Market Study on Potatoes, Vegetables

Market study on potatoes and vegetables

“ CARITAS CZECH REPUBLIC”

NATIONAL ASSOCIATION OF MONGOLIAN AGRICULTURAL COOPERATIVES ХОРШООЛОГЧДЫН ҮНДЭСНИЙ ХОЛБОО

MARKET STUDY ON POTATOES, VEGETABLES

STUDY REPORT Khentii Province-2016

MARKET STUDY TEAM:

Enkh-Amgalan Gurjav (Economist, researcher)

Ganbaatar Ulziibayar

(Marketing manager)

Market study on potatoes and vegetables Contest LIST OF ABBREVIATIONS ................................................ Error! Bookmark not defined.v TABLETS, LIST OF PHOTOS ................................................................................................ v BRIEF INTRODUCTION OF MARKET STUDY ................................................................... 1 ONE. PREFACE ........................................................................................................................ 2 1.1 Rationale of study ............................................................................................................ 3 1.2 Goal and objective of study.............................................................................................. 3 1.3 Importance of study and expected outcomes ................................................................... 4 1.4 Value chain analysis and Structure of market study concept ......................................... 4 1.5 Scope, methology and phases of study ............................................................................ 4 TWO. MARKET ANALYSIS OF POTATOES AND VEGETABLES ............................... 112 2.1 Historical path of potatoes and vegetables market in Khentii province (dynamic change) ............................................................................................................................... 112 2.2 Market, feature of products and startegies .................................................................... 14 2.2.1 Itroduction of products and market channels ......................................................... 15 2.2.2 Porduct labeling and dissimilitude ........................................................................ 23 2.2.3 Market demand and supply assesment of potatoes and vegetables ........................ 26 2.3 Market players and their relationship ............................................................................ 46 2.4 Infrastructure and facilities impacts in the market development ................................. 473 2.4.1 Climate change impacts on production and preservation of products ................... 473 2.4.2 Warehouse and its capacity ................................................................................... 473 2.4.3 Transportation and its capacity ................................................................................ 48 2.5 Role and particiption of public and private organizations on market development....... 46 THREE.VALUE CHAIN ANALYSIS OF POTATOES AND VEGETABLES .................. 550 3.1 General mapping of value chain .................................................................................. 550 3.2 Economical analysis of value chain ............................................................................ 562 3.2.1 Research on product price .................................................................................... 562 3.2.2 Transaction and other costs of participants ........................................................... 583 3.2.3 Participants’ profit .............................................. Error! Bookmark not defined.54 3.3 Analysis on organizations in value chain ....................................................................... 64 3.3.1 Horizantal and vertical zone ................................................................................... 64 3.3.2 Agreements, governmental policies, regulations ...................................................... 655 FOUR. SUMMARY OF POSSITIVE/NEGATIVE FACTORS FOR MARKET DEVELOPMENT OF POTATOES AND VEGETABLES ................................................... 70

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Market study on potatoes and vegetables 4.1 Positive factors for market development of potatoes and vegetables ........................... 70 4.2 Negative factors for market development of potatoes and vegetables ......................... 711 FIVE. CONCLUSION ........................................................................................................... 711 SIX. RECOMMENDATION ................................................. Error! Bookmark not defined.4 SEVEN. REFERENCE .......................................................................................................... 766 EIGHT. APPENDIX ................................................................................................................ 79

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Market study on potatoes and vegetables

LIST OF ABBREVIATIONS

En

Entities

NRSO

National Registration and Statistics Office

GDP

Gross Domestic Production

FDSME

Fund for SME’s development

SGKhM

State Great Khural of Mongolia

GM

Government of Mongolia

AV

Added value

FLD

Fund for Local Development

FF

Family farming

SDF

Soum Development fund

NGI

National Gross Income

NSC

National Statistical Committee

Agri

Agriculture

SWOT

Strengths, Weaknesses, Opportunities, Threats

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Market study on potatoes and vegetables

LIST OF TABLES AND FIGURES Table1.1 Agricultural sector’s position in national economy ................................................... 2 Table2.1 Structure of poducers and suppliers in potatoes and vegetable market, by family farmers and entities…………………………………………………………………………..284 Table2.2 Structure of potatoes and vegetable growers, by soums included in study ............ 296 Table2.3 Structure of potatoes and vegetable growers, by form of entrepreneurship .......... 296 Table2.4 Total production of potatoe growers covered by study, tons .................................. 330 Table2.5 Total production of vegetable grower covered by study, tonsError! Bookmark not defined.1 Table2.6 Total production of greenhouse farmers covered by study, tons ............................ 351 Table2.7 Products distribution and market supply of entities covered by study,by potatoes 362 Table2.8 Products distributin and market supply of entities covered by study, vegetables .. 363 Table2.9 Products distribution and market demand of entities covered by study,greenhouse vegetable ................................................................................................................................ 373 Table2.10 Products distribution and market supply of family farmers covered by study, potatoes .................................................................................................................................. 374 Table2.11 Products distribution and market supply of family farmers covered by study, vegetables ............................................................................... Error! Bookmark not defined.4 Table2.12 Products distribution and market supply of family farmers covered by study, greenhouse vegetables ........................................................... Error! Bookmark not defined.5 Table2.13 Annual market demands of the potatoes and vegetables ........................................ 38 Table2.14 Sufficiency and supply of potatoes and vegetables ................................................. 39 Table2.15 Market demand of potatoes and vegetable (actual consumption) and annual demand ................................................................................................................................................ 440 Table2.16 Total consumption of potatoes and vegetable for kindergartensError! Bookmark not defined.0 Table2.17 Total consumption of potatoes and vegetable for hospitalsError! Bookmark not defined.1 Table2.18 Total consumption of potatoes and vegetable for schoolsError! Bookmark not defined.

Table2.19 Total consumption of potatoes and vegetable for publec service organiztions .................................................................................................. Error! Bookmark not defined.

Table3.1 Price changes of potatoes and vegetables ................................................................ 57 Table3.2 Legal framework of agrcultural sector ..................................................................... 65 Figure1.2 Study stage and order ........................................... Error! Bookmark not defined.0 Figure2.1 Number of population (market demands and needs of potatoes and vegetable) .. 132 Figure2.2 Domestic production of potatoes and vegetable market in Khentii province ....... 143 Figure2.3 Wholesale and retail organization of Khentii province .......................................... 14 Picture2.4 Product advertisement and introduction of potatoes and vegetables farmers ....... 16 Figure2.5 Marketing channel of potatoes and vegetable market, by total result of soums included in study ...................................................................................................................... 16 Figure2.6 Market supply form of potatoes and vegetables producers (about family farming), by total result of soums included in study ................................................................................ 17 Figure2.7 Market supply form of potatoes and vegetables producers (about entities), by total result of soums included in study ............................................................................................. 18 Figure2.8Market supply form of the potatoes and vegetable producers in Kherlen soum...... 18

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Market study on potatoes and vegetables Figure2.9 Marketing channel of Kherlen soum’s potatoes and vegetable market ................ 197 Figure2.10 Product market supply form of potatoes and vegetables producers in Murun soum .................................................................................................................................................. 19 Figure2.11 Marketing channel of Murun soums’ potatoes and vegetable market .................. 18 Figure2.12 Form of market supply by potatoes and vegetable producers in Binder .............. 18 Figure2.13 Marketing channel of Binder soums’ potatoes and vegetable market .................. 19 Figure2.14 Form of market supply by potatoes and vegetable producers in Umnudelger ..... 19 Figure2.15 Marketing channel of Umnudelger soum’s potatoes and vegetable market ......... 22 Picture2.16 Label of products.................................................................................................. 23 Figure2.17 Products distinctive ............................................................................................... 25 Figure2.18 Structural indicator of the potatoes and vegetable farming family which included in study .................................................................................................................................... 30 Figure2.19 Experience of the potatoes and vegetable grower entities which included in study. .................................................................................................................................................. 28 Figure2.20 Fertilizer, which has been used by farmers,and its types ..................................... 29 Figure2.21 Domestic production of potatoes and vegetable market ....................................... 36 Figure2.22 Domestic production structure of potatoes market in Khentii province ............... 37 Figure2.23 Domestic production structure of Khentii province .............................................. 37 Figure2.24 Total market supply of potatoes and vegetables, at the national level ................ 38 Figure2.25 Required equipments and techniques for entities ................................................. 45 Figure2.26 Required equipments and techniques for family farmers...................................... 46 Figure3.1 Market value chain mapping of potatoes and vegetables ....................................... 56 Figure3.2 Unit price of potatoes and vegetables(MNT/kg), seasonal ................................... 572 Figure3.3 Value chain mapping of potatoes ............................................................................ 54 Figure3.4 Value chain mapping of beetroots .......................................................................... 55 Figure3.5 Value chain mapping of turnips .............................................................................. 56 Figure3.6 Value chain mapping of cabbages and carrots ....................................................... 61 Figure3.7 Value chain mapping of other vegetables ............................................................... 62 Figure3.8 Value chain mapping of pickles .............................. Error! Bookmark not defined.

Figure3.9 Value chain mapping of preserved assorted green salad ....................................... 63 Figure3.10 Value of other preserved products ........................................................................ 64 Figure3.11 Vertical zone of value chain ................................................................................ 644 Figure3.12 Horizontal zone of value chain ............................................................................. 65

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Market study on potatoes and vegetables

BRIEF INTRODUCTION OF MARKET STUDY

As of 2015, national GDP reached 15.8 billion (by comparison price of 2010) tugrugs which means the economy has been increased by 2.29 percent compared to the previous year.

According to structure of GDP, the agriculture, mining, wholesale and retail trade sectors mostly contributed to GDP. This shows that the agriculture plays significant role in the national economy. In other word, this is one of our traditional sectors which has been bear main economic burden, as well as potential sector for ensuring food to population, providing raw materials to manufactures. Also, the agricultural sector’s production is directly depended on nature and climate. Thus, it is important to have market study on agricultural sector, especially on potatoes and vegetables; therefore there is need of doing assessment, explanation, analysis about its market. Hence, within framework of needs, the National Association of Mongolian Agricultural Cooperatives has done this market study under the “Caritaz Czech Republic” International organization’s request and funding, therefore we expected outcomes from study as followed:  Demand and needs of agricultural products in local, region and nationwide  Establishment market partnership with governmental organizations  Opportunities to receive any information about potential market and supply with short track demand  Financial opportunities and capacity of local area.

There is also economic analysis on value chain of products in market was covered by this market study so that from the main part of this study you could see a goal, objectives and methodology of market study, as well as outcomes of analysis on potatoes and vegetables market and its value chain.

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Market study on potatoes and vegetables ONE. PREFACE

AGRICULTURAL SECTOR’S POSITION IN MONGOLIAN ECONOMY: In 2015, national GDP reached 15.8 billion (by comparison price of 2010) MNT which means the economy has been increased by 2. 29 percent compared to the previous year. And, according to configuration of GDP, the agriculture, mining, therefore added value of wholesale and retail trade sectors mostly contribute to GDP1. This shows that the agriculture sector plays significant role in the national economy.

Total production of agricultural sector and added value are consisted by livestock and crop productions. Thus, the agricultural sector, specially the livestock and crop production are still very important sector to Mongolian economy.

Tablet 1. Agricultural sector’s position in national economy Indicator GPD, Mill.MNT Added value of agricultural sector mill.mnt

2010 9’756’588.4

2011 11’443’578.4

2012 12’853’406.6

2013 14’350’689.2

2014 15’482’273.4

2015 15’837’660.3

1’144’697.9

1’141’074.1

1’381’284.7

1’646’183.5

1’871’396.9

2’070’882.1

Source: Mongolian Statistical Yearbook.,NRSO, www.1212.mn

As shown above tablet, the added value of agricultural sector reached 2.07 billion MNT which increased by 2.07 percent as compared to previous year, furthermore in between year of 2010 and year of 2015, the added value of this sector increased by approximately 12.6 percent per year. On other hand, the added value of this sector’s percentage2 in GDP decreased in 2011 compared with 2010, but it re-increased in year of 2012. In other words, the percentage of the added value of this sector increased by 6.7 percentage in point in between year of 2012 and year of 2015. This means that the added value of this sector has kept re-increasing in recent years.

Also, the agricultural sector is one of our traditional sectors. In other word, it was proved that during the Bronze Age Mongolians used to engage crop production as discovered plenty cave paintings from Western Mongolia and center Khalkh were showed that human images used cavalry plow for cultivating field and grain mill. Also, in the Chingis Khaan's commandment the first documentation about engagement of crop production was reflected.

According to the statistic yearbook 2015, the total of 435,027.3 hectare land has been cultivated, and out of total sown area, there was cereal in 89.8 percent, in 4.8 percent for potatoes and vegetables and in rest percentage used for cultivating technical and fodder crops. Also, by 1Mongolian 2

Statistical Yearbook, 2015. National Registration and Statistic Office Agricultural sector’s position in economy

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Market study on potatoes and vegetables end of 2015, total harvested yields, including cereals, potatoes, vegetables and fodder crop, were 501.5 tons and about 47.1 percent out of total yields were up from potatoes and vegetables. In addition, the production of potatoes and vegetables are mostly based on family level production.

For example, in year of 2015, there were 236.1 thousand tons of potatoes harvested and out of this 74.3 percent was from family farming3. It means that family farming is important to crop production especially potatoes and vegetables production.

1.1 RATIONALE OF THE STUDY 1. The agriculture is one of Mongolian historic and traditional sectors, therefore it has been playing important role in Mongolian economy. That is why the national policy and implementation on agriculture are essential to our national economy and its growth. Thus, in order to determine appropriate policies, programs and activities of agri-sector, therefore to implement them successfully, there is need of doing researches, studies on agriculture especially on livestock and crop production sector.

2. Mongolian crop sector is also considered main sector which provides raw materials to the national industries as well as the sector of providing healthy food for people which is directly related to national food security. Thus, it is a vital for economic to study and analyze about family farmers as well as entities who have been carried out production in such important sector.

3. Consequently, the agricultural sector is quite specific sector than others. Because, itdirectly depends on nature and weather conditions, means it always contains high probability of risk. Hence, in order to support agri-production, it is important to implement the projects and programs in subject to natural disaster.

1.2 GOAL AND OBJECTIVES OF STUDY GOAL OF STUDY: Main goal of study is to research on potatoes and vegetables market of Khentii province in order to identify challenges, analyze and explain of value chain of local market.

MAIN OBJECTIVES OF STUDY: In accordance with main goal of this study, we proposed following objectives:  

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Specify types of products by family farmers and entities, and to analyze the current state of agri-production; Identify and analyze the products’ sales channels and current market situation (for example demand, supply, price etc.) of potatoes and vegetables;

Based on” Introduction of agricultural sector-2015 “/National Registration and Statistic Office/

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Market study on potatoes and vegetables  

Analyze the added value of potatoes and vegetables, and explain its outcomes , Identify and explain market related issues and challenges faced by family farming and entities, who engage potatoes and vegetables, also identify solution methods.

1.3. IMPORTANCE OF STUDY AND EXPECTED OUTCOMES PRACTICAL IMPORTANCE OF STUDY: -

Identify form of support on collaboration with potatoes and vegetables grower family farmers and entities; Solve the problems faced by family farmers and entities; Increase resources to support farmers activities; Create favourable environment for increasing effectiveness of argocultural initiatives;

Establish vital database about potatoes and vegetables production and their market circumstances Following outcomes were expected from study: -

 Agricultural products demand and needs in local, region and nationwide  Assurance of any market partnership with related local authorities (including implementing blueprint, signed official contracts/agreements and their fulfillment, any challenges etc.)  Clarification of availability of receiving information about potential market and short track speed supply  Capability and financial opportunities of local area.

1.4 ANALYSIS OF VALUE CHAIN AND CONCEPTS OF MARKET STUDY The concept of marketing activities has been different in every stage of market development, therefore it has been developing with its specific characteristic in each country.

There are main concepts of marketing activities as followed:  Production improvement  Product improvement  Sales activation  “Net” marketing  Societal marketing  Ecological marketing  Partnership marketing Above mentioned concepts have been reflected in marketing revolution of developing countries and the producers have been choosing and implementing most adequate modules for

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Market study on potatoes and vegetables them. Thus, the team expected that the study based on those concepts would help to identify main issues related to marketing and to give feasibility of their solutions.

The study team also considered that following matters while analyzing value chain:  Participants of value chain (nature, communication, product flow, employment, volume of production etc.)  Profit distribution of value chain participants  Requirement of value chain improvement  Governance liability 1.5 STUDY SCOPE, METHODOLOGY AND PHASES Depending on the study objects and its calculating indicator, we divided a scope of study into following parts:  In regional level (assessment of demand and supply, products price and potential market)  In provincial level (assessment of demand and supply, products price and potential market)  In selected soums level (analysis of value chain/market study) As mentioned before we divided the scope and object of market study into three parts (figure 1.1).

Figure1.1 Study object and scope

Based on types and forms of useful information for the study, the participants, who included in the study, have been divided into following categories: 1. Producers such as the potatoes and vegetables grower family farmers and entities 2. Consumers 3. Middleman or supermarkets (local markets, trading centres) 5

Market study on potatoes and vegetables 4. Others (governmental organizations in local area) The first and second information from participants was gathered by using tools of focus group interview and sample survey within prepared questions and from other sources. However, during developing methodology of the study, the sample survey was more focused.

And, the second information, which from governmental and nongovernmental organizations of soums, province and city, was based on interview and other types including collecting additional information in order to clarify and analyse collected data.

PRODUCERS AND CLIENT WHO COVERED BY STUDY In this market study, 173 vegetable growers were selected and out of this 32.7 percent was representatives from Umnudelger (included Khurkh village), 18.8 percent was representatives from Binder soum, 10.9 percent was representatives from Kherlen soum and rest of 37.9 percent was from Murun soum.

Unities covered by study, by soum /Producers/ Structure Soum

Umnudelger Binder Kherlen Murun Total

Numbers

Percentage

57 32 19 65 173

32.7 18.8 10.9 37.6 100.0 Source: Calculated outcomes of study

But, the most vegetable growers who included in this study were family farmers which was 80.3 percent out of total, 11 percent was companies and cooperatives and rest said that the engaged in other forms of enterprises.

Unities covered by study, by form of enterprises /Producers/ Structure Form of enterprises

Numbers

Percentages

Company

9

5.2

Cooperative Community NGO Family farmers Total

10 3 12 139 173

5.8 1.7 6.9 80.3 100.0 Source: Calculated outcomes of study

Trading organization which covered by study: In the framework of study, we selected local markets, province level trading centres, supermarkets, stores and shops of Binder, Umnundelger, Murun and Kherlen soums in order to collect primary information on loan and value chain.

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Market study on potatoes and vegetables Structure

Type of trading

Market Wholesale Supermarket Retail Total

Kherlen

Murun

3 1 5 6 15

0 0 0 3 3

Umnudelger, Khurkh village 0 0 1 4 5

Binder

Total

0 0 1 3 4

3 1 7 16 27

Source: Calculated outcomes of study

Local government and public organizations covered by study: In Binder, Umnudelger, Murun and Kherlen soums, the administators and accounts of local governments, financial units, schools and hospitals were interviewed in focus group discussions with the purpose of potatoes and vegetables procurement, and also they were covered in study for collecting secondary information of procurement.

Structure Types

Local government School Kindergarten Hospitals Total

Kherlen

Murun

1 5 7 2 15

1 1 1 1 4

Umnudelger, Khurkh village 2 2 2 2 8

Binder

Total

1 1 1 1 4

5 9 11 6 31

Source: Calculated outcomes of study

METHODOLOGY OF SAMPLE SURVEY The information, which was necessary for market study and analysis in level of selected soums, was gathered by sample survey. There were two main ways to gather the information: o Overall observation o Partial observation The sample survey is included in the partial observation, means that the sample survey is a part of statistic science method which does not cover whole objects, only covers some parts by using certain method which is associated with activities on disseminate information and explain general population. Following stages have been determined for accomplishing sample survey: o o o o o o o o

Determine objective of sample survey (for market study) Develop sample survey’s questionnaire template for gathering information Settle an arrangement of sample survey’s observation Select method of participants and calculate percentage Gather information by using sample survey, compile, calculate the result and assess Disseminate sample survey’s record in population, and Develop summary and recommendations accordance with survey outcomes (by outcome of market study).

While gathering information by using sample survey, a selecting method of configuring

sample population and a methodology of optimal dimension are very important. Because, if we 7

Market study on potatoes and vegetables do not determine selecting method of configuring sample population and a methodology of optimal dimension correctly, the sample’s ability of representative is reduced and mistakes of sample is increased.

CALCULATING METHOD OF SAMPLE SURVEY’S OPTIMAL DIMENSION The potatoes and vegetables growers were chosen as sample survey unity and following formula, which is for calculating sample’s optimal dimension, is used broadly in practical. đ?’™=đ?’ ∙ đ?’?= đ?‘Ź=

đ?’„

đ?&#x;?

đ?&#x;?đ?&#x;Žđ?&#x;Ž

∙ đ?’“ ∙ đ?&#x;?đ?&#x;Žđ?&#x;Ž − đ?’“

đ?‘ľđ?’™

Formula 1 Formula 2

đ?‘ľâˆ’đ?&#x;? ∙đ?‘Źđ?&#x;? +đ?’™ đ?‘ľâˆ’đ?’? đ?’™

Formula 3

đ?’? đ?‘ľâˆ’đ?&#x;?

Here: n – Rational portion of sample’s population N – Portion of population4 r – Our forecast outcome percentage5 Ń â€“ Level of importance Z– Table value of normalized fluctuation, for example, if we calculate the sample’s ability of representative is 90 percent, then the mistake will be 10 percent and table value Z will be 2.33. In practice, the sample’s ability of representative is usually shown as 90%, 95%, 99% etc.

SELECTION METHOD OF CONFIGURING SAMPLE’s POPULATION It is possible to choose a way of selection when sample’s population was configured by using above mentioned methodology. Following selection methods which help to configure sample’s population have been used broadly in practice: o o o o o

Random selection Mechanical selection Traditional selection Series selection Combined selection We chose and used traditional selection method. In other word, we configured farmers

from selected soums as a unity in group population based on proportional. đ?’?đ?’Š = đ?’?

đ?‘ľđ?’Š

Formula 4

đ?‘ľ

4

Total number of farmers who included in study.

This is forecast percentage of confidence while answering questionnaires. If this indicator is calculated as 50 %, the highest sample’s level was determined. Our main goal is to cover all farmers as many as possible and we considered this indicator as 50%. Because if r is less than or more than 50%, it is not possible to determine the highest sample’s level.

5

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Market study on potatoes and vegetables

Here: ni Ni N n

- Number of farmers from soums who included in study - Total number of farmers from present soum - Total number of farmers (in total of 4 soums) -Total number of farmers who will include in the study (in total of 4 soums)

ACTIVITIES ON GATHERING INFORMATION AND INFORMATION QUALITY CONTROL, ASSESSMENT AND CONFIDENTIALITY We divided study questionnaires and information quality assessment into following phases: Phase 1: Developed form of sample survey questionnaires in advance and finalized after discussion with NAMAC. Phase 2: Checked reference to study unity that there was any other similar study or research done before, the study team leader would check logical consistency of collected data, also removed inaccurate survey and survey questionnaire which from non-targeted group, and offset it.

Phase 3: Whether the collected information has normal distribution (asymmetry, ratio of leptokurtosis), and by using mathematical and statistical methods to assess and verify a quantitative and qualitative indicators (t test, chi-square test etc.).

All of it as mentioned above facilitated to process and analyzed data as well as to evaluate importance level of study.

Confidential information about farmers and middleman should

be classified in

accordance with provisions of paragraph 3 of Article 22 from “Mongolian law of Statistic”.

Data processing, analysis methodology and software: In order to process primary and secondary data, the STATA software was applied, and method of average and grouping, also statistical graphics and tables were used.

METHOD OF BUNDLING We applied main basic rule for first digital bundle of study indicator, but for second bundle following methods were applied: o Changed the first interval (usually the interval is being extended), as a result of it, a num ber of group decreased, but a volume enlarged. o Divided each bundles’ percentage in general result METHOD OF GRAPHICS AND TABLETS

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Market study on potatoes and vegetables The primary and secondary data were shown by methods of tables and graphics and due to feature of indictors the following tables have been used:  Simple table  Grouping table  Combined table Also, in order to show data we used some graphics such as:  Statistical diagramm (compared, timing, structural, correlation)  Statistical card (cartogram, carto diagram) METHOD OF AVERAGE Statistical arithmetic, geometer and chronology average were applied with purpose of showing indicator’s average from market study outcome, and therefore for calculating average of structure we applied and explained by using indicators such as mode, median and quartile.

Moreover, for analysis we used methodology of statistical dispersion (ANOVA) and correlation and regression. Also, in order to calculate assessment of market demand and supply in level of selected soums, province and region, we used some methodologies developed by National Registration and Statistics Office and other organizations.

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Market study on potatoes and vegetables

STUDY PHASES AND SEQUENCE: The phases and order were divided as followed: (figure1.2).

Figure1.2 Study stage and sequence

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Market study on potatoes and vegetables

TWO. MARKET ANALYSIS OF POTATOES AND VEGETABLE

2.1

HISTORICAL PATH OF POTATOES AND VEGETABLES MARKET IN

KHENTII PROVINCE (DYNAMIC CHANGE)

Obviously, the historical development of potatoes and vegetables market is closely linked with agricultural sector. Since 1950 Mongolia started to bring virgin lands under cultivation and farming, therefore at that time there were many entities established widely for planting potatoes, vegetables and fodders. This was historical turning point in crop sector, therefore scientists and researchers concluded that it was a period of self-sufficient for this sector. Since then for next 50 years, the crop sector had been developed and promoted as a main sector of providing food, fodder and raw materials to industries (until 1990s), also it had been down the deterioration (about next 20 years), but in recent years this sector seems to back in truck again. Since 1950 Mongolia startes to bring virgin lands under cultivation and has been developing crop sector:  Mongolia is self-sufficient on its flour needs by providing domestically produced products  If harvesting is more than domestic needs during the year with favourable weather, Mongolia is able to exports it to foreign countries  Since crop sector has been run widely, there was established secure base of livestock fodder in order to keep them away from natural risk such as drought and dzud, and moreover it helped to develop intensive farming of pigs and poultry with highly efficiency  There were other advancements side of crop sector development such as it was establishment for development of newly built food industries in order to process crop productions, fruits and vegetables During this 50 years (1959-1990) the virgin lands were brought under cultivation and farming, the scientists noted that this sector had showed its development role and its development stages could be divided into following phases:    

Years between 1959-1970, Years between 1970-1980, Years between 1980-1990 and From 1990 till present.

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Market study on potatoes and vegetables Therefore, the potatoes and vegetables market’s historical path is closely linked with above phases of crop sector.

TIME CHANGES OF POTATOES AND VEGETABLE MARKET IN KHENTII PROVINCE: Until now, the main indicators that could reveal dynamic change of the potatoes and vegetables’ market are the market demands (population), producers and supply (production of commodities) as well as a number of trading centers. So, we tried to show dynamic change, market development and structure of potatoes and vegetables by way of explaining dynamic changes of above mentioned indicators:  Population (associated with consumers and market demand and needs)  Production of potatoes and vegetables (associated with market supply)  Number of trading points (associated with middlemen in the market) Market demand and needs of potatoes and vegetables or population: The figure in below shows that number of population in province level has been changing in relation with period of agri-sector development.

Figure2.1 Population (market demand and needs of potatoes and vegetables) Source: NSC

As seen from above figure, the number of population reached the highest level and decreased again in between years of 1980-1990, however lately it seems to increase again. It means that there is possibility of increasing consumers number of potatoes and vegetable as well as a volume of market.

MARKET SUPPLY OF DOMESTIC PRODUCTION OF POTATOES AND VEGETABLES: The production market of potatoes and vegetables have been increasing in 13

Market study on potatoes and vegetables every year. It depends on policies and programs of Khentii province on crop sector and other many factors. The result has been showed by following figure.

Figure2.2 Domestic production of potatoes and vegetable market in Khentii province Sources: NSC

Wholesale and retail entities of potatoes and vegetables in Khentii province: In every year the number of selling points of potatoes and vegetable retailers, wholesalers and middleman are getting increased. The result has been showed by following figure.

350 300

330

250 200 201 150 100

161 137

50 0 1990-2000

2000-2005

2005-2010

2015

Figure2.3 Wholesale and retail organizations of Khentii province Sources: NSC

2.2 MARKET, FEATURE OF PRODUCTS AND STRATEGIES

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Market study on potatoes and vegetables

2.2.1 INTRODUCTION OF PRODUCTS AND MARKETING CHANNELS

MARKETING ADVERTISEMENT AND INTRODUCTION OF PRODUCTS: One of main consists of marketing activities is an advertisement. In order to introduce the products, the following adverting elements can be used:  TVs, radios  Newspapers, magazines  Internet  Others However, it was observed during the study that an implementation of above mentioned main elements from completion of advertisement have been not active in most soums which covered by study. But, about Kherlen soum was a bit different than other soums. Because this soum is closer to central market and the public communication channels are easier to access.

Therefore, they introduce their products to public by promoting public relations such as attending to exhibition of “autumn green days” in Khentii province. Unfortunately, there was impossible for every farmer to attend to this event, due to lack of local governmental coordination, financial difficulties (such as transportation) and other issues.

For some soums, they organize events among the farmers and public during the public celebrations such as Chinese New Year etc. (for example Umnudelger soum of Khentii province). Thus, there is need of organizing such events widely in right time coordinated and supported by local governments with purpose of advertising and promoting products (produced by potatoes and vegetable growers) to public. Because, when the potatoes and vegetable growers in family farming level try to advertise their products without local government support and they face following challenges:   

Lack of opportunity to implement key elements of advertising (TV, radio, newspapers, magazines and internet etc.)

Even there is such opportunity, they face financial issue.(normally for family farmers) Due to limited size and volume of market, it is hard to access centralized market (in province and city). For this reason, sometimes the advertisement does not help, therefore not succeeded.

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Market study on potatoes and vegetables

Picture2.4 Product advertisement and introduction of potatoes and vegetables farmers

MARKET CHANNEL: In case of soums covered by the study, the products in potatoes and vegetable market are reached to final costumers through the following marketing channels.

Figure2.5Marketing channel of potatoes and vegetable market, by total result of soums included in study

As shown in above figure, by total number of soums covered by the study a market channel divided into 3 main levels in vertical zone and 4 main levels in horizontal. Also, in figure 2.5, trading entities s meant as markets, service points, supermarkets and trading centers in soums

16

Market study on potatoes and vegetables and province; and the families, population, public service organizations are included as consumer .

Also, you can see from level 3 in vertical zone in above figure, the producer supplies the products to the market through the middleman. Accordance with that following figure shows how many percentages of their products have been supplied to market via middleman.

Figure2.5 Market supply form of potatoes and vegetables producers (about family farming), by total result of soums included in study

As showed in figure 2.6, out of all farmers involved in study (only about family farmers):      

86.4 percentages totally supplies their products to the market, Out of 1.5 percentages, the 95% is supplies their products to market by themselves and 5% is via middleman, Out of 3 percentages, the 90% is supplies their products to market by themselves and 10% is via middleman, Out of 1.5 percentages, the 60% is supplies their products to market by themselves and 40% is via middleman, Out of 3 percentages, the 50% is supplies their products to market by themselves and 50% is via middleman, Rest of 4.6 percentages totally supplies their products to the market via middleman.

Thus, above results revealed that the most of family farmers, who plant potatoes and

vegetables, sell their products in the market by themselves. About entities, following figure displays a way of their supply channel of market.

17

Market study on potatoes and vegetables

Figure2.6 Market supply form of the potatoes and vegetable producers (about entities), by total result of soums included in study

We tried to show market supply form of the potatoes and vegetables producers from soums included in study. By next figures and explanations, we intended to reveal the each soums’ market supply form.

KHERLEN SOUM: The 80 percentage from out of total potatoes and vegetable producers supply their products to the market by themselves directly, 10 percentage supply by themselves and via middleman, and remaining 10 percentage of producers supply product to market via middleman totally.

Figure2.7 Market supply form of the potatoes and vegetable producers in Kherlen soum

The figure 2.8 reveals that the most of potatoes and vegetable producers supply and sell their products by themselves without any middlemen. Maybe it depends on characteristics of its soum comparing to other soums such as being close to central market and located in province center. The marketing channel of Kherlen soum’s producers was shown in below.

18

Market study on potatoes and vegetables

Figure2.8 Marketing channel of Kherlen soum’s potatoes and vegetable market

From above marketing channel of Kherlen soum’s potatoes and vegetables market, you can see that generally the total sales which is 59.6 percentages directly goes to consumers (family, population-42.4%, public services in province-17.2%), 34.5 percentages goes to trading organizations (supermarkets, selling points and bigger trading markets) and remaining 5.8 percentages are supplied to market via middlemen. In summary, more sales have done and the products have supplied through the marketing channel-1.

MURUN SOUM: The 91 percent from the total of potatoes and vegetables’ producers supply and sell their product to the market 100% independently by themselves, 3 percents supply 95% of their products by themselves and remaining 5% of products are supplied via middlemen, other 3 percent of producers supply 90% of their products by themselves and remaining 10% of products are supplied via middlemen and rest of 3 percent of producers totally depend on middlemen.

Figure2.9 Product market supply form of potatoes and vegetables producers in Murun soum

The indicator in figure 2.10 confirms that the most of potatoes and vegetable producers (91%) in Murun soum totally self-sufficient on supplying their products to markets without any

19

Market study on potatoes and vegetables involvement of middlemen. It is maybe related to their location where is near to province center.

The marketing channel in Murun soum is showed in figure below.

Figure2.11 Marketing channel of Murun soums’ potatoes and vegetable market

According to the potato and vegetable's marketing channel of Murun soum, 88% of total potato and vegetable is sold to the final consumer (people and family) directly and 11% is sold via trade organisations (local shops of province and soum, large trade centres, markets and service points) and rest of the vegetables are supplied to the market through the middlemen. In summary, more sales done and the products supplied through the marketing channel-1.

BINDER SOUM: Out of total of potatoes and vegetable producers, the 93.3 percent is supply and sell their product by themselves, 6.7 percents supply 90% of their products by themselves and remaining 10% of products are supplied to market via middlemen.

Figure2.10 Product market supply form of potatoes and vegetables producers in Binder soum

20

Market study on potatoes and vegetables The figure 2.12 proves that the most of potatoes and vegetable producers from Binder soum supply their products to the market without any middlemen help.

Figure2.11 Marketing channel of Binder soums’ potatoes and vegetable market

As seen marketing channel of Binder soum’s the potatoes and vegetables market in above, the total sales which is 88.5 percentages directly goes to consumers (family, population67%, public service-13.2% and herders from other soums-8%), 10.9 percentages goes to trading organizations (supermarkets of soum) and remaining 0.6 percentages are supplied to market via middlemen. In summary, same as Murun soum, more sales have done and the products have supplied through the marketing channel-1. Also, due to remote location producers from this soum could not able to supply their products to centralized markets and trading centers in province center.

UMNUDELGER SOUM: Out of total potatoes and vegetable producers, the 77.3 percent is supply and sell their product by themselves, 4.5 percents supply 60% of their products by themselves and remaining 40% of products are supplied via middlemen, other 9.1 percent of producers supply 50% of their products by themselves and remaining 50% of products are supplied via middlemen, 4.5 percent of producers supply 40% of their products by themselves and remaining 60% of products are supplied via middlemen and rest of 4.5 percent of producers totally depend on middlemen.

21

Market study on potatoes and vegetables Figure2.12 Product market supply form of potatoes and vegetables producers in Umnudelger soum

The indicator in figure 2.14 confirms that the potatoes and vegetable producers (77.3%) in Murun soum usually supply their products to markets without any involvement of middlemen.

Comparing with other soums, the special of this soum is that Khurkh village where is many crop farmers established for some period due to main region of crop production as well as productiveness. This is main reason of middlemen and dealers’ flow has been increased. The marketing channel in Umnudelger soum is showed in figure below

Figure2.13 Marketing channel of Umnudelger soum’s potatoes and vegetable market

As you can see from above mentioned the marketing channel of potatoes and vegetables, an each level of marketing channel has similar sales volume and the products are supplied to markets.

This shows that Umnudelger soum has Đ° specific features compared to other soums. Therefore, about market players are more comprehensive and specific in this soum. In other word, the 30.2 percentages from the total sales directly goes to family and population, 8.8% to public service organizations in soum, 1.3% to public service organization in province center, 10.9% to supermarkets in soum, 12.9% to supermarkets in province center, 2.6% to central markets in province and city, 1.3% chain supermarkets and 1.0% goes to shops in other soums, 30.6% sold by middlemen of Khentii province and city, and 0.6% is via middlemen from other provinces.

All these matter indicates that the players in potatoes and vegetable markets of Umnudelger soum as well as their participation in marketing channel levels are different and specific than other soums .

22

Market study on potatoes and vegetables

2.2.2 PRODUCT LABELING AND DISSIMILITUDE PRODUCT LABELING: During the study, it was exposed that basic requirements of labeling of products including potatoes and other vegetables directly from field have been left. It seems as if this concerns the producers more than the others (potato and vegetables), however, it is thought it is also relevant to the oganisations who make a decision regarding permit of label usage for the given standard as well as local authorities' policies and procedures where the implementation and compliance of the standard is monitored. In terms of product labelling, about Mongolia this has been happening not only in the case of potatoes and vegetables, but it also has been continuing as uncertain problems in some other food products The product labeling is quite important, because this is only information about products for the consumers. At the local level, there is lack of product labeling, thus product info is usually delivered by verbal way that means all necessary information could not be reached to consumers. However, it was different for preserved vegetables. It was noted during the study that the consumers are able to get certain amount information about the product; even the requirement of labeling standard is not well provided.

Picture2.14 Products labels

PRODUCT DIFFERENTIATION We aimed to explain about products dissimulate in potatoes and vegetable markets involved soums in study as followed: PRODUCT DISSIMILITUDE OF QUALITY AND TECHNOLOGY: 23

Market study on potatoes and vegetables When potatoes and vegetables from soums covered by study were compared with harvested vegetables from Tuv and Selenge provinces which called crop region, there is one main difference. It was product quality related are technology, volume and type of fertilizer. For example, it was revealed by result of focus interviews during the market study, the farmers in soums covered by study (specially in Murun soum) pick up and clean the weeds from farmland by hands compared to Tuv and Selenge provinces’ farmers where the many types of chemical fertilizers have been used due to size of farmland. This issue brings question about whether the products met hygiene requirements which makes difference of product technology and quality, furthermore product dissimilitude.

PRICE LEVEL: As we explained about the product difference, it was also base of price level difference.

In other word, the price level of potatoes and vegetables produced by farmers in study covered soums was higher than Tuv and Selenge provinces.

DIFFERENCE BETWEEN DOMESTIC PRODUCTION AND IMPORTED PRODUCTS: It was revealed by price level difference due to product quality and purchasing power of customers. For example, the price level of domestically produced products is higher than imported potatoes and vegetables. This was also one of main reasons of making product dissimilitude.

However, in terms of price, the product difference was explained by above mentioned features, it was observed that there were not any other dissimilitude based on distinguishable features of the product and customer satisfaction, and marketing strategy.

24

Market study on potatoes and vegetables

Figure2.15 Product dissimilitude

â„–

Product types

Potatoes 1

2

3

Vegetables

Greenhouse vegetables

Seed info According to result of focus interview with farmers included in study, the following types of seed have been usually cultivated such as Astila, Vitara, Impala, Sante and Khongor.

Not certain varieties of seeds are cultivated. Every spring, farmers make selection and purchase seeds for cultivation from seed shops located in UB

Packing

Type of fertilizer

Generally, the products are sold without any packing and during the transportation and storage the fibro sack sized 25-30 kg from Chine is mainly used for packing.

In order to preserve greenhouse vegetables, the method of conservation is mainly used. For preservation, the sterilized old jars /of Urbanek and Vagro etc. / have been used.

About label, it has been printed out based on farmers own resources which is not met requirement of appearance and standart

25

Entities: - 27.8 % natural organic fertilizer (humic acid fertilizer and bio humic) - 88.8 % livestock manure and chicken manure - 11.1 % nitrogen, phosphorus, compound fertilizer Family farming: - 8.5 % natural organic fertilizer (humic acid fertilizer and bio humic) - 85.7 % livestock manure and chicken manure - 8.6 % nitrogen, phosphorus, compound fertilizer

Plant protection chemicals

Entities: According to study result, the plant protection chemicals are used relatively low which is only 5.6% from total entities covered by study use pesticide and other chemicals.

Family farming: Due to small scaled farming, they normally tackle their problem as picking up the weeds instead of chemicals, and only 2.8 % from total farmers included in study use pesticide and other chemicals in order to protect plant and soil.

Structure and the productivity of the soil

About Murun soum,during the study it was observed that the soil deterioration and erosion are increased.

However, in other soums, there was the positive result of the productivity of the soil.

Market study on potatoes and vegetables

4

Product losses:

The loss usually related with the harvesting, transportation and storage standard of the potatoes and vegetables' products. There is nationwide survey which resulted that in average the 5-10% from total production is counted as loss In order to define the product losses, we applied a method of focus interview to study participants and following results were showed: Family farming: It was identified that there are comparatively low losses due to small scaled farming, manually picked up and clean the weeds and quick selling. According to average of study result, the 3.2% counted as loss from total vegetable production.

Entities: Compared to family farming, there is high volume of loss due to size of farmland, harvesting is performed with assisstance of semi or fully automatic machineries, as well as during the storage and transportation.

According to average of study result, the 7.4% counted as loss from total vegetable production.

Therefore, related estimation has been done by using above mentioned average indicator.

2.2.3 ASSESSMENT OF POTATOES AND VEGETABLES’ MARKET DEMAND AND SUPPLY We aimed to explain in this part about feature of consumers, market and responses of suppliers, as well as to show an assessment of market demand and supply in way of reflecting current situation of market demand and supply 2.2.3.1 FEATURE OF COSTUMERS IN MARKET AND THEIR ACTIONS The final consumers of potatoes and vegetable market in soums involved in study can be divided into following parts:  Family, population (Population, families of soum and province and herders)  Public service organizations in soum and province (school, kindergarten and hospital)  Services (coffee shops, cafeterias, restaurants in centre) But, shops, supermarkets, chain stores, bigger markets, trading centers (whole and retail) and chain stores in soum and province are included in category of middlemen which are main subject of dealing between producers and final consumers. About herders and public service organizations are considered as final consumers, they play in markets very different ways. For example, due to lack of cash herders usually deal with veggie growers by a bartering way when they need potatoes and vegetables. This makes them very specific. Also, about public service organizations such as schools and hospitals, they need to announce tender or bid when they purchase required potatoes and vegetables. This reduces market opportunities of individuals in the family level who cultivate produce and supply to market. Because, at the Mongolian Law of Procurement states that interested body in tender must entity which reduces to expand market opportunities for producers in this market. On other hand, for the individuals, they have ability

26

Market study on potatoes and vegetables to enter procurement tender under 10 million MNT, unfortunately they loose this ability due to their lack of knowledge of legislation.

During the study, there was found interesting facts about middlemen who purchase products from producers and resell it to the market.  For small sized groceries and shops, potatoes and vegetable sale is considered as seasonal activities (usually summer and autumn).  Depending on store and supply of potatoes and vegetable in soum, during the winter and spring the most of local trading centers receive products from capital city  They purchase potatoes and vegetables from local farmers during the autumn and winter, still it is very low percentage in total purchased products of trading centers. Because of price difference (there is difference between local products and products from other provinces and city), it is very often that they purchase same products from other provinces and bigger markets (“Bars” and “Narantuul” etc.) in city.  Some wholesale centers (like “99”) purchase very low amount of products from farmers due to run own farming.

Thus, based on specific features, we explained and showed differences of final consumers and midllemen in the potatoes and vegetables market.

2.2.3.2 MARKET AND SUPPLIERS’ RESPONSE

It was observed that current situation of potatoes and vegetables market is not sustainable, therefore the governmental policies and programs for crop sector, especially for vegetable sector and farmers, have not been implementing successfully. The policies and programs for promoting crop sector have an extreme view to one side in some respects. For example, due to subsidies on whole grain and wheat, there were many organizations started to run crop farming. For this reason, the family farmers’ responsibility in potatoes and vegetables sector has been increased.

For example, as 2015 total harvested potatoes was 163.7 thousand tons and out of this 72 percent was from family farmers, and from total of 72.3 thousand tons of vegetables harvested and out of this 79.6 percent was done by family farmers. That proves that the family farmers have got more responsibility and loads in market supply, furthermore in production of this sector. All these changes and movement can be understood as suppliers’ response against the market and government policies and programs on this sector. In other word, the majority of enterprises,

27

Market study on potatoes and vegetables which used to run the potatoes and vegetable farming, started to engage with crop sector means that it is reaction of suppliers for the result of government policies and programs.

Now, you can see from table in below, what consequences brought by these issues (family farmers role) in level of soums and province involved in study.

Table2.1 Structure of producers and suppliers in potatoes and vegetable market, by family farmers and entities Governors Administration unit

Production of potatoes thous.ton

Structure Family Entities farming

Total of national level Eastern region Khentii province Kherlen soum Binder soum Murun soum Umnudelger soum

161.4

70.4%

29.6%

Production of vegetables thous.ton.

104.7

8.03 5.1 1.05 0.2 1.3 0.6

68.0% 75.3% 90.7% 100.0% 24.5% 100.0%

32.0% 24.7% 9.3% 75.5% -

5.2 3.6 0.8 0.1 1.1 0.1

Structure Family Entities farming 83.6%

16.4%

72.6% 72.0% 83.6% 100.0% 21.9% 100.0%

27.4% 28.0% 16.4% 78.1% -

Source: Data base of National Registration and Statistic Office Ps: In soums level, there is not found official statistic data about year of 2015, thus the table is shown data about year of 2014.

From above table, you can find that suppliers and producers (especially entities) in Umnudelger and Binder soums more reacted on implementation of government policies and programs for this sector.

Moreover, due to market relation, its changes as well as development and movement, the following responds have been done by supplier and producers who play in this market:  Looking for financial and advanced technologies in order to sustain their finance and activities  Addressing the issues about storages and product preservation for stability of their products  They have more interest on greenhouse support and its farming  Lack of product preservation and storage, they sell the products in very low price during the harvesting season, but producers are not able to take any actions on this matter.  Due to location soums covered by study, they affected by price fluctuations and not able to cover their expenses. Unfortunately, the producers could not able to response against that.

28

Market study on potatoes and vegetables ďƒź Although they want stable their production and to reduce flow of imported products, unfortunately with weak participation of local government and civil society organizations the actions are not been organized and still not taken.

As seen from all facts mentioned above, the potatoes and vegetables producers’ response against the market change, movement and their negative impact werenot effectively taken a place. If it continues like this, eventually it will bring the adverse consequences such as the potatoes and vegetable producers may failure to farming, therefore faced to bankrupt.

2.2.3.3 CURRENT SITUATION OF POTATOES AND VEGETABLES MARKET DEMAND AND SUPPLY CURRENT SITUATION OF POTATOES AND VEGETABLES MARKET SUPPLY Based on the study outcomes, we decided to show information about producers (potatoes and vegetable farmers) who were main subjects of the study, and their production volume, before assessing the current situation of market supply.

STUDY OUTCOMES ABOUT POTATOES AND VEGETABLES FARMERS The study covered 173 unities, out of total 32.7% was from presenters from Umnudelger (Khurkh village), and 18.8% was from Binder soum, 10.9% from Kherlen soum and remaining 37.6 percent was presenters from Murun soum.

Table2.2 Structure of potatoes and vegetable farmers, by soums included in study

Structure Soums

Umnudelger Binder Kherlen Murun Total

Frequency

Percent

Valid Percent

57 32 19 65 173

32.7 18.8 10.9 37.6 100.0

32.7 18.8 10.9 37.6 100.0

Cumulative Percent 32.7 51.5 62.4 100.0 Source: Study outcome

Also, majority of potatoes and vegetable farmers which 80.3 percent out of total are family farmers, 19.7 percent are running company, cooperetaive and other form of enterprises.

Table2.1 Structure of potatoes and vegetable growers, by form of entrepreneurship

Structure Form of entrepreneurship

Company Cooperative Community

Frequency

Percent

Valid Percent

Cumulative Percent

9 10 3

5.2 5.8 1.7

5.2 5.8 1.7

5.2 11.0 12.7

29

Market study on potatoes and vegetables NGO Family farming Total

12 139 173

6.9 80.3 100.0

6.9 80.3 100.0

19.7 100.0 Source: Study outcome

We calculated to explain structural indicator6 of potatoes and vegetables farming families and entities according to their years of cultivation.

Figure2.16 Structural indicator of the potatoes and vegetable family farmers which included in study Source: Study outcome

The figure 2.18 is shown that: 

Bottom quartile is Q1 = 10 years. This indicates that out of total 139 families involved in study, the 35 families or 25% have less than 10 years farming experience and 104 families have more than 10 years farming experience



Center quartile is Q2 = 18 years. This indicates that out of total 139 families involved in study, the 70 families or 50% have less than 18 years farming experience and remaining 50% has more than 18 years farming experience



Top quartile is Q3 = 22.7 years. This indicates that out of total 139 families involved in study, the 105 families or 75% have less than 22.7 years farming experience and 25% has have more than 22.7 years farming experience

As summary, outcome of study determined that the majority of families, which run potatoes and vegetable farming, have plenty experience.

About entities: 

Q1 = 6.5 year. This indicates that out of total 34 entities involved in study, the 25% have less than 6.5 years farming experience and remaining 75% has more than 6.5 years farming experience

6

The quartile of top, bottom and center has been calculated from structural indicator

30

Market study on potatoes and vegetables 

Q2 = 10 year. This indicates that out of total 34 entities involved in study, the 50% have less than 10 years farming experience and remaining 50% has more than 10 years farming experience



Q3 = 13 years. This indicates that out of total 34 entities involved in study, the 75% have less than 13 years farming experience and remaining 25% has more than 13 years farming experience

Figure2.17 Structural indicator of the potatoes and vegetable farming entities which included in study Source: Study outcome

PRODUCER’S RESOURCE OF LAND, AND ITS UTILIZATION: As of 2016, total of 34 entities included in the study owe total of 625.5 ha land and out of this 97.5% is farmland, 0.2% is for production, 0.8% is for hay field and 1.1 rented to others.

Compared with previous year, the size of land owned by these entities has been increased by 1.4 times. This gives us positive expectation of influence on utilization land production level. Out of 609.8 ha farmland owned by 34 entities involved in study 14.4% is used for potatoes and vegetables farming. In other word, as 2016 the potatoes were planted in 89.6 ha farmland and remaining ha was used for vegetable planting. However, the size of potatoes and vegetable farmland was decreased by 6.4 percent as compared with previous year and by 20 percent as compared with year of 2014. About greenhouse farming, in 2016 the 24.7 ha farmland was planted which means decreased 3 times than previous year and 2.6 times than year of 2014. It is maybe related to greenhouse farming cultivation has not stopped completely while the study was ongoing.

31

Market study on potatoes and vegetables In terms of family farming, there were 139 families involved in the study and total size of land owned by them was 246.6 ha. Out of this total land, the 95.4% is for cultivation, 0.1% is for production, about 4.1% is used for hay field and pasture and remaining 0.4% is rented to others. As compared with previous year, the size of land by owned by family farmers also increased by 3.8% and farmland has been increased by 2.6%. The family farmers planted the potatoes and vegetables in 105.7 ha which 44.6% is from out of 235.2 ha farm land.

In summery for the family farmers, the size of farm land used for potatoes and vegetable planting was increased by 6.3% in 2016 than previous year and by 8.1% than year of 2014. About greenhouse farming run by family farmers in 2016, the 8.5 ha was cultivated which means it is also increased 2.1 times as compared with previous year and 2.2 times than year of 2014.

SOIL USED FOR PRODUCTION AND PLANT PROTECTION PRODUCTS /pesticides/: As of year of 20157, the 72% is from out of 34 entities involved in the study, answered that they used fertilizers with the purpose of soil and plant protection.

According to structure of the fertilizers and protection products usage:  The natural based organic fertilizers, in order to protect soil and plants, have been used by 27.8% from total entities;  The 88.8% is used other organic fertilizer such as manure and bird excrement for increasing yields;  The mineral fertilizers such as nitrogen and complex fertilizers used by 11.1%;  And, 5.6% from total, which use fertilizers and plant production products, answered that they use pesticides and other chemical products for protecting soil and plants.

About in level of family farming, as of 20158, the 92.1% from total family farmers coved by study said that they used the fertilizers and other chemicals in order to protect the soil and plants.

According to structure of the fertilizers and protection products usage:  The natural based organic fertilizers have been used by 8.5% from total family farmers;  The 85.7% is used other organic fertilizer such as manure and bird excrement for increasing yields;  The mineral fertilizers such as nitrogen, phophorus and complex fertilizers used by 8.6%;  And, 2.8% from total, which use fertilizers and plant production products, answered that they use pesticides and other chemical products for protecting soil and plants.

7 8

2015 has been chosen due to the crop sector’s activities of 2016 have not been completed yet.

2015 has been chosen due to the crop sector’s activities of 2016 have not been completed yet.

32

Market study on potatoes and vegetables

Figure2.18 Fertilizer, which has been used by farmers, and its types Source: Study outcomes

PRODUCTION VOLUME OF FARMERS WHO INVOLVED IN STUDY: We determined the structures of 173 farmers’, who covered by our market study, production volume by types of product, by family farming and entities and finally by soums.

POTATOES : In year of 2015, 791.7 tons of potatoes are harvested by 173 family farmers and entities which decreased by 12.1% compared with previous year. This was directly related to reduction of production number of study unities in Kherlen soum.

According to total volume of potatoes production, 55.8% is from Umnudelger soum, 4.6% is from Binder soum, 21.7% is from Kherlen soum and remaining percent is from Murun soum. In other hand, examining of the potatoes production volume was consisted that the 39.1% is from family farmers and 60.9% is from entities. As seen from this figure, the percentage of family farmers’ production volume has been increased than previous year. Also, in 2015 the production volume of family farmers from study covered soums increased by 9.8% as compared with 2014, but about entities it decreased by 22.1%. (Table2.4).

Table2.2 Potatoes production of farmers who involved in study, tons Year Soum Production Total production in Total

2014

2015

Umnudelger Binder Kherlen Murun Total Umnudelger Binder

Family Farmers

Entities

164.030 25.700 34.000 58.330 282.060 173.280 26.460

247.800 11.500 288.400 70.650 618.350 269.000 9.800

33

411.830 37.200 322.400 128.980 900.410 442.280 36.260

percentages Family Farmers

Entities

39.8% 69.1% 10.5% 45.2% 31.3% 39.2% 73.0%

60.2% 30.9% 89.5% 54.8% 68.7% 60.8% 27.0%

Market study on potatoes and vegetables Kherlen Murun Total

48.500 61.730 309.970

124.000 79.000 481.800

172.500 140.730 791.770

28.1% 43.9% 39.1%

71.9% 56.1% 60.9% Source: Study outcomes

VEGETABLES : In year of 2015, 791.7 tons of potatoes are harvested by 173 study unities which decreased by 28.5% compared with previous year. This is related to production reduction of entities as well as vegetables production volume of Kherlen and Umnudelger soums.

According to total volume of vegetables production, 54.2% is from Umnudelger soum, 4.4% is from Binder soum, 15.8% is from Kherlen soum and remaining percent is from Murun soum. As examining of the vegetables production volume, it was consisted that the 57.2% is from family farmers and 48.2% is from entities. As seen from this figure, the percentage of family farmers’ production volume has been increased than previous year. Also, in 2015 the production volume of family farmers from study covered soums increased by 3.7% as compared with 2014, but about entities it decreased 2 times. Regarding to the vegetables production volume in 2015, the cabbages are 20.2%, the turnips are 19.7%, beetroots are 11.9%, carrots are 28.7%, onions and garlic are 18.9% and remaining percentages from other vegetables (For more details about vegetables structure, please see annex).

Table 2.3 Vegetable production of farmers who involved in study, tons Year

Soum

Production

Total production in Total

Family Farmers 2014

2015

Umnudelger Binder Kherlen Murun Total Umnudelger Binder Kherlen Murun Total

111.435 9.556 20.570 50.108 191.669 107.485 13.942 24.000 53.440 198.867

Entities result 204.473 1.960 55.630 33.470 295.533 81.055 1.230 30.960 35.770 149.015

315.908 11.516 76.200 83.578 487.202 188.540 15.172 54.960 89.210 347.882

percentages Family Farmers

Entities

35.3% 83.0% 27.0% 60.0% 39.3% 57.0% 91.9% 43.7% 59.9% 57.2%

64.7% 17.0% 73.0% 40.0% 60.7% 43.0% 8.1% 56.3% 40.1% 42.8%

Source:Study outcomes

GREENHOUSE VEGETABLES: In 2015, the unities involved in the study, the harvested 15.3 tons greenhouse vegetables in total which decreased by 3%. This is in one hand related to production reduction of entities, and in other hand it is directly to production volume of Kherlen soum. According to total volume of greenhouse vegetables production, 17.9% was from Umnudelger soum, 14.9% was from Binder soum, 56.3% was from Kherlen soum and remaining percent was from Murun soum. As examining of the greenhouse vegetables 34

Market study on potatoes and vegetables production volume, it was consisted that the 44.1% was from family farmers and 55.9% was from entities. As seen from this figure, the percentage of family farmers’ production volume has been increased than previous year. Also, in 2015 the production volume of family farmers from study covered soums increased by 9.4% as compared with 2014, but about entities it decreased 11%. Regarding to the vegetables production volume in 2015, it consisted that 69.3% from cucumbers, 16.6% form tomatoes, 0.49% from green salad, 0.9% from aubergines, 8.7% peppers, 0.4% leaf vegetables and remaining percentages from other greenhouse vegetables (For more details about greenhouse vegetables structure, please see annex 6-8).

Table2.4 Greenhouse production of farmers who involved in study, tons Year

Soum

Production Family Farmers

Umnudelger Binder Kherlen Murun Total Umnudelger Binder Kherlen Murun Total

2014

2015

2.395 3.860 3.537 1.308 11.100 2.395 4.017 3.857 1.880 12.149

Total result

Entitie s 2.425 0.130 13.650 1.070 17.275 2.555 0.100 11.650 1.070 15.375

4.820 3.990 17.187 2.378 28.375 4.950 4.117 15.507 2.950 27.524

Total production in percentages Family Entities Farmers 49.7% 96.7% 20.6% 55.0% 39.1% 48.4% 97.6% 24.9% 63.7% 44.1%

50.3% 3.3% 79.4% 45.0% 60.9% 51.6% 2.4% 75.1% 36.3% 55.9% Source:Study outcomes

FARMERS, WHO COVERED BY MARKET STUDY, PRODUCT SUPPLY TO THE POTATOES AND VEGETABLES MARKET: A product distribution (market supply) is very essential in the crop sector, and A product distribution (market supply) is very essential in the crop sector, and it is normally different depend on what type of farming has been engaged. Thus, the study outcomes of product distribution (market supply) have been developed in two main parts such as family farmers and entities.

PRODUCT DISTRIBUTION (MARKET SUPPLY) OF ENTITIES, BY TYPES OF PRODUCTS: As of 2015, the total of 481.8 tons of potatoes were harvested by study unities; and out of total harvest the 17.3% was used as seedling, 19.9% was for self-consumption and remaining percentage was sold in the market. From these figures, the volume of potatoes used for seedling was decreased by 27.2%, the volume of self-consumption was increased by 19.8%

35

Market study on potatoes and vegetables and the volume of sold potatoes in the market was decreased by 28.3% as comparing with previous year.

Table2.7 Products distribution and market supply of entities covered by study, by potatoes Year Soum For seedling Selfconsumption Sold in Sold by farmers Total the harvest, market tons 2014

2015

Umnudelger Binder Kherlen Murun Total Umnudelger Binder Kherlen Murun Total

60 1 52.7 1 114.7 50.1 2.8 26.6 4 83.5

35.8 1 11.5 29.2 77.5 53.4 1.32 8.9 29.2 92.82

152 9.5 224.2 40.45 426.15 165.5 5.68 88.5 45.8 305.48

113 9 36.7 40.25 198.95 124 5.18 25 40.7 194.88

247.8 11.5 288.4 70.65 618.35 69 9.8 124 79 481.8 Source: Study outcome

As of 2015, the total of 149.01 tons of vegetables were harvested by study unities; and out of total harvest the 3.3% was used as seedling, 17.9% was for self-consumption and remaining percentage was sold in the market. From these figures, the volume of vegetables used for seedling was increased by 39.1%, the volume of self-consumption was increased by 5.6% and the volume of sold vegetables in the market was decreased almost 2 times than previous year. (For more details about vegetables distribution, please see annex Table2.8 Products distributin and market supply of entities covered by study, vegetables Year Soum

2014

2015

Umnudelger Binder Kherlen Murun Total Umnudelger Binder Kherlen Murun Total

For seedling Self Sold in Sold by farmers Total consumption market harvest, ton 2.5 0 1.025 0 3.525 3.4 0 1.505 0 4.905

13.593 0.04 7.573 3.99 25.196 18.495 0.08 4.033 3.99 26.598

188.38 1.92 47.032 29.48 266.812 59.16 1.15 25.422 31.78 117.512

172.68 1.92 27.032 25.42 227.052 59.16 1.15 25.422 26.34 112.072

204.473 1.96 55.63 33.47 295.533 81.055 1.23 30.96 35.77 149.015

Source: Study outcome

As of 2015, the total of 15.375 tons of greenhouse vegetables were harvested by study unities; and out of total harvest the 26.1% was for self-consumption and remaining percentage was sold in the market. From these figures, the volume of greenhouse vegetables used for selfconsumption was increased by 5.8% and the volume of sold greenhouse vegetables in the market

36

Market study on potatoes and vegetables was decreased by 15.7% than previous year. (For more details about greenhouse vegetables distribution, please see annex) Table2.5 Products distribution and market supply of family farmers covered by study, greenhouse vegetables Year Soum For seedling Self Sold in Total Sold by farmers consumption market harvest, ton 2014

2015

Umnudelger Binder Kherlen Murun Total Umnudelger Binder Kherlen Murun Total

2.5 0 1.025 0 3.525 3.4 0 1.505 0 4.905

13.593 0.04 7.573 3.99 25.196 18.495 0.08 4.033 3.99 26.598

188.38 1.92 47.032 29.48 266.812 59.16 1.15 25.422 31.78 117.512

172.68 204.473 1.92 1.96 27.032 55.63 25.42 33.47 227.052 295.533 59.16 81.055 1.15 1.23 25.422 30.96 26.34 35.77 112.072 149.015 Sourse: Study outcome

PRODUCT DISTRIBUTION (MARKET SUPPLY) OF FAMILY FARMERS, BY TYPES OF PRODUCTS: As of 2015, the total of 309.9 tons of potatoes were harvested by study unities; and out of total harvest the 15.9% was used for seedling, 11.3% was for selfconsumption and remaining percentage was sold in the market. Compared with previous year, the volume of potatoes which used for seedling was increased by 12.8%, product used for selfconsumption was increased by 20.5% and the volume of sold potatoes in the market was increased by 7.8%.

Table2.10 Products distribution and market supply of family farmers covered by study, potatoes, Year Soum For seedling Self Sold in Total Sold by farmers consumption market harvest, Ton 2014

2015

Umnudelger Binder Kherlen Murun Total Umnudelger Binder Kherlen Murun Total

29.700 5.970 3.500 4.680 43.850 31.000 4.280 8.500 5.710 49.490

9.470 5.550 4.700 9.310 29.030 9.720 7.100 5.200 12.950 34.970

124.860 14.180 25.800 44.340 209.180 132.560 15.080 34.800 43.070 225.510

51.360 9.830 16.500 36.990 114.680 63.560 12.480 18.300 36.420 130.760

164.030 25.700 34.000 58.330 282.060 173.280 26.460 48.500 61.730 309.970 Source: Study outcome

As of 2015, the total of 198.8 tons of vegetables were harvested by family farmers covered by study and out of total harvest the 0.6% was used as seedling, 11.4% was for selfconsumption and remaining percentage was sold in the market. From these figures, the volume of vegetables used for seedling was increased by 66.2%, the volume of self-consumption was 37

Market study on potatoes and vegetables increased by 7.8% and the volume of sold vegetables in the market was also increased by 2.9% than previous year. (For more details about vegetables distribution, please see annex) Table2.11 Products distribution and market supply of family farmers covered by study, vegetables Year Soum For seedling Self Sold in Total Sold by farmers consumption market harvest, ton 2014

2015

Umnudelger Binder Kherlen Murun Total Umnudelger Binder Kherlen Murun Total

0 0.005 0 0.738 0.743 0 0 0 1.235 1.235

2.77 2.223 3.43 12.66 21.083 2.45 2.854 3.62 13.802 22.726

108.665 7.328 17.14 36.71 169.843 105.035 11.088 20.38 38.403 174.906

98.965 4.878 15.85 31.825 151.518 98.335 10.764 20.33 32.668 162.097

111.435 9.556 20.570 50.108 191.669 107.485 13.942 24.000 53.440 198.867

Source: Study outcome

As of 2015, the total of 1.149 tons of greenhouse vegetables were harvested by study covered family farmers, and out of total harvest the 34.5% was for self-consumption and remaining percentage was sold in the market. The volume of greenhouse vegetables used for self-consumption was increased by 13.3% and the volume of sold greenhouse vegetables in the market was also increased by 7.5% than previous year. (For more details about greenhouse vegetables distribution, please see annex) Table2.12 Products distribution and market supply of family farmers covered by study, greenhouse vegetables Year Soum For seedling Self Sold in Total Sold by farmers consumption market harvest, ton 2014

2015

Umnudelger Binder Kherlen Murun Total Umnudelger Binder Kherlen Murun Total

0 0 0 0 0.000 0 0 0 0 0.000

0.555 2.003 0.497 0.653 3.708 0.555 2.18 0.617 0.85 4.202

1.84 1.857 3.04 0.655 7.392 1.84 1.837 3.24 1.03 7.947

1.84 1.857 3.04 0.515 7.252 1.84 1.837 3.24 0.91 7.827

2.395 3.860 3.537 1.308 11.100 2.395 4.017 3.857 1.880 12.149 Source: Study outcome

So, based on the study outcomes, we explained potatoes and vegetable farmers’ products distribution and market supply as shown in above. Morever, we would like to include picture of the domestic production volume and current situation of potatoes and vegetable market supply in level of study covered soums, Khentii province as well in eastern region as followed.

38

Market study on potatoes and vegetables THE VOLUME OF DOMESTIC PRODUCTION (MARKET SUPPLY) AT THE STUDY COVERED SOUMS’ LEVEL9.

KHERLEN SOUM: In level of this soum, there were 1.05 thousand tons of potatoes and 0.815 thousand tons of vegetables were harvested. Examining volume of domestic production it consisted that 12.3% from cabbages, 29.4% from carrots, 14.7% from turnips, 22.1% from onions and garlic and rest of percentages from other vegetables.

BINDER SOUM: In level of this soum, there were 0.28 thousand tons of potatoes and 0.171 thousand tons of vegetables were harvested. Examining volume of domestic production it consisted that 26.3% from cabbages, 30.4% from carrots, 20.5% from turnips, 17.0% from onions and garlic and rest of percentages from other vegetables.

MURUN SOUM: In level of this soum, there were total of 1.385 thousand tons of potatoes and 1.11 thousand tons of vegetables were harvested. Examining volume of domestic production it consisted that 10.7% from cabbages, 14.2% from carrots, 12.3% from turnips, 24.6% from onions and garlic and rest of percentages from other vegetables production.

UMNUDELGER SOUM: In level of this soum, there were 0.68 thousand tons of potatoes and 0.171 thousand tons of vegetables were harvested. Examining volume of domestic production it consisted that 18.1% from cabbages, 19.9% from carrots, 20.5% from turnips, 32.2% from onions and garlic and rest of percentages from other vegetable production.

Also, following picture was observed during the examination of all soums’, which included in our study, total of domestic production volume in potatoes and vegetable market by family farming and entities:  POTATOES: The 33.7% out of total percenteges of domestic production of

potatoes was configured from entities and remaining was from family farmers.  VEGETABLES: The 44.2% out of total percenteges of domestic production of vegetables was configured from entities and remaining was from family farmers.

In summary, the potatoes and vegetables market is consisted mostly by family farming and their participation on domestic production and supply of this market higher than others, therefore it is very important.

THE VOLUME OF DOMESTIC PRODUCTION (MARKET SUPPLY) AT THE LEVEL OF PROVINCE AND EASTERN REGION

9

It was explained by 2014 due to the official data of 2015 is not included yet in National Statistic Committee

39

Market study on potatoes and vegetables As of 2015, there were 236.1 thousand tons of potatoes and vegetebles harvested at the national level. Out of this 4.5% which was 10.6 thousand tons of potatoes and vegetables from Eastern region and from total of Eastern region harvest the 64.6% consisted from production volume of Khentii province. This means the domestic production volume of Khentii is leading position in the Eastern region.

Figure2.19 Domestic production volume of the potatoes and vegetables market

We compared the domestic production volume of Khentii province with the Easten region, therefore the changes of the domestic production volume of Khentii province in last few years have been identified as followed.

As of 2015, the 6.8 thousand tons of potatoes and vegetables were harvested and out of this the 62.8% was potatoes. Unfortunately, this percentage has been decreased by 22.2% compared to year of 2014 and decreased by 1.2% than 2010. Moreover it has been decreasing by 0.3% in every year as compared to average volume of product years between 2010-2015. Its happening because of drop of potatoes and vegetables cultivation, as well as the most of enterprises moved to crop sector from production of potatoes and vegetables. Furthermore, it is important to separate the production volume between family farming and entities, therefore to support a development of the family farming in this production.

POTATOES: In year of 2015, the 4.3 thousand tons of potatoes were harvested and the 38.4% out of total was consisted from entities. This proves that the family farming production

40

Market study on potatoes and vegetables is essential position of domestic production volume of Khentii province as well.

Figure2.20 Domestic production structure of potatoes market in Khentii province

ďƒ˜

VEGETABLES: In year of 2015, the 2.5 thousand tons of vegetables were harvested and

the % out of total was consisted from entities. This proves that the family farming production is essential position of domestic production volume of Khentii province as well.

Figure2.21 Domestic production structure of vegetables market in Khentii province

THE VOLUME OF DOMESTIC PRODUCTION (MARKET SUPPLY) AT THE NATIONAL LEVEL AND IMPORTED PRODUCTS As of 2015, the total of 236.1 thousand tons of potatoes and vegetables were harvested at the national level, and the 10.8% of potatoes and vegetables, which is in equal with total domestic production, were imported as well. In other word, in 2015 there were total of 180.8 thousand tons of potatoes and 80.9 thousand tons of vegetables supplied to the market.

41

Market study on potatoes and vegetables

Figure2.22 Total market supply at the national level

CURRENT SITUATION OF THE POTATOES AND VEGETABLE MARKET SUPPLY: Demand and needs in the any markets are different. In other word, the demand is defined as a need which guarenteed by ability of procurement. Thus, the first of all we determined needs and requirements of the products in order to show current situation of market demand of potatoes and vegetables. It has been calculated within framework of the study covered soums’ level on base of population number.

Table2.6 Annual needs of the potatoes and vegetables Administration units

Eastern region Khentii Kherlen Binder Murun Umnudelger

2015 Total population

Comparised population

207,519 72,339 21,520 3,976 1,833 5,521

186767 65105 19368 3578 1650 4969

Daily need, kg10 Potatoes Vegetables

0.140 0.140 0.140 0.140 0.140 0.140

0.200 0.200 0.200 0.200 0.200 0.200

Annual needs, tons Potatoes Vegetables

9543.8 3326.9 989.7 182.9 84.3 253.9

13634.0 4752.7 1413.9 261.2 120.4 362.7

Annual total needs of potatoes and vegetables, ton 23177.8 8079.5 2403.6 444.1 204.7 616.6

Source: Calculated outcome

As shown above table, in 2015 there was needs of the 23.1 thousand tons of potatoes and vegetables in the Eastern region, the 8.07 thousand tons of potatoes and vegetables in Khentii province, the 2.4 thousand tons of potatoes and vegetables in Kherlen soum, the 0.4 thousand

“. The norm of daily and annual need for person was defined by food safety statistics calculation method which explained that person necessary to have 0,140 kg of potatoes and 0,200 kg of vegetable in daily, and 51, 1 kg of potatoes and 73, 0 kg of vegetables in annual” 10

42

Market study on potatoes and vegetables tons of potatoes and vegetables in Binder soum, the 0.2 thousand tons of potatoes and vegetables in Murun soum, the 0.6 thousand tons of potatoes and vegetables in Umnudelger soum were required. Moreover, in between years of 2000-2015, the population was increased by 0.3% in Eastern region, by 1.8% in Kherlen soum, by 0.4% in Binder soum in average, but was decreased by 1.7% in Murun soum and by 0.2% in Umndelger soum. Furthermore, the needs of potatoes and vegetables might be increased in Khentii province, Binder soums and in Eastern region, but on other hand it may be decreased in Murun and Umdelger soums. This is how we determined the food availability and provision by using method which was comparing the population’s annual needs of potatoes and vegetables with size of production.

Here: ХХ

Food availability and provision

Н

Store of food or domestic production

ХЖХ Annual needs of food Table2. 7 Availability and provision of potatoes and vegetables Administrative unit Eastern region Khentii Kherlen Binder Murun Umnudelger

Domestic production thousand.tons Potatoes Vegetables Total 6.616 3.985 10.601 4.302 2.543 6.845 1.05 0.815 1.865 0.28 0.171 0.451 1.385 1.11 2.495 0.68 0.171 0.851

Loss (5%), thousand.tons Potatoes Vegetables 0.331 0.199 0.215 0.127 0.053 0.041 0.014 0.009 0.069 0.056 0.034 0.009

Total 0.530 0.342 0.093 0.023 0.125 0.043

Domestic food store, thousand. tons Potatoes Vegetables Total 6.285 3.786 10.071 4.087 2.416 6.503 0.998 0.774 1.772 0.266 0.162 0.428 1.316 1.055 2.370 0.646 0.162 0.808 Source: calculated outcome

Continuous Administrative unit

Eastern region Khentii Kherlen Binder Murun Umnudelger

Annual needs, thousand.tons Potatoes Vegetables 9.544 3.327 0.990 0.183 0.084 0.254

13.634 4.753 1.414 0.261 0.120 0.363

Total annual needs of potatoes, and vegetables, thous.tons 23.178 8.080 2.404 0.444 0.205 0.617

Availability and provision (%) Potatoes

Vegetables

Total

65.9% Sufficient Sufficient Sufficient Sufficient Sufficient

27.8% 50.8% 54.8% 62.2% Sufficient 44.8%

43.5% 80.5% 73.7% 96.5% Sufficient Sufficient

Source: Calculated outcome

Based on domestic production and store of food, we caulculated needs of potatoes and food market (based on matching indicator of population) and we came to conclusion that it is insufficient, especially other than Murun and Umnudelger soums, there are the insufficiant of availability and provision of potatoes and vegetables. It proves that there is possibility of 43

Market study on potatoes and vegetables increasing the potatoes and vegetables market capacity, and

this directly relates to

consumers’ability of procurement.

But, the average indicator, which sat by National Registration and Statistics Office, was applied to determine market demand of potatoes and vegetables11.

Table 2.8 Market demand (substantive consumption) of potatoes and vegetables, and annual needs Administrative unit

Eastern region Khentii Kherlen Binder Murun Umnudelger

Compared population of 2015

186767 65105 19368 3578 1650 4969

Compared monthly consumption of person, kg Potato Vegeta es bles 2.8 2

Annual consumption (substantive demand), thous.tons Potatoes 6.275 2.188 0.651 0.120 0.055 0.167

Vegetabl es 4.482 1.563 0.465 0.086 0.040 0.119

Total 10.758 3.750 1.116 0.206 0.095 0.286

Annual consumption, thous.tons

Potatoe s 9.544 3.327 0.990 0.183 0.084 0.254

Vegetabl es 13.634 4.753 1.414 0.261 0.120 0.363

Total 23.178 8.080 2.404 0.444 0.205 0.617

Source: Calculated outcome

As shown in above mentioned table, there is insufficient availability and provision of potatoes and vegetables consumption. This is directly related to resource of products, livelihood level of people and ability of procurement. There is opportunity for expanding potatoes and vegetable market, if the Government could formulate supportive policies for this sector’s development and increase of livelihoods of local people as well as their capacity of procurement.

This is how we defined the demand and needs of potatoes and vegetables market in the level of study covered soums, province and region. Furthermore, on the base of study outcomes we tried to explain consumption of some feature consumers which are retailers and local State organizations.

POTATOES

AND

VEGETABLE

CONSUMPTION

OF

LOCAL

STATE

ORGANIZATION: Main consumers in these categories were kindergarten, schools and hospitals. (Table 2.16-2.19).

Table2.9 Potatoes and vegetable consumption of kindergartens Types

Potatoes Cabbages Carrots

Consumption, tons 9.6235 4.3565 1.4605

Total consumption 2014 Consumption, thous.MNT Consumption, tons 7947.6 9.897 5628.75 5.383 1849 1.106

11

2015 Consumption, thous.MNT 10277.1 7531.5 1316.6

The market demand of potatoes and vegetables was calculated by the way of using an indicator for comprised person and national consumption average of some food products which allocated monthly usage of per person

44

Market study on potatoes and vegetables 0.905 0 0.8387 0.0396 17.2238

Turnips Beetroots Onions Garlic Total

1157.5 0 1146 198 17926.85

0.93 0 0.8132 0.0396 18.1688

1050 0 1150.7 198 21523.9

Source: Financial department of kindergartens of study covered soums

As shown in above table, the potatoes and vegetable consumption of kindergarten was increased by 20.1% which was 3.5 million MNT. And, also their consumptions were based on direct procurement. This means, there has not set appropriate legal framework of easy accessing for family farmers to enter procurement tender. In other word, it was explained that the family farmers had notparticipated activily in tender, even this was observed a common in procurement of State organizations.

Table2.10 Potatoes and vegetable consumption of hospitals Type

Potatoes Cabbages Carrots Turnips Beetroots Onions Garlic Total

Health centers Consumption, tons 2.15 1.322 0.169 0.143 0.06 0.195 0.01 4.049

2014 Consumption, thous.MNT 1265 1301.6 158.2 126.8 23 145.5 42 3062.1

Consumption, tons 1.91 1.21 0.16 0.123 0.06 0.175 0.01 3.648

2015 Consumption, thous.MNT 1282 1209 175 114 25 172 45 3022

Source: Financial department of health centers of study covered soums

The table in above shows that the potatoes and vegetables consumption of health centers was decreased by 1.4% which is 40.1 thousand MNT. Table2.11 Potatoes and vegetable consumption of schools Type

Potatoes Cabbages Carrots Turnips Beetroots Onions Garlic Total

Consumption, tons 6.2564 2.6762 0.6777 0.2 0 0.5902 0.04 10.4405

Schools 2014 Consumption, thous.MNT Consumption, tons 4983.55 5.5842 3438.31 2.9583 952.82 0.5512 300 0.15 0 0 822.81 0.4618 240 0.061 10737.49 9.7665

2015 Consumption, thous.MNT 4366.54 4167.45 782.3 195 0 612.7 385 10508.99

Source: Financial department of health centers of study covered soums

The table in above shows that the potatoes and vegetables consumption of health centers was decreased by 2.2% which is 228.5 thousand MNT. Table2.12 Potatoes and vegetables’ total consumption of public service organizations Types

Potatoes

Total 2014 2015 consumption, ton consumption, thous.mnt consumption, ton consumption, thous.mnt 18.0299 14196.15 17.3912 15925.64

45

Market study on potatoes and vegetables Cabbages Carrots Turnips Beetroot Onions Garlic Total

8.3547 2.3072 1.248 0.06 1.6239 0.0896 31.7133

10368.66 2960.02 1584.3 23 2114.31 480 31726.44

9.5513 1.8172 1.203 0.06 1.45 0.1106 31.5833

12907.95 2273.9 1359 25 1935.4 628 35054.89

Source: Financial department of public services of study covered soums

As shown in above table, the potatoes and vegetables consumption of public service organizations is expected to grow by 10.5 percent which is 3.3 million MNT .

POTATOES AND VEGETABLE PROCUREMENT OF RETAILERS: In Kherlen soum, there are out of total retailers the supermarkets and chain shops are 34.1%, small shops are 40.5% and remaining percent is bigger trading centers and markets.  The potatoes and vegetables’ total procurement of supermarkets and chain stores, which are involved in market study, mostly based on purchase from UB city (Narantuul and Bars market);  It was observed from the study outcome that the procurement of small shops has been done from farmers and wholesalers (“99”) in Kherlen soum. However, most of them have purchased from UB city again. This depends on the availability and provision of potatoes and vegetables supply.

As regards of large trade centers and markets:  Khurkh village  Most of procurements from UB city (Bars and Narantuul market)  Cultivated by themselves 2.3 MARKET PLAYERS AND THEIR RELATION In the potatoes and vegetable market, the producers and farmers from one side and from other side the middleman, wholesalers and final consumers included population, families, public service organizations and local government organizations participate directly. About producers, beside local farmers, it was observed during the study that the farmers from other provinces especially region of Tuv and Selenge who participate regularly in this market, therefore their relation is not really in good condition. Furthermore, there are many stages have to be passed for the producers in order to contact with other subjects in the market and their relation with local authorities is not in good condition as well. The middlemen play in main role in the potatoes and vegetable market; therefore they make decisions related to price and volume of procurement in this market. Moreover, the participation of middlemen in the market have brought many negative results such as the price and stages of products are increased (in fall) and decreased 46

Market study on potatoes and vegetables (autumn) factitiously. (with high fluctuation) For this reason, it is often that the producers, who cultivate a large amount, interface with middlemen. Also, it is common that during the harvesting season due to lack of storages the producers negotiate with middlemen and other buyers in order to sell their products. Other main players of the potatoes and vegetable market are retailers and wholesalers. About local trading organizations, their relation with producers is not good condition; therefore it was observed from study outcome that they do not have business confidence. Because, the challenges included the producers are not able to supply regularly and on time weakened relation between them. Thus, they purchase products from bigger market of UB city.

It was observed that, one of final consumers of the potatoes and vegetable markets are families and population, they have established good relationship with producers comparing with others, because there various reasons such as they know each other and as regular consumers they have already apprehended the products. But, about public service organizations the relationship was different. In some places they work closely with producers, in some places they have weak relation with producers but good relation with retailers.

2.4 INFRASTRUCTURE AND FACILITIES IMPACTS IN MARKET DEVELOPMENT 2.4.1 CLIMATE CHANGE IMPACTS ON PRODUCTION AND PRESERVATION OF PRODUCTS Mongolia has harsh climate and same time it impacts on production and preservation of products. In 2015, the most of country faced to droughts, therefore the crop production effected by this. Also, severe cold, strong rain and wind in end of summer and beginning of autumn lead yield losses. During the market study, it observed that some producers’ production volume has been decreased due to climate. Another challenge in the potatoes and vegetable market is product storage. During the winter and fall temperature reaches minus 29 or 30 degrees directly effects to product storage as well. The negative impact of climate change on production and product storage is one of common challenges everywhere in Mongolia 2.4.2 WAREHOUSE AND ITS CAPACITY PRODUCT PRESERVATION OF ENTITIES: The total of 34 entities involved in market study and answered study questionnaire that 56% out of total they do not have any storages and remaining 44% they have own storages. In other word, 15 entities:  Underground storage, average capacity is 9 tons,  Other types of warehouse, average capacity are 65 tons.

47

Market study on potatoes and vegetables About 19 entities which do not own any warehouses answered that the 28.6% is rent from others, 50% is share with friends and remaining percentages answered they do not need any storages because they sell directly. The study outcome shows that the 5 entities from 19 which are 28.6% spend 210 thousand MNT monthly for storage cost.

PRODUCT PRESERVATION OF FAMILY FARMERS: The total of 139 families involved in market study answered study questionnaire that 72.9% out of total they do not have any storages and remaining 27.1% they have own storages.

In other word, 38 families:  Underground storage, average capacity is 10.2 tons,  Other types of warehouse, average capacity are 15.8 tons.

About 101 families who not owned any warehouses answered that the 37% is rent from others, 40.7% is share with friends and remaining percentages answered they do not need any storages, because they sell directly. The study outcome shows that the 37 families from 101 which are 37% spend 125 thousand MNT monthly for storage cost.

2.4.3 TRANSPORTATION AND ITS CAPACITY The transportation is one of the essential factors for the market development; however it was developed differently in the soums covered by market study. For example, in Kherlen and Murun soums the product transportation is quite well developed, but about Binder and Umnudelger soums there are some problems such as remote location from market, high transportation cost and poor existing the infrastructure. On the other hand, an important issue related to the infrastructure of transportation for producers is sufficiency and provisions of equipment and technics . Thus, we summarized the study report on transportation as followed.

EQUIPMENT SUFFICIENCY OF ENTITIES: The total of 34 entities were covered by study, the 24% answered that they run crop production by using own agricultural equipment and the 32% rents equipment, the 24% is combined and remaining percentage deals it by other ways such as manual cultivation and borrow from friends or relatives. The equipment which used in crop production is:      

Compact tractor Plough, the potatoes and vegetable seeder, picker, shovel plough and crushers, Irrigation pump and system Cars and trucks and trailers Onion seeder, ski harrow, weeder/hoe, cultivator Digger, venom spreader, scale, drill-harrow etc.

48

Market study on potatoes and vegetables

Also, 83.3% of entities which run crop production by using own agricultural equipment deemed that it is necessary to update their agricultural equipment. The following equipment is needed for entities.

Figure2.23 Required equipment for entities

As seen from above figure, the most urgently needed equipment for local level of entities is tractor and its related aggregates. Also, during the study it was urged that there is requirement of warehouses for greenhouse vegetables. About entities, which rent agricultural equipment from others, annually spend 448.7 thousand MNT for renting cost during the harvesting season.

EQUIPMENT SUFFICIENCY OF FAMILY FARMERS: The total of 139 families covered by study, the 14.9% answered that they run crop production by using own agricultural equipment and the 56.8% rents equipment, the 12.2% is combined and remaining percentage deals it by other ways. The equipment which used in crop production by family farmers is:  Compact tractor  The potatoes and vegetable seeder  Crusher, harrow, plough,  Truck  Digger, excavator , venom spreader  Irrigation pump  Digger  Potatoes picker  Seeder  Drill-harrow

49

Market study on potatoes and vegetables Also, 60% of entities which run crop production by using own agricultural equipment deemed that it is necessary to update their agricultural equipment. The following equipment is needed for entities.

The following equipment is needed for entities.

Figure2.24 Required equipment for family farmers

As seen from above figure, the most urgently needed equipment for level of family farming is tractor and its related aggregates, potatoes and vegetable seeder and irragation system.

Also, during the study it was urged that there is requirement of warehouses for potatoes and vegetable and greenhouse vegetables. About family farmers, who rent agricultural equipment from others, during the harvesting season they annually spend 240.2 thousand MNT for renting cost.

2.5 ROLE AND PARTICIPTION OF PUBLIC AND PRIVATE ORGANIZATIONS ON MARKET DEVELOPMENT The role and participation of local authorities are the most important part of market development.

Especially, formulating appropriate policies and soft loan for agricultural producers andpolicies and programs which support other market players’ activities contribute a lot to market development. Furthermore, the market development depends on sectorial development directly.

UMNUDELGER SOUM: The local organizations work closely with local producers by supporting through the Fund for soum development, the Fund for local development and the Fund for supporting small and middle sized business. Thus, we tried to show how study covered family farmers and entities cooperated with local state organizations in last 3 years.

50

Market study on potatoes and vegetables ďƒź In last 3 years, the 55.5% from out of total study covered family farmers and entities delivered a formal request to local state organizations for cooperating and 40.6% received useful information from them. ďƒź The 6.5% of study unities included in equipment support therefore received balance of 11.3 million MNT. Out of total study unities, the 21.9% received support related to livestock health and vaccine, 12.5% received support from the Fund for soum development (total of 14.5 million MNT), 2 families received total of 9 million MNT from the Fund for local development, and 1 family received total of 5 million MNT from the Fund for supporting small and middle sized business. Also, 34.4% cooperates with local state organizations as participating events organized by them, 28.1% cooperates as owing and using land, 21.9% cooperates on boring a well, 12.5% as participating local procurement, and 43.8% cooperates as participating agri-related trainings and for searching advice.

Also, the study units supplied products, which were total amount of 43.9 million MNT, to the local state organizations.

In addition, the 30.3% from total study unities received the total of 29 million MNT loan service from commercial banks aimed to spend for agricultural activities, installing and fixing the building.

BINDER SOUM: The main financial resource which local authorities cooperate with citizenry through the financial support and help is the Fund for soum development, the Fund for local development and the Fund for supporting small and middle sized business.

In 2014 total amount of 46.6 million MNT and in 2015 the total amount of 46.6 million MNT granted from the Fund for soum development. All these spent for local production and service development.

About the Fund for local development, in 2014 the total of 394.8 million MNT and in 2015 total of 219.6 million MNT granted purpose of implementing local development program and local landscape and service.

In between 2009-2015, the total of 107 local people received soft loan amount of 389.8 million MNT from the Fund for supporting small and middle sized business, and out of this amount the 13.4% was spent for supporting vegetable growers’ activities (2 families). In 2015, the total of 43.5 million MNT loan granted from this fund and 23% was spent for vegetable sector (1 family).

51

Market study on potatoes and vegetables Despite local authorities support, we summarized how study covered families and entities have been cooperated with their local state organizations in last 3 year as followed.  In last 3 years, the 36.8% from out of total study covered family farmers and entities delivered a formal request to local state organizations for cooperating and 47.4% could receive useful information from them. Also, the 15.8% of study unities included in equipment support therefore received balance of 9.85 million MNT.  Out of total study unities, the 42.1% received support related to livestock health and vaccine, 15.7% received support from the Fund for soum development (total of 8 million MNT), 1family received total of 2 million MNT from the Fund for local development, and 42% cooperates with local state organizations as participating events organized by them, 21% cooperates as owing and using land, 10.5% cooperates on buying seed and fertilizers, 15.8% as participating local procurement, and 58% cooperates as participating agri-related trainings and for searching advice.

Also, the study units supplied products, which were total amount of 3.16 million MNT, to the local state organizations.

In addition, the 47.3% from total study unities received the total of 34 million MNT loan service from commercial banks and non-banking financial institutions aimed to spend for crop productions, updating agricultural equipment and tuition fee of their children.

KHERLEN SOUM: The local authorities in Kherlen soum cooperated with citizenry through the above mentioned funds such as:  In 2014 total amount of 322 million MNT granted from the Fund for soum development and out of this amount the 18% spent for agriculture, in 2015 the total amount of 219.6 million MNT granted as well and from this amount 15% was spent for agricultural sector.  About the Fund for supporting small and middle sized business, in 2014 the amount of 49.5 million MNT loan was granted and out of this 10.1% was spent for crop production and in 2015 the 26.5 million MNT loan granted.

Despite local authorities support, we summarized how study covered families and entities have been cooperated with their local state organizations in last 3 year as followed.  In last 3 years, the 72.2% from out of total study covered family farmers and entities delivered a formal request to local state organizations for cooperating and 45.5% could receive useful information from them. Also, the 9.1% of study unities included in equipment support therefore received balance of 5 million MNT. 52

Market study on potatoes and vegetables ďƒź Out of total study unities, the 18.2% received support related to livestock health and vaccine, 9% received support from the Fund for soum development (total of 2 million MNT) and 36.3% cooperates with local state organizations as participating events organized by them, 18.2% cooperates on boring a well, 36.4% cooperates as owing and using land, 36.4% cooperates on buying seed and fertilizers, 63.6% as participating local procurement, and 90.9% cooperates as participating agri-related trainings and for searching advice.

Also, the study unities supplied products, which were total amount of 106.5 million MNT, to the local state organizations.

In addition, the 54.5% from total study unities received the total of 124.5 million MNT loan service from commercial banks aimed to spend for crop productions.

MURUN SOUM: The main financial resource which local authorities in Murun soum cooperate with citizenry through the financial support and help is above mentioned funds and in 2014 total amount of 33 million MNT granted from the Fund for soum development in order to support livestock, other farming (pig husbandry) and block production. And in 2015, the total amount of 65 million MNT loan granted for supporting farming, processing plants for livestock raw materials, textile and vegetable preserving activities. About the Fund for supporting small and middle sized business, in 2014 the amount of 16.8 million MNT loan was granted in order to invest fence and tire repair services, sewing, sliced flour and handmade saddlers factors and in 2015 the 10.8 million MNT loan granted for supporting block productions, fence, handmade saddlers, hay and fodder.

Despite local authorities support, we summarized how study covered families and entities have been cooperated with their local state organizations in last 3 year as followed. ďƒź In last 3 years, the 21.2% from out of total study covered family farmers and entities delivered a formal request to local state organizations for cooperating and 47.4% could receive useful information from them. Also, the 7.9% of study unities included in equipment support therefore received balance of 12 million MNT. ďƒź Out of total study unities, the 18.4% received support related to livestock health and vaccine, 2.6% received support from the Fund for soum development (total of 15 million MNT) and 42.1% cooperates with local state organizations as participating events organized by them, 18.2% cooperates on boring a well, 39.5% cooperates as owing and using land, 50% cooperates as participating agri-related trainings and for 53

Market study on potatoes and vegetables searching advice and 39.5% cooperates as providing statistical data about crop production.

The 63.2% from total farmers and entities included in study received the total of 147.7 million MNT loan service from commercial banks aimed to spend for crop productions and updating equipment other facilities.

PARTICIPATION OF STUDY COVERED ENTITIES ON PROCUREMENT AND PRODUCT SUPPLY: The study on procurement and partnership between local authorities was based on methods of questionnaire, focus group interviewe and secondary data collection from public organizations.

The 18 unities from 173 families and entities which involved in the market study have been supplying their products to public service organizations and out of 18, the 7 entities directly supply their products after involvement of tender, and remaining 11 families and entities supply their products to the entities that selected in tender or participated indirectly in the tender. The study outcome proves that the participation of vegetable growers in public service organizations’ procurement is not fully rendered. The cause of this condition is defined in the following table.

Soum Umnudelger

Binder Kherlen

Number of entities 3

0 4

Procurement organnizations Hospitals, Kindergartens, Schools

Types of supplied products potatoes, carrots, cabbage, onions

Total supply /mill.mnt/ 24.2

Schools, Kindergartens

potatoes, carrots, cabbage, onions, turnips

106.5

Murun 0 Participation of procurement and challenges Public services In order to organize tender within legal framework, public organizations put some limitation for the family farmers and only allow the entities which have business activities, to enter into tender.

They prefer to select middlemen or trading centers in order their interest to select entities that are able to supply regularly The selected entities consist their contracted supply from local farmers 30% and remaining 70% from outside market /UB city/.

It was observed, the tender evaluation committee does not follow the article accordance with Law of Procurement, where states that there shall be representative from civil social organizations in the committee. This makes doubt whether tender is conducted fair or not.

Farmers The most of vegetable growers are family farmers, thus there are some limitations for family farmers if they want to enter to agricultural tender.

About the entities in crop production, they think the tender is not fair enough, therefore they are reluctant to enter into tender due to requirement of various documents and materials.

The size of farm land is not big, thus the cultivated small amount of vegetables sold out in autumn.

Due to insufficient storage facility, it is not possible supply regularly.

54

Market study on potatoes and vegetables

THREE. VALUE CHAIN ANALYSIS OF POTATOES AND VEGETABLES 3.1 GENERAL FIGURE OF VALUE CHAIN

According to the recent value chain analysis, they often reach the end consumers via middlemen without processing. Local farmers tend to sell the vegetables cheaply to the black marketers during the harvesting season around October and November as they do not have enough storage space. As for farmers from Khentii province, they consume the crops themselves as they do not sow that much and are likely to sell the remaining portions of their harvest to the final consumers.

We demonstrated the figure of the value chain analysis of the potatoes and vegetables based on the figure showing the marketing channel. Besides, we presented the figures generally and in details regarding where and how a value added to the potatoes and vegetables.

Detailed figure of the value chain marketing of the potatoes and vegtables

Supply chain: In the study research clearly states that there are following three types of price differences for the supply chaint.

1. Seasonal price discrepancy 1. Additional non-processing cost at the supply chain stage 2. Meat price discrepancy for each province

55

Market study on potatoes and vegetables

Figure3.1 General mapping of market value chain for potatoes and vegetables

According to the figure above, at the channel 1, potatoes and vegetables reach the final consumers after an addition of production and transportation cost as well as other related costs (such as storage cost) and profit/loss share. At the channel 2, products reach the final consumer after absorbing the cost incurred while handing the products to the traders and the traders’ handling expenses.

However, at the channel 3, final consumer receives the products after going through many stages thus a value added to the product is much wider than the others. On the supply chain figure, green-house vegetables are emphasized. The reason is that greenhouse vegetables are supplied to the end consumer after adding value via reprocessing (to pickle). It was observed during the study that value chain of the greenhouse vegetables have much more special features compared to the potatoes and vegetables. Using the figure above, value chain can be shown in overview, however is not possible to be demonstrated in a quantitative data. Therefore, we attempted to demonstrate the figure by each products based on the data from the producers, traders as well as the previously reported secondary data in due courses.

3.2 ECONOMICAL ANALYSIS OF VALUE CHAIN 3.2.1 RESEARCH ON PRODUCTS PRICE

PRODUCERS: Following figure shows an average price of potatoes and vegetables supplied to market (final consumers and trading organizations) by producers.

56

Market study on potatoes and vegetables

Figure3.2 Unit price of potatoes and vegetables (MNT/Đşg), seasonal Source: Study outcome

As you can see, the price level of potatoes and vegetables is cheaper in autumn as compared with other seasonal price level. (It directly depends on harvesting and product supply of that time). Also, how unit’s price level of every product changes (autumn price level used as base) has been showed by following table.

Table3. 1 Price changes of potatoes and vegetables Potatoes and vegetables Potatoes Beetroots Turnips Carrots Cabbage Onions Garlic Average prive of vegetables

Winter/Autumn 37.5% 15.4% 7.0% 24.4% 35.4% 9.4% 30.4% 20.3%

Price change, by percentages Spring/Autumn Summer/Autumn 37.5% 33.3% 15.4% 15.4% 7.0% 26.9% 29.1% 51.4% 41.7% 58.3% 19.8% 25.0% 63.0% 29.3% 35.4% Source: Study outcomes

According to the table above, price level of the potato per kg is much higher during winter and spring (compared to summer) as early crops of potatoes are supplied to the market in the summer.

However, the price of the other vegetables are comparatively higher during summer.

MIDDLEMAN: The research shows that marketers pay for the crops much less price during harvesting. Thus marketers buy the products in the autumn as follows.

57

Market study on potatoes and vegetables  Potatoes: Price level is 30-40% less than wholesale price  Other vegetables: Price level is 20-30% less than whole sale price.

This is main reason for producers to incur losses.

TRADING ORGANISATION: Trading organisations resell to the end consumer the potatoes and vegetables they buy from producers, marketers and large markets adding 50-150 MNT and it is not false to say that this serves as a net profit for the traders. Because it is observed in the research that transaction fee or other related expenses do not hardly or in some cases none existed during purchase as the products are too small in amount.

3.2.2 TRANSACTION AND OTHER COSTS The cost and expenses incurred as follows:  As for producers, there are costs in regard to the production, transportation and storage.

Previous studies suggest that 30.2 % of potato value and 36.2% of other vegetable value are added when sold to the market (except to the marketers and traders).

Besides, it is reported that transportation cost per 1tn of potato is 50k (MNT) and 50MNT per kilogram and storage cost for 1tn of potato is 167.5k (MNT) which is 168 MNT per kilogram. This includes transaction cost and all other expenses.  The products with special value chain and are supplied to the markets by the producers are the greenhouse vegetables. Producers who sell this kind of vegetables add value to the product during reprocessing and supply to the market. The research result shows that:  Pickled cucumber: Selling price for the 500g jar of pickled cucumber is 2500 MNT and production cost is 1100 MNT.  Dunayski salad: Selling price for the 650g jar of salad is 6500 MNT and production cost is 3500 MNT.  Carrot salad: Selling price for the 650g jar of carrot salad is 5500 MNT and production cost equals to 70% of the selling price.  Beetroot salad: Selling price for the 500g jar of beetroot salad is 4000 MNT and production cost is 2200 MNT. This shows that there are difference in the cost between field vegetables such as potatoes and greenhouse vegetables.

58

Market study on potatoes and vegetables ďƒź Market supply the potatoes and other vegetable that they bought from the producers to the market and supermarkets after calculating the transportation and storage costs as well as profit percentage.

3.2.3 PROFIT TO THE PARTIES Profit and loss to the parties are explained via value chain for each product.

Based on potatoes’ value chain, the profit is explained:

Figure3.3 Value chain mapping of potatoes

According to the figure above, producers gain a profit of 88 MNT per kilo of the potatoes when selling them to the end consumer or the trade organization, however incur loss when selling to the marketers as they are paid 30% less than the market price. Trade organization makes average of 100 MNT profit per 1 kg of potatoes and marketers pays producers 30% or around 560 MNT less per kilo of potatoes in the autumn and resell them to the market adding 20% on the purchase price.

59

Market study on potatoes and vegetables Based on beetroots’ value chain, the profit is explained:

Figure3.4 Value chain mapping of beetroots

When the producers supply to end consumers and trading organizations, they make a profit of 510 MNT for each kg, but if they deal with middleman they incur loss as they sell their products 20 percent below of the market price. Trade organisations make profit average of 50-150 MNT per kilo of beetroot and marketers pays producers 20% or around 1930 MNT less per kilo of beetroot in the autumn and resell them to the market adding 20% on the purchase price.

Based on turnips’ value chain, the participants profit is explained:

Figure3.5 Value chain mapping of turnips

According to the figure above, producers gain a profit of around 226 MNT per kilo of the turnip when selling them to the end consumer or the trade organization; however incur loss when selling to the marketers as they are paid 20% less than the market price. The trade organizations make average of 50-150 MNT profit per 1 kg of turnip and marketers pays producers 20% or around 60

Market study on potatoes and vegetables 1180 MNT less per kilo of potatoes in the autumn and resell them to the market adding 20% on the purchase price.

All the parties make profit on the other vegetables as well, however amount of profit differs depending on the difference of the cost for each products.

61

Market study on potatoes and vegetables

Figure3.6 Value chain mapping of carrots and cabbages

61

Market study on potatoes and vegetables

Figure3.7 Value chain mapping of other vegetables

62

Market study on potatoes and vegetables We have explained the value chain of the field vegetable and the amount of profit to the parties based on the value chain. And now, we are showing value chain mapping in regards to the reprocessing of the greenhouse vegetables.

Pickled cucumber: Selling price for the 500g jar of pickled cucumber is 2500 MNT and production cost is 1100 MNT where packaging cost is 30% of the total production cost.

Figure3.8 Value chain mapping of the pickled cucumber

According to the figure above, the reprocessing cost of greenhouse vegetable is 1100 MNT and market price of pickled cucumber is 2500. Difference of 1400 MNT is net profit to the producers.

Dunayski salad: Selling price for the 650g jar of salad is 6500 MNT and production cost is 3500 MNT. The cost of raw materials is 60-70% of the total cost.

Figure3.8 Value chain figure of Dunayski salad

Carrot salad: 650 gramm original package is sold by 5500 MNT. Out of this, the 70% which is 3850 MNT is for porduction cost and reamining 1650 MNT is producer’s profit.

63

Market study on potatoes and vegetables Beetroot salad: 500 gramm orginal package is sold by 4000 MNT. Out of sale price 2200 MNT is for production cost and remaining 1800 MNT is calculated as producers’ profit.

Figure3.9 Value chain figure of other preserved products

3.3 ANALYZIS ON ORGANIZATIONS IN VALUE CHAIN 3.3.1

VERTICAL AND HORIZONTAL ZONES

As regard of vertical zone the value chain of potatoes and vegetables could be divided into 3 parts such as: 

Level 1 which is the value chain related to products from producers to consumers directly  Level 2 which is value chain related to products from producers to trading organizations, and from trading organizations to consumers  Level 3 which is the value chain related to products from producers to middlemen, and from middlemen to trading organizations, and from trading organizations to consumers.

Also, there are 4 main subjects participate in the vertical zone.

Figure3.10 Vertical zone of value chain

64

Market study on potatoes and vegetables About horizontal zone of potatoes and vegetables’ value chain, it can be divided following level: o Level 1 /producers/; o Level 2 /middlemen/; o Level 3 /trading organization/; o Level 4 /final consumers/

Figure3.11 Horizontal zone of value chain

3.3.2 AGREEMENT, POLICY AND REGULATIONS

Mutual agreements regarding market supply and purchase of potatoes and vegetables are made between following subjects. Which: 

Agreement between retail shops, cooperatives and public sectors who are buying potatoes and vegetables: As rural shops are officially registered and with legal capacity, they are able to go into an agreement with public sectors. However, this is limited to the family farmers.



Some of the rural local shops obtain the potatoes and vegetables needed from the large suppliers and supermarkets in UB under a contract. However, during the study it was noted that this kind of relationship is harder to be established with the local producers (Lack of resource for continuous supply, responsibility and honesty).

65

Market study on potatoes and vegetables The research suggests that financial contracts and agreements are made broadly and openly with producers with help of financial aid from local public and private organizations.

The policies and regulations related to the potatoes and vegetables sectors are seen as below.

To this date, there are 19 Mongolian state laws, 12 parliament decrees, 20 government resolutions and 22 minister’s order which are legally governing relationship between agricultural sectors are effectively in force.

Table 3.2 Legal regulations of agricultural sectors One . Mongolian state law â„– Name

Date

1

Constitution of Mongolia

1992.01.13

2

Mongolian chamber of commerce and industry law

1995.10.24

3

Law for setting amount for imposing custom duty on certain goods

1996.03.29

4

Crop seed and assortment law

1999.06.27

5

Crop insurance law

1999.07.02

6

Protection of livestock genetic fund and health law

2001.06.07

7

Special permit law of industrial activity

2001.02.01

8

Quarantine inspection and control of livestock, crops and their raw 2002.11.28 material on the state border Combat and prevention of livestock theft law 2004.05.14

9

10 Exemption from VAT law

11 Custom duties and tariffs law

2008.05.29 2009.07.16 2012.05.22 2008.05.20

12 Exemption of custom duty law

2008.05.29

13 Drugs and medical devices law

2010.05.27

14 Agricultural goods and raw materials exchange law

2011.06.02

15 Innovation law

2012.05.22

16 Ensuring safety of food products law

2012.12.20

17 Food products law /revised/

2012.12.20

18 Livestock indexing insurance

2014.06.13

19 Crop farming law /revised/

2016.01.29

Two. Parliament decree 1

Enactment of lists of non-tariff and restricted goods as well as goods 1998.01.08 â„–5 prohibited on the state border 66

Market study on potatoes and vegetables 1999.06.03 №27

2

Setting custom tax rate on the imported goods

3

Empowerment of the government (authority to establish the customs 2008.05.22 №42 tariff rates of custom) Enactment of government policy regarding herders 2009.06.04 №39

4

2010.05.20 №23

8

Enactment of national program “Mongol livestock” / Some parts have been revoked under 2011.12.23 decree №64/ Some measures on law implementation regarding agricultural goods and their raw material exchanges Adopting program of Mongolian government activities between 2012-2016 Some measures for supporting domestic manufacturers and farmers

9

Intensification program of crop production

2014.01.16 №16

5 6 7

2011.06.02 №29 2012.09.18 №37 2012.12.28 №74

10 Enactment of state policy regarding drugs

2014.10.16 №57

11 Enactment of state policy regarding food and agricultural goods

2015.11.26 №104

12 Establishment of “Khalkh gol” agricultural free zone

2015.07.09 №75

13 Enactment of state policy regarding drugs /invalidated/

2002.10.11 №68

14 Enactment of state policy regarding food and agricultural goods 2003.06.18 №29 /invalidated/ Three. Government resolution 1

National program to help protecting livestock from natural disaster

2001.03.13 №47

2

1st: List of encrypted and licensed product to pass the state border,

2002.10.25 №219

3 4 5

2nd: Regulation of import/export license issue to pass the goods through international border under state control Small manufacturing of agricultural goods- establishment of new 2004.04.14 №86 technology fund Regulation of creating fund to support farming, monitoring the 2005.06.22 №139 process and reporting Agro-park project 2008.04.09 136

8

Regulation of issuing subsidy on loan interest of working capital for 2008.06.18 №260 the national manufacturers who buy Mongolian cashmere from the farmers Regulation of livestock’s contagious disease diagnosis confirmation 2008.07.29 №305 and setting quarantine zone as well as operating on this zone Border point for passing livestock through 2009.09.23 №297

9

Some measures regarding development of cooperative herders

6

7

2013.01.12 №8

10 About national food security program

2009.02.04 №32

11 About livestock protection fund

2011.12.28 №374

12 About “campaign of co-operativization of rural area”

2012.03.28 №95

13 About approval program of operation plan

2012.11.03 №120

67

Market study on potatoes and vegetables 2013.07.06 №239

14 Export support program

15 Monetary reward policy for those cooperative member farmers who 2015.03.30№122 prepare sheep and camel wool and submit them to the national manufacturers 16 Some measures to support livestock herders 2016.02.04 №90 17 About development of agricultural performance

2016.02.22 №113

18 About approval of sub-programs to promote livestock production

2016.02.22 №114

19 About approval of short term program regarding “stabilization of 2016.01.11 №42 crop production” 20 About developing of agriculture in the western region 2013.11.09 №366 21 Export goods development program

1998.08.21 №158

22 “Livestock health” national program /Completed in 2010/

1999.04.21 №64

23 National program regarding water /Completed in 2010/

1999.03.10 №43

24 Preventing livestock disease “Brucellosis” project /Completed in 2010/ 25 Regulation of livestock protection fund, management and report /invalidated/ 26 Livestock herding in the city policy and program /Completed in 2010/ 27 Encrypted list of prohibited goods /Invalidated in 2002/

2001.09.19 №206

28 Intensified agriculture development program /Completed in 2015/

2003.06.07 №160

29 Green revolution national program- 2nd stage /Completed in 2012/

2004.08.05 №169

30 “Milk” national program /Invalidated/

2006.10.11 №239

31 Ecologically clean products program /completed in 2015/

2006.03.22 №50

2001.10.24 №246 2002.07.01 №133 2001.03.14 №54

32 Improvement of livestock quality program/will be completed in 2006.04.26 №93 2016/ 33 Livestock feed program /invalidated/ 2007.11.07 №283 34 About approval of 3rd newground campaign /completed in 2010/

2008.02.27 №70

Four. Order of Minister for food and agriculture 1

2

1st: Regulation of organization of breeding stock exhibition and 1998.03.04 №А/46 auction 2nd: Regulation of organizing an operation regarding protection of livestock genetic fund and storing and using the semens 1st: Sanitary and veterinary common policy of pig farm 1998.06.30 2nd: Sanitary and veterinary common policy of fowl farm

№А/127

3

Regulation of selecting extra beneficial livestock

1999.06.10 а/84

4

1st: Regulation of controlling veterinary and fertility service

1999.08.02

2nd: Review and verification regulation regarding sire

№А/117

68

Market study on potatoes and vegetables

6

Regulation of veterinary and sanitary examination, certification 1999.11.22 А/168 mark and their application Regulation of controlling livestock and animal disease and transfer 2000.03.23 А/49

7

Regulation of meat

2001.10.01 А/43

8

Veterinary, sanitation and hygiene related common regulation during sale of milk and dairy in the city Integrated guideline for veterinary sanitization and disinfection process Veterinary quarantine regulation during preparation of meat, transportation of livestock and receiving them at the industry Regulation of verification and claim of the farmers who are free from brucellosis and tuberculosis Regulation of controlling, registering and monitoring of the breeding and selection achievement for livestock and pets 1st: Veterinary and sanitization- certificate of origin and its application procedure 2nd: Veterinary and sanitization- instruction of certificate of origin 3rd: Veterinary and sanitization- Code of certificate of origin 1st: Temporary accreditation of livestock procedure 2nd: Board members for accreditation of vets 3rd: Accreditation agreement sample 1st: Growing breeding livestock regulation 2nd: Regional focus for highly productive livestock and breed for national and regional level 3rd: Appropriate setting for the dams and sires Issuing license to import veterinary drugs and instruments

2002.07.16 А/92

5

9 10 11 12 13

14

15

16

17 About registering and creating integrated database of livestock

2002.04.19 А/56 2002.06.07 А/79 2003.11.27 А/121 2004.07.09 №69 2005.03.16 №35

2005.04.14 №51

2008.05.15 №97

2010.09.10 А/212 2011.05.12 А/74

18 List of livestock disease and livestock to be quarantined and 2011.06.02 А/86 restricted 19 About setting quantity and stock of livestock to be imported and 2014.03.14№А/35 exported at the first half of 2014 20 Regulation of receiving charity and aid of veterinary drugs and 2015.11.10 А/138 instruments 21 About setting food quantity of importing strategy 2015.11.17 А/139 22 About setting food quantity of importing strategy in 2016

2016.03.14№А-20

23 Regulation of prompt reporting of livestock’s contagious disease

1994.03.19 №А/10

24 Setting quarantine and restriction of livestock /invalidated/

1994.06.09 №А/54

25 1st: Instruction to combat livestock disease /invalidated/

1998.02.10 №А/31

2nd: Instruction to combat parasitic disease 26 Temporary regulation of issuing accreditation to vets

69

2002.04.22 №А/60

Market study on potatoes and vegetables 27 1st: Regulation of including large cattle in the indexed stamp and numbered network /invalid/ 2nd: About stamp and index number of urban and rural livestock /invalid/ 3rd: Registration form of livestock which was included in the indexed stamp and numbered network /invalid/ 28 List of Mongolian custom prohibited, foreign and quarantined plant disease, poisonous insects, weeds, rodents and worms as well as limited spread internally quarantined plant disease, poisonous insect, mites and weeds /invalidated/ 29 Regulation to assess performance of provincial and capital veterinary service, Soum and district’s veterinary and breeding service /invalidated/

2005.12.16 №175/193

2005.11.15 №155

2008.10.15 №13

FOUR. SUMMERY OF NEGATIVE/POSITIVE FACTORS ON THE POTATOES AND VEGETABLE MARKET DEVELOPMENT 4.1 POSITIVE FACTORIES ON THE DEVELOPMENT OF POTATOES AND VEGETABLE MARKET The positive factors for potatoes and vegetables market as well as agricultural sector are defined as follow:  Investment for potatoes and vegetable market. Especially, greenhouses and other related support to greenhouse vegetable production. /Greenhouse in Binder soum from the Fund for supporting small and middle sized enterprises./  Financial support from local governmental and non-governmental organizations and international organizations. Although it not cover all, still one of positive factors.  Soft conditioned equipment loan which granted the Fund of supporting crop production of Ministry of Agriculture and Light Industry  International programs and projects, trainings for farmers organized by CSOs  TV trainings and programs for vegetable growers  Local development. Transportation and establishing new trading center etc. For example, newly built trading center in Umnudelger soum.  Governmental policies, acts and regulations. /Financial support for vegetable growers from the Fund for soum development/  Activities of domestic and international organizations for the agricultural sector and its market.

Furthermore, the negative factors on potatoes and vegetable market have been reflected in next chapter.

70

Market study on potatoes and vegetables

4.2 NEGATIVE FACTORIES ON THE DEVELOPMENT OF POTATOES AND VEGETABLE MARKET The factories which are negative impact on the potatoes and vegetable markte and its sector as followed:  Lack of management and its methods.  Unsustainable price and sale channel.  Absent of technical and technology development  Shortage of work force.  Insufficient legal environment and unsupportive government for this sector  Lack of cooperation between local governmental organizations  There is not any financial services which sufficient for farmers and their feature  Climate change, soil damage and defect.  Lack of infrastructure related to product transportation, as well as absence of storage facility and warehouse.  Price difference of imported products.  Lack of plant or factory for re-processing potatoes and vegetables.  Nowadays in level of family farming producers’ participation is increased in the market, as well as in production of potatoes and vegetable’s sector, however there are some factories such as farm land in level of family farming is not enough, therefore shortage of equipment are being throttle of this sector’s development, furthermore those are getting negative impact on the market.

FIVE. CONCLUSION Based on the study outcomes in the line with expected outcomes, the following conclusions are put forward: DEMAND AND NEEDS AGRICULTURAL PRODUCTS AT THE LOCAL, REGION AND NATIONAL LEVEL.  Every year the potatoes and vegetables demand and needs of population have been increasing at level of soums that involved in the market study. At the same time virtual needs and demand have been effected by low purchasing power of population.  There is possibility that the potatoes and vegetables producers could increase their volume of production in line with (related to growing number of populations)

71

Market study on potatoes and vegetables enhancement of population’s demand and needs of potatoes and vegetables. This also will increase the needs of seed potatoes of producers  Comparing year of 2015 with 2014, the volume of imported potatoes has been increased. If, imported potatoes could be replaced by domestic production then it will help to increase domestic production and the market volume of producers will gradually enhance at the same time. However, amount of imported vegetables has been decreased as comparing year of 2015 with 2014. Cause of this can be considered as increase of domestic production as well as enhancement of demand and needs of domestically produced products.  The potatoes and vegetable market’s hedge is getting limited due to re-processing industrial problem and interest and requirement of consumers and buyers EXISTING MARKET PARTNERSHIP WITH GOVERNMENTAL ORGANIZATION The partnership between local authorities and producers and other market players has been limited.  Although, there are some appropriated supports and policies formulated for farmers at the national level, however at the soum level these policies have not been really enforced, therefore have not been reached to targeted group.  The farmers likely to be left out of public service due to officers in charge of this sector at the soum level do not provide essential information to them.  It was revealed during the study, there is insufficient support from governmental organizations and cooperation between farmers and public organizations is unsatisfactory.  It was observed that there is lack of receiving relevant information and a weak participation of vegetable growers in the public events, projects and programs and supportUsually, agreement and partnership made through the Fund for soum development.  Due to lack of legal environment, there is limitation for family farmers on market partnership and cooperation with governmental organizations. The main reason for limiting the potatoes and vegetable market development is a requirement that anyone who wants to enter public procurement must be enterprises.  Comparing with others, the trading organizations more closely cooperate with the public organizations.

72

Market study on potatoes and vegetables  The contracts associated with governmental procurement of potatoes and vegetable is available for trading organizations, but limited for family farmers.

AVAILABILITY OF ACCESSING THE INFORMATION ABOUT MARKET POTENTIAL AND SUPPLY IN SHORT-ROTATION  There is insufficient access of information for market players especially for family farmers.  The farmers need information related to governmental policies, programs and activities more than general information about market, however dissemination of information is not sufficient as quick as possible  As seen from study outcomes there are many sources of information, but still farmers face lack of relevant information  There is needs and requirement for accessing the information about market potential and its related education and awareness  Although there is opportunity to expand market potential, unfortunately integrated policies have not been implementing as well as regard.  The participation of civil society organizations in the potatoes and vegetable market is weak, therefore ineffective.

FINANCIAL CAPABILITY OF LOCAL AREA  The financial capability in soums is limited due to allocation which done according to government approved budget.  Most of producers are family farmers, thus they do not have sufficient financial resource.  Financial supports for potatoes and vegetable market and its players from local governmental organizations usually pass through the Funds, however expenses and legal environment of these funds are limited therefore distribution is not fair enough.  Due to low power of consumers’ procurement ability of, there is interest of buying imported production and cheap potatoes and vegetables.

THE VALUE CHAIN OF POTATOES AND VEGETABLES  Regarding to products, the value chain of potatoes and vegetables is different. About greenhouse vegetables it is common that to add value before reaching consumers, thus producers receive more profit from it.  About value chain of potatoes, the cost of transportation and store have been already included. However, it is impossible to add value on re-processing.

73

Market study on potatoes and vegetables  About vegetable value chain seems like same structure as value chain of potatoes.  The middlemen and trading organizations benefit from the value chain of potatoes and vegetables more than others.  There is need of changing the middlemen's higher participation in current value chain, as well as requirement of participating in market relation in line with fair trade principal and selling the products in the targeted market with actual cost SIX. RECOMMENDATIONS Based on gathered information and study report, following recommendations are put forward: DEMAND AND NEEDS AGRICULTURAL PRODUCTS AT THE LOCAL, REGION AND NATIONAL LEVEL.  Influence on implementation or enforcement of the promotion system, policies and programs aimed to increase

population’s level of livelihood and ability of

procurement  Increase crop production on the base of national and local area’s vegetable consumption, and need more consideration on product supply by setting new supply chain  Develop value added products industrialization which met the interest and requirement of consumers and buyers.  Farmers need to organized at the local level and cultivate as planned  Formulate marketing strategy in order to increase the demand of targeted market and need to enhance sales and supply through the ensuring planned activities reflected in the strategy  Organize marketing activities for consumers who prefer imported products and introduce them advantages of domestic products  Enhance participation of civil society organizations in the potatoes and vegetable sector, therefore intensify their activities EXISTING MARKET PARTNERSHIP WITH GOVERNMENTAL ORGANIZATION  Influence on creating friendly legal environment for farmers and give them understanding of information related to this  Improve monitoring of civil society organizations and farmers on positive policies, promotions and activities for farmers.

74

Market study on potatoes and vegetables  Enhance participation of civil society organizations and strengthen their capacity building in order to expand partnership and cooperation with state organizations  Emphasis on increasing an obligation of officers in charge of this sector at the soum level and to ensure working together with them in order to provide information to farmers  Focus on improving farmers’ participation and activities and provide them information and knowledge about advantages of partnership with Government and its services.  Influence on legal regulations for farmers which aimed to promote opportunities to participate in public procurement, receive support and signing agreement with governmental organizations for collaboration AVAILABILITY OF ACCESSING THE INFORMATION ABOUT MARKET POTENTIAL AND SUPPLY IN SHORT-ROTATION.  Set structure, unit or channel which is able to provide relevant information continuously for the farmers.  Improve the factors that to inform promptly about governmental policies, decisions, programs and activities for farmers  Accessible and prompt publish the information about market and other useful things through the all channels which the farmers mostly access  Enhance capacity of the civil society organizations which aim to facilitate the farmers and support a dissemination of information flow for farmers  Create opportunities for using agricultural advanced technologies  Organize training for providing market relations and skills of agricultural technics and technologies FINANCAIL OPPORTUNITIES AND CАPABILITY OF LOCAL AREA  Form the environment for the civil society organizations that they are able to monitor expenditures of limited capital of soum  Monitor on enforcement of Law of procurement, financial support for farmers and SMEs and distribution of the Fund for soum development, and ensure the representative from civil society organizations include in the evaluation committee  Implement activities in order to improve expenditures and procedures of the Fund for soum development, the Fund for local development and the Fund for supporting small and middle sized business and other legal regulations 75

Market study on potatoes and vegetables  The most of vegetable growers are family farmers, thus there is need of improving their financial resources and capacities, on top of it to initiate and introduce the appropriate financial service for them.

VALUE CHAIN OF POTATOES AND VEGETABLES  Advocate the governmental policies and decisions aimed to promote the value added production which can replace imported products, and to support it in the project framework.  Develop projects and technic and economic feasibility study aimed to improve value chain and product quality and reducing price losses therefore capital investment needed in order to support  There is need of changing the middlemen's higher participation in current value chain, and lay the foundation for clear structure of sales and its network  Establish the potatoes and vegetable storages and warehouses in the level of soums and province in order to supply the products to the market in regular basis.

SEVEN. REFERENCES I. BIBLIOGRAPHY, MANUALS, METHODOLOGY [1]. NRSO (2015). “Methodology of Agricultural sector statistics”, Chapter 5, page 10-17.

[2]. NRSO (2015). “Methodology of Food security statistics”, page 20, appendix 1 table 1, 2.

[3]. NRSO (2013). “GDP and GNI calculating methodology”, Chapter 2.

[4]. NRSO (2007). “Manual of Statistical research and study”.

II. STUDY REPORT, ARTICLES, YEARBOOK [1]. Government agency on land affairs, geodesy and cartography (2016). “Annual report about unified fund of land-2015”, Chapter 2, pages 63-94, Chapter 3, pages 98-102.

[2]. Invest in Mongolia (2015). “Agriculture” article.

[3]. NRSO (2002-2015). “Yearbook”, Chapter 3-9, 13-15, 17-19.

[4]. NRSO (2010-2015). “Introduction of Agricultural sector”.

[5]. Land administration department of Kherlen soum, Khentii province (2015). “Structure of integrated land fund” Statistic information.

[6]. Land administration department of Binder soum, Khentii province (2015). “Structure of integrated land fund” Statistic information.

76

Market study on potatoes and vegetables [7]. Land administration department of Murun soum, Khentii province (2015). “Structure of integrated land fund” Statistic information.

[8]. Land administration department of Umnudelger soum, Khentii province (2015).

“Structure of integrated land fund” Statistic information.

[9]. B.Purev, S.Badarch, T.Erdenechuluun (2014). “Agricultural products and commodities value chain, financing”.

[10]. L.Erkhembayar (2014). “The Future and trend of Mongolian agricultural sector”.

[11]. NRSO (2011). “The first National Agricultural census 2011”, Chapter 2, 4, 5, 11, 15.

III. LEGAL REFERNCES [1]. Government of Mongolia (2014). “SME support program (2014-2016)”.

[2]. Parliament of Mongolia (revised in 2012). “Law of Mongolia on procurement of goods, works and services with state and local funds”.

[3]. Government of Mongolian (2012). “Guideline on calculating the transaction from Local development fund and General development fund” [4]. Government of Mongolia (2011). “Regulation of composing, expending and moritoring capital of Soum development fund”.

[5]. Government of Mongolia (2007). “SME law”.

IV. ELECTRONIC REFERENCE www.1212.mn, National Registration and Statistics Office information database. www.nrso.mn, National Registration and Statistics Office web site. www.mofa.gov.mn www.khentii.mn www.khentii.nrso.mn

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Market study on potatoes and vegetables

EIGHT. APPENDIX

Appendix 1. Mongolian GDP structure /by percentage/ Classification of economic sector Total Agriculture, forestry and fishing Mining and quarrying Manufacturing Electricity, gas, steam, air conditioning Water supply, sewerage, remediation activities Consruction Wholesale and retail trade; repair of motor vehicles and motorcycles Transportation and storage Accommodation and food service activities Information and communication Financial and insurance activities Real estate activities Professional, scientific and technical activities Administrative and support service activities Public administration and defence; compulsory social security Education Human health and social work activities Arts entertainment and recreation Other service activities Net taxes on product Resource:Mongolian Statistical Yearbook 2015,NRSO, www.1212.mn

79

2010 100.0% 11.7% 21.5% 6.8% 1.9% 0.3% 2.6% 12.3% 6.9% 0.5% 2.6% 2.5% 7.0% 1.4% 0.8% 4.4% 3.9% 1.7% 0.3% 0.5% 10.2%

2011 100.0% 10.0% 19.8% 6.3% 1.8% 0.3% 2.7% 15.3% 6.8% 0.6% 2.4% 3.1% 6.2% 1.2% 0.7% 3.4% 3.3% 1.3% 0.2% 0.5% 14.2%

2012 100.0% 10.7% 19.1% 6.1% 1.7% 0.2% 4.4% 15.3% 6.6% 0.6% 2.4% 4.0% 5.6% 1.1% 0.7% 3.2% 3.0% 1.2% 0.2% 0.4% 13.6%

2013 100.0% 11.5% 20.2% 6.0% 1.6% 0.2% 4.3% 14.9% 5.8% 0.6% 2.5% 4.6% 5.2% 1.0% 0.6% 3.0% 2.7% 1.2% 0.2% 0.4% 13.5%

2014 100.0% 12.1% 22.4% 5.8% 1.5% 0.2% 3.8% 14.2% 6.2% 0.5% 2.4% 5.7% 5.0% 1.1% 0.6% 2.8% 2.6% 1.2% 0.2% 0.4% 11.5%

2015 100.0% 13.1% 24.7% 5.7% 1.6% 0.2% 3.7% 13.3% 6.4% 0.5% 2.4% 6.0% 5.0% 1.1% 0.6% 2.8% 2.5% 1.1% 0.2% 0.4% 8.9%

Market study on potatoes and vegetables Appendix 2. Population of Khentii province Province 1963 1969 1979 1989 36734 40122 52803 73804 Khentii Continue Province Khentii

2001 70717

2002 70359

2003 68935

2004 68517

1990 76408

2005 67571

1991 74498

2006 67363

1992 72232

1993 72461

2007 67036

1994 72722

2008 66223

1995 1996 1997 1998 1999 2000 72989 73291 73278 72766 70946 70861 Source:Mongolian Statistical Yearbook 2015,NRSO, www.1212.mn

2009 2010 2011 2012 2013 2014 2015 66144 65942 66447 67466 67489 71212 72609 Source:Mongolian Statistical Yearbook 2015,NRSO, www.1212.mn

Vegetabe

Potato

Vegetabe

Potato

Vegetabe

Potato

Vegetabe

Potato

Vegetabe

Potato

Vegetabe

Potato

Vegetabe

Potato

Vegetabe

Potato

Vegetabe

Potato

Vegetabe

Potato

Vegetabe

Potato

Vegetabe

Potato

Vegetabe

Province

Potato

Potato

Vegetabe

Appendix 3. Potato and vegetable production volume of Khentii province, /by tonn/ 1960 1960 1961 1961 1962 1962 1963 1963 1964 1964 1965 1965 1966 1966 1967 1967 1968 1968 1969 1969 1970 1970 1971 1971 1972 1972 1973 1973

Khentii 427 204

1986

1987

1987

Potato

Vegetabe

Potato

Vegetabe

Potato

Vegetabe

Potato

Vegetabe

Potato

Vegetabe

Potato

Vegetabe

Potato

Vegetabe

Potato

Vegetabe

Potato

Vegetabe

Potato

Vegetabe

Potato

Vegetabe

Potato

Vegetabe

Potato

Vegetabe

Province

Potato

Continue 1974 1974 1975 1975 1976 1976 1977 1977 1978 1978 1979 1979 1980 1980 1981 1981 1982 1982 1983 1983 1984 1984 1985 1985 1986

Vegetabe

Khentii 199.2 119.5 445.5 94.6 498 98.3 2,955 169.2 301 379 518.8 312.4 145.1 61.7 341.4 173 242.5 141 290 168.2 538.9 115.6 247.4 122.5 80.3 12.7 531 203 Source:Mongolian Statistical Yearbook 2015,NRSO, www.1212.mn

210 216 222 114 552 167 624 202 903 203 294.3 226.2 226 248 572 284.7 1,204.20 234.1 2,202 499 1,741.50 210.9 1,332.20 466.9 2,018.40

80

739.3

Market study on potatoes and vegetables Continue

Vegetabe

Potato

Vegetabe

Potato

Vegetabe

Potato

Vegetabe

Potato

Vegetabe

Potato

Vegetabe

Potato

Vegetabe

Potato

Vegetabe

Potato

Vegetabe

Potato

Vegetabe

199 199 1993 1994 1994 1995 1995 1996 1996 1997 1997 1998 1998 1999 1999 2000 2000 2001 2001 2 3

Potato

Vegetabe

Potato

Vegetabe

Potato

Vegetabe

Potato

Potato

Provin ce

Vegetabe

1988 1988 1989 1989 1990 1990 1991 1991 1992

Khenti 1,523. 773. 1,993 1,103. 1,402. 452. 1,074. 185. 438.

792.

1,14 369. 1,04 439. 1,08 598. 1,085. 626. 1,496. 1,018. 1,48 1,112. 1,319. 982. 1,401. 730.

75.6 200 i 3 3 .4 9 7 7 4 5 2 7 6 9 5 1 8 3 4 9 2 9 7 8 9 4 6 3 Source:Mongolian Statistical Yearbook 2015,NRSO, www.1212.mn

Potato

Vegetabe

Potato

Vegetabe

Potato

2010

2011

2011

2012

2012

2013

2013

2014

Potato

Vegetabe

2010

Vegetabe

Potato

2009

Potato

2009

Vegetabe

2008

Potato

2008

Vegetabe

2007

Potato

2007

Vegetabe

2006

Potato

2006

Vegetabe

2005

Potato

Vegetabe

Potato

Vegetabe

Potato

Vegetabe

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2002 2002 2003 2003 2004 2004 2005

Vegetabe

Continue

Khentii 1,626.5 896.4 1,964.1 988.0 1,931.1 826.5 1,933.3 1,219.7 2,580.3 1,399.9 2,339.4 1,195.9 2,905.8 1,705.3 4,614.4 2,574.0 4,480.0 2,442.5 4,800.0 2,685.5 6,600.9 3,312.7 6,231.0 3,564.1 5,154.

Source:Mongolian Statistical Yearbook 2015,NRSO, www.1212.mn

Appendix 4. Total crop of family farmers Crop type Potato, t.

Cabbage Turnip Beet root Carrot Onion Garlic Watermelon Total crop, t.

Umnudelger 2014 2015 164.030 173.280 0.450 0.495 40.965 40.575 25.395 23.360 41.955 41.520 1.050 0.915 0.300 0.300 1.320 0.320 111.44 107.49

81

Binder 2014 25.700 3.110 0.920 0.665 2.060 2.675 0.046 0.080 9.556

2015 26.460 4.500 1.160 0.653 2.292 5.117 0.060 0.160 13.942

Kherlen 2014 34.000 7.200 1.300 1.080 4.300 6.190 0.000 0.500 20.570

2015 48.500 8.800 2.200 1.100 4.500 6.900 0.000 0.500 24.000

Murun 2014 58.330 22.885 5.605 4.860 5.765 7.090 3.383 0.520 50.108

2015 61.730 21.550 6.245 5.510 6.880 8.630 4.485 0.140 53.440

Market study on potatoes and vegetables Cucumber Tomato Salad vegetable Pepper Eggplant Sweet pepper Leafy vegetable Others Total crop of Greenhouse , t.

Total crop, t

1.670 0.345 0.020 0.000 0.000 0.060 0.000 0.300 2.395 277.860

1.670 0.350 0.020 0.000 0.000 0.055 0.000 0.300 2.395 283.160

2.615 0.940 0.000 0.000 0.000 0.167 0.050 0.088 3.860 39.116

2.765 0.890 0.000 0.000 0.000 0.192 0.050 0.120 4.017 44.419

2.400 0.447 0.030 0.000 0.100 0.560 0.000 0.000 3.537 58.107

2.600 0.447 0.030 0.000 0.120 0.660 0.000 0.000 3.857 76.357

0.890 0.258 0.010 0.000 0.000 0.150 0.000 0.000 1.308 109.746

1.390 0.330 0.010 0.000 0.000 0.150 0.000 0.000 1.880 117.050

Source: Study outcome

Appendix 5. Total production by family farmers and entities Crop type

Potato, t.

Cabbage Turnip Beet root Carrot Onion Garlic Watermelon Total crop, t.

Cucumber Tomato Salad vegetable Pepper Eggplant Sweet pepper Leafy vegetable Others Total crop of Greenhouse , t.

Family farmers 2014 282.060 33.645 48.790 32.000 54.080 17.005 3.729 2.420 191.669 7.575 1.990 0.060 0.000 0.100 0.937 0.050 0.388 11.100

2015 309.970 35.345 50.180 30.623 55.192 21.562 4.845 1.120 198.867 8.425 2.017 0.060 0.000 0.120 1.057 0.050 0.420 12.149

Entities 2014 618.350 35.717 86.985 44.389 94.137 18.019 8.131 8.155 295.533 12.385 3.825 0.000 0.000 0.150 0.545 0.120 0.250 17.275

82

2015 481.800 34.923 18.313 10.858 44.500 29.940 9.332 1.150 149.015 10.360 2.820 1.110 0.000 0.150 0.550 0.335 0.050 15.375

Total 2014 900.410 69.362 135.775 76.389 148.217 35.024 11.860 10.575 487.202 19.960 5.815 0.060 0.000 0.250 1.482 0.170 0.638 28.375

2015 791.770 70.268 68.493 41.481 99.692 51.502 14.177 2.270 347.882 18.785 4.837 1.170 0.000 0.270 1.607 0.385 0.470 27.524

Family farmers percentage in total production 2014 2015 31.3% 39.1% 48.5% 50.3% 35.9% 73.3% 41.9% 73.8% 36.5% 55.4% 48.6% 41.9% 31.4% 34.2% 22.9% 49.3% 39.3% 57.2% 38.0% 44.8% 34.2% 41.7% 100.0% 5.1% 40.0% 44.4% 63.2% 65.8% 29.4% 13.0% 60.8% 89.4% 39.1% 44.1%

Entities percentage in total production 2014 2015 68.7% 60.9% 51.5% 49.7% 64.1% 26.7% 58.1% 26.2% 63.5% 44.6% 51.4% 58.1% 68.6% 65.8% 77.1% 50.7% 60.7% 42.8% 62.0% 55.2% 65.8% 58.3% 0.0% 94.9% 60.0% 55.6% 36.8% 34.2% 70.6% 87.0% 39.2% 10.6% 60.9% 55.9%

Market study on potatoes and vegetables Total crop, t

484.829

520.986

931.158

646.190

1415.987

1167.176

34.2%

44.6%

65.8%

55.4%

Appendix 6. Total production by soum Crop type Potato, t.

Cabbage Turnip Beet root Carrot Onion Garlic Watermelon Total crop, t.

Cucumber Tomato Salad vegetable Pepper Eggplant Sweet pepper Leafy vegetable Others Total crop of Greenhouse , t.

Total crop, t.

Umnudelger 2014 2015 411.830 442.280 11.210 11.575 109.973 50.080 58.585 29.572 115.365 75.788 10.360 18.715 1.360 1.360 9.055 1.450 315.908 188.540 3.475 3.470 0.715 0.720 0.020 0.130 0.000 0.000 0.000 0.000 0.190 0.195 0.120 0.135 0.300 0.300 4.820 4.950

Binder 2014 37.200 4.860 0.940 0.715 2.160 2.695 0.046 0.100 11.516 2.715 0.955 0.000 0.000 0.000 0.182 0.050 0.088 3.990

2015 36.260 5.500 1.180 0.733 2.372 5.147 0.060 0.180 15.172 2.845 0.900 0.000 0.000 0.000 0.202 0.050 0.120 4.117

2014 322.400 19.700 15.100 9.080 23.100 8.240 0.080 0.900 76.200 11.850 3.847 0.030 0.000 0.250 0.960 0.000 0.250 17.187

2015 172.500 20.200 6.545 2.300 12.700 11.915 0.800 0.500 54.960 10.050 2.847 1.030 0.000 0.270 1.060 0.200 0.050 15.507

2014 128.980 33.592 9.762 8.009 7.592 13.729 10.374 0.520 83.578 1.920 0.298 0.010 0.000 0.000 0.150 0.000 0.000 2.378

2015 140.730 32.993 10.688 8.876 8.832 15.725 11.957 0.140 89.210 2.420 0.370 0.010 0.000 0.000 0.150 0.000 0.000 2.950

2014 900.410 69.362 135.775 76.389 148.217 35.024 11.860 10.575 487.202 19.960 5.815 0.060 0.000 0.250 1.482 0.170 0.638 28.375

2015 791.770 70.268 68.493 41.481 99.692 51.502 14.177 2.270 347.882 18.785 4.837 1.170 0.000 0.270 1.607 0.385 0.470 27.524

732.558

52.706

55.549

415.787

242.967

214.936

232.890

1415.987

1167.176

635.770

Kherlen

Murun

Total

Source:Study outcome

83

Market study on potatoes and vegetables Appendix 7. Product distribution of entities Crop type

Cabbage Turnip Beet root Carrot Onion Garlic Watermelon Total crop, t.

Cucumber Tomato Salad vegetable Pepper Eggplant Sweet pepper Leafy vegetable Others Total crop of Greenhouse , t.

Umnudelger soum 2014 Own consumption Direct sales 3.056 7.204 2.904 51.104 1.386 31.804 3.214 70.196 1.846 5.164 0.156 0.604 1.031 6.604 13.593 172.680 0.515 1.290 0.200 0.170 0.000 0.000 0.000 0.000 0.000 0.000 0.130 0.000 0.120 0.000 0.000 0.000 0.965 1.460

Seed 0.000 0.000 0.000 0.000 2.300 0.200 0.000 2.500 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

Restored/Sales 0.500 15.000 0.000 0.000 0.000 0.100 0.100 15.700 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

Seed 0.000 0.000 0.000 0.000 3.200 0.200 0.000 3.400 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

Own consumption 4.576 3.501 1.708 5.872 2.256 0.156 0.426 18.495 0.500 0.200 0.110 0.000 0.000 0.140 0.135 0.000 1.085

2015 Direct sales 6.504 6.004 4.504 28.396 12.344 0.704 0.704 59.160 1.300 0.170 0.000 0.000 0.000 0.000 0.000 0.000 1.470

Restored/Sales 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 Source:Study outcome

Continue Crop type

Cabbage Turnip Beet root Carrot Onion Garlic Watermelon Total crop, t.

Binder soum 2014 Own consumption Direct sales 0.000 1.750 0.000 0.020 0.000 0.050 0.000 0.100 0.020 0.000 0.000 0.000 0.020 0.000 0.040 1.920

Seed 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

84

Restored/Sales 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

Seed 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

2015 Own consumption Direct sales 0.000 1.000 0.000 0.020 0.030 0.050 0.030 0.050 0.010 0.020 0.000 0.000 0.010 0.010 0.080 1.150

Restored/Sales 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

Market study on potatoes and vegetables Cucumber Tomato Salad vegetable Pepper Eggplant Sweet pepper Leafy vegetable Others Total crop of Greenhouse , t.

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

0.030 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.030

0.070 0.015 0.000 0.000 0.000 0.015 0.000 0.000 0.100

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

0.030 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.030

0.050 0.010 0.000 0.000 0.000 0.010 0.000 0.000 0.070

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 Source: Study outcome

Continue Crop type

Cabbage Turnip Beet root Carrot Onion Garlic Watermelon Total crop, t.

Cucumber Tomato Salad vegetable Pepper Eggplant Sweet pepper Leafy vegetable Others Total crop of Greenhouse , t.

Kherlen soum 2014 Own consumption Direct sales 1.030 11.470 1.550 6.750 2.450 1.050 1.800 7.000 0.603 0.442 0.040 0.020 0.100 0.300 7.573 27.032 1.435 8.015 1.110 2.290 0.000 0.000 0.000 0.000 0.000 0.150 0.025 0.375 0.000 0.000 0.143 0.107 2.713 10.937

Seed 0.000 0.000 0.000 0.000 1.005 0.020 0.000 1.025 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

Restored/Sales 0.000 5.500 4.500 10.000 0.000 0.000 0.000 20.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

Seed 0.000 0.000 0.000 0.000 1.505 0.000 0.000 1.505 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

20115 Own consumption Direct sales 0.930 10.470 0.450 3.895 0.500 0.700 1.700 6.500 0.353 3.157 0.100 0.700 0.000 0.000 4.033 25.422 1.435 6.015 1.110 1.290 0.100 0.900 0.000 0.000 0.000 0.150 0.025 0.375 0.100 0.100 0.043 0.007 2.813 8.837

Restored/Sales 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 Source: Study outcome

85

Market study on potatoes and vegetables

Continue Crop type

Cabbage Turnip Beet root Carrot Onion Garlic Watermelon Total crop, t.

Cucumber Tomato Salad vegetable Pepper Eggplant Sweet pepper Leafy vegetable Others Total crop of Greenhouse , t.

Murun soum 2014 Own consumption Direct sales 1.276 8.132 0.496 3.157 0.375 2.392 0.218 1.387 0.791 5.042 0.833 5.310 0.000 0.000 3.990 25.420 0.080 0.950 0.000 0.040 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.080 0.990

Seed 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

Restored/Sales 1.299 0.504 0.382 0.222 0.805 0.848 0.000 4.060 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

Seed 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

20115 Own consumption Direct sales 1.276 8.426 0.496 3.271 0.375 2.478 0.218 1.437 0.791 5.224 0.833 5.502 0.000 0.000 3.990 26.340 0.080 0.950 0.000 0.040 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.080 0.990

Restored/Sales 1.740 0.676 0.512 0.297 1.079 1.136 0.000 5.440 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 Source:Study outcome

86