The next durian?

This article first appeared in Enterprise, The Edge Malaysia Weekly, on December 30, 2019 - January 05, 2020.
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Sector: Agriculture

Global problem being addressed: Rising global demand for bananas

Potential addressable market: According to Khazanah Research Institute, Malaysia exported RM40.4 million worth of bananas in 2017.

Number of patents: In the midst of applying for one

Product description and USP: A standard operating procedure for farms to produce export-grade Cavendish bananas from Southeast Asia.

Currently exporting: Yes, to China, the Middle East, South Korea and Japan, among others

Industry challenges: Land and farmer awareness

 

Malaysia is perfect for growing bananas. It has fertile soil, consistently warm temperatures and rain. In most places in the country, strong winds and extreme temperatures are rare.

Datuk Tom Chow Chin Kiat, founder and executive director of Agrofresh International Group Sdn Bhd, saw this as an opportunity to turn bananas into an export product. “I was in the business of trading bananas overseas. I was buying the fruit from farms in the Philippines. But the demand kept increasing and the supply could not keep up,” he says.

For the two years Chow was in the Philippines, he sent 150 to 200 containers of bananas a week to China. The demand was also rising in China, Europe and the Middle East. Growing health awareness in Western markets was also driving up consumption.

“But in 2012, there were some tensions between the Philippines and China [which was the main importer]. I became unsuccessful and lost a lot of money. So I thought, why not get involved in the plantation business?” says Chow.

In 2013, he set up a company in Malaysia and tied up with Universiti Putra Malaysia (UPM) to engage in R&D. His goal was to create a standard operating procedure (SOP) that contract farms could use to produce export-grade Cavendish bananas.

The Cavendish variety is best suited for international trade as it is more resilient to the effects of global travel, according to the Food and Agriculture Organization of the United Nations.

Soon, Chow set up contract farms and joint ventures in Cambodia, Malaysia and Vietnam. These farms use the SOPs developed by the R&D team so that farmers can produce bananas suitable for export.

“Planting bananas for export is different from planting for local consumption. For export, you need a packaging factory and you cannot use pesticides that are not certified, for instance, or you will not pass quarantine. If foreign buyers inspect your produce and you do not meet their standards, it will create problems,” he says.

Bananas meant for export also need to be of a certain size or weight so they can be sold at a higher grade and with better prices. Farmers must learn how to time the harvest according to the amount of time the fruit will be in transit to various destinations. For instance, bananas shipped to the Middle East need to be harvested earlier than those headed for China. If not, the bananas may expand and explode in transit.

The SOP covers areas such as farm management methods, irrigation technology, cultivation practices and the composition of fertiliser. Chow’s team and UPM are in the midst of patenting the SOP.

“My system is already successful. Our plantations are doing very well. Our customers in China are very happy with the quality of our bananas. If the quality of the produce is good, then prices can be higher,” he says.

Chow also exports to the Middle East, Japan and South Korea. In fact, Japan has invited Agrofresh to supply bananas for the 2020 Olympics, he says.

 

Challenges in the industry

One of the challenges Chow has faced since the beginning is working with local farmers and convincing them to use the SOP. Many are not used to growing bananas for export as they mostly grow the fruit for local consumption, he observes.

“We have always found it hard to work with farmers in Malaysia. Why? The farmer needs to have land, which is expensive and hard to find. So, they need funding. They also need to have knowledge of agriculture. Finally, they need to trust you, so you can convince them to plant bananas according to the SOP,” says Chow.

He insists that farmers follow the SOP not just because they can produce bananas that meet international standards and fetch higher prices but also because good farm management practices are important to ward off diseases. For instance, the Panama disease ails Cavendish bananas globally.

“How to protect your bananas? Soil and plantation management is very important. It reduces the chances of your bananas becoming diseased. For instance, some plantation owners do not allow people or cars to enter their plantations so they do not contaminate the soil. Many also use organic fertilisers because it helps the land to become healthier,” says Chow.

Other challenges that he faces are land availability and competition with oil palm. According to him, many farmers prefer to plant oil palm and are not familiar with other kinds of crops. But as palm oil prices have plunged in recent years, the government has been encouraging farmers to diversify.

“Now, more people look me up, especially those who want to move away from oil palm. But many do not understand how to plant bananas and it can be hard to teach them new ways,” says Chow.

Farmers also require land and funding to start a banana plantation.

These challenges are the reason he only has one contract farm in Malaysia. “Land in Cambodia and Vietnam is cheap and abundant. Their governments really encourage agricultural activities and are eager for technology from abroad. It is not just bananas but also the farming of cows and ducks, among others. In Cambodia, they will fund you if you have the technology,” he says.

In Cambodia, Chow’s plantation has its own fertiliser manufacturing factory to produce non-chemical and organic fertilisers, a modern irrigation system and drones for monitoring. A packaging factory and cold storage room are also located on-site.

 

Still eager to grow

But Chow is not ready to give up on Malaysia. For one, the country is perfect for planting bananas. For another, he is Malaysian and wants to plant local bananas that can be as famous as the Musang King durian.

“Malaysia has a lot of rain and fertile land compared with Vietnam. A cold spell two years ago caused all the banana trees in my contract farm to die. In Hainan, China, there are monsoon winds every year that threaten the trees,” he says.

“Cambodia has very little rain. With our technology, we can plant bananas there, but the weight of the produce is not as good as it is in Malaysia. We do not have strong winds or natural disasters here.”

According to the Federal Agricultural Marketing Authority, the export value of bananas in the country rose from RM34 million in 2016 to RM40 million in 2017. A Khazanah Research Institute paper points out that Malaysia produced more bananas than any other fruit in 2017. Historically, the country has been a net exporter of bananas, although imports of the fruit are increasing.

In July, Sabah’s minister of agriculture and food industry, who had visited Chow’s contract farm in Cambodia, identified banana farms as an investment opportunity for the state. “The minister found my company and wanted to visit my farm. He wanted to see a farm with an export-standard packing room and cold rooms,” he says.

Chow only has large-scale facilities at his farms in Cambodia and Vietnam. Now, he is determined to bring such facilities to Malaysia. “My company is ready to find a 1,000-acre tract to plant bananas in the country. It will be a four-year project,” he says.

He thinks that technology and funding are not the problem in Malaysia, but land availability. “The most important thing is that the government gives out land not just for oil palm plantations. Even in Vietnam, a lot of land is locked with oil palm plantations for 60 to 90 years. It is not profitable, but the government cannot take it back now and some companies do not want to change crops. So, the plantations are just there,” he says.

Governments and farmers should recognise the export opportunity for crops such as bananas. Interestingly, Chow also sees an opportunity to turn fruit such as coconuts, papayas and pineapples into export products.

“If you go to the supermarkets, you will see that the price of those fruits are increasing. We used to plant pineapples, which do not need as much land as bananas, but the cost is higher,” he says.