foreign companies; others have been holding meetings with wholesalers, processors, transporters and distributors to discuss how to build "cross-sector coalitions," reduce costs and distribute profits fairly; and others still have been vigilantly monitoring the "finished products" sent by farmers from their fields and orchards to packing centers, using precision sweetness meters or flower grading machines to grade the produce so as to be sure of meeting the "specifications" and quality standards demanded by buyers.

Under pressure from WTO accession, the need for structural adjustment and organizational improvement in the farming industry has become inescapable. Apart from various measures such as giving farmers guidance in moving into other lines of business, providing incentives to take farmland out of production, and providing financial assistance, in recent years the most important task for the Council of Agriculture has been to try to find ways to "cure" the various "ills" of Taiwan's farming sector, such as excessively small-scale operations, ineffective sale and distribution channels, and inaccurate grading of packaged produce. "We hope that by the use of new production and marketing techniques, we can find ways to enable the value of the farming industry's technological expertise to be truly reflected in the price of its products, and upgrade farming from a primary industry to a secondary or tertiary industry." COA chairman Chen Hsi-huang, who firmly believes that agriculture can be another export earner for Taiwan, stresses that business management concepts in the farming sector need to change, and the industry has to go down the path of the knowledge economy.

In line with this way of thinking, in November 2000 the Taiwan Agricultural Strategy Coalition (TASC) was set up with the goals of reducing imbalances between production and sales, assisting farmers in technological upgrading, and helping to establish a safety net for Taiwan's farming industry. The coalition aims to complement the work of government agencies, in a similar way to the past "automation team" under the Industrial Development Bureau, which helped SMEs to improve the efficiency of their factories.

No profit in pounds and ounces

How can Taiwan's agricultural produce be made more competitive in the market? "Quality, and stability of supply, are two important prerequisites for the marketization of farm produce," says Dr. Wang Shih-hsieh of the Tainan District Agricultural Improvement Station, who is actively involved in the work of farmers' strategic coalitions. The low profit margins earned on Taiwanese produce are not due to poor quality, but to a failure to grade produce. "In the past, farmers did not manage to band together effectively, but instead competed against each other on price, and were knocked off one by one by the merchants who controlled the distribution channels." Lee Shan-ren, director of TASC's department of administration, says that if farmers growing the same type of produce can form strategic alliances, raise the quality of their produce and grade it properly, they will have a stronger hand in price negotiations.

From another perspective, inconsistent quality and insufficient supply are also barriers to retailers' efforts to develop the market. Therefore, to further reduce production costs, expand the market and maximize profits, it is not enough merely for farmers to join forces; they also need to integrate their operations with those of processing, logistics, transport and marketing firms. In other words, a triple combination of R&D, production and marketing is needed to create a win-win situation for all the sectors involved.

For example, says Lee Shan-ren, in July 1999, when farmers were dumping mangoes and government officials were hawking mangoes, hordes of people were queuing up at ice cream shops to buy mango slushes. "It's not that there's no market. But however good your production techniques, if you don't understand how to market your products, you'll always lose out." It is only by forming cross-sector coalitions, and working with wholesalers, traditional markets, supermarkets, processors, distributors and traders, that one can effectively balance production and sales, and find more diverse outlets for one's produce.

Crisis is opportunity

These are fine-sounding ideas, but how do they work out in practice? Over the past year, TASC has organized over ten production coalitions for different types of produce, including mangoes, pomelos, starfruit, flowers, staple vegetables, seedlings, wax apples, and tea, as well as strategic coalitions in the areas of processing, logistics, export marketing, and rural tourism.

During 2001, not only did the Aiwen, Jinhuang and Kaite mangoes grown in Tainan County all find buyers, but the quantity exported was doubled compared with the previous year, and even during the peak production period, not all distributors could be allocated supplies. Staple vegetables spoil easily and are difficult to package, but using vacuum preservation technology developed by the Tainan District Agricultural Improvement station, in December 2001 the staple vegetable growing zone at Paochung in Yunlin County exported 1600 metric tons to Singapore, and already has orders for next year. Export sales of flowers such as Oncidium orchids, flamingo flowers and hothouse chrysanthemums also increased by 30%; and Suhsin tea and starfruit from Ilan County were sold to Shanghai, Hong Kong and elsewhere. Success stories like these greatly boost farmers' willingness to join such alliances.

How does one bring together all these related businesses that previously made their decisions alone and did their best to do each other down? TASC consultant Lu Shui-sheng, who did much of the work of persuading people in the mango trade to form a coalition, says that with the impact of the WTO, farmers themselves had already realized that they were in a "life and death" situation, and this was a good opportunity to get them to join forces. Lu sought out the general secretaries of the farmers' associations of eight mango-growing townships in Tainan County. Spurred on by the fact that farmers' associations are in the throes of financial and political reform, the secretaries showed great resolve. "They all said, 'We have to do this! We have to do this! If we don't solve this we've got no future!'" recounts Lu.

Mango marketeers

In Taiwan, mangoes are mainly grown in Tainan, Pingtung and Kaohsiung. In Tainan County, mango groves cover almost 8500 hectares of land, accounting for 40% of Taiwan's mango growing area. The county produces 95,000 metric tons of mangoes a year. But the fruit is harvested later there than in Kaohsiung and Pingtung. By the time it comes onto the market in July, the price of Kaohsiung mangoes has already begun to slide, and the arrival of Tainan mangoes pushes prices down to rock bottom. "In the past, whenever there was a big mango harvest you'd get dozens of tons dumped into the rivers, causing pollution problems," says Lu, frankly describing the difficult former predicament.

After the mango farmers themselves had reached a consensus, five fruit and vegetable wholesale co-operatives involved in the mango trade joined the coalition on their own initiative, and the organizers then also sought out fruit juice producers and transport firms, and finally set up the Tainan Area Mango Industry Strategic Coalition. "We had to get everyone together and in agreement before we could get started," says Lu Shui-sheng, who used all his powers of persuasion to get the project off the ground.

"We hope to get the farmers to understand the market, and also marketing and distribution, themselves," says Lee Shan-ren. He states that the farmers themselves elected representatives to form the coalition's executive committee and to head its production, processing and export marketing teams. Lu Shui-sheng describes how, when the mango harvesting season began, the coalition members were like soldiers preparing for battle: "All the teams met without special notice, every Monday afternoon at 1:30 sharp, to report on progress and decide matters large and small, such as improvements to the grading standards or the price they were looking for per case of fruit." Lu says that because all the relevant people attended, people from different kinds of businesses got to know each other, and problems became easy to solve. For instance, for many years firms in Liuchia Rural Township have bought mangoes to process into fruit juice and dried mango, and after everyone got together in the coalition, the Liuchia farmers' association secretary slapped himself on the chest and promised that Liuchia would buy up however many mangoes couldn't be sold in the first year. "This brotherly promise meant that the coalition had no worries as to what to do if their marketing plans failed," says Lu.

¥10,000 for a pair of melons

Many people who have been to Japan speak with amazement of how in that country two muskmelons in a gift box can be sold for the sky-high price of ¥10,000. The reason for Japanese farmers' success in building a brand image is their careful grading and packaging of produce.

Since the mango coalition was organized, "seeking to establish a collective brand image, by implementing collective grading and packaging and setting up inspection teams to control quality, has been the main focus of our work," says Lu Shui-sheng. All the farmers send their mangoes to a collective packing station, where they are rigorously graded by sweetness, weight, color and size.

In fact, explains Lee Shan-ren, to promote the rapid establishment of coalitions for different kinds of produce, "in TASC's early stages we deliberately selected distinctive, competitive types of local fruit as pioneers." Lee says that mangoes and starfruit are both highly distinctive fruits with an international market. In the case of mangoes, in the past Tainan County's Nanhua Rural Township had experience of exporting them to Hong Kong. "The coalition also broke through the limitations of separate producers marking their produce with their own particular place of origin. Now, whether they are for domestic sale or for export, they are all marked 'Taiwan mangoes' or 'Taiwan wendan pomelos.'" Lu Shui-sheng says that this approach depends on those production areas which were already well known being willing to give a boost to other areas. Nanhua Rural Township's experience in grading and exporting produce provided an important experience base for the mango coalition. The pomelo farmers of Touliu and Matou Rural Townships have also done away with individualized packaging, instead using the same coalition boxes and logo. They merely mark the specific origin inconspicuously on the outer boxes to ensure that if there is any problem with the quality, the "culprit" can be identified.

Apart from farmers monitoring each other and striving to improve quality, food processors, convenience store chains and distributors all take an interest in the quality of farm produce. Leaving nothing to chance, from the end of the year flower exporters Taiwan Flower Biotechnology Company stationed personnel in Huwei in Yunlin County, which produces hothouse chrysanthemums, for a two-month stint "supervising" the farmers in grading flowers using a fearsomely expensive grading machine supplied by the company.

The farming knowledge economy

One important reason for TASC's initial success has been the timely application of technology provided by research organizations. For instance, using the preservation techniques independently developed by the Tainan District Agricultural Improvement Station, Oncidium orchids and flamingo flowers can be kept fresh for ten days longer than before. This means that they can be shipped to Japan by sea instead of by air, reducing costs by 10%. The problem of fresh produce such as wax apples, papayas and vegetables easily spoiling in transit is also being tackled. For example, better-keeping papayas are now being grown by the TASC in small quantities in cooperation with the agricultural improvement station. "The production cost is something over NT$10 a catty. If we sell them locally, they fetch NT$40. But if we ship them to Shanghai, they get there looking just as good and tasting just as fresh, and they fetch NT$80 a catty." Lee Shan-ren says that by using technology to deliver fresh produce to the right market, they can profit from papayas' relative scarcity in Shanghai. Where does the profit come from? The answer is clear: "Papayas are no different from CPUs-it's know-how that gives them value."

"Back when food was scarce, of course people would eat whatever you could grow. But today, if you don't know how to market your produce, you'll go the way of the dinosaurs." Lee Shan-ren cites the example of the overabundance of vegetables in winter, when the farmers lose money hand over fist. But at Huwei in the plains of Yunlin County, with technical assistance from the Tainan District Agricultural Improvement Station several dozen farmers have changed over to hydroponic cultivation under netting, which they use to buck the market by growing vegetables in summer, but switching to hothouse chrysanthemums in winter. With an investment of NT$600,000 per 1000 square meters of land, in this way they can also grow temperate-zone vegetables. With these high-margin crops they recoup their investment within two years. Perhaps one day hothouse vegetables could also solve the problem of soil erosion in mountain areas. Lee Shan-ren cites a familiar example of successful marketing: The advent of iced tea products in the soft drinks sector has created a gigantic market for tea.

"Not every industry is worried about the WTO. Aren't the fish fry farmers rubbing their hands with glee at the prospect of the US$2 billion Asia-Pacific fish fry market?" Lee Shan-ren says that those who are not competitive must find ways to change. Consumers today no longer merely want to fill their bellies, but are also prepared to pay for satisfaction and sensations.

After a year and a half in operation, TASC is barely out of the starting gate, and farmers' coalitions are not yet gaining large enough orders. "With the advent of globalization, within the structure of an international division of labor, there's no point in trying to outproduce everyone else." Chen Hsi-huang explains that when produce can be marketed at high price points, it is not necessary to grab the whole market. One only needs to go for a number of high-income areas, such as Europe, North America, Hong Kong, Xiamen, Shanghai, Singapore and Japan-the more the better. If you can conquer part of the market in each, it adds up to a very big cake.

"We can't be content to be a declining sector that always relies on subsidies." Chen Hsi-huang hopes that just as for Dutch flower growers and Scandinavian dairy farmers, the road to the WTO will be the road to success for Taiwan's farming industry.

p.079

Improving the structure of Taiwan's agricultural sector is a pressing need. Proper grading of produce, computerization of the wholesale market, and introducing greater transparency, are among the first tasks that must be tackled.

p.080

Taiwan's diversity of delicious fruit is ideally placed to conquer overseas markets. Fruit is the first type of produce to be "marketed" by the Taiwan Agricultural Strategy Coalition.

p.081

By growing high-quality vegetables in summer and hothouse chrysanthemums in winter, the farmers of Huwei have escaped the annual scourge of the winter trough in vegetable prices.

p.083

Council of Agriculture chairman Chen Hsi-huang (above) hopes the farming sector can take its cue from the knowledge economy, and use technology to increase the added value of produce.