Report No. S097-MAG Madagascar Export Crops Sub-sector Review Decemir 28, 1984 East Afiica Prjects Dcpartmnent Central Agriculture Division FOR OFFICIAL USE ONLY 1::_ -bidlosued oAf tht World: Bank'atoiain MS ,. . -hi doumn ha a ret-ce ditibto an ma be use by .re-. ;. ..e.s. 1nl -n th per_orancef terffca du-s -t cotet ma no othewis be di,sclosed w_hu Wol Ban authorization CURRENCY EQUIVALENTS currency Unit tialsy Francs (FMG) USS1.00 - FMG 550 1/ FMG 100 - US$0.18 WEIGHTS AND MEASURES metric System metric 1 hectare (ha) 2.47 acres 1 kilometer (ka) - 0.62 mile I square kilometer (km2) , 0.39 square mile 1 kilogram (kg) - 2.20 pounds I liter (1) 0.26 US gallon 0.22 Imperial gallon 1 metric tonne (t) 2,204 pounds GOVERNMENT ADNINISTRATION Fokonolona Institutions Fokantany - village Firaisam-pokontany - group of Fokontany (or Firaisana) (former canton) Fivondronan-pokonolona - group of Firaisana (or Fivondronana) (former sub-prefecture) Faricany - group of Fivondronana (former province) FISCAL YEAR Government of Madagascar January 1-December 31 Parastatals Vary by institutions but most commonly january 1-December 31 11 The exchange rate between the US dollar and the Malagasy franc used in this report is based on an average of the rates obtained during the second half of 19b3. FOR OMCIAL USE ONLY Abbreviations and Glossary BCRDH Central Bank of Madagascar (Banque Centrale de la Republique Democratique de Madagascar) BCSPG Clove Marketing Board and Price StabilIzatiou Fund (Bureau de Commercialisation et de Stabilisation des prix du Girofle) BCSPP Pepper Marketing Board and Price Stabilization Fund (Bureau de Commercialisation et de Stabilisation des Prix du Poivre) BFV National Commercial. Bank (Banky Fampandrosoana Ny Varotra) BNI National Industrial Development Bank (Bankin' Ny Indostria) BTH Rural Development Bank of Madagascar (Bankin' Ny Tantsaha Mpamokatra) CAVAGI Coffee Vanilla and Cloves Stabilization Funds CCCE French Development Fund (Caisse Ceutrale de Cooperation Econouique) - CMN Malagasy navigation company (Compagnie ialgache de Navigation) COROI State marketing company (Comptoir de Commerce et de Representation de L'Oc-an ludien) CSPC Coffee Price Stabilization Fund (Caisse de Srabilisation des Prix du Cafe) CSPV Vanilla Price Stabilization Fund (Caisse de Stabilisation des Prix de la Vanille) DGP Directorate General of Planning (Direction Generale de la Planification) EXA txport Assistance International FAC Prench Technical Assistance Agency (Fonds d'Aide et de Cooperation) - FAO Food and Agiculture Organization of the United Nations FED European Development Fund (Fonds Europeen de D&vEloppement) FNUP Natioual Consolidated Equalization Fund (Fonds National Unique de Pfir6quation) FOB Free on board FOFIFA National Center for Applied Research on Rural Development (Foibe Fikorahana Mombnon ny Fampandrosanan ny eny Ambarivohitra) GATT General Agreement on Tariffs and Trade GNIV National Vanilla Association (Groupement National Interprofessionel de la Vanille) ICA International Coffee Agreement ICCO International Cocoa Organization ICO International Coffee Organization INSRE National Institute of Statistics and Economic Research (Institut National des Statistiques er de la Recherche Economique) IPC International Pepper Community ISNAR International Service for National Agricultural Research ITC International Trade Center MIEM Ministry of Industry, Energy and Mines (Ministare de l'Indust_ie, de l'Energie et des Mines) MPAEF Ministry of Animal Production, Water and Forests (Ministere de la Production Animale, des Eaux et Forets) This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. MPARA Ministry of Agricultural Production and Agrarian Reform (MinistAre de la Produciton Agricole et de la Reforme Agraire) MPFE Ministry of Finance and Economy (Ministtre auprAs de la Prgsidence charge des Finance et de 1'Economie) KRSTD Ministry of Scientific and Techaological Research (MinistAre de la Recherche Scientifique et Tecnnologique pour le d6vRloppement) MTP Ministry of Public Works (Ministare des Travaux Publics) MTRT Ministry of Transport, Supply and Tourism (Ministare des Transports, du Ravitaillement et du Tourisme) OAMCAF African and Malagasy Coffee Organization (Organisation Africaine et Malgache du CafE) OCPGC Coffee, Pepper, Cloves and Cocoa Operation (Operation Cafe-Poivre-Girofle-Cacao) ODR Rice Development Operation (Op6ration de Developpement Rizicole) RINDRA State audit company (Foibe Mpanaramaso Ny Fanjarianasa) RNCFM National railway network (REseau National des Chemins de Fer Malagasy) ROSO State marketing company (Tranombarotra Roso) SICE State marketiug company (SociEte Industrielle et Commrciale de L'Emyrne) SMTM National maritime transport company (SocietE Malgache des Transports Maritimes) SOMACODIS State marketing company (SociEte Malgache pour la Collecte et La Distribution) UNCTAD United Nations Conference on Trade and Development Executive Summary Ci) Objectives and Focus. Export crops are the main means of livelihood for almost one-third of Madagascar's population, and the country's principal source of foreign exchange. Coffee alone contributes an average 40-50X of annual export revenue. Cloves and vanilla are also critically important to the economy. Together these three account for about 80% of export revenues. This report examines Madagascar's performance, policies and prospec.s with regard to development of these and other export crops, in order to provide a framework for Government/Bank dialogue and subsequent action in this important sub-seccor of agriculture (Chapter I). (ii) External Market Constraints and Prospects. Over the past decade Madagascar's export earnings have been sustained mainly by the 1976-77 boom in world market prices for coffee, and by the subsequent sharp rise in export prices for cloves and vanilla. Simultaneously the export volume for most other crops has been in steep decline. Increases in export revenues will be difficult to sustain in view of unpromising prospects for rapid growth in world markets for Madagascar's key export commoditites. External market constraints (including slow consumption growth, international quota agreements and quality standards, and increasingly intense competition from more enterprising trading countries) limit export growth potential. However internal policies and constraints (including declining volume, reliability and quality of production, lack of price incentives for export crop production, Government monopolies and excessive controls on export trading, and neglect of export services and promotion) have also seriously weakened Madagascar's ability to expand agricultural exports. Market opportunities are identified for renewed growth in exports of coffee, vanilla, cocoa, green pepper, sisal and a diversified range of lesser, inadequately exploited crops (Chapter II). (iii) Crop Production Constraints and Prospects. Despite favorable lands, soiLs and climatic conditions for tropical agriculture, production of export crops (with the exception of cloves and, to a lesser extent, vanilla) has become increasingly unprofitable for small farmers as a result of prevailing pricing policies. Yields are well below potential. Production is severely constrained by labor shortages at times of peak demand, low standards of farming technology, inadequate input supply services, weak extension services, neglect of crop research, and lack of farmer access to wage goods and to protection against climatic risks. Faced with these problems, many cash crop farmers have reverted to a semi-subsistence system of cultivation. To reverse this situation, major adjustments in agricultural policy and services are required, most urgently for coffee. Cocoa, sisal and cassava also warrant attention for rehabilitation, and longer-term opportunities are identified for increased production of coconut, cashew, maize, various fruit crops and spices. To provide an adequate foundation for future production growth, early action is needed to overhaul extension services and techniques, to re-establish essential infrastructure and input supply services, to create a viable system for crop monitoring and forecasting, and to reformulate export crop pricing policies to provide production incentives (Chapter III). Cii) (iv) Internal Marketing Constraints and Prospects. Policy changes and legislative measures introduced during the 1970s greatly increased Government involvement in the marketing system for export crops. Coffee, cloves, black pepper and certain lesser crops became subject to state trading monopolies, and the activities of private sector marketing and processing enterprises were severely circumscribed. In general, the regulated marketing system has functioned poorly, and operationaL difficulties are widespread. Lack of strategic planning, inadequate faciliti-s at the primary marketing level, deteriorating transport infrastructure, inefficiencies in port handling, severe weaknesses in quality control of export commodities, complex export administration procedures, inadequate market-research and promotion services, and structural distortions in the marketing and pricing system are among the most serious constraints. Reduction of marketing costs offers possibly the greatest scope for early improvement in the profitability of agricultural export production and trade. Initial action in this direction calls mainly for organizational and policy adjustments (Chapter IV). (v) Pricing Policy Constraints and Prospects. For the main export crops a system of administered pricing, providing guaranteed minimum prices to producers and exporters, has been maintained since Madagascar became independent in 1960. A separate price stabilization scheme is operated for each commodity, and official price structures are issued annually. The system has provided a degree of protection to growers under volatile commodity trading conditions, but it has become arbitrary, inflexible and inefficient. Price setting procedures are bureaucratic, are not based on economic criteria, and have been unresponsive to farm production costs and constraints. The structures and operations of the Price Stabilizaiton Funds have not evolved in line with changing production and trade coniditious, and have been weakened by poor financial management, serious accounting flaws and organizational weaknesses. Pricing policies are dictated mainly by the short-term needs of the Government Treasury. The decline of coffee production, for example, is mainly attributed to arbitrary pricing, heavy taxation, diversion of Stabilization Fund revenues to non-productive sectors of the economy and inadequate re-investment of resources in coffee development. Major changes in pricing policies and procedures are called for, including reexamination of the level of taxation, liberalisation or abolition of the set differentiels, and fixation of producer floor prices, based on improved knowledge of actual production and marketing costs and the criterion of border pricing (Chapter V). (vi) Institutional Constraints and Prospects. Government policy changes since 1972 have vastly expanded the role and numbers of public institutions in foreign and domestic trade. Export crop development directly or indirectly involves no fewer than eight ministries, of which MPARA (and its dependent agency OCPGC) and MC (which overseas the Stabilization Funds and parastatal trading agencies) are the most important. Since 1982 an extensive realignment and internal reorganization of these institutions has been underway, but the process is not yet complete. In the private sector, Government policies since the early 1970s Ciii) actively discouraged investment and severely curtailed export operations. Howerer, a well-established residual nucleus of private enterprises exists which handles the vanilla trade and could rapidly expand exports of other agricultural products under more favorable production and trading conditions. A review of institutional structures and resources shows the need to address a range of organizational issues facing the public sector (fragmented responsibilities, ill-defined objectives, weak planning and coordination, poor information services, procedural and management constraints) and to re-activate private sector investment in order to accelerate export growth (Chapter VI). (vii) Action Undertaken. Since 1981 the Government has sought ways to initiate a strong recovery in export crop production and trade. Various stabilization measures and policy adjustments have been implemented to deal with the broader economic and agricultural sector issues affecting export growth. Specific steps taken recently to alleviate the identified external trading, production, marketing, pricing and institutional constraints are itemized (Chapter VII, 7.02-7.03). Outstanding issues for early attention are identified (7.04-7.05). Conclusions and recommendations for follow-up action arising from this review are both commodity-specific and applicable to the export crops sub-sector as a whole (7.06). CViii) Coffee. The problems for coffee development are the most economically important and complex among the major crops, and the least amenable to rapid solutions. Long-term strategy should aim to strengthen Madagascar's competitive position in the world market through crop research and technological diversification. A medium-term plan (1986-1990) should seek to revitalize the coffee sector through rehabilitation of robusta coffee production, exploitation of arabica coffee potential, and upgrading of coffee quality. Short-term action (1984-85) should focus on improved cultivation, marketing and trading efficiency. Immediate priorities include action on: (a) pricing policy and incentives (including an increase in real producer prices of 502 over teLree years, and an initial increase in 1984/85 of 15-20% over the 1983/84 guaranteed producer price); (b) the structure and mechanisms for price setting and.administration (including establishment of economic criteria for price determination, and an improved methodology and procedure for annual price reviews); (c) improvement of input supply and distribution; (d) reduction of transport and shipping bottlenecks to coffee exporting, (e) upgrading of processing and quality control, and (f) improvements in organization and administration (7.07-?7.08). (ix) Cloves. The prospects for development of clove exports are not promising, since Madagascar's existing production capacity far exceeds the expected growth rate of world market demand. A dual strategy is recommended which calls for production and price restraint and vigorous exploitation of available markets for clove products. Medium-term planning (1986-1990) should aim to promote broader growth of the country's spice trade based on established markets for cloves. Short-term action (1984-85) should focus on reduction of accumulated stocks. Immediate priorities include: (a) active market promotion in target countries; (b) more flexible (iv) export pricing to secure entry into new markets; (c) maintenance of unchanged producer prices; (d) utilization of Stabilization Fund Resources to finance export market development; (e) basic improvements to crop quality and storage; and (f) formulation of a program of industrial and technological research to identify the scope for diversified product forms and industrial uses for subsidiary clove products (7.09-7.10). (x) Vanilla. Demand growth prospects are relatively stable. Nadagascar's position as leading world supplier has made possible application of monopolistic pricing policies; however, the high prices charged are threatening Madagascar's revenue prospects as they have encouraged consumers to switch to cheap synthetic flavorings. In order to sustain long-term demand, early action is recommended to raise yields through improved crop husbandry and extension services, to strengthen ongoing agronomic research, and to explore new consumer uses for natural vanilla. Short-term plans (1984-85) should focus on re-investment of Stabilization Fund resources in crop and market development under a medium-term (1986-1990) plan. Priorities for investment include: (a) development of vanilla research and extension services; (b) diversification of production areas and cropping systems; (C) technological, product development and market research; and (d) providing institutional support for GNIV (the National Vanilla Association), a private sector institution (7.11-7.12). (xi) Pepper. The outlook is favorable for continued growth in world markets for both black and green pepper, but Madagascar's export growth prospects differ between the two. A pepper development strategy should favor expanded production and promotion of green pepper (a Malagasy speciality) by improving extension, input supply and crop collection services and by encouraging additional private sector investment in this product. For black pepper, fundamental policy changes are needed quickly to restore production and trade on a profitable basis. In the area of trade policy, (a) removal of marketing and pricing controls and (b) abolition of the price stabilization scheme for black pepper are recommended. Priorities from an agricultural policy standpoint should focus on (c) raising crop yields through supply of improved plant material, reduction of plant material, reduction of plant disease, improved use of fertilizer, and husbandry techniques, and (d) linkage of production and trading operations within a coherent strategy and action plan to restructure and expand pepper exports with effect from 1985 (7.13-7.14). (xii) Cocoa. Despite generally unpromising world market and price trends, cocoa offers some scope for increased production and export earnings. Production by small farmers is expanding, yields are moderate and capable of further increases, and apparent demand exists for Malagasy cocoa varieties. Short-term action (1984-85) should focus on: (a) carrying out a detailed study on cocoa development potential and (b) maintaining and increasing support for varietal and yield improvement through OCPGC. Experience gained in this period would guide the formulation of a more precise medium-term (1986-1990) strategy for expansion of cocoa exports (7.15-7.16). (v) (xiii) Lesser Crops. In addition to the five principal export crops, eight other commodities are suggested for further research and development in the immediate future (7.17). An in-depth study is needed on sisal, a well-established crop in Madagascar and traditional foreign-exchange earner (7.18). Recent liberalization of trade in butter beans ('pois du cap') should assist a revival of production and renewed export growth of this crop (7.19). Production and long-term export possibilities for coconut have not been sufficiently exploited (7.20). Another versatile crop, well-established in certain areas, is cashew, for which Madagascar has a small export market capable of further development (7.21). Production of cassava is second only to rice among the food crops, and provides the raw material for processing and export of tapioca in increased quantities (7.22). High priority should be given to detailed study of maize export potential in the light of apparent adaptability of this crop to various regions and unfulfilled export demand (7.23). The export prospects for various spices, such as cinnamon, nutmeg and ginger, have so far been poorly exploited and should be examined, in conjunction with vanilla and cloves, by a proposed National Spice Promotion Board (7.24). Madagascar's diversified climate and land resources also offer considerable long-term scope for increasing exports of tropical fruits, for which rehabilitation of transport infrastructure and an investment code to attract private capital would be essential pre-conditions for trade expansion (7.25). (xiv) Export Crop Development Strategy. Development planning for specific crops should be reviewed in the broader context of economic and sector development plans. Preparation of a long-term inter-sectoral strategy and action plan for the export crops sub-sector is recommended and should follow Government/Bank review of the present report (7.26). Cxv) Components of an Export Crop Strategy. The principal policy choices lie between expansion, rehabilitaiton and diversification, or a combination of these three options. Crop diversification policy should also weigh options for crop, product, market and production area diversification. An overall strategy for Madagascar should seek to: (a) reconcile crop resource potential with external market opportunities, (b) establish policy linkages between production, internal marketing, agro-industrial processing and pricing policies for specific crops, and (c) ensure coordination of information, research, extension, input supply and promotion services. Relationships between external and domestic markets and prices, and between cash crop and food crop policies, should be carefully evaluated (7.27). (xvi) Recommended Strategy. The three main export crops (coffee, cloves and vanilla) offer limited prospects for long-term economic growth. It is therefore recommended that Government's long term goals should focus on regional crop and product diversification. In the medium-term, however, Madagascar will remain heavily dependent on the existing major crops; for the 1986-1990 period emphasis should be on expansion of established crop exports and progressive diversification of production. In the short term (1984-85), Government efforts should focus on (a) measures for rehabilitation of production and diversification of markets for the major (vi) export crops, (b) expansion of the existing export trade among lesser crops, and (c) preparation of a strategy and action plan for long-term diversification and development (7.28). (xviL) Priorities for Action. Follow-up action in response to this review will require Government/Bank dialogue on a range of issues which call for early attention. These issues include information management, manpower training, price policy formulation, institutional reform, marketing infrastructure, control of quality standards, and the role in export crop development assigned to the private sector (7.29). The main elements of an action plan and schedule to address these issues is annexed to this report (7.30). It is suggested that within this framework for action, the agenda for discussions should focus on five key topics: (a) coffee development (b) marketing policy issues (c) pricing policy issues Cd) institutional reforms (e) export diversification MADAGASCAR EXPORT CROPS SUB-SECTOR REVIEW Table of Contents Page I. INTRODUCTION .............................. ...... ........ .......... I I1. EXPORT MARKETS: STATUS AND TRENDS A. Structure of External Trade ............. ..... ............... 4 B. The Market for Coffee . 4 C. The Market for Cloves ......................................... 13 D. The Market for Vauilla .. . ... . . ... ..... .. . . . .. . * * * * * * * * * * * * * * * 17 E. Markets for Lesser Crops ..... ............... .... .................... 22 F. Conclusions ......... ........ ............ ................... ... 29 III. EXPORT CROP PRODUCTION A. Ecological Conditions for Crop Production .............. ...... 31 B. Production and Post-Harvest Practices ........................ 31 C. Production Volumes and Yields ................................ 35 D. Farming Systems and Constraints .............................. 40 E. Economics of Crop Production ..... .... ........................ 44 F. Scope for Crop Diversification ......*..*................ .... 49 G. Conclusions ................................................ . 52 IV. EXPORT CROP MARKETING A. Crop Marketing Systems ........ ...................................... 54 B. Status of Marketing Operations ............................... 58 C. Conclusions ....... ........................................ . . 66 V. PRICING AND PRICE STABILIZATION A. Price Administration System ............ . ................. 68 B. PLices and Margins .......................................... 70 C. Role and Operations of the Stabilization Funds ............ ... 73 D. Utilization of Export Revenues ............................... 75 E. Conclusions ....... ......... ....................... 78 VI, ORGANIZATION FOR EXPORT A. Institutional Framework .. . .... .. . .. .. . ... . ... .. . ... . ... . .. .. 80 B. *Private Sector Operations *.*... ... . .......... .87 C. Organization of Export Services ............................. 88 VII. PROSPECTS FOR DEVELOPM4ENT A. General Situation Summary .......**** ****. ................... . 92 B. Commodity Prospects and Scope for Development ............... 98 C. Towards an Export Crop Development Strategy ........... 105 Annex: Main Elements of an Action Plan Tables (separate listing) Graphs and Charts (separate listing) map: IBRD 28282 List of Tables Table No. Title 1. Structure of Merchandise Imports (c.i.f_) 1978-1982 2. Structure of Merchandise Exports (f.o.b_) 1978-1982 3. Value and Volume of Total Exports, 1960-1982 4. Crop Production, 1973-1982 5. Major Merchandise Exports (Volume m/t), 1973-1982 6. Major Merchandise Exports (Value f.o.b., FMg mill.) 1973-1982 7_ World Net Imports of Coffee by Major Regions/Countries 8. Coffee Prices, 1973-82 and 1983-95 (Projected) 9. Price Differences between Centrals and Other Kinds of Coffee 10. Coffee Year 1983/84: Exporting Members Entitled to a basic Quota 11. Coffee Year 1983/84: Exporting Members Initial Annual and Quarterly Quotas 12. Madagascar: Coffee Production and Exports 1973-1984 13. Coffee Exports by ICO Exporting Members to Non-Members 14. Madagascar: Cloves Production and Exports 1973-1982 15. Indonesian Imports of Cloves, 1973-1981 16. Imports of Cloves (Excluding Indonesia), 1976-1980 17. New York Spot Prices for Cloves and Madagascar Producer Prices, 1973-1983 18. Madagascar: VaniUa Production and Exports, 1973-1984 19. Imports of Vanilla, 1976-1980 20. New York Spot Prices for Vanilla and Madagascar Producer Prices 21. Madagascar: Pepper Production and Exports 1973-1984 22. World Imports of Pepper, 1976-1980 23. New York Spot Prices for Pepper and Madagascar Producer Prices 24. Production and Export Volumes of Principal Export Crops, 1978-1983 25. Distribution of Farm Types (October 1983) 26. Number of Producers and Farm Size (1983) 27. Participation of Women in Agricultural Activities 28. Crop Establishment Data for Export Crops 29. Estimated Yields of Principal Export Crops 30. Producer Prices for Export and Other Crops (October 1983) 31. Returns per Laborday on Farm Production from Operation of Existing Farms, 1982-83 32. Prices of Farm Inputs (October 1983) 33. Imports of Agricultural Chemicals (Tons), 1979-1983 34. Price Structure for Coffee, 1975-1983 35. Price Structure for Clove Buds, 1975-1984 36. Price Structure for Vanilla, 1975-1983 37. Price Structure for Black Pepper, 1974-1983 38. Changes in Coffee Price Components, 1978-1983 39. Changes iu Clove Price Components, 1978-1983 40. Changes in Vanilla Price Components, 1978-1983 41. Changes in Black Pepper Price Components, 1978-1983 42. Stabilization Fund Receipts and Expenditures, FY 1979/80-1982/83 43. FNUP - Annual Receipts and Expenditures, 1979-82 44. FNUP - Revenues, Expenses and Investments by Commodity List of Graphs and Charts Graphs Figure 1 World and Brazil's Coffee Production Figure 2 Real World Coffee Prices and World Stocks Figure 3 Coffee prices, Actual and Projected Figure 4 Ratio of Robusta to Arabica Prices Figure 5 Producer Price as X of Coffee Guaranteed Export Price and Actual Export Price Figure 6 Producer Price as Z of Cloves Guaranteed Export Price and Actual Export Price Figure 7 Producer Price as Z of Vanilla Guaranteed Export Price and Actual Export Price Figure 8 Producer Price as Z of Pepper Guaranteed Export Price and Actual Export Price Figure 9 Producer Prices of Selected Crops as Z of Guaranteed Export Price Figure 10 Producer Prices of Selected Crops as Z of Actual Export Prices Charts Chart 1 Export Crop Marketing Circuit Chart 2 Export Crop Marketing Calendar Chart 3 List of Participants in Decision-Making Map: Principal Export Crops of Madagacsar MADAGASCAR EXPORT CROPS SUB-SECTOR REVIEW I. INTRODUCTION 1.01 Objective. Export crops are the main means of livelihood for more than 500,000 farm families, almost one-third of the population of ladagascar. They are also the country's principal source of foreign exchange and important for the future expansion of employment opportunities in agriculture. Growth in this sector is therefore critical for social and economic development. How to improve Madagascar's competitive standing in world markets, sustain and expand crop production, increase marketing efficiency, and ensure optimal use of export crop revenues are the main issues addressed in this review. It is intended that the information, analysis and conclusions presented in the report should provide a framework for Government/Bank dialogue on export policy in the agriculture sector and for subsequent action. 1.02 Background. The present economic crisis in Madagascar has prompted renewed interest in export crops after a prolonged period of relative neglect. When independence was achieved in 1960, production and trade in agricultural commodities dominated the national economy. During the 1960s the Government and the private sector sought to build on this colonial inheritance. Political changes in the early 1970s, however, led to new approaches. By the mid-1970s agricultural policy had shifted explicitly towards achieving self-sufficiency in food production as a priority goal. Public sector investment increased, and many production and trading enterprises were nationalised. While the value of crop exports coutinued to rise, the volume of exports failed to keep pace. Growth in the agriculture sector as a whole was slow. Another Government policy initiative in 1978 sought to diversify the economy through rapid expansion of the manufacturing sector. An ambitious public investment program followed in 1979, financed in part by a sudden large increase in external borrowings. As the worldwide recession approached, Madagascar found its financial resources over-extended and the economy plunged quickly into severe crisis. Since 1980 this crisis has dominated the national scene. Faced now with acute balance of payments difficulties, continued production stagnation and widespread economic dislocation, the Government has begun to look more deeply into its export crop performance and prospects. 1.03 Commodity Focus. The range of agricultural exports is broad. It extends from tropical beverages and spices to livestock, fish, and various processed products, such as tapioca, vegetable fibers and essential oils. Collectively these exports account for about 90% of foreign exchange earnings. However, a few commodities account for a disproportionately large share of the export trade. Coffee alone contributes an average 40-50% of annual export revenue. Cloves and vanilla are also of critical economic importance. In the 1981-82 period the combined value of these three crop exports amounted to 80% of foreign exchange earnings froi -2- agriculture. Of necessity, this report assigns priority to this group of traditional exports.. Lesser crops, including pepper, sisal, cocoa, butter beans (pois du cap), various other spices and essential oils play a significant supporting role in the export trade and are also examined in this review. The prospects for crop diversification are also given some consideration. However, other important sub-sectors of agriculture - livestock, fisheries, and industrial crops such as sugar and cotton - are addressed more appropriately either in separate studies or in the context of ongoing Bank-assisted projects. They are therefore considered only peripherally in this report. 1.04 Multi-sectoral Implications. The problem of export crop development is not exclusively agricultural. The production process must perforce be geared to the final goal of sale in international markets, and trading performance may be affected by structural, organizational or economic weaknesses at any point in the farr-to-market chain. For Madagascar, given the thousands of miles which separate rural producers from their major ultimate markets, this chain is exceptionally long. It is also internally complex, involving both the public and private sector and a large number of intermediaries and institutions. Within the Government, export crop development currently involves no fewer than eight ministries, those of Agricultural Production and Agrarian Reform (MPARA), Commerce (MC), Transport, Supply and Tourism (MTRT), Public Works (MTP), Industry Energy and Mines (MIEM), Scientific and Technological Research (MBSTD), Finance and Economy (MPFE), and Planning (DGP). The formulation of a coherent development policy in this sector must therefore engage all key participants in the process. Accordingly, the approach adopted for this review is inter-sectoral. It recognises that constraints and their remedies should be identified throughout the export crop production and trading system. 1.05 Report Structure. The structure of the report is designed to assist sequential study of the system's component parts. Chapter II examines trends and prospects in the international commodity markets which will influence the progress of Madagascar's exports for the foreseeable future. It analyses both past and present constraints and seeks to differentiate between short-term (19b4/85) and longer-term (1986-1990) opportunities. Chapter III reviews the production of export crops in this light. It examines the ecological conditions and local environments for crop production, farming practices, constraints and achievements, and the scope for expanding production in the context of prevailing prices and available services. Chapter IV looks into the internal workings of the marketing system on which the farmer depends and which must supply the products to the port of exit for international trade. Marketing channels, infrastructure, procedures and services are reviewed, and an assessment is made of the scope for improving crop processing and marketing efficiency. Chapter V focusses on prices, pricing mechanisms and the issue of price stabilization. It explores the role and operations of the Price Stabilization Funds, and the use made of export crop revenues controlled by the Government. Desirable changes in pricing policies and procedures are also identified. Chapter VI reviews the relationships between various -3- participants in the export crop trade, the institutions concerned, and the respective roles which are or should be played by the public and private sectors. The organization and management of export operations is the main issue addressed in this chapter. Finally, in Chapter VII, the prospects for development are summarized. For each of the commodities considered, a profile is provided of the opportunities for growth and the measures needed to achieve that growth. The outlines of a coherent inter-sectoral export crop development policy are suggested, and alternative strategies and action plans are reviewed. Relevant tables, charts, and matrices and map supporting the body of the report are grouped together in the Annexes. 1.06 Acknowledgements. The report is a product of Government/Bank consultations on export crop issues over the past three years. It draws on many sources, and benefits from considerable information assembled for a preliminary Bank working paper on export crops issued in June 1982. This contributed to a first overview of agricultural export issues in the Sector Memorandum on Agriculture and Rural Development issued in March 1983. Following further discussions on these issues, a mission comprising Messrs. N. Wilkie, E. Los (EAPCA) and M. Couillaud (consultant) visited Madagascar in September 1983 to carry out a more extensive study of the export crop sub-sector. The present report mainly reflects the work of this mission and its close collaboration with many Government officials in concerned ministries and agencies. A follow-up mission in March 1984 by Mr. N. Wilkie, the study coordinator, assisted in updating the analysis of production and trade statistics and in reviewing institutional changes resulting from Government reorganization during the latter half of 1983. Outstanding information gaps and statistical inconsistencies, where these are especially important, are discussed in relevant sections of the report. EAPCA staff responsible for the present report recognize the valuable contributions made by Malagasy officials, by the studies of other organizations cited in the text, and by colleagues in various quarters within the Bank during its preparation. 1.07 Note. The statistical data and commentary contained in this report were updated in April 1984. The report therefore does not take account of either subsequent developments or action subsequently undertaken by the Government of Madagascar. Following review of the findings and conclusions of this report, additional economic analysis of export crop pricing and taxation issues will be carried out by the Bank. The results of this work will be incorporated in follow-up discussions with the Government on its action plan for export crop development. -4- II. EXPORT MABRXETS: STATUS AND TRENDS A. Structure of External Trade 2.01 As a large island situated in the Indian Ocean and adjacent to mainland Africa, Madagascar Is uniquely positioned for international trade. Nevertheless the country's trading structure shows many features common to other developing nations in the tropics. Exports consist mainly of primary commodities. Imports consist mainly of capital goods, raw materials and energy supplies. Although independence in 1960 inspired hopes for broader and more rapid economic growth, Madagascar, like other developing countries, has been profoundly affected both by the changing economic climate in world markets and by internal shifts in national development policy. In general progress has been slow. In recent years economic difficulties have prompted significant changes in the import trade structure, marked by rapid increases in rice and fuel imports. Simultaneously lack of progress in the never industry and energy sectors has led to even greater dependence on primary agricultural commodities as the foundation of export trade. (Tables 1 and 2). Export Trends _.02 Export revenues show a continuous upward tread. Since independence, the value of total exports measured at current prices has multiplied sixfold, from FMG 18.4 billion in 1960 to FMG 109.0 billion in 1982. With the excreptiou of 1977, when export revenue jumped by 25% over the previous year (largely in response to the sudden boom in world market prices for coffee), earnings from exports show a pattern of relatively steady growth over more than two decades. Throughout the 1960s the volume of exports grew even faster than export income, rising from 235,000 tons in 1960 to 782,000 tons in 1970, an increase of 333%. (Export value, by comparison, rose by only 218% over the same period.) In the 1970s, however, this promising trend was reversed. While in current terms earuings more than doubled from FMG 40.2 billion in 1970 to FMG 84.7 billion in 1980 and in real terms export income continued to show modest growth, the actual volume of goods exported declined sharply. From the peak of 782,000 tons in 1970 export volume dropped by 10% in 1971, recovered slightly In 1972-74, then declined steadily for the remainder of the decade. By 1980 export volume was only 372,000 tons, the lowest level of achievement in 15 years (Table 3). While these officially reported trade figures are at best approximate and are subject to many inconsistencies (deriving from the use of multiple sources, occasional data gaps, weaknesses in collection methods and - more recently - diffusion of responsibility for data collection), the general decline in export performance since 1970 is indisputable. 2.03 The export pattern for agricultural products generally reflects that of Madagascar's total export trade, demonstrating both the importance of agricultural commodities in the export portfolio and also the almost universally poor performance across all sectors of the economy since the early 1970s. In 1973, excluding agro-industrial products, agriculture's -5- share of exports amounted to 77% in value and 23Z in volume terms; in 1981 the comparable proportion of primary agricultural commodity exports to total exports amounted to 82% in value, 25% in volume. The addition of agro-industrial exports (processed foods and other processed products, textiles, shoes, wood and paper products) shows that agriculture's total share amounted to 90% of the FMG 109.0 billion in export revenues earned by Madagascar in 1982. Stagnation in other sectors has meant that over the 10 years from 1973 to 1982, despite declining output, the agriculture sector as a whole has enjoyed a rising share of total export earnings. Of this share, the primary commodities have consistently accounted for at least two-thirds in terms of both the value and the volume of agricultural trade. In the present period of crisis, the national economy is therefore especially dependent on export crops for earning foreign exchange. Agricultural Commodity Trends 2.04 With its large land area (about 592,000 Im2), varied climate, topography and soils, and a total population of about 10 million, Madagascar has a diversified agricultural economy to support export development. At present this potential is poorly exploited. Rice, the dominant crop and staple food of almost all Malagasy, was formerly also an export crop. As recently as 1970 rice exports amounted to 66,000 tons. Stagnating production over the subsequent decade, however, has transformed Madagascar's trading status in rice to that of a major importer. In 1982 imports of rice reached a peak of 352,000 tons while exports, a mere 170 tons, virtually ceased. Bananas, likewise once included among the range of export crops (an average of 7,000 tons were exported annually between 1971 and 1974), have also almost disappeared from the export balance sheet. Only 423 tons were exported in 1982, although production (281,000 tons in 1982) remains close to the levels achieved a decade previously. Certain export commodities, including sugar and cassava, show a pattern of sustained or expanded production growth which contrasts with a sharp decline in the actual export performance of these crops in world markets over the past decade. Other formerly importaut export items, including livestock products, butter beans, sisal, raffia, and oilseed cake, demonstrate a steady decline in the volume of both exports and production. 2.05 While the agriculture sector as a whole has failed during the l97Us to keep pace wi:h domestic market demand and volatile conditions in global markets, several key export crops have proved more resilient. Coffee, the leading export revenue earner since the pre-independence era, is still the most important export crop. Although over the past decade coffee export volume has declined by almost one-fifth from an annual average of 65,000 tons in the early 1970s to 53,000 tons in 1982, foreign exchange earnings from coffee, expressed in current prices, have more than doubled over the same period. Exports of cloves have increased substantially over the past decade and in the 1981-82 period were contributing 27% of agricultural export earnings. Madagascar remains the leading world producer of vanilla, another high value crop, from which export earnings at current prices have multiplied ninefold since 1973. Other traditional crop exports such as pepper (black and green) retain some -6- importance in the export accounts. Production and exports of cocoa, a potentially high value but relatively new crop in Madagascar, have shown slight growth in the 1978-82 period over the previous five years. Efforts to halt the prolonged decline in the volume of agricultural exports and to sustain foreign exchange earnings in the short term will depend very considerably on the performance of this key group of commodities. (Tables 4, 5, and 6). 2.06 The position of each of these key commodities is being eroded in world markets by factors only partially under Madagascar's control. Global consumption of coffee has shown little growth in recent years and international prices remain low. I: this tight and highly competitive market, for various reasons Madagascar is poorly placed to strengthen its already small (1.5:) world marKet share. As a member of the OAMCAF group of Francophone African partners within the International Coffee Agreement (ICA), Madagascar has little influence on global decision-making. Competition in the (mainly Eastern European) markets not covered by the ICA is intense. Furthermore as an exporter of the robusta (canephora) variety of coffee, and of only average quality, Madagascar's access to the premium markets for arabica and high-quality robusta coffees is extremely limited. The market for Madagascar's cloves is also fragile, being highly dependent on Indonesia's capacity to replace clove imports by local production for the clove cigarette industry. Even Madagascar's near-monopoly domination (with an approximately 80% share) of world markets for natural vanilla is being progressively undermined by successful competition from the cheap synthetic, vanillin, and other substitutes. These market situations, and possible strategies to deal with them, are examined in detail later in this report. It suffices here to stress the extreme vulnerability of Madagascar's entire export crops sub-sector in the light of recent world market trends. Trading Partners 2.07 In value terms, 96% of Madagascar's export trade is shared among about 30 importing countries. In 1979, the last year for which detailed data are available almost half of export revenues derived from sales to Western Europe: EEC member countries accounted for 42.2%. Trade with France, the former colonial power, accounted for more than half the EEC share and about a quarter of all exports. Western Germany is the second most important trading partner in the EEC. Exports to North America (14.8% of total in 1979) were almost exclusively to the USA, a major consumer of both coffee and vanilla from Madagascar. Asian countries took 20.2% of exports in 1979, dominated by Indonesian imports of cloves and, to a lesser extent, Japanese imports of fish products and minerals. Trade with African countries (b.2Z, mainly Algeria), Eastern Europe (5.4%) and neighbouring countries of the Indian Ocean (4.1%) accounted for almost all residual exports in 1979. Over the past ten years, Madagascar has managed to diversify its market outlets for export crops (especially coffee) by entering new markets in Western and Eastern European countries, North Africa and elsewhere. however, these openings resulted mainly from short-term opportunities and have not provided stability. In the absence -7- of renewed and sustained vigor in export market development, the EEC, the USA and (for cloves) Indonesia will continue to be the main outlets for Madagascar's agricultural export trade. Subsequent sections of this chapter explore trends in each of the world commodity markets affecting the growth of this trade. B. The Market for Coffee World Trade 2.08 The coffee plant, originally native to Africa, is now cultivated in about 60 tropical countries around the world. Most of these producing countries export virtually all of the coffee they grow. World production for the 1983/84 season is expected to be around 5.5 million tons (92 million bags), of which approximately three-quarters will enter world trade.1/ In terms of export revenues for developing coutries, coffee is the most important non-fuel commodity. 2.09 World Supply. Since 1950 the world coffee market has been characterized by slow growth and periodic adjustment to sharp fluctuationS in production and prices. On the supply side, market trends have been mainly affected by events in Brazil, the largest producer country, which presently accounts for about one-third of world exports. Erratic swings in Brazilian coffee production, caused mainly by sudden frosts (severe in 1975, less so in 1981), have intermittently destabilised prices and strongly influenced movements in world trade. Shortfalls in Brazilian output have uevertheless been fully made up by other producers in Latin America, Africa and Asia, and over a 30-year period the increase in global production has averaged 2.1Z per annum (Figure 1). 2.10 World Demand. Growth of consumption has uot kept pace with output over the past two decades. Whereas total world net imports increased by an average 2.0% in the period from 1961 to 1970, consumption growth declined in the 1970-79 period to a mere 0.6Z per annum (Table 7). Although world import demand grew fairly steadily until 1976, rapid price increases that year in the wake of the Brazilian frost accentuated other factors depressing market growth in the main consuming regions. The industrialized countries of Western Europe, the U.S.A. and Japan, which together account for about 90% of global coffee imports, experienced slower income growth. Competition from other beverages (especially soft drinks and fruit juices), conceru over health side-effects from coffee drinking, and technological developments increasing liquid coffee yields from processed coffee beans have contributed to a fall-off in world demand. Although consumption trends vary markedly among the major consuming countries, with above average growth in some countries of Western Europe, Japan aud certain newer markets in Eastern Europe, North Africa and the 1/ See World Bank "Prospects of World Coffee Economy and their Implications on Producing Countries,' Revised Draft, 10/24/1983. 8- Middle East, consumption in the United States, the single most important coffee-drinking country, shows a long-term decline in imports of 1.9% per annum. Global demand overall is currently rising by only about 1% per annum, and coffee stocks in producer countries, estimated at 50 million 60-kg bags (3 million tons) in January 1984 were already at a post-1975 record level and still rising at a rate of between 4 and 6 million bags per annum (Figure 2). Prices 2.11 In most countries demand for coffee is highly inelastic with respect to incomes and pr'ces. In the USA and EEC, which together account for about two-thirds of imports, the market response to the tripling of prices which occurred in 1976-77 as a result of the Brazilian crop crisis was a 12-15% drop in consumption levels. Price movements over the past decade therefore closely reflect the changing equilibrium between supply and demand. The trends in prices are shown in Table 8 and Figures 2 and 3. Low prices in the early 1970s reflected the vastly increased plantings which took place during the 1960s and more moderate consumption growth. The unprecedented price boom of 1976-77 dramatically increased the coffee earnings of Brazil's smaller competitors, but led quickly to a situation of renewed global over-production and steadily declining prices and a wave of economic problems in producer countries. By 1981 prices had dropped by about 55Z against 1977 levels, and in constant terms had again reverted to the low levels of 1973-75. The generally depressed prices over the past several years oblige producers to exploit more deliberately the specialized -arkets for particular coffee types and qualities. Types and Qualities of Coffee 2.12 Although there are over a hundred known coffee plant varieties, world trade is conducted on the basis of two types: arabica and robusta. The arabicas thrive at higher altitudes and are most widely grown in Latin America and East African highlands. Robustas, which are normally grown in lowland plantations and on hill slopes below 800 metres, are exported mainly from Brazil, African and Asian countries. Arabica coffees are considered to have a milder flavor, higher acidity and lower caffeine content than robustas. Arabicas are generally regarded as superior for regular (ground roasted) coffee, and command a premium price about 5-15% above robusta prices on the world market. Nevertheless, robustas have traditionally been favored in some major markets (e.g. France, Italy), and have the advantage that they produce a higher yield of soluble coffee per pound of beans. Consumption of soluble C"instant) coffees has expanded steadily since the early 1950s to a point where this form now dominates consumer sales in the U.K. and Japan and accounts for almost a quarter of the coffee sold in the U.S.A. Although arabicas and robustas are interchangeable and most coffees reaching consumers are blends of several varieties of different origins, relative demand for robusta has increased while robusta's share of world production has remained basically unchanged for the past 20 years. The price discount of robusta against arabica has therefore tended to decline over time (Figure 4). -9- 2.13 Price differentials exist not ouly between arabica and robusta but among various coffees from different origins (Table 9). Coffee traded on world markets through the New York and London commodity exchanges is also subject to different premiums and discounts applicable to spot purchases and deliveries against future coutracts. Differences in prices, however, are an inadequate gauge of product quality as perceived by coffee import -rs, roasters, blenders and ultimate consumers. Exportable 'green" coffee (i.e. hulled coffee beans), graded in accordance with international standards, may further vary in color, taste and flavor characteristics and other properties important to the buyer. These variables are complex and can occur not only between coffees of different types and country origins but between different production areas within countries and within different consignments (even within the same grade) for export. Trends in the quality of coffee traded in the world market are therefore extremely difficult to measure. Recent studies nevertheless suggest that world quality standards, at least as perceived by major importers, are dropping continuously for all coffees in general. A Bank-financed study carried out in 1983 suggests that 'top quality' coffees are produced mainly by Kenya, Central America, Ethiopia, Tanzania, Papua New Guinea and Zimbabwe.2/ Annual availability of such top quality coffee is estimated at between 100,000 and 150,000 tons or about 2Z of current world production. Harket Regulation 2.14 For the past twenty years, regulation of the world coffee market has been carried out under the International Coffee Agreement (ICA), to which Nrdagascar is a signatory. Since tbe first agreement was signed in 1962 by a large group of consuming and producing countries, the ICA has been iatermittently successful in sustaiuing prices for producer countries and regulating trade flows. It main instrument has been an export quota system. At the height of turbulence in the world coffee market in the mid-1970s, quotas were in abeyance (1973-76) due to a breakdown in agreements between producer and consumer countries on price and quota levels. In 1976 the ICA was renewed, with specific provisions to base member country quotas not only on the basis of past export performance, as hitherto, but also on the basis of the stocks held by each producer country. However, quota provisions under the ICA 1976 came into force only in October 1980 in response to the sharp fall in prices over the 1978-8W period, ending a seven-year period of intense free market competition in the world coffee trade. Since then the global market has again stabilised, and a new agreement, ICA 1983, which came into force in October 1983 is scheduled to last until September l189. The provisions of this agreement govern curreat short-term and medium-term prospects for Madagascar's coffee trade. 2/ "World Availability of Top Quality Arabica Coffee." Report to the World Bank (RMEA) by H.J. von Rilten, Coffee Consultant. August 1983. - 10 - 2.15 Quota and Price Controls. Producer member countries of the ICA account for over 99% of world net exports; importing country members account for about 88% of world net imports. The main non-member importing countries include most Eastern European countries, the USSR, and some countries in North Africa and the Middle East. Quotas are assigned to ICA producer member countries only for their exports to ICA importing members, and no limits are placed on their sales to the non-quota countries who absorb 12% of global coffee exports. For ICA member countries, the Council of the International Coffee Organization (ICO), its administrative authority, sets a global annual quota for each coffee year (October to September), taking into account annual world consumption and estimated changes in inventory level among importing members. The mechanism by which annual country quotas are set is complex but offers some scope for negotiation by individual producer country members in the light of their export performance and production and stock levels. Initial global quotas are adjustable during the coffee year, increases or decreases in quotas being triggered at pre-determined price levels in response to market and price fluctuations. From 1980 to 1983, however, initial and final annual quotas have stagnated around 56 million bags (equivalent to 3,360,000 tons), which represents only about 77% of exportable production, or 59% of total world production at estimated current (1983/84) levels (Tables 10,11). While this quota mechanism aud the relatively low levels set by the ICO in recent years have effectively stabilized prices since 1980, the stagnant market has kept prices at generally depressed levels until the 1983/84 season. The initial quota of 56.2 milliou bags agreed by ICA members in October 1983 for 1983/84 was increased by 1 million bags in December and subsequently by three further increments of I million bags between February and June 1984, the first indicators of an upturn in market and revenue prospects for producer countries for over four years. Madagascar 's Export Performance 2.16 Notwithstanding the above-mentioned multiple constraints imposed by conditions and movements in the world coffee market, Madagascar's competitive performance in this market has been weak. Historical data show that following the introduction of coffee cultivation during the nineteenth century, by 1930 Madagascar was the leading coffee producer in francophone Africa with an 83% share of exports to France from its African colonies. By 1956, annual global exports had reached over 50,000 tons. A new peak in production was reached in the 1970/71 season with an estimated output of over 90,000 tons. Exports subsequently reached an all-time high of 72,960 tons in 1976, since when they have only twice (in 1979 and 1980) exceeded 60,000 tons. Since 1980 annual exports have retreated to the average levels, around 55,000 tons, which prevailed over a decade previously. (Table 12). Growth of the country's coffee exports has not kept pace with the slow upward trend in the world market, of which Madagascar's current share is about 1.5%. Among francophone African exporting countries, Madagascar's once dominant position has been progressively eroded over time. Whereas the OAMCAF group as a whole accounts for 12.3% of ICO's global quota, Madagascar's present share of the OAMCAF quota is only 11.0%. Since the early 1970s her export performance has been far outstripped by Ivory Coast and, more recently, by Cameroon both in ICA quota markets and more recently in non-quota markets (Table 13). - 11 - 2.17 Causes of Declining Market Share. Aspects of Madagascar's performance in the coffee sub-sector have been the subject of several recent studies and a National Coffee Symposium sponsored by Government agencies (OCPGC/BTM) at Toamasina in May 1983. A study of export prospects undertaken in 1981 by the International Trade Center (ITC)3/ briefly cited numerous difficulties: (a) inadequate production (due to ageing plantations, dispersed and poorly maintalned smallholdings, shortage of land, insufficient supplies of fertilizer, declining product quality, low producer prices, and competition with other crops), (b) inadequate transportation (lack of feeder roads, deteriorating road surfaces, decaying harbour facilities, infrequent shipping services), and tc) various problems in pricing and marketing (fluctuating world market prices, disincentive effects of internal pricing controls, and related factors). however, no attempt was made in this ITC study to analyse these factors and their relationship to export market performance, or to review more fundamental issues of national policy and objectives, organization and structure of the coffee trade, and priorities for sub-sector development. A simultaueous study carried out by an UNCTAD consultant4/ focussed primarily on microeconomic trends and prospects for coffee and other key commodities in Madagascar's export trade. Other studies have reviewed organizational and financial aspects of coffee marketing.5/ At the National Coffee Symposium held in May 1983, participants sought to trace the causes of deteriorating coffee production and trading performance, identified various weaknesses in current marketing and pricing policies, and proposed a number of measures to improve short-term and long-term production and exports.6/ These proposals are considered later in this report. It nevertheress appears that there has been no systematic effort to diagnose Maui.gascar's competitive position in the world coffee market from the standpoint of comparative advantage or to assess the root causes of declining export volumes in recent years. 31 "Etude du potentiel a l'exportation de la Republique Democratique de Madagascar et de la situation de l'offre des entreprises industrielles et commerciales exportatrices." Rapport de mission du M. Jean Muller, 9 July - 22 October 191l. International Trade Centre, UNCTAD/GATT, June 1982. 4/ "Madagascar: Microeconomic Analysis of Commodity Production and Trade." Walter C. Labys, Consultant, UNCTAD - Geneva. September 1981. 5/ See "Development des Exportations Malgaches: Diagnostic des Caisses de Stabilisation," Export Assistance International, Paris. March 1980; and 'Caisses et Bureau de Commercialisation et de Stabilisation des Prix du Cafe, de la Vanille et du Girofle (CA.VA.GI): Revue des comptes des exercices 1978-1979 et 1979-1980 et du Dispositif de Controle Interne," RINDRA. May 1982. 61 Rapport du Colloque sur le Cafe:, 16-20 May 1983, Toamasina. OCP/BTM. - 12 - World Market Prospects 2.18 Recent Bank studies have assessed the prospects for coffee market growth and expected price trends into the 1990s.7/ World import demand is projected to grow at a very slow pace, about 1.0 - 1.5X per annum, up to 1990. The adoption of the new ICA in 1983 and the willingness of producer countries in recent years to maintaln tight quotas to preserve prices suggest that a period of relatively stable conditions accompanied by slow increases in quotas may be expected for the remainder of the 1980s. Non-quota markets offer additional scope for producer countries, but intense competition as a result of excess world production and high stock levels is likely to stimulate further downward pressure on prices in these markets. While lower prices could encourage some importing countries to follow the recent withdrawals of Hong Kong, Hungary and Israel from the ICA prior to the new 1983 agreement, this is not to be expected. Per capita consumption levels are thought to be already relatively high in some of the Eastern European markets, and newer consumer countries in the Middle East and Africa are unlikely to expand rapidly given the still depressed economic conditions affecting these regions. Strong action is promised under the new ICA to clamp down on the hitherto profitable so-called -'tourist' coffee trade from non-quota into quota importing countries. This would further curtail growth of market opportunities in the non-quota countries. 2.19 The increases in ICA quotas since December 1983 and currently improving prices are likely to strengthen the confidence of producer countries in the ICO and its quota system as the safest mechanism for continued expansion. However, given that their present stocks amount globally to one year's world market supply and that Brazil has taken elaborate measures (by transferring production into more northerly frost-free areas) to combat previous disruptions of output, the scope for expanding exports is extremely limited. The Bank's econometric projections support the conclusion that for the remaining 1980s producing countries will need to adjust their production growth to the combined growth rate of domestic consumption and world export demand. For countries with small domestic markets this implies production increases of only about 1.32 per annum up to 1990. In the absence of unpredictable occurrences, such as socio-political turmoil in a major producer country, stock accumulations at even this modest rate of production growth are likely to postpone any significant increases in coffee prices until at least the early 1990s. Implications for Madagascar 2.20 The above scenario implies that for Madagascar, as for other coffee producing countries in Africa, world market prospects should discourage reliance on rising coffee prices as a source of Increased foreign exchange earnings to fuel economic growth. UnLess economic - 13 - recovery in the industrialized countries stimulates abnormal growth of demand in major expanding coffee markets such as Japan, quotas and prices will grow only very slowly. Competition from other beverages, greater coucentration within the international coffee roasting and blending industry and narrowing profit margius are likely to further encourage technological innovations and stret.gthen existing trends to improve coffee extraction rates and reduce coffee bean demand. (The recent introduction of -extended-yield- coffee, which uses about 20Z less coffee to produce a normal brew, is already making inroads on markets in the U.S.A_ and West Germany; its effect is to decrease coffee bean demand even when demand for liquid coffee is stable.) 2.21 In the foreseen global market situation of slow consumption growth, high stock levels and intense international competitioa between producer countries, Madagascar cannot afford to permit any further decline in its steadily weakening position. Current prospects would suggest a three-pronged strategy: (a) for the short term (1984/85), to improve production, marketing and trading efficiency, (b) for the medium-term 1986-1990), to revitalize the coffee sub-sector with a view to increasing Madagascar 's share of world markets in the 1990s; and (c) to accelerate development planning for long-term crop and market diversification. The desirability and feasibility of achieving these goals are explored in more detail in later chapters of this report. C. The Market for Cloves World Trade 2.22 The clove tree provides three products entering world trade. Dried clove buds, marketed wtole or iL ground form, are by far the most important of these. They have two distinct markets. One use is as a spice, widely consumed by households and the food industries in industrialized countries, for baked products, desserts and (by industry) in spice blends for seasonings, sauces and pickles. Their second, highly specialized, use is for blending with tobacco in the manufacture of 'kretek' cigarettes in Indonesia, in which proportions of clove content vary between 25-40%, according to brand. Approximately 40,000 tons of cloves are absorbed internationally in these markets, of which about half enters world trade. In normal years the Indonesian cigarette market accounts for up to 80% of this trade. Other cLove products are clove bud oil, distilled from the buds, stalks and leaves of the tree for sale to the perfumery, pharmaceutical and flavoring industries, and clove oleoresin, which is used in extract form by the food processing industry as a replacement for the whole or ground spice. Madagascar has alternated with Tanzania as the world's leading exporter of dried cloves and is the leading exporter of clove bud oil. 2.23 World Supply. The clove trade is highly irregular from year to year. Oa the production side, harvests are cyclical, with peaks in yield reached every 3-4 years. In all three major producing countries - Indonesia, Tanzania (on the islands of Zanzibar and Pembal and Madagascar - crop productiou patterns are also vulnerable to cyclones and plant - 14 - diseases. Annual output in Indonesia, the world's largest producer, ranges from 25,000 tons in an average season to 45,000 tons in a good year. ALthough production hectarage more than doubled between 1976 and 1981 in a drive towards staf-sufficiency in supplies for Indonesia's expanding clove cigarette industry, domestic output still meets only two-thirds of requirements. Imports from Tanzania and Madagascar have normally made up this deficit. In Tanania, however, clove production has experienced a steady declifne over the past decade. Madagascar's production has fluctuated sharply over the same period (between 4,200 tons in the low year of 1979 and 17,800 tons in the bumper year of 1974). (Table 14). The extremely uneven production patterns within the three largest clove trading countries have opened up market opportunities for the smaller producers, including Sri Lanka and Comoros, and for the start-up of new production schemes in Brazil, India and Malaysia. 2.24 World Demand. Indonesia's kretek cigarette industry has been the main factor behind a slow but steady increase in world demand for cloves over the past decade. From an annual output of 22 billion kretek cigarettes in 1972, production had risen to over 40 billion by 1977 and approximately 50 billion by the early 1980s. Despite a marked growth in Indonesia's production of cloves over this period, domestic output has not kept pace with demand. As a consequence, average annual imports have risen from around 10,000 tons in the early 1970s to about 15,000 tons in 1980-1982 (Table 15). Global consumption of cloves as a culinary spice has been stable over this period, with signs of a low level of growth in imports from around 4,000 tons in the early 1970s to around 4,600 tons in the period 1976-1980 (Table 16). Among these markets, the U.S.A. has on average absorbed about 25% of exports and appears to have stabilized current imports around 1,000 tons per annum. Consumption in EEC countries, the second most important market grouping, has been increasing at around 4.5Z per annum since the mid-1970s to a current annual level of around 1,5U0 tons. Demand in other markets, including Japan, Scandinavia, Eastern Europe, Saudi Arabia and Singapore, shows continued slow growth. The entrepot trade in cloves through Singapore to Indonesia and other countries nevertheless remains clauded by the uncertainties affecting Indonesian production. Demand for clove bud oil and oleoresins in industrialized countries, the main markets, has been relatively stable. Prices 2.25 Cloves are a high-value spice. In 1982 world market prices reached an average of US$5.30 per lb, an all-time high. Despite the year-to-year fluctuation in supplies within the major producing countries, clove prices remained relatively stable in the early 1970s. Later in the decade, and particularly since 1980, there has been a strong upward trend in prices, although prices slipped to an average of US$4.70/lb in 1983. High prices reflect both the continued inadequacy of Indonesian supplies to feed the domestic market and a slowly strengthening demand for cloves elsewhere. Prices show considerable competition between the exporting countries, reflected in annual price movements. Until the late 1970s prices from Madagascar tended to be around 10% lower than prices from Tanzania and 5-1OZ lower than those from Sri Lanka. However, Brazilian prices in the U.S. market are presently 5% lower below those of Madagascar (Table 17). - 15 - Quality Factors 2.26 Demand for cloves, both for kretek cigarettes in Indonesia and as a spice ingredient for food preparations elsewhere, is sensitive to a variety of factors associated with product quality. Indonesia's clove supply problem is partly affected by the high oil content of locally produced cloves, which are both less suitable for cigarette manufacture and less pungent than the Zanzibar and Malagasy varieties. The major quality criteria in the food industry are flavor and oil content, appearance, and freedom from humidity and foreign matter. In these respects, cloves from Sri Lanka, Indonesia and Brazil appear to have acquired a competitive edge in major markets over the less selective suppliers, Madagascar and Tanzania. Strict standards in the food industry, particularly those exerted by the Food and Drug Administration in the U.S.A., place a premium on quality grading and dependability. Quality variables also have some influence on prices. Market Regulation 2.27 The clove trade is virtually free from international regulation. Historically, standards and prices were mainly determined by traders in Singapore. During the 1970s Indonesia introduced regulations restricting import purchases to those coutracted directly with Tanzanian and Malagasy suppliers under letters of credit. These regulations, still in force, have sharply reduced but not eliminated the entrepot trade. On the export supply side, a Tanzanian/Malagasy Clove Marketing Organization (TAMCO) was established in April 1977 toz increase sales, strengthen prices and improve the quality of cloves. Through a marketing branch of TAMCO known as Uni-Cloves, import orders were to be allocated between Tanzanian and Malagasy exporters. However, this organization never functioned effectively and has been allowed to lapse. Madagascar's Export Performance 2.28 Cloves have accounted for a rising share of Madagascar's export trade over the past decade. The volume of exports has grown from an annual average of 8,300 tons in the 1973-77 period to an average of 10,700 tons in 1978-82 (see Table 5). This progress appears to have been roughly in line with import demand growth in Indonesia and other markets. Over the decade the value of clove exports has risen significantly faster than volume, from an average of FMg 7 billion at current prices in 1973-77 to FMg 17.5 billion in 1978-82 (see Table 6). This impressive growth reflects iacreases in both export volume and particularly prices. During the same 10-year period Madagascar has also increased its world market share at the expense of Tanzaiia. While Madagascar's export volume increased annually by an average of about 6% per arnum between 1973-77 and 1978-82, Tanzanian exports in 1980 (5,300 tons) had slumped to less than half the volume achieved in 1973 (10,800 tons). By 1980 Madagascar had become the principal supplier of cloves to virtually all the major importing countries. By these criteria the country's clove export performance over i -~ ~ ~~~~~~~~~~~i - 16 - the past decade has been a notable success. In 1982, however, export volume and foreign exchange earnings from cloves dropped precipitously to 1,972 tons and FMg 7 billion, representing respective declines of 81% and 75Z over 1982 figures. These disappointing results stemed mainly from failure to negotiate a new trade contract with Indonesia, and expose the basic vulnerability of Madagascar's clove export trade. 2.29 Underlying Trends. Various reviews by Government services and ITC and UNCTAD consultants have charted the trend of Madagascar's clove exports but offer little explasatory analysis. Among external factors, steadily rising demand and a continuing shortfall of domestic supplies of cloves in Indonesia have driven up prices and provided the main spur to Madagascar's overall growth in export volume and earnings. The decline in Tanzania's production and export capability has undoubtedly also worked to Madagascar's advantage. Internal policies have also influenced export growth. Exceptionally high exports (22,300 tons) iz 1975 following a poor harvest in Indonesia in 1974 prompted the Malagasy Government to launch a 5-year production expansion program from 1975 to 1980. Although this fell far short of planting targets, comparatively favorable producer prices stimulated sufficient production growth to sustain Madagascar's emerging position as the primary source of large volume supplies available to Indonesia in poor harvest years (e.g. in 1982). This progress has not been achieved without cost. The high world market prices prevailing over the past few years have restrained consumption growth in other importing countries and encouraged price competition from newer producers. Since 1977 the emergence of Brazil and Malaysia as new clove exporters has already affected the level of Madagascar's exports to the U.S.A. and Japan. Recent ITC studies suggest that clove prices quoted by Madag2scar are now too high, that product quality has deteriorated, that deliveries are unreliable, and that trading practices are unsatisfactory. These and other internal factors affecting the country's competitive position are reviewed in more detail later in this report. The latest market indicators suggest that Madagascar's clove export trade has now reached a crossroad. World Market Prospects 2.30 The import demand outlook for cloves is closely linked to the production prospects in Indonesia and this country's future trading policy. Good harvests in 1980, 1981 and 1983 have eased the growth of imports, but the goal of self-sufficiency (which in the mid-1970s was expected by 1983) has not yet been secured. The most likely rospect is for continued fluctuatious in Indonesia's import needs from year to year, and an overall slackening of demand for the remainder of the 1980s as the planting program undertaken in the 1970s bears full results. Qualitative differences between local and imported clove varieties should help to sustain import demand at a moderate level. Elsewhere, long-term prospects for steady growth in the global spice market are firm, and the use of cloves in the food industries and among household consumers in the industrialized countries is likely to continue slow expansion. Import growth averaging 5% per annum is expected, in line with recent trends. This suggests that market absorbtion in this sector could rise to around 7,000-8,000 tons per annum by 1990. Concurrent growth in the industrial market for clove oil and oleoresins would absorb an additional 2,000-3,000 tons of cloves by 1990. - 17 - 2.31 The prospect is therefore that import demand, excluding Indonesia, could reach around 10,000 tons per annum by 1990. Cyclical factors in production, weather and plant disease hazards and annual fluctuations in demand will probably lead to continued volatility in global trading patterns. Prices generally seem likely to slacken from their 1981-1983 peaks as Indonesian imports stabilize. However, the greatest risk to export earnings for developing country producers is the emerging situation of global over-supply. Quantities of exportable cloves from traditional producers and, since 1977, from Brazil now seem likely to exceed demand growth in the 1980s, thus putting further downward pressure on prices. In this increasingly competitive situation, marketing efficiency and innovation, competitive pricing, and guaranteed product quality will become progressively more critical for developing country exporters. Implications for Madagascar 2.32 The immediate prospect for Madagascar is a rapid change from the generally favorable conditions for clove exports which prevailed over the decade from 1973 to 1982. Furthermore, the failure in 1983 to negotiate a sales contract with Indonesia left the country with an already high level of current stocks (estimated at around 11,000 tons in October 1983) prior to the 1983 harvest at a time when prices appear to be turning down. Although the latest harvest coincides with the cyclical low in production and is estimated at under 7,000 tons, Madagascar's clove stockpile is now at an unprecedented level. (Provisional estimates placed total stocks at around 14,000 tons in March 1984.) Over the 1984-85 period, a decline in both export volume and value from the 1981-82 levels is in prospect. For the remainder of the 1980s, market and price prospects seem equally unpromising, in view of the emerging global surplus. Markets for clove bud oil and oleoresins can absorb only a fraction of these supplies. This situation calls for a comprehensive review of clove production policy and trading strategy as a matter of urgency. In the light of current and prospective world market conditions, two needs appear paramount: (a) for the short-term (1984/85), to adopt a flexible marketing and pricing policy and aggressively pursue opportunities to expand sales outside the Indonesian market, and (b) for the medium-term (1986-90) to reorganize clove production and trading activities within the Framework inter-sectoral plan to develop Madagascar's spice trade. Proposals in these directions are explored more fully later in this report, taking account of other factors incluencing production, marketing, pricing and organization for export. D. The Market for Vanilla World Trade 2.33 Vanilla is the perfumed fruit of a tropical climbing orchid native to Mexico. In world trade it is classified as a spice. Natural vanilla products are sold in four different forms: (i) as dried vanilla beans (the elongated pods of the orchid), (ii) as a ground powder, (iii) as an extract or essence, and (iv) dispersed on a sugar or dextrose base. - 18 - These products are used mainly by the dairy, ice cream, confectionery (especially chocolate), pastry and perfumery industrles in the U.S.A. and Western Europe. For the past several decades natural vanilla has had to compete in these markets with extremely cheap synthetics, particularly vanillin, which is produced from the waste sulphite liquor of paper mills, coal tar extracts and clove oil. Natural vanilla probably accounts for at most about 5% of the world market for vanilla flavoring. At their peak in 1978, world exports of natural vanilla were around 2,800 tons. By comparison annual production of synthetics exceeded 40,000 tons in natural vanilla equivalent during the 1970s. In average years the global trade in vanilla beans varies around 1,500-2,000 tons. Although the volume of trade is small, vanilla is second only to saffron as a high-value spice. 2.34 World Supply. The particular climatic and ecological conditions required for vanilla have tended to limit its production to a relatively small group of countries. The preferred, highly flavored and scented Bourbon variety grown in the Indian Ocean countries accounts for about 907 of world trade. Among these, Madagascar has traditionally been the largest exporter. In an average year Madagascar alone accounts for about 75% of global exports. Comoros and Indonesia each have a market share of around 10%. Reunion, French Polynesia and Mexico export small quantities. Madagascar's dominant position among the exporters dates from the nineteenth century, hence production conditions and policies in this country have long been the major determinants of world export and price trends. Until the late l96Os output levels in Madagascar and elsewhere more than kept pace with the slight annual increases in global demand. This situation acted as a brake on prices and led to accumulation of stocks. An agreement reached in 1963 between the Indian Ocean suppliers (Madagascar, Comoros and Reunion) and industry consumers in the USA and EEC has generally tended to stabilize trade movements. However, production in Madagascar has been erratic. Deliberate Government action to deplete stocks, in 1968 and again in 197b, and severe crop damage from a hurricane in 1976 had changed the supply-demand ratio by the late 1970s (Table 18). In 1977 Madagascar's harvest of 'green" vanilla (4.6 kg - 1 kg of dried vanilla beans) fell to a 20-year low of 1,000 tons. Production has steadily recovered again since 1980, but stocks are still below the levels of the l9bOs. The shortage and unpredictability of natural vanilla supplies in recent years has kept prices high, restrained demand and further encouraged the swing towards the synthetics. 2.35 World Demand. The United States is by far the single largest market both for natural vanilla and competing synthetics. Vanilla bean imports into the USA normally absorb 40-60% of world trade, with Madagascar the main supplier (Table 19). Virtually all imported vanilla is transformed into extract, primarily for the food and drink industries. After steadily increasing during the early 1970's, U.S. vanilla imports reached a peak of 1,550 tons in 1977, but have since fallen to an annual average of 800 tons as a result of high prices and the attraction of the cheap synthetics. France is the second largest importer, absorbing on average about 400 tons per annum, or about 25Z of global export shipments. In both these markets use of natural vanilla by the food industries has - 19 - been sustained by labelling legislation enacted in the late 1960s. Market promotion, respectively, by the Vanilla Bean Association of America and Univanille in France, has also helped to counter the use of synthetics. However, efforts by vauilla bean producer and consumer groups to promote similar legislation elsewhere, among EEC and other industrialized country importers such as Japan, have made no progress. Market promotion efforts have also stagnated in recent years because of unpredictable supplies. In general, over the past decade world market growth has averaged only about 2% per annum. Prices 2.36 During the prolonged period of general over-supply which prevailed up to 1976-77, world market prices for natural vanilla fluctuated in the vicinity of USS12-15 per kilo. Iu the later 197Us, mainLy under pressure from Madagascar and other producers in the Vanilla Alliance, prices rose sharply (Table 20). The official FOB price for Malagasy exports rose from US$19.80/kg in mid-1976 to US$38/kg in mid-1978 and to US$45/kg in 1980. As a result of tight supplies, even spot prices of up to US$lOO/kg were being quoted in some major consumer markets during 1979-80. Since this volatile period, prices have tended to stabilize but the overall upward trend has been maintained. (In March 1984 the annual meeting of Vanilla Alliance producers and consumers is reported to have raised their agreed price for the 1984-85 trade year to US$70/kg, or 12% above the 1983-84 level of US$62.5/kg.) Quality Factors 2.37 Quality variables affect both demand and prices. The particular fragrance and flavor characteristics of vanilla from the Indian Ocean producers have contributed to their domination of the world market. Mexico also produces good quality vanilla but for any years quantities available for export have been negligible. The -Java" vanilla beans from Indonesia are generally priced about 1OZ below the 'Bourbon- variety from Madagascar. International quality standards are well defined, but are not universally applied. Natural vanilla is generally marketed in five qualities: extra, 1st, 2nd, 3rd and 4th. The classification is based on bean length (between 20 and 25 cm), aroma, color, consistency, and freedom from blemishes, insects and mildew. For the food and drink industries, humidity level (optimally less than 20%) and content of natural vanillin (normally 0.2 gr per 100 millilitres of extract) are major considerations. A recent ITC study of the U.S. market suggests, for example, that vanilla beans imported from Indonesia and having a humidity level of only 11. compare favorably with some recent imports from Madagascar which barely conform to minimum standards. To raise the natural vanillin content of the dried beans to optimum levels, up to three years of controlled storage may be necessary prior to export. - 20 - Market Regulation 2.38 The agreement concluded in 1963 between Indian Ocean producers and principal USA and EEC importers who make up the Vanilla Alliance has remained in force. In practice this association governs the world vanilla trade. At annual meetings both sides agree to an export plan which establishes quotas, prices and delivery schedules for the following commercial year (April 1 to March 31). Madagascar participates through the Vanilla Price Stabilization Fund and the private consortium of producers, processers and exporters which was established in 1966, known as the National Vanilla Association (GNIV). The general level of tariffs on vanilla bean imports is low (zero for entry into the USA market), so tariffs have little influence on trading patterns. Madagascar's Export Performance 2.39 As the world's largest producer-exporter of natural vanilla, Madagascar has reaped exceptional profits from the constant demand for this high-value spice, the country's--black gold-. During the 1960s and early 1970s relative stability in the world markets and careful nurturing of domestic vanilla stocks provided regular and increasing export earnings (see Table 6). Since 1978 increasingly short supplies from both Madagascar and other exporters have further boosted prices and revenues. In 1983 vanilla provided Madagascar with record earnings of FMG 25.8 billion, about triple the value of 1978. Contraband sales of vanilla caused some disturbance in the export market for vanilla in late 1981. Furthermore the impressive gain in revenue earnings has been achieved at high risk to long-term market growth. The exceptionally high prices prevailing over the past five years appear to have sharply curtailed demand and accelerated market movements towards the synthetics. (An ITC study in 1983 suggests that synthetic vanilla flavorings are now available to the U.S. food industries at about one-hundredth of the cost of natural vanilla extract equivalent.) The accelerating growth of Madagascar's export revenues from vanilla has also masked an overall decline in production and stocks since 1976. This has had adverse side-effects on the quality of exported vanilla and on Madagascar's reliability as a source of supply. These trends have further encouraged food industry buyers to seek alternative sources (e.g. in Hexico). Disruptions in supplies have also led to a fall-off in market promotion by vanilla traders in importing countries. In short, although Maiagascar has managed to retain roughly a 75% share of the world vanilla trade over the past decade and has enjoyed a rapid growth in earnings, high prices and supply difficulties have seriously jeopardised further growth prospects. 2.40 Factors Affecting Recent Performance. Market regulation by the Vanilla Alliance has worked generally to Madagascar's advantage. Legislation promoted by the Alliance's member associations has done much to protect established markets in the U.S.A. and France against the inroads of artificial vanilla substitutes among industry users. Joint promotional efforts have contributed since the 1960s to a growing consumer awareness of the differences between natural vanilla and the synthetics and have helped - 21 - to sustain slow market growth. Within Madagascar GNIV appears to have been an effective partner in these processes. The changed world market situation which developed in the late 1970s, from relative oversupply to relative undersupply of import needs, stems from both external and internal factors affecting Madagascar. In response to the severe crop damage caused by the cyclone in 1976, US importers in particular sharply increased imports from Madagascar to a record level (1,049 tons) in 1977 to build up stocks. By 1979 Madagascar's exports (437 tons) and domestic stocks had reached record low levels. Although that year producer prices were raised by an unprecedented 64%, other internal factors (including unfavorable weather, plant disease) restrained production until the 1981-82 seasons. In 1982 the supply-demand equilibrium improved, and unfavorable weather affecting Indonesia's crop helped to sustain the overall rise in prices. However, 1983 was again only a moderate year for Madagascar's harvest. To restore stocks to a safer level, in April 1983 the Government raised producer prices for green vanilla to 1,000 FMG/kg, an increase of 43% above the 1982 level. World Market Prospects 2.41 The prospects appear fair for a return in 1984-85 to normal levels of demand among vanilla importing countries. Subject to favorable climatic conditions in the producer countries, especially in Madagascar, over the next two seasons there are also good prospects that the supply situation will continue to improve. There could therefore be some tapering off of the recent growth in world market prices in the short-term. Beyond 1985 the prospects for market and price growth appear less certain. The long-term market outlook is favorable for most spices, with increased consumption expected in established markets among the industrialized countries and some scope for developing new markets elsewhere. For vanilla the situation is problematical and highly sensitive to trends among food industries, especially in the U.S.A. Their consump:ion of natural vanilla is declining. The U.S. Food and Drug Administration controls on the transformation of vanilla beans into extract are precise, strict, regular and exacting. Prices of vanillin, the main artificial flavoring substitute, remain stable and continuously more attractive to industry. It is also reported that the two largest vanilla importers among U.S. corporations are participating in a revival of vanilla production in Mexico for future export supplies. 2.42 These developments imply continued contraction of the U.S. market for traditional exporters. The European market is also insecure. In France, the main EEC vanilla importer, the 1967 legislation to protect natural vanilla against substitutes has not prevented domestic industrial production of vanillin. The large chocolate industries in the UK and West Germany use vanillin almost exclusively, and there are slim prospects that legislation similar to that in France could achieve support among other EEC countries. In short, vanilla is not a growth market. Prices are probably close to their ceiling. Any long-term increase in exports will depend heavily on the market promotion initiatives of the producer countries. - 22 - tmplications for Madagascar 2.43 Although in the short-term Madagascar's leadership in the vanilla export trade is not in question, the longer-term market and price prospects offer no grounds for complacency. On the contrary Madagascar's near-monopoly situation is highly exposed. Some lowering of price growth expectations should be tolerated in order to retain and strengthen established markets and prevent further long-term erosion by the synthetics. The high market value of vanilla is a strong incentive to other developing country producers, particularly the smaller exporters such as Comoros, to compete more actively for export earnings. It also places a premium on effective control of contraband. Both Indonesia and Mexico may be expected to boost their future vanilla exports to the extent possible, given their comparative advantages of lower prices (Indonesia), quality and proximity to the U.S. market (Mexico). There are also reports of increased output by new producers in Uganda and Brazil. 'As market leader, Madagascar will need to act with prudence to avoid being outflanked. The situation calls for a revised strategy to sustain the vanilla trade into the l9YOs. This will require attention not only to (a) production and control of stocks, but also to (b) crop research, (c) quality control, (d) marketing organization, (e) trade promotion, (f) product diversification, and (g) pricing policy. E. Markets for Lesser Crops 2.44 Four crops - pepper, cocoa, sisal, and butter beans - are important secondary sources of agricultural export earnings. Over the five-year period 1978-1982, annual export revenues averaged US$1-3 million for each of these crops. All four are also vital as sources of income to farmers living outside the Eastern coastal belt where coffee, cloves and vanilla predominate, and as such are key crops for balanced regional development in the agriculture sector. Their present and future market prospects therefore merit particular attention. The Market for Pepper 2.45 Pepper is the most widely used of all the spices. In terms of both tonnage and value, it accounts for about one-third of the world spice trade. A product of the pepper vine which thrives in wet tropical areas, the small pepper berries are traded on the world market mai nly in three forms: as (i) black pepper, the dried unripe fruit, which normally accounts for about 8OZ of the trade and is preferred by food industry users who represent the largest market segment; (ii) white pepper, which is derived from ripe or unripe fruit with the mesocarp removed, and is used mainly as a condiment by household consumers, and (iii) green pepper, which is produced by preserving immature berries in brine or vinegar, and sells mainly as a luxury item for use in the catering sector. There is also a small trade in pepper oleoresin. The world's major producers and exporters of pepper are Brazil, Indonesia, Malaysia and India. Madagascar is the fifth largest producer-exporter of black pepper, though with a minor market share which is presently under 2Z (Table 21). Conserved green pepper, however, is a speciality of Madagascar, which remains the leading supplier. - 23 - 2.46 Market and Price Trends. Global imports of pepper are currently estimated at around 130,000 tons per annum, representing a total value of about US$200 million at average 1983 prices of US$0.70/lb. The USA and EEC countries, as a group, each account for about 25% of imports; Eastern European markets also absorb considerable quantities, and Singapore is a major re-exporter especially to countries in Asia and the Middle East (Table 22). World consumption has increased substantially over the past 20 years, rising on average by 4% per annum during the 1970s. Despite fluctuations in output among the main Asian producers, rapid expansion in Brazilian production and exports (which doubled between 1971 and 1980) maintained global supplies well above market growth. As a result pepper prices fell steadily during the 1970s, and deteriorated even more sharply from 1979 to 1982 as consumption slackened. Depressed prices have prompted a notable fall in Brazilian production since 1979 and moderate to mediocre harvests elsewhere. Since March 1983, however, tight supplies, low stocks and improving demand among major importers have driven prices sharply upwards, and by March 1984 export prices of almost all varieties and grades of pepper had recovered, at least temporarily, to 1979-80 levels. The four leading producer countries, which account for over 95% of pepper exports, are members of the International Pepper Community (IPC), which has gradually taken shape since 1972. (Brazil joined only in 1981; Madagascar, although invited to join, is not a member but holds observer status.) Although the IPC has so far been unsuccessful in sustaining floor prices, in July 1983 agreement was reached for the first time to establish a single minimum price (US$0.70/lb since November 1983) for exports of all grades of black pepper. Although production and prices of pepper have been depressed for some years, there appear to be reasonable prospects for improved stability and renewed market growth over the 1984/85 period, and long-term demand for pepper is likely to remain firm. 2.47 Madagascar's Market Position and Prospects. Madagascar has been a pepper producer for fifty years, but never a major exporter. At the peak levels achieved around 1970, total production reached 4,000-4,500 tons per annum, from a cultivated area of about 11,000 ha. In most years approximately 95% of pepper production is exported, mainly to France and West Germany. In the year of highest exports (1972), the total volume traded amounted to 4,200 tons or about 5% of world exports. Over the subsequent decade, however, the area cultivated, production and export volume all declined by about 50Z. While global output and exports steadily increased, Madagascar's share of the black pepper market declined. By 1981, when global exports reached 132,000 tons, Madagascar exported only 1,440 tons, just over 1% of the total. Simultaneously, however, from small beginnings in the late 1960s, exports of green pepper have shown some growth, reaching over 1,000 tons in 1977. Although green pepper output and exports have declined more recently, their share of Madagascar's total pepper exports has risen to about one-third. 2.48 Depressed world market prices, reflected in low and (in real terms) declining minimum prices for Malagasy producers, have been a major constraint on pepper production (Table 23). Other internal factors have also contributed to poor performance: the overall neglect of export crop - 24 - research and development, lack of priority assigned to pepper research and extension, low fertilizer use and low yields, the uneven quality of exportable product, the general deterioration of marketing infrastructure and organization, and problems of pepper plant disease. Although green pepper quality has been maintained by the private sector processors and packers, identified opportunities for increasing crop collection and export volume have not been adequately exploited. Given the favorable ecological conditions for pepper growing (especially in the Sambirano area and Nosy-BH island), the existence of established trading channels, the firm market prospects for black pepper and the excellent reputation of Madagascar's green pepper, a concerted effort is needed to restore the country's competitive position in the world pepper market. Over the 1984/85 period priorities would include (a) maximizing green pepper production and exports, (b) improving the economics of pepper production, (c) attention to pricing questions, and (d) rejuvenating pepper extension and research services. The Market for Cocoa 2.49 World trade in cocoa covers several products: cocoa beans, which are fermented and dried after harvest, and various products (cocoa liquor, butter, powder and presscake) which result from grinding and processing the beans. These products are consumed in various forms, mainly in chocolate, cocoa drinks and other confectionery items. Production of cocoa is concentrated in a few developing countries of the tropics: Brazil, Ivory Coast, Ghana, Nigeria and Cameroon account for about three-quarters of world production and exports. The main importers are the industrialized countries of Western Europe and North America, Eastern Europe and the USSR: together these markets account for 80Z of world consumption. In this international trade, Madagascar has a miniscule share of only O.1.. However, alone among Madagascar's export crops, cocoa made gaiss during the l97Us while agriculture as a whole was in decline. Production area, output and exports of cocoa all doubled between 1970 and 1980. Current market trends can therefore provide pointers for further growth. 2.50 Market and Price Trends. According to recent estimates by the International Cocoa Organization (ICCO), world cocoa production in the 1983/84 season was about 1.5 million tons. Although for various reasons global cocoa supplies and prices are subject to sharp seasonal fluctuations, production in 1983/84 came close to the median for the previous ten years. In this period the main features of the supply position have been: (a) the emergence of Ivory Coast as the largest cocoa producer, (b) a marked fall in output in Ghana, (iii) expansion of hectarage in early bearing and high-yielding hybrid varieties (mainly in Brazil, Ivory Coast and Malaysia), and (iv) a progressive shift in grinding facilities from importing to producing countries. Structural changes ir. the cocoa trade have made parallel estimates of consumption trends a complex task. A Bank study on the cocoa market in 1982 showed that for the 1970-78 period, apparent world consumption declined by O.1Z per annum.8/ 8/ Analysis of the World Cocoa Market, World Bank Staff Commodity Working Paper Np. 8. June 1982. - 25 - A recent ICCO report suggests continuing stagnation of consumption since 1978, although varying trends are found among major consuming countries.9/ Overall the markets in Western Europe (where average consumption is around 2 kg per head per annum) and the USA (the largest market, averaging 1.5 kg per head per annum) have been static, whereas Eastern Europe and the USSR showed rapid growth in the early 1970s until checked by a sharp rise in prices in 1976. Since 1977 market prices for cocoa beans have steadily fallen and in real terms are below the levels prevailing in the late 1960s. Successive international agreements through the ICCO have so far failed to establish effective price stabilization measures, in part because neither the Ivory Coast nor the USA (respectively the largest producer and consumer countries) have been partners to these agreements. Although ICCO proposals are being prepared for a new agreement to replace the current one which expires in September 1984, the general outlook for cocoa remains uncertain. Long-term projections made in the Bank's 1982 study warn of a further decline in producer prices unless the growth of world cocoa supplies can be held below 2% per annum up to 1990. 2.51 Madagascar's Market Position and Prospects. Cocoa accounts for only 1% of Madagascar's exports, and world market trends would appear to discourage further export growth. Forecasts of short-term price stagnation are also unpromising. However, as a marginal producer and non-member of the ICCO, Madagascar operates under fewer constraints than many larger competitors. Furthermore, marketing of cocoa in Madagascar is not subject to export and price controls. The main problem is that cocoa has been a neglected crop, and existing growth potential has not been exploited. Malagasy cocoa is of the "Criollo' type, light colored and much in demand for fine chocolate manufacturing. It commands a higher price than the Forestero' type widely grown in tropical Africa. Established plantations in the northern area around Ambanja, the center of Malagasy cocoa production, have been poorly maintained and could yield a much higher output. Research and extension have also been neglected. Current production is stagnating around 1,500-2,000 tons per annum. Over 90% of this is exported to France, West Germany and the Netherlands, where demand for high quality cocoa remains relatively firm. In this situation, a case can be made for re-launching cocoa exports. Over the 1984/85 period attention should be given to undLrtakiag detailed production, marketing and economic feasibility studies on Madagascar's cocoa potential, and to the preparation of a coherent inter-sectoral policy for this commodity. The Market for Sisal 2.52 Sisal is among the natural hari fibers (including hemp, abaca and coconut) which provide the raw material for spun twines, ropes, and cordage. Agricultural markets for twines, binders and balers have consistently absorbed the greater part of sisal imports, but sisal cordage also has a wide range of industrial, outdoor and household uses. 9/ An Analysis of the World Cocoa Economy. International Cocoa Organization. 19 January 1984. - 26 - Productiou of sisal is concentrated in two regions of the tropics: in Latin America, where Brazil (the world's largest producer), Mexico and Haiti are the main growing countries, and in East Africa, where Tanzania, Kenya Mozambique and Madagascar are leading suppliers. For Madagascar, sisal Is important as a cash crop in the south-eastern area around Taolanaro and as an established source of export earnings. In 1982, export volume of 15,500 tons of raw sisal fiber accounted for about 2% of agricultural export value. Several hundred tons of locally manufactured sisal products are also exported. 2.53 Market and Price trends. Over the past twenty years the world sisal market has been hard hit by two adverse trends: the growth of lower-cost polypropylene substitutes for natural fiber twines and cordage, and changes in grain baling and binding techniques associated with agricultural mechanization. In the USA, the largest importer of hard fibers, synthetics had gained 20% of the market by 1980, and agriculture's share of sisal product usage had declined from 80% of imports in 197b to 65Z in 1980. Although the pace of these structural and technological changes has varied among importing countries, their cumulative effect on global sisal demand has been negative. During the 1970s, falling demand was eased by some improvement in prices following the oil crises of 1974 and 1979, but led to falling levels of production in several producing countries (e.g. Tanzania, Mozambique). In 1982 world production of sisal and hemp was about 485,000 tons, a decline of 11% over a five-year period. Sisal accounted for about 85Z of this volume. Since 1981, as a result of a further reduction in supplies, in part affected by drought in Brazil, the market has shown a modest recovery. Prices for East African fibers have also strengthened in 1982-83. However, trading patterns are presently in a state of flux, and prospects for short-term stabilization of the market remain uncertain. Long-term growth prospects are unpromising. However, as a result of the heightened competition of recent years, there is scope for the more efficient producers of high-quality sisal fiber to sustain export growth. Kenya, for example has mounted a program to increase smallholder production which increased sisal production and exports by over 50Z between 1978 and 1982. 2.54 Madagascar's Market Position and Prospects. Madagascar is the world's fifth largest sisal producer. Official fuiures suggest that ftom 1970 to 1980 production and exports declined by about one-third, due both to trends in external demand and to various internal factors (lack of crop maintenance and investment, deteriorating infrastructure for input supply and marketing). Production and exports have since stabilized around the 15,000 ton level, which is approximately 3.6t of tve world sisal trade. Traditiosally most of Madagascar's exports went to European markets. However, as cheaper Brazilian sisal has gained a larger share in the northern European countries, additional new export outlets have been found in North Africa, the USSR and China. Despite unfavorable market conditions and declining port and shipping facilities at Ta%,lanaro, Madagascar appears to have retained a competitive position in the world sisal trade. This may be partly attributable to the reputed high quality of Malagasy fiber, which is well suited to specialized cordage production. Domestic competition in - 27 - crop handling and export may also be a factor. Production, marketing and export of fiber are handled by 6 different enterprises in the private and public sectors. Manufacture of twines and cordage for domlrstic and export markets is handled bv a single parastatal enterprise, SIPOR. Given these product advantages and established facilities, there would appear to be scope for rehabilitation and expansion of sisal exports. Market studies undertaken by ITC and EXA provide initia1 guidance in this direction. Over the 1984/85 period it will be important o carry out a fuller investigatioQ of the export growth possibilities for Malagasy sisal, including detailed feasibility studies on the economics of production and an updated review of possibilities for product and market diversification. The Market for Butter Beans 2.55 Madagascar's 'pois du cap', a variety of butter bean, is one of several pulses (including red and white beans, kidney beans and lentils) which are cultivated in the western, southern auc plateau regions of the country. In some respects similar to, but larger than, the better known Californian lima bean, this product has been exported since 1920 for highly specialized markets. Although market information is sparse, it is known that the bulk of exports have gone to the United Kingdom, where the highest grades are reportedly conserved and consumed as a family food and in pet-foods. Mauritius and Reunion nave also imported the fresh butter bdans. The lowest grade, which is exported mainly to Japan, is used -there as an ingredient in manufactured biscuits. In Madagascarts domestic market, the 'pois du cap' competes with other varieties of dried beans as a family food. 2.56 The 'pois du cap' is unique among the export crops in several respects: (a) Madagascar is reputed to be the sole producer and exporter, (b) it is the only legume crop which has been a significant export, and (c) in the decade since 1972 no other export crop experienced such a rapid and total decline. Whereas at their peak in the early 1970s, exports were around 20,000 tons (about 2.3X of agricultural export value), by 1981 this trade had fallen almost to zero. The causes of this export collapse have not been systematically analysed but are thought to include: (i) inadequate, fixed producer prices (e.g. la 1981/82, FMg 65/kg for 'pois du cap', compared with FMg 120-170 for other varieties of beans); (ii) growth of official export prices to uncompetitive levels since the mid-1970s, when a Government export monopoly was introduced, (iii) declining supplies, exacerbated by the effects of drought in 1978 which caused production that year to fall by almost half, (iv) declining quality of the product, worsened by vulnerability to insect disease and lack of insecticides, (v) sanagement inefficiences in parastatal enterprises sharing the state export monopoly, and (vi) deteriorating export infrastructure (particularly access to, and shipping facilities at the ports of Morombe, Morondava and Toliara). 2.57 Prospects for the revival of butter bean exports depend primarily on Government policy and supportive action. A promising step was taken in August in 1983 when Government terminated its export monopoly and announced - 28 - the liberalization of all domestic and export trade in dry grains, including 'pols du cap' (Ministry of Commerce Decree No. 83-313). After an almost total halt to production and exports in 19dL, provisional estimates by MPARA. suggest that output recovered somewhat in the 1982-63 period. Exports of about 2,500 tons were recorded for 1982, and this volume was exceeded in the first six months of 1983. Renewed interest by UK importers is reported, and in response to the recent price and trade liberalization measures continued recovery is expected in 1984. The historical importance of butter beans as a cash crop and supplementary food crop in the west and south-west regions makes it imperative now to carry out a detailed study of export market development prospects, and associated economic, agronomic and organizational issues affecting production and marketLag. Prospects for other pulse crops should be examined in this context as a basis for formulating a viable long-term strategy. Other Agricultural Exports 2.58 Market studies undertaken for the Ministry of Commerce by EXA (1980) and ITC (1981-83) have indicated possibilities for expanding other agricultural exports which are not reviewed here. The EXA study explored prospects for tea, lychees, mangoes, avocados, cut flowers, medicinal plants and essential oils, as well as specific import markets for sisal Products and green pepper. The series of ITC studies included summnary reviews of export potential for each of Madagascar's agricultural and industrial crops, and more detailed reviews for specific crops (e.g. cinnamzn and other spices) and import markets (e.g. USA, Japan, Singapore, and neighboring Indian Ocean countries). Since commodity markets, prices and trading conditions change rapidly, the findings of these reports should be re-examined and updated where necessary to reassess medium and long-term export potential. Furthermore, the EXA and ITC studies purposely addressed mainly external market factors; production, domestic marketing, pricing, and organizational constraints are given limited consideration. The prospects for certain important food crops with export potential, such as cassava and maize, should particularly be reviewed in the context of national food policy and priorities. These issues are examined further in Chapters III and VII of this report. F. Conclusions 2.59 The recent growth in revenues from Madagascar's major agricultural exports will be difficult to sustain. The world market for coffee is stable, but marked by very slow consumption growth, excess supplies, only slight improvement in prices, and intense iaternational competition. Prospects for clove exports and prices are discouraging. Demand for natural vanilla remains relatively stable, but high prices severely limit the prospects for growth. Madagascar's excessive dependence Oa these crops and passive neglect of other options has placed the country's export trade in a highly vulnerable position. Competition from large, dynamic exporting countries such as Brazil and Indonesia has weakened Madagascar's positioa in traditional consumer markets. Lack of attention to changing market conditions, declining product quality, - 29 - inadequate investment in crop and market research and development and the absence of clear strategies for export promotion and growth are proving to be severe handicaps. To reverse the general downward trend of export volume calls for rapid action to rehabilitate and diversify export crop production and a rigorous re-appraisal of trading policies. Export Market Constraints 2.60 In formulating a strategy to renew agricultural export growth, particular account should be taken of the following current constraints: (a) international quota agreements (affecting coffee, vanilla and possibly cocoa), which place limits and strict conditions on the quantities of exportable crops; (b) difficult access to growth markets in North America and Asia (because of distance, freight costs, price competition and delivery times), requiring a thorough review of trade prospects in other established markets (principally EEC and Indian Ocean countries) and alternative new targets for export promotion; (c) excessive dependence on traditional exports of primary commodities vulnerable to world price fluctuations, lack of Government priority and incentives for diversification and development of new exportable products; (d) unreliability of supplies and uneven quality of produce for export, resulting in reduction or loss of export sales opportunities; Ce) lack of continuous export market research, strategic planning and effective trade promotion, resulting in slow and inadequate adaptation to changes in client demand for Madagascar's crop exports; (f) Government monopolies and controls on export trading activity, restraining private sector initiative and investment and lowering Madagascar's ability to compete against entrepreneurial export efforts in such countries as Brazil, Malaysia, Mexico and Kenya; and (g) diversion of exportable production to the domestic market, encouraged by trade controls and official pricing (e.g. for coffee, pois du cap). Export Market Opportunities 2.61 The long-term outlook for the main export crops is bleak. In the short-term, however, coffee, vanilla, and to a lesser extent, cloves and sisal will continue to provide the foundations for Madagascar's export - 30 - trade and earnings. Opportunities exist to improve earnings from coffee by raising robusta quality, promoting the development of arabica production for export, pressing for an increased quota allotment from ICO/OAMCAF, exploiting markets in ICO non-member countries, and extending the available range of coffee varieties, products and by-products. Options for cloves are more limited, although there is some scope for penetration of new markets, and diversifying outlets for clove oils and resins. Vanilla exports may perh. .s best be sustained by active promotion in established markets and by identifying new forms and uses for vanilla-based products. There is scope for steady growth of green pepper exports, and for increasing Madagascar's share of the black pepper trade in selected target countries. (Other spices such as cinnamon could also be promoted more vigorously.) As a minor exporter of high-quality cocoa, there is some scope for increasing trade in this neglected commodity. The structure of the well-established but depressea sisal industry should be carefully investigated with a view to reviving export growth and capitalizing on continued demand for high-quality Malagasy fiber. Renewal and growth of butter bean exports is feasible, and non-traditional markets should be explored. The diverse climate, soils and range of agricultural produce found in Madagascar offer further possibilities for export development of various tropical fruits, grains and oilseed products, and preliminary market studies have been undertaken on some of these crops. Subsequent chapters of this review examine the pre-conditions that must necessarily be met in order to develop successfully the most promising alternatives. - 31 - III. EXPORT CROP PKODUCTION A. Ecological Conditions for Crop Production 3.01 The main export crops grow in humid tropical areas which extend inland from the eastern northern and north-west coasts to about 1,000 m altitude (see Map). Within this vast elongated zone, robusta coffee is the dominant crop. Cloves production is also widely dispersed. Vanilla (in the north-east), pepper (in the north-west and lower east coast) and cocoa (in the north-west) each cover a more limited area. Cultivation of bananas, coconut, miscellaneous spices and condiments and several other exportable crops is also concentrated mainly along the eastern coast. Production of food crops such as rice and cassava has become progressively more important in this area for family subsistence. Certain export crops are grown elsewherez sisal in the south-east, butter beans in the west and south-west. Two industrial crops - cotton and sugar - which were formerly significant exports but now supply mainly the domestic market, are grown extensively in the west. Arabica coffee production, which is presently sold in the domestic market but could be developed for export, is concentrated in central highland areas and a few higher altitude locations in the north-east. The prospects for export crop development in each of these regions calls for further consideration. In this chapter, however, reference will be made mainly to the east coast and northern regions; and to the group of five crops - coffee, cloves, vanilla, pepper and cocoa - which provide the bulk of Madagascar's export revenues (Table 24). 3.02 Natural Features. The east coast region consists of a belt of very broken country, 5U-100 km wide. In many areas, the land falls steeply from the high plateau to the Indian Ocean, and is intersected by a number of short meandering rivers. Flooding is increasing with deforestation, and transport problems are widespread. The north is somewhat isolated from the rest of the country by a high mountain range between Antalaha and Ambanja. Most agricultural activities are concentrated in the many small river valleys, which occupy about 5-10% of the area. The hill side areas (tanety), occupying 65% of the land area, have well-weathered, generally depleted ferruginous or ferralitic soils, with very variable but generally low production potential. Near the coast there are ridges of sandy soils suitable for coconuts, root-crops and vanilla. The remaining area is formed by steep slopes unsuitable for cultivation. 3.03 Climate. Rainfall is distributed over the whole year without a dry period. Total rainfall is lowest in the far south and north, but rarely drops below 1500 mm. In the most important coffee area of Mananjary, rainfall is around 2000-2500 am, while further north around Toamasina it increases to 3000-3500 mm. There are about 170 rainy days per annum, with the lowest rainfall in September/October, but the monthly amount seldom drops below 50 mm. Cyclones occur mostly between January and March, creating havoc for all crops, but in particular for cloves. Outside the cyclone period rain can fall iu tropical storms, and maximum daily - 32 - rains up to 200 mm/day are experienced. These heavy rains are particularly damaging to coffee if they occur during the flowering period. In spite of a continuous rainfall throughout the year, the number of sunshine hours is high, averaging about 7 hours per day. For certain crops, vanilla in particular, shadow cropping is indispensable, and for pepper and coffee it is also widely practised. Evaporation varies between 60 and 160 mm/month or about 1000-1300 mm/year, with a minimum during the winter, when lower temperatures prevail. Except for the narrow sandy coastal strip there is no water deficit of importance. The average minimum and maximum temperature varies between 20' and 30'C, but in winter months the absolute minimum can drop during the night to 10-12
Groupe de la Banque mondiale · Pre-2003 Economic or Sector Report
Madagascar - Export crops sub-sector review
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Groupe de la Banque mondiale
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Pre-2003 Economic or Sector Report
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Madagascar
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Banque mondiale