Taiwanese Farm Products Go International

If you come to Peinan Township in Taitung County, with its beautiful mountain scenery, in early spring, you will frequently see the following scene: baskets of atemoya line either side of the road. The overwhelming heavy fragrance of the fruit often makes visitors stop their cars and pick out one after another of the jade-green fruit to take home and try.

From December to April is the high season for atemoyas. Taiwan is planted with some 2,200 hectares of the fruit, 78% of which is concentrated in Taitung County where there is ample sunlight and adequate rainfall. Peinan Township itself is the main producing area.

Top-grade oolong tea, with its mellow, thick taste and sweet after-aroma, stands as a symbol for Taiwan's quality products. Planted all over with tea bushes, Luku Township in Nantou County has become a premier tea-growing area thanks to its ample rain, rich soil and warm sun.

Return of the fruit kingdom

To ship 500 cases of atemoyas to Hong Kong on the weekend, early Friday morning the farmers from Peinan's Meinung Village Panchiu production and marketing team come to the depot and get busy. Everybody has his or her own job to do as they grade the harvested atemoyas by weight, appearance, color and ripeness.

The women busily put variously sized atemoyas onto a mechanical grading device, which weighs the fruit employing the principle of the balance-beam scale. Using a movable brass weight and the reaction of the steelyard beam, fruit of similar weight falls off into side baskets and is very quickly graded into X-large, special, #1, and #2.

After they are graded by weight, the atemoyas are inspected visually for appearance, color, and ripeness, and fruit that is deformed or has been damaged by insects or by the machine is weeded out. The selected fruit is packed in boxes and weighed, to await shipping.

Under the guidance of the Taitung District Agricultural Research and Extension Station and in coordination with the production and marketing team, a breakthrough was made in the storage and packaging technology for atemoyas, and last year the "Green Jade" brand was test marketed in Singapore and Canada with initial success.

Fangshan Township in Pingtung County is full of Irwin mango trees with their protective bags fastened around the fruit, waiting for ripening and picking. The Irwin mango is a favorite with domestic consumers and a great success overseas too. Half of all the butterfly orchids sold on world markets come from Taiwan. The flower is a symbol of Taiwan's beauty.

Moving upmarket

To package the fruit into separate grades based on weight and quality seems complicated but it is actually done to meet differing overseas consumer demands. Chen Chin-hsien explains that Singapore and Canada want small fruit of "special" quality, while Shanghai consumers, like Taiwan consumers, prefer large atemoyas, and the X-large grade is meant for them.

"For most Asian consumers, sweetness is the touchstone of fruit quality. The atemoya is fragrant and sweet and has a definite potential for development," says Yang Cheng-shan, director of the Taitung District Agricultural Research and Extension Station, Panchiu sub-station. Last year Taitung exported 12 tons of atemoyas. By the end of March this year the figure was already 30 tons as a result of adding the Malaysian, Hong Kong and Shanghai markets. Great interest was also shown in Japan.

Although Taitung's export sales of atemoyas are still small at the moment, only comprising some 2% of the county's production, after grading and shipping the price immediately quadruples. In Singapore, one atemoya of the "special" grade can fetch NT$118. This is twice the domestic price. Attracted by the high profits, fruit farmers are only too happy to cooperate.

Of all exported fruit, Taiwan's Irwin mangoes command the highest prices in Japan, where one small mango sells for the equivalent of about NT$150.

"The year before last there was a drop in the number of mangoes sold to Japan but the total monetary value rose," points out Huang Tzu-bin, director general of the international affairs department at the Council of Agriculture (COA). The amount in 2003 was 12,623 metric tons with a monetary value of US$3.69 million. Because of typhoons last year there was a reduction to 5,000 tons but the monetary value rose rather than fell, reaching US$4.82 million. This means that while the export numbers dropped 60%, the monetary value rose by 30%.

"Many fruit farmers from Yuching Township, Tainan, already know that numbers need not be high for export sales. Frequently making a quality selection of five pieces out of one hundred will bring higher prices," he says.

After Taiwan joined the WTO, agricultural products from abroad lined domestic supermarket shelves. Musk melons imported from Japan cost NT$1,500 a piece. Based on the principle of reciprocity, Taiwan agricultural products also sold successfully in Japan, which has become the number-one overseas market.

Standards in Japan

Many people who have traveled to Japan are amazed at the astronomical ¥10,000 a couple of musk melons can fetch at a supermarket, so it's no wonder that Japan, which can afford to eat expensive fruit, has been the number-one choice as a target for Taiwan agricultural produce. COA statistics show that in 2003 the value of Taiwan agricultural products shipped to Japan was US$1.2 billion, which represented 37% of total agricultural exports. Last year it grew slowly to US$1.396 billion to reach 39% of all agricultural exports.

Nevertheless, although Japan is Taiwan's chief agricultural export destination, it also has a well-deserved reputation as the world's toughest place when it comes to quarantine standards. To open up the Japanese market farmers and government agricultural officials put in a great deal of effort and achieved significant breakthroughs.

Take papayas, for example. Taiwan papayas can be exported to Singapore, Canada, Malaysia and Hong Kong but Japan used the reason that Taiwan was an area infested with the "oriental fruit fly" to drag their feet and not open their market.

To get Taiwan papayas into the Japanese market the COA held discussions with Japan in 1997 and set up fumigation equipment that would eliminate the oriental fruit fly in accordance with the quarantine standards of the Japanese Ministry of Agriculture, Forestry and Fisheries. After Japanese quarantine officials finally came to Taiwan last year for an inspection, they approved the papaya fumigation process. After eight long years of work the first step on the road to selling papayas to Japan had been taken.

The same was true for Fuli rice from Hualien County. Only after it passed a 120-item inspection last year was the Japanese market re-opened after a 33-year hiatus. For Fuli rice and papayas, Taiwanese exporters have adopted the strategy of raising the quality level, "squeezing" a few products in through the narrow door of test marketing and then proceeding on a firm footing to increase overall quantities.

Agricultural trade with mainland China in past five years source: COA/art: Lee Su-ling

Improvements

A close look at Taiwan agricultural exports to Japan shows that fishery products top the list at about US$1.017 billion. Next are vegetables at about US$80 million. Taiwan's most competitive tropical fruits, like bananas, mangoes, wax apples, lychees and pineapples, make up only a small proportion of the fruit imported into Japan, which shows there is a lot of room for growth in this market.

In addition to non-tariff trade barriers such as quarantine, Taiwan agricultural products have structural problems awaiting solution, like quality and unstable supply, production and field management, grading and packaging, freshness, and storage and shipment, which all need improvement.

"In the past Taiwan agricultural products focused on the domestic market. Once farmers saw that domestic prices were good, they were unwilling to supply produce to exporters, who laid down all kinds of strict conditions. If the farmers didn't provide the products, there was nothing exporters could do because there were no compulsory rights or obligations involved. Moral suasion was all that could be counted on," says Richard J. T. Chen, manager of the agricultural products section of the Taiwan External Trade Development Council (TAITRA) and a man who has organized Taiwan agricultural trade fairs overseas on a number of occasions. Last year the Agriculture and Food Agency of the COA began planning "fruit export agricultural zones" where some ten varieties of fruit, including mangoes, pineapples, bananas and atemoyas would be grown exclusively to supply the export market.

For example, a farmer named Chu from Meinung Village, Peinan, planted an orchard of 1,000 atemoya trees. Because the trees and orchard are free of disease and protective barrier tents have been raised against typhoons to prevent fruit being blown to the ground, this has been selected as an export fruit orchard.

Fruit farmers whose orchards are listed as export orchards must take guidance on producing pesticide-residue-free products. Government agricultural officials hope that complete and rigorous quality management will raise the competitiveness of agricultural products and boost farm profits. Otherwise, if produce is inspected at customs in an importing country and found not up to standard, this could have a ripple effect on all produce of the same category shipped overseas and could even deliver a severe blow to the image of Taiwan agricultural products as a whole.

Huang Tzu-bin points out that in recent years orders for Taiwan frozen vegetables have dropped off in the face of low-price competition from mainland China and Thailand. But last year Japanese inspections of frozen soybeans produced in mainland China revealed too-high levels of pesticides, so Japanese buyers transferred their orders to Taiwan.

Because vegetables have a shorter shelf life than fruits, breaking into the export market presents numerous challenges.

In 2001, under the guidance of the COA, the Yunlin County vegetable production and marketing team established a "Vegetable Producers' Strategic Alliance" to deal with Taiwan's vegetable production surplus. They first selected Singapore as their target, a pure consumer country with small domestic production. The alliance sent some 20 vegetable varieties, including head lettuce and cabbage to Singapore, where they were in competition with vegetables from other countries. The result was that although several hundred tons were exported without a hitch, the price the vegetables fetched was not ideal and after deducting expenses, there was a loss.

In the end, the Singapore market was captured by the low prices of mainland China and Malaysia and it looked like a setback for Taiwan in the overseas market. Who would have ever expected a new dawn to break-but this is just what happened. In Singapore a Japanese businessman saw some excellent, fresh lettuce that had come from Yunlin and got the idea of going to the source for some business discussions. Thus was the door to the Japanese market opened.

Chen Ching-shan, chairman of the Hsinhu cooperative farm at Yunlin, who went to Singapore to survey the export market, points out that head lettuce is not suited to hot climates. The US has an extensive growing area and, coordinating with the seasons, can supply Japan with 7,000 metric tons a year. Yunlin can only produce lettuce during the winter. Last year it exported 1,000 tons and this year is looking forward to raising that figure to 2,000 tons. Although only 15% of Yunlin's vegetable crop is exported, the price does not suffer the large fluctuations of the domestic market, and farmers make a stable profit of NT$3-5 per kilogram.

Major export markets for Taiwan agricultural products

Banana kingdom once again

International market conditions are quick to change, and expert talent in agricultural export sales is hard to come by. The story of Taiwan bananas going from boom to bust then slowly getting back on track reflects this problem of a lack of talent in international sales.

In the 1960s Taiwan planted some 40,000 hectares of bananas. At the time, banana exports accounted for 25% of all foreign currency earnings, and Taiwan acquired fame and the reputation as a "banana kingdom."

To maintain order in the banana export market and strengthen price negotiating power, in 1974 the government designated the Taiwan Fruit Marketing Cooperative to exclusively handle banana exports, yet over the next 30 years exports of bananas saw a steady decline. From a high point of 400,000 metric tons, exports fell to only 25,000 tons in 2003, pushed to the side by cheap bananas from the Philippines and Central and South America.

The reason for this was the export oligopoly system. It lacked healthy competition and creativity, and gave rise to a host of problems and failures. In recent years banana farmers, production and marketing teams and exporters have focused a great deal of thinking on this question and are demanding improvements.

To regain the glory years of Taiwan banana exports, the COA has announced that from this year it will open up the Japanese banana market to businesses outside the Taiwan Fruit Marketing Cooperative.

COA international affairs department director-general Huang Tzu-bin points out that Japan imports some 75 million cases of bananas yearly, only 1.5 million of which come from Taiwan. Fortunately the flavor and texture of Taiwan bananas is better than that of Philippine bananas and the aromatic, sweet Taiwan banana is still the favorite in Japan. The hope is that opening the market will enable banana exports to Japan to hit two million cases this year and gradually rise from there.

Agricultural trade with mainland China in past five years

Four flagship products

To promote exports of Taiwan agricultural products, two years ago the COA invested NT$30 million in studies on improving export varieties and preserving freshness. It also teamed up with TAITRA, which has a great deal of experience in exhibiting at overseas trade fairs, to draft an export sales plan for agricultural products.

TAITRA's agricultural products promotion group also underwent a major expansion from a single person to a 12-man staff. Last year TAITRA led farm groups and businesses to exhibit at 15 agricultural trade fairs including those in Tokyo, Hong Kong, New York, Seoul and Singapore. Business contracts worth about NT$500 million were signed on the spot with follow-up purchases reaching NT$1.7 billion.

"We have to develop some secure mechanisms for the export sale of Taiwan agricultural products and attract overseas consumers through product variety, quality and branding," says Richard Chen, manager of the agricultural products section at COA. At the same time as Taiwan agricultural products are being promoted, he says, the strategies of "equal emphasis on domestic and foreign sales" and "production and marketing marching hand in hand" should be applied during the harvest season to guard against farmers raising large crops of products with little market demand.

Last year the COA selected the butterfly orchid, oolong tea, mangoes and Taiwan tilapia as key flagship products for export. After ten years of effort on the part of Taiwan, the butterfly orchid finally got the OK from the US for importation with its "growing medium" (soil) so that the plant can continue to grow, cutting costs by half. Currently, four private orchid farms have received US certification.

Other techniques, like cold storage of oolong tea to preserve freshness and prevent deterioration through oxidation, methods for managing Irwin mango anthracnose, and ways to preserve the natural color of frozen Taiwan tilapia fillets, have all been made priority tasks by the COA, and some concrete results have been achieved.

Value of Taiwan's agricultural imports and exports,1990-2004

Sales to the mainland?

Recently Taiwan agricultural products have become a very animated topic of discussion for cross-strait contact. From mainland China's Taiwan Affairs Office holding out the olive branch to Taiwan's farmers by saying China would expand its purchases of agricultural products, to Kuomintang party vice chairman Chiang Pin-kun's visit to China in late March when he brought back with him a ten-point agreement, three points of which dealt with Taiwan agriculture, the question is being asked, are sales to the mainland really so advantageous for Taiwan farmers?

Since the Chinese New Year cross-strait relations have been at a low point, and agricultural products have become an object of the frequent push and pull of diplomacy. But with mainlanders speaking the same language and having similar consumption habits to people in Taiwan, what could be done if one day Taiwan agricultural varieties and technology found their way to the mainland and the resulting produce was sold back to Taiwan?

The government has a cautious wait-and-see polity on moving Taiwan agricultural products into the mainland market. Huang Tzu-bin says that sales of agricultural products to mainland China constitute 8% of Taiwan's total production value. With the 15% represented by export sales to Hong Kong added in, this means that already one fourth of all agricultural products depend on the Chinese market. If, just because mainland China makes a big show of being nice, the main battlefield for the export of agricultural products is unceremoniously shifted to China, and expansion in the US, Japan and other important markets is neglected, then some day when China suddenly pulls the plug we will have to face the bitter consequences of an imbalance between production and sales.

Aside from overdependence on export sales, an issue of greater concern in Huang Tzu-bin's view is the prospect of mainland China turning around and, on the principle of trade reciprocity, demanding that Taiwan open its markets to mainland-produced rice, mushrooms, garlic and other sensitive agricultural products that Taiwan produces in large quantities. How could Taiwan refuse? Taiwan farmers could win the battle but lose the war.

Professor Lei Li-fen of National Taiwan University's Department of Agricultural Economics has written that in the future, no matter what structure is discussed with mainland officials, we must hold fast to the principle that we "cannot allow the mainland to lead the talks to their own advantage." Discussions on agricultural trade have broad implications. If there are discussions, they should establish a permanent and effective trade window, where either side can open up talks at any time. Only in this way can we be sure Taiwan will not be left at the mainland's mercy.

Value of Taiwan's agricultural imports and exports,1990-2004

"No" to technology drain

Not only is the mainland opening its markets to Taiwan agricultural products, it is also spending a great deal of effort in wooing Taiwan farmers.

Chu Jung-chang, director of the Nanchang orchid farm in Taitung, says that last year 28 different groups from the mainland visited the farm. In addition to asking questions about farm management, they invited him to go to the mainland one week every month to give technical guidance. Using the excuse that "the orchid variety doesn't belong to me," he refused.

Chu says that the Fujian Provincial Government has built 165,000 square meters (1.8 million square feet) of greenhouses on the coast and is pressing him to make a 50% investment and operate them as a partner with the local government. "I'm not interested in taking the risk. They approve your leasing the land for 50 years now, but then three years down the line, after you've made your investment, might they not just go back on their word, trump up some charge and then take over?"

"Right now the Taiwan butterfly orchid still occupies its niche on the world market, but the market is fairly competitive. The Netherlands strictly prevent their varieties from going abroad and will certainly not sell a new variety to Taiwan because they worry the year after they do this, they will start seeing the Taiwan market producing and selling them, with the sellers laughing all the way to the bank," says Chu Jung-chang. When the mainland groups visited Chu he didn't let them take photographs but they still had their "secret tricks." For example, they would scrape up some pollen with their fingernails and then put it in a plastic bag, or break off a shoot to take back and do tissue culture.

"How much do you water? When do you water? What depth are they at? How close are the water plants? How many water plants are planted? How do you take care of the roots? This experience and knowledge is Taiwan technology, and Taiwan's great advantage," says Chu.

Taiwan joined the World Trade Organization in 2002, and based on negotiations agreed that it had to lower some agricultural tariffs and open its market. In the subsequent three years, a great number of imported agricultural products have appeared on the market, and Taiwan agricultural products must certainly "go global."

The industrious Taiwan farmer, bringing to life his wonderful fruit from the fertile ground through the sweat of his brow, deserves more than just a full stomach and a roof over his head. As Taiwan agricultural products go on sale worldwide and break into overseas markets, hopes of introducing the Taiwan brand name to the world should be accompanied by overflowing purses for the Taiwan farmer.

Fangshan Township in Pingtung County is full of Irwin mango trees with their protective bags fastened around the fruit, waiting for ripening and picking. The Irwin mango is a favorite with domestic consumers and a great success overseas too. Half of all the butterfly orchids sold on world markets come from Taiwan. The flower is a symbol of Taiwan's beauty.

Top-grade oolong tea, with its mellow, thick taste and sweet after-aroma, stands as a symbol for Taiwan's quality products. Planted all over with tea bushes, Luku Township in Nantou County has become a premier tea-growing area thanks to its ample rain, rich soil and warm sun.

Major export markets for Taiwan agricultural products