How to Start Your Business: Cavendish Banana Production

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Why go into Cavendish Banana Production?

Cavendish banana is commonly cultivated in the Philippines and contributes 50% to the total national output for banana. An estimated 65% of the total produce is utilized locally as table fruit, for processing and as input for animal feeds while the remaining volume is exported. The crop is the country’s second top agricultural export product, earning millions of dollars and catering to various markets such as Japan, China, Middle East, Singapore, and Indonesia.

The Philippines produced a total of 4,448,460 metric tons of Cavendish banana in 2014 with Mindanao accounting for 99.9% of the total production. Davao Region topped the list with 2,537,740 MT or 57% of the total production. Northern Mindanao and SOCCSKSARGEN Regions followed with production of 1,148,625 and 522,133 MT, respectively.

Although production is currently concentrated in Mindanao, opportunities to start plantations in other areas look promising, with the country aiming to capture a wider scope of the export market. Government units and agencies are developing technologies to increase the yield and connect growers to exporters. The strong export potential of the industry makes it a viable business to venture into.

Basics of Cavendish Banana Production

Cavendish banana is the most consumed banana worldwide. It is usually between 15 to 25 centimeters long, with yellow skin. It is best eaten raw or processed.

Banana cultivation requires a special climate and certain soil characteristics. It must be planted in a flat and fertile terrain, with pH levels between 6 and 6.5, and with good drainage. It can survive in an average temperature of 25 degrees Celsius with regular rainfall between 100 and 180mm. Sunlight is also important to guarantee photosynthesis activity. Wind velocity must not exceed 30 kilometers per hour.

Land preparation involves the clearing and leveling of the land. All stumps and bushes are removed and deep plowing and harrowing should be done three times. Dry holes are also dug at least 50 centimeters in diameter and 30 centimeters deep. The holes should be three meters apart and fertilized. Canals are also dug, particularly the main boundary and tertiary canals. For planting, distance must be three by three meters apart and suckers are erected in the hole to about 30 centimeters deep. Regular watering is required for the plants to germinate. Rainy season is therefore the optimum time to plant. Plants that do not germinate three weeks after planting should be replaced.

The maintenance of the plants involves the cultivation, removing of unnecessary suckers, and pruning. Cultivation should not go beyond six inches from the base of the plant to avoid root injury. Plants must also be propped with bamboo poles during fruiting for support against strong winds, and to prevent them from falling down. There should be only two suckers per hill to minimize soil nutrient competition.

Application of fertilizer and pesticides are done regularly. For poor soils, fertilizers should contain N-P-K. The ratio is doubled when fertilizers are applied to young plants. The amount of fertilizer applied increases as the tree matures. Different pesticides are applied intermittently to fight different threats of diseases.

Six months after planting, bananas are ready for harvesting, characterized by the following: having six or less leaves, and fullness, plumpness, and roundness of the fruit with light green skin. Fruit care is done post-harvest such as washing, drying, packing, sorting, grading, and packaging in boxes.  Class A fruits are those that conform to the desired quality standard for export: no dark spots, regular number of hands, and hand length of 10 inches. Class B fruits are those with defects: bruises, spots, animal bites, and clustered hands and are only tolerable for sale depending on the specification of contractual buyers. Each box contains 13 kilograms of banana and is sold at PhP 490.00 for Class A and PhP 140.00 for Class B.

For a hectare of land intended for Cavendish banana production, the investment cost amounts to PhP 1,481,140.00 with a return on investment (ROI) of 43% and payback period within two years and six months. A favorable gross profit rate of 40% and a net profit rate of 16% is projected, higher than normal bank interest rates. This makes Cavendish banana production a promising industry worth investing into.

Market Outlook and Opportunities for Cavendish Banana Production

In 2013 the global banana trade reached a new peak, marked by ample supplies due to production recovery in major banana-producing areas and strong demand in all major markets. As a result, exports surpassed 17 million tons – 6.1% above the level in 2012 and marking a third consecutive year of strong export growth.

Most of this expansion was driven by increased shipments from Latin America and the Caribbean. Ecuador, the largest exporter worldwide, experienced a slump in exports in 2012 due to floods, but rebounded in 2013, supplying 5.3 million tons of bananas to world markets. Asian exports also grew by 4.2% in 2013.

The Philippines, the largest exporter in the region and second largest globally, exported 2.7 million tons, supplying 71,000 tons more than in 2012. This corresponds to a 2.7% increase, below the growth rates in the previous years. Starting in 2011, the country’s supplies have been recovering at a fast pace after a period of low production due to typhoon damages. Its export destinations include Japan, China, Middle East, Korea, Singapore, Malaysia, Russia, Indonesia, New Zealand, Thailand, and Hong Kong. Pakistan, although not a major banana exporter, expanded shipments from 28,000 tons to 86,000 tons. India, the largest banana producer in the world, has been rapidly increasing cultivated area and volume of production over the past decade. Although India currently produces predominantly for the domestic market, it also supplies bananas to markets in Nepal and the Middle East – total exports equaled 36,000 tons in 2013 – and these shipments could increase in the future given the increase in area planted.

The companies that dominate the export of bananas in the country include DOLE Philippines Inc., in Polomolok, South Cotabato; Fresh Del Monte Produce Inc., Chiquita-Unifrutti Philippines Inc., Sumitomo Fruits Corp. Philippines (Sumifru) and Lapanday Foods Corporation, all located in Davao City.

Financial Projections

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This resource material came from the The Department of Trade and Industry (DTI) thru its Negosyo Centers. The DTI has started implementing the Negosyo Center Program during the last quarter of 2014, as mandated by Republic Act No. 10644, also known as the “Go Negosyo Act”. The law, specifically Section 3 of the said Act, provides for the Establishment of Negosyo Centers in all the cities, provinces, and municipalities nationwide, with the end-goal of bringing government services closer to the country’s MSMEs, most especially the micro entrepreneurs, to help them grow and flourish; thus, intensify the promotion of entrepreneurship in the country.

One such material that has come about is the production of the book Compendium of Investment Briefs, made up of business opportunities that a potential, start-up, or existing entrepreneur can go into. Totalling 75 Project Briefs, these business opportunities focus on different industries: agri-business, fisheries, tourism, food processing, and service industry, among others.

The investment briefs contain basic information on these business undertakings to help startup businessmen and those looking to expand their existing businesses, come up with sound business decisions. The investment briefs include estimates on the capital requirement, costs for operation, projected sales, return on investments, and payback period, as well as other related schedule of computations.

For more investment briefers, business consultancy, and business information, kindly visit your local Negosyo Centers.


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