Travel report - Onion-workshop in Panama

Much time and energy has been put in to opening new markets for the Dutch onion by GroentenFruit Huis, their supply chain partners and the Dutch government in recent years. Panama is one of those markets buying an increasing volume of onions. Last season, about 15,000 tonnes of onions were exported in the period from week 29 to week 5 of 2018, which corresponds to more than 500 tonnes per week. Gijsbrecht Gunter, chairperson of the Holland Onion Association (HOA), visited Panama from 16 to 20 April, as part of a knowledge exchange programme in cooperation with the Dutch embassy in Panama. The following is a report of his visit.

The Dutch onion is increasingly faced with import restrictions from the broad range of export destinations. Besides import tariffs, a limited import period or import licences, phytosanitary aspects, food safety, traceability, certifications and pesticide residues play an increasingly important part. Additionally, the Dutch onion obviously has to continue meeting well-known but very important quality conditions such as colour, (skin) firmness and spraying dormancy. On the one hand, the ever more complex conditions are considered difficult, but on the other hand it’s a chance to anticipate and deliver customers work as the Dutch onion supply chain.

Sometimes the import restrictive measures are actually agronomical, but political interests often play their part, such as protecting local production. The Netherlands understands that and wants to be a reliable trade partner that works on sustainable long-term relationships without disturbing the internal market or dumping. After all, if the market is disturbed, everybody loses. The combination of opening export markets and stimulating inland economic development go hand in hand increasingly often, and this is a successful approach. Besides agronomical aspects, all sorts of other local interests, which don’t have anything to do with the actual import measures, sometimes play a part. In that case it’s good to enter into talks with local governments about this. Particularly when there are underlying trade treaties between countries that guarantee free trade.

The bottom line is that the global population will continue to grow to ten billion people in coming years (2017: 7.6 billion), and they’ll eat 15 kilograms of onions on average (2017: 12 kilograms) per head of the population. This means 150 million tonnes of onions will be necessary, and these have to be grown on a limited — and rapidly decreasing — agricultural area. This means a small doubling of the current global production towards 2050. The question is how the Netherlands as an export country can efficiently and distinctively continue to supply onions to all corners of the world.

Exporting onions to Panama requires an investment. Exporters have to be registered, onions have to meet high quality requirements and be inspected, and moreover, the onions have to be sold on the local market within 120 days after harvesting. This so-called 120-days rule is currently in effect for both imported onions and for domestic production.

During the first visit to the Panamanian food and consumer product safety authority (AUPSA), it became clear that the quality of the Dutch onion is excellent in general, and that the Netherlands also complies with the 120-days rule. Meanwhile, other exporting countries such as Chile and the US are also urged to meet this requirement. We’ve indicated we naturally respect the regulations, and we thought it was good to observe that exporting Dutch companies also meet these agreements. At the same time, we emphasised that the 120-days rule doesn’t actually have a link to the quality of the Dutch onions as some people Panamanians claim. After all, more than 100 other countries appreciate and consume Dutch onions in large numbers 120 days after harvesting without any problems.

We also visited various research institutions, a university and an agricultural school to talk about the Panamanian onion production, storage and processing. We were on the road with the Ministry of Agriculture (MIDA) for several days, visiting local farmers. We concluded that there are five main causes that explain why Panamanian farmers experience such a difference between Dutch and Panamanian harvests.

Firstly, it’s a given that onions are a free crop in the Netherlands, and that it’s sometimes traded below cost price. Onions are part of a complete development plan, and returns of a free crop such as onions have to be considered over three to five years. Panamanian farmers see themselves mainly as producers, and they are of the opinion that the government should make up the difference when there’s a cost price shortage, or that they should remove onions from the market at a fair compensation. Some seem to think the Dutch onion production is heavily subsidised, which isn’t the case, and which has been exemplified by means of an indicative cost price calculation for Dutch onions.

Besides the roles of grower and governments, the high fixed costs of production are a bottleneck. Because Panamanian farmers work with so-called transplanted onions, which are first sown and then planted out again, production is very labour-intensive, much water is needed, and pesticides are often used, the fixed costs are around ten to twelve thousand dollar per hectare. That’s more than twice as high as in the Netherlands.

Thirdly, yields are about two to four times lower, depending on production region, and combined with the second point, this means the cost price increases by a factor of four to eight compared to Dutch onion production.

Fourthly, the harvested onions experience significant post harvest losses, and therefore have to be sold on local markets within a week. Net yield per hectare is therefore even lower. Besides, it’s no exception when onions have to be sorted for deficiencies two or even three or four times in that week. That doesn’t just make a difference in yield, but is costly as well.

Finally, the quality of (short day) onions sold locally can’t be compared to the quality of Dutch onions. These last circumstances mean that prices sometimes drop drastically during the harvest because of urgent supply.

During the field visits and workshops, all kinds of practical measures were discussed. Varying from recommendations to prevent sunburn, the developments of fusarium fungi at high temperatures combined with irrigation by means of flooding, the importance of the remaining bit of green attached to the onion bulb to prevent fungal diseases and improve the drying process to production methods to use, for example, two-year seed onions as starting material rather than the current transplanted onions. Mechanisation, the importance of crop rotation and the availability of plenty of fresh water also regularly came up for discussion. In short, many topics passed in review that people in Panama can practically use, in cooperation with the Dutch onion supply chain where necessary and useful.

In the end, the Dutch onions remain unrivalled due to their so-called ‘very long day’ physiological characteristics, constant quality and efficient production and processing. Nevertheless, there are plenty of options to improve the production of domestic onions, whether in combination with other agricultural food products or not, so that, combined with the logistical opportunities of the Panama Canal, there are opportunities for more trade and an added value for all parties. The former Minister of Agriculture, who we visited at his large farm, offered to help conduct tests at his farm, preferably in cooperation with Dutch companies and knowledge institutes such as Wageningen UR.

With Ambassdor Dirk Janssen and Minister of Agriculture Eduardo Carles, a well-attended workshop was organised, and findings during an earlier visit in 2016 were examined. The substantive presentations and open discussions led to many factual obscurities being cleared up, and an interesting breeding ground was created to continue working on mutual agricultural economical development, and to continue exporting Dutch onions to that end without negatively impacting local farmers.

In the national press and on social media, attention was paid to the working visit, and during the opening of the La Feria Internacional de Azuero we were given the opportunity to talk to the president of Panama, Juan Carlos Varela, about the relationship between both countries, and, of course, the onion production in both countries. For the members of the HOA, a report of the findings will follow, and we’re working on a follow-up visit.