REPOBLIKAN’I MADAGASIKARA

Tanindrazana – Fahafahana – Fandrosoana

MINISTRY OF AGRICULTURE, LIVESTOCK AND FISHERIES

GENERAL SECRETARIAT
GENERAL DIRECTORATE OF AGRICULTURE, LIVESTOCK AND FISHERIES

Rural Income Promotion Programme (PPRR)

MADAGASCAR COUNTRY PROGRAMME: CASE STUDY

Director: Benoît Thierry, IFAD Country Programme Manager

Editor: Emeline Schneider, Institut Supérieur Technique d’Outre Mer, France
August 2007

LYCHEE COMMODITY CHAIN

CONTENTS
1. ACTORS AND PRODUCE FLOWS ......................................................................................................... 2
INTRODUCTION .................................................................................................................................................. 2
CONSTRAINTS ON PRODUCTION........................................................................................................................... 2
STANDARD .......................................................................................................................................................... 3
PRODUCTION SYSTEMS ........................................................................................................................................ 3
KEY ACTORS ....................................................................................................................................................... 3
EXTENSION ......................................................................................................................................................... 4
2. PROFILE OF THE COMMODITY CHAIN ............................................................................................ 8
3. PROFILE OF LYCHEE PRODUCERS ................................................................................................... 9
4. OPERATING ACCOUNT ....................................................................................................................... 10
5. ANALYSIS OF THE COMMODITY CHAIN: DECISION TREE...................................................... 12

1
 1. Actors and produce flows

Introduction

The lychee is cultivated for its fruit, which is generally eaten raw and is rich in Vitamin C and
glucides. It was introduced into Madagascar by Cossigny in 1764. The Malagasy lychee is the
earliest on the European markets at the end-of-year period and Madagascar is the world’s
largest exporter to Europe.

Six regions produce lychees: Tamatave, Mananjara, Manakara, Marontsetra, Taolagnaro

(Fort Dauphin) and Antseranana (Diego Suarez). Although it is hard to quantify
production, some figures are available: 25,000 to 35,000 tons from an estimated area of
5,750 hectares (AFDI-Dromes, 1994)

Production is dependent upon gathering. Harvesting takes place from mid-November to

January. The main production zone for export lychees is Toamasina, which accounted for
95 per cent of the volume exported in 1992 (X. Fabrègues, 1994) and almost 100 per cent in
1998 (bearing in mind that, apart from a few special loads sent by air from Mananjary-
Manakary, all exports were shipped from Toamasina).

Lychee production involves 20,000 to 30,000 farming families spread along

800 kilometres on the east coast.

The main competitors on the lychee market are Brazil, Mauritius, Réunion, Australia,
Zimbabwe, China and South Africa.

Constraints on production

The trees are scattered and located far from collection centres, so that much of the fruit is not
picked, especially fruit in the wild.

Lychees are a perishable product that must be processed quickly. Collection circuits are short,
and production zones accessible to independent collectors or those working for exporters are
the ones harvested. Lychees must be transported to exporters within 24 hours. (Note: a
producers’ organization in the Brickaville zone supported by Landscape Development
International enters into direct contracts with exporters.)

Road infrastructure is deteriorating and it is difficult to place produce with a harvesting period
that often coincides with the rainy season, when secondary roads are barely passable.

Lychee trees on the east coast are rarely maintained (X. Fabrègues, 1994).
Apart from producing fruit, the trees have a social and territorial function, and are not
viewed purely in terms of production and trade.

Problems encountered: a lack of market transparency, inasmuch as some information is

available only to certain actors (large-scale exporters); a lack of capital; and a lack of
technical skills, affecting quality. The region’s climate is the only element that allows lychees
to grow well, but the fruit must be harvested when ripe, otherwise quality suffers and it is hard
to sell.

2
The State does not intervene in the lychee market.

Since 1996, quotas have been established between exporters and importers, allowing export
flows to be regularized. Importers act as intermediaries between exporters and large-scale
distribution networks. The latter try to cut out the importers, who are responsible for loading
produce aboard ships, payment of freight charges, customs clearance and unloading the
produce. Importers play a major role in the commodity chain, entering into contracts with
exporters having facilities up to standard, supervising loading and playing a part in pricing.
Some importers have adopted a joint transport system in order to reduce costs.

Standard

Sound fruit with a minimum diameter of 30 mm; sulphur residue of 250 mg/kg of dry matter
in the shell, 10 mg in the pulp.

Production systems
(Source: study by the ATW consultancy firm for the Madagascar Agricultural Export
Liberalization Support Project/USAID)

It is estimated that 80 per cent of the total fruit produced in Madagascar comes from
trees growing in the wild without human intervention, while 15 per cent comes from fruit
trees maintained by farmers. These trees are cultivated around dwellings or villages.
Ministry of Agriculture experts call this type of plantation “extensive village cultivation”.
The remaining 5 per cent is produced by professional growers whose main activity is
planting and maintaining fruit trees.

Most lychee plantations are either wild or “extensive village plantations” (Y. Bertin, 1987).

Key actors

Producers are both planters and gatherers. They may hire seasonal labour at harvest time.
There are three types of producer:
- Small-scale producers with a few lychee trees
- Medium-scale producers
- Large-scale producers with one or more orchards.
Their location is a major factor with regard to collection.

A large amount of produce is sold to collectors on the tree before harvesting. The collectors,
who then resell it to exporters, are either organized with their own or rented means of
transport, or the exporters provide them with vehicles.

Exporters are major actors in the commodity chain, having a large amount of capital in
comparison with other actors. The fruit is generally graded, treated with sulphur, sorted,
packed in cartons and stacked on palettes at the exporter’s premises. The exporter is also
responsible for transport to the port or aircraft.
Forty-two lychee exporting companies were recorded in 2004, with the number growing each
year. The exporters are grouped together in a structure known as the Lychee Exporters Group
(GEL).

3
Contact: Groupement des Exportateurs de Lychees (GEL) Madagascar
c/o Ramanandraibe: tel. +261 20 222 0565; fax +261 20 222 0574
e-mail: chorobert@dts.mg
Exportation S.A.
5, Rue Lieutenant Lubert
B.P. 106
501 Toamasina
B.P. 6211
Antananarivo

The transport of lychees is a key factor at harvest time. Whether the fruit leaves fresh or after
processing, it must be moved out very quickly. The choice of transport plays a decisive role in
terms of price. Transport times were calculated by the Tamatave Horticultural Technical
Centre for the 2000 harvest as follows:
- 8 to 16 hours to reach the sulphur station
- 2 to 24 hours to reach the port.
Malagasy lychees are mainly exported by ship, shelled and treated with sulphur.

Many people are actively involved in the lychee harvest and this period allows many
Malagasies (local inhabitants or people from other regions) to augment their incomes.

Some farmers use the layering technique to renew their lychee stands.

A traceability system has been in place for several years.

Extension

The Tamatave Horticultural Technical Centre (CTHT) is a major actor in the lychee chain,
supplying lychee seedlings, popularizing cultivation techniques and boosting quality by
training farmers in good agricultural practices (Euro Retailer Produce Working Group’s Good
Agricultural Practices: EurepGAP). The centre also has a processing centre that it makes
available to exporters.

Farmer trainers and extension workers teach techniques of maintenance, fertilizing etc.
(pruning, manure application).

The Agricultural Exporters Support Project (1996–2002) with French development aid
participated in the development of Malagasy agricultural commodity chains. As part of this
project, the Lychee Commodity Chain Support Project backed lychee exports.

The Cooperative for Assistance and Relief Everywhere (CARE) also provides funding and aid
after cyclones that damage lychee stands.

The PPRR has been active in the region for three years in support of agricultural commodity
chains. With regard to the lychee chain, it is at present engaged in the long-term task of
renewing lychee stands. It supplies farmers with good quality seedlings, participates in
technical training using service providers, and has also undertaken the training of farmers in
EurepGAP so that they do not find their produce rejected through lack of attention.

The commercial success of a lychee export harvest depends on a number of parameters:

4
 - A good choice of opening date;
- Coordination of logistical activities by importers to avoid any over-supply on the
European market;
- Concentration of activities on Tamatave (Madagascar’s commercial port) so that
harvesting can be better planned;
- Respect for quality criteria (ripeness, colour, diameter) to ensure the quick sale of
fruit.

Importers impose their prices on exporters so that Malagasy lychees will be competitive on
the European market.

Lychees: graph of prices for Toamasina.

Source: Technical and Economic Information Centre (CITE)

Marked variations in price can be seen among cropping seasons and also within the same
year.

5
 CHART OF ACTORS IN THE LYCHEE COMMODITY CHAIN
ANALANJIROFO REGION

MINISTRY OF
SUPPORT TECHNICAL CENTRE
AGRICULTURE,
PROGRAMME (CTHT)
LIVESTOCK &
(PPRR)
FISHERIES

PRODUCERS
+ SEASONAL WORKERS
(PLANTERS/
GATHERERS)

COLLECTORS LOCAL
COLLECTORS

PROCESSORS WHOLESALE
DISTRIBUTORS

EXPORTERS

INTERNATIONAL DOMESTIC MARKET LOCAL MARKETS

MARKET
6
CHART OF PRODUCE FLOWS IN THE LYCHEE COMMODITY CHAIN
ANALANJIROFO REGION

SUPPORT TECHNICAL CENTRE MINISTRY OF

PROGRAMME (CTHT) AGRICULTURE,
(PPRR) LIVESTOCK &
FISHERIES

PRODUCERS
+ SEASONAL WORKERS
(PLANTERS/
GATHERERS)
90% 10%
COLLECTORS LOCAL
COLLECTORS
8%
PROCESSORS WHOLESALE
DISTRIBUTORS
2%

EXPORTERS
8%

INTERNATIONAL DOMESTIC MARKET LOCAL MARKETS

MARKET

7
 2. Profile of the commodity chain
(drawn from the averages for three districts – Fénérive Est, Vavatenina and Soanierana Ivongo – based on surveys)
Historical factors Export commodity chain well-known by farmers, based on gathering, many support
programmes
Actors Planters/gatherers, collectors, exporters, importers
Phases in the chain Production, processing, marketing
Techniques used Layering, grafting, pruning, drip irrigation (rare)
Average level of facilities Basic, fruit cultivation (collection), maintenance equipment (pruning and layering)
Actors’ structures and modes of organization Farmers’ organizations, producers’ groups, cooperatives
Labour used Seasonal, generally family
Upstream sub-chains Technical training, development of quality seedlings
Downstream sub-chains Collection, transport, processing, export
Number of cropping seasons per year One harvest (November–January)
Annual production About 20,000 tonnes in the Tamatave zone
By-products Lychee pulp, jam (domestic market)
Inventory of costs - production cost (purchase of seedlings, equipment, training)
- cost of inputs
- cost of labour
- transport, for some producers
Production cost to producer 25,500 MGA (30 MGA: production cost per kilogram when fully ripe)
Rate of return (gross added value) 654,500 MGA
Average turnover per producer 680,000 MGA
Average production per producer 850 kg (average number of trees hard to estimate: about 5)
Total production per year Yield: 7.4 t per ha (average area per producer estimated at 200 m2)
Markets Mainly the export market, 10% on the domestic market
Critical points Techniques, collection
Strengths Buoyant market, increasing exports
Weaknesses Strong organization of collectors to the disadvantage of farmers
Opportunities Farmers’ organizations and PPRR support, high European demand for quality lychees
Threats International competition, compliance with quality and quantity
Support bodies Rural Development Support Project, PPRR, Tamitave Horticultural Technical Centre

8
 3. Profile of lychee producers

Category Characteristics Constraints Strategies Proposed actions

Vulnerable A few trees Lack of Development of the fair-trade Training, renewal of lychee stands, awareness-
technical and label, collection at the Market raising on fair trade, regrouping within
financial Access Centre or organized structured farmers’ organizations
resources, directly with the exporter
collectors
With potential Small orchards Lack of Development of the fair-trade Training, renewal of lychee stands, awareness-
financial label, collection at the Market raising on fair trade
resources, Access Centre or organized
collectors directly with the exporter
Advanced Developed Collectors Development of the fair-trade Awareness-raising on fair trade, improvement
orchards label, collection at the Market in capacity to negotiate with exporters
Access Centre or organized
directly with the exporter

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 4. Operating account Operating account of an improved commodity chain on 1 hectare
LYCHEE modern crop
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
OPERATIONS Unit U. cost No. Cost No. Cost No. Cost No. Cost No. Cost No. Cost
Installation Clearing M/D 1,600 20 32,000 0 0 0 0 0
Planting marking out M/D 1,600 20 32,000 0 0 0 0 0
Drilling M/D 1,600 3 4,800 0 0 0 0 0
filling in M/D 1,600 3 4,800 0 0 0 0 0
Sowing M/D 1,600 5 8,000 0 0 0 0 0
Planting M/D 1,600 3 4,800
Seedlings piece 200 45 9,000 0 0 0 0 0
Maintenance Pruning M/D 1,600 0 10 16,000 10 16,000 10 16,000 10 16,000 10 16,000
fertilizer
application M/D 1,600 0 2 3,200 3 4,800 5 8,000 5 8,000 5 8,000
Mowing M/D 1,600 0 0 10 16,000 10 16,000 10 16,000 10 16,000
Fertilizing organic manure t 12,00 20 240,000 0 0 0 0 0
NPK kg 1,400 150 210,000 0 75 105,000 150 210,000 150 210,000 150 210,000
Dolomite t 200,000 10 2,000,000 0 0 0 0 0
Urea kg 1,400 0 25 35,000 50 70,000 100 140,000 100 140,000 100 140,000
Harvesting Harvesting M/D 1,600 0 0 0 10 16,000 15 24,000 30 48,000
placing in
baskets M/D 1,600 0 0 0 5 8,000 10 16,000 20 32,000
Baskets M/D 1,600 0 0 0 6 9,600 8 12,800 15 24,000

COSTS Labour MGA 86,400 19,200 36,800 73,600 92,800 144,000

Inputs MGA 2,459,000 35,000 175,000 350,000 350,000 350,000
Total MGA 2,545,400 54,200 211,800 423,600 442,800 494,000

PRODUCE yield per ha t 0 0 0 5 15 18

Total MGA 0 0 0 4,000,000 12,000,000 14,400,000

-
RESULT 2,545,400 -54,200 -211,800 3,576,400 11,557,200 13,906,000
GROSS PROFIT 89.4% 96.3% 96.6%

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OPERATING ACCOUNT OF AN IMPROVED COMMODITY CHAIN (Serge Maro)
20 eight-year-old trees (about 400 kg per tree)
MAINTENANCE Unit Unit cost MGA No. Cost
Cleaning M/D 2,000 20 40,000
Mulching M/D 2,000 10 20,000
Pruning M/D 2,000 30 60,000
Irrigation (in case of drought) M/D 2,000 50 100,000
Surveillance M/D 2,000 20 40,000
TOTAL MGA 260,000
HARVESTING
Purchases (baskets etc.) piece 600 40 24,000
Harvest labour M/D 20,000 10 200,000
Travel M/D 10,000 5 50,000
Ravinala leaves piece 20,000 5 100,000
Van hire trip 400,000 5 2,000,000
Red card, licence, ristourne (communal export tax) MGA 300,000 1 300,000
TOTAL MGA 2,674,000
SALES
kg 1,000 8,000 8,000,000
PROFIT MGA 5,066,000

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5. Analysis of the commodity chain: decision tree

Production
o Land

Lychee trees on the east coast are not maintained

Apart from producing fruit, the trees have a social and territorial
function, and are not viewed purely in terms of production and trade
o Inputs

Seedlings
• Supply of seedlings is insufficient, with few suppliers
• Plant propagation by layering is poorly understood

Plant protection
• Farmers make very little use of pharmaceutical products to
protect their crop
• These products are very expensive
• Farmers have little knowledge of the crop’s pests and diseases,
and of how to combat them

Post-harvest processing
• Many operators fail to respect EurepGAP standards
• Ripeness of fruit is sometimes poorly assessed

Productivity
• Trees are poorly maintained, with a loss in yields; they are not
pruned after harvesting and grow too high – and it is impossible
to harvest from high branches
• Some zones are harvested too late (e.g. Anjahambe with
production at the end of December) for the international market
• There are serious competitors in terms of produce quantity and
quality (South Africa, Indonesia, Brazil)
• Fertilizer applications are needed to increase yields

Marketing
o Marketing system

Local
• Local markets account for very small volumes and are still
insignificant
• Selling prices vary greatly from one year to another and during
the same season

International
• Importers fix the price
• Collectors, who are intermediaries between the producer and
exporter, reduce the price to the producer (increasing their own
profit)
• There are many other producing countries and their volumes
and productivity are very high; the quality of their produce is
also recognized
o The produce
• Requirements with regard to quality are gradually being met
(EurepGAP)

Financing
o Farmers have difficulty in accumulating capital

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