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Bottleneck in the value chain
By Trinh Hoang
Sunday,  Mar 29, 2020,12:08 (GMT+7)

Bottleneck in the value chain

By Trinh Hoang

A recent study on measuring the food loss of vegetables, fruits, meat and seafood published by CEL Consulting shows that an average 25.4% of agro-products are spoiled before being transported to processing factories or distribution centers - PHOTO: LE HOANG VU

Finding the market for Vietnam’s vegetables and fruits is a hot issue when the Covid-19 is disrupting agro-product exports to China. Why do Vietnam’s agro-products rely almost on the Chinese market? This is the question the Government wants to find an answer in a recent conference on promoting agro-product processing and farm mechanization.

According to data of the General Department of Vietnam Customs, vegetable and fruit exports in 2019 reached US$3.74 billion. China was the biggest market for the agro-products, accounting for nearly 70% of the export revenue. The lack of essential facilities for collection, preservation, processing and transport is one of the main factors which make it hard for Vietnam’s vegetable and fruit sector to expand exports to other markets and force the sector to focus mainly on China, a market with geographical proximity. It also puts enterprises and traders in passiveness and embarrassment whenever there are upheavals in the Chinese market.

High loss rate

Vegetables and fruits are perishable and seasonal products which have a short life cycle and need preservation at a low temperature. Different vegetable and fruit products even need different levels of temperature control for each stage. Therefore, the logistics for these agro-products must follow a synchronized process, from farming to harvesting, processing, packaging, preserving, transporting and distributing.

A recent study on measuring the food loss of vegetables, fruits, meat and seafood published by CEL Consulting shows that an average 25.4% of agro-products are spoiled before being transported to processing factories or distribution centers. Even during transport and distribution, few vegetables and fruits are properly preserved and carried; therefore the loss rate is around 5-10%.

The assurance of the quality of vegetables and fruits of Vietnamese traders hinges mainly on the transport speed. If the transport time is short, the loss rate will be acceptable. However, due to this practice, the traders will immediately get passive and embarrassed if there is any change at a certain point of the supply chain. As an example, if partners are slow in taking deliveries, the traders will have no way to preserve the products or have to bear high cost, so they have to accept a selloff or see their products spoiled or degraded in quality upon delivery. 

The bottleneck

The first reason for this dilemma is there is no unified harvest and collection process in vegetable and fruit farming areas. Vegetables and fruits are grown by farming households, collected sparsely and gathered at wholesale markets; so there is barely synchronization in packaging and raw processing before transport. This disrupts the transport process at different points in the supply chain when the products are unloaded and re-packaged, which wastes time and costs money and makes the products spoiled due to failure to preserve at appropriate temperatures when there is a change of the means of transport or the location.

This shortcoming is the main reason for the high loss rate at the collection phase. Further, the inappropriate collection and preservation at the start makes it more difficult for the transport phase. It’s nearly impossible to export products whose quality is not ensured at the beginning to distant markets like the EU and the United States.

The next reason is preservation during transport. The preservation of fruits and vegetables during transport is quite complicated, as each vegetable and each fruit need preservation under different temperatures and conditions, which requires the use of high-standard cold chains. However, at present, only a small part of vegetables and fruits, meat and fish are preserved with cold chains. According to the CEL study, only 14% of producers in Vietnam use cold chains, mainly for export fisheries.

The cold chain supply business in Vietnam has attracted many local and foreign enterprises, but the size of the supply chains is moderate. Twenty percent of the cold chains can supply less than five services and over 50% can supply six or seven services, which are equivalent to about one-third of the number of services cold chains can supply to close the product preservation chain loop. 

Besides cold storage and preservation, the transport with refrigeration trucks is also a problem. There is a serious shortage of up-to-standard trucks because few trucks have the right thermal insulation systems. Therefore, the assurance of the temperatures of the cold storage and the refrigeration trucks up to the temperatures required for agro-products is not yet fully controlled.

The recently ratified EU-Vietnam Free Trade Agreement will be a great stride forward for Vietnam in general and the agriculture sector in particular, especially for vegetable and fruit products. However, preservation and transport will be much more difficult, as the EU has very high technical safety standards and the transport by sea takes a long time. Therefore, the complete development of the collection, preservation and transport system is an urgent issue for Vietnamese enterprises seeking to expand the market for Vietnamese agro-products.

Transport infrastructure and logistics fees

According to studies by the HCMC University of Transport and the Vietnam Logistics Research and Development Institute, agro-products in general and vegetables and fruits in particular are transported mainly by road due to the undeveloped railway transport or inland waterway transport system and the inappropriate transport and preservation of agro-products, which forces enterprises to use road transport to save time and ensure product quality. This is the reason for the high logistics cost of agro-products. According to enterprises, the cost may range from 15% (for black pepper and dried fruit) to 60-70% (for fresh fruit). The high cost is attributed to road fees and expenses arising from congestion and overload on roads and at border gates and seaports.

 

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