Nestle, Tesco Deal Directly With Farmers to Bring Down Prices

By Sonia Ramachandran

FOOD giant Nestle has plans on what it wants to implement under the Northern Corridor Economic Region (NCER) project.

Its manager for agricultural services, Yong Lee Keng, said Nestle is conducting research and development (R&D) with the Malaysian Agricultural Research and Development Institute (Mardi) on red rice.

“Once the seeds are released, we will work with Sime Darby Bhd and implement the project in Kedah. We expect it to begin in mid- 2008,” he said in Petaling Jaya.

Nestle, he said, was also looking into semi-aerobic farming with Mardi under the NCER. This is the recommended worldwide padi- planting practice to reduce greenhouse emissions and conserve water at the same time.

“When submerged in water, padi produces greenhouse gases. With semi-aerobic farming, you use a damp surface instead.

“If we use full-aerobic farming, the yield would be very low. This way, we don’t significantly lower the yield. Sometimes, the yield is higher.”

Yong said Nestle was already practising semi-aerobic farming at its R&D farm in Sik, Kedah, which produces rice for their infant cereal products. Nestle is also sharing its experience with Sime Darby on this.

Yong added that contract farming was another viable option for NCER as it provided farmers with a steady income while allowing companies like Nestle to control practices right from the farm level.

“This allows us to look at food safety and monitor the food `from the farm to the fork’. We can control the amount of pesticides used and how it’s sprayed and so on.

“We can also make sure the environment is not harmed by taking care of the waterways and ensuring the proper disposal of pesticide canisters,” he said.

Yong said Nestle was the first to start contract farming in 1985 when they decided to stop buying chillies for their famous Maggi Chilli Sauce from wholesalers.

“When the price was high, the wholesalers would not deliver to us and when the price was very low, they would dump the chillies on us.

“It was then that we decided to implement the first ever contract farming,” he said.

Before starting the project, Nestle, together with the Federal Land Development Authority (Felda) and Mardi, evaluated chillies from all over the world

“In 1985, we had 10 people from all over the country growing chillies for us. When the problem with the wholesalers occurred, we chose two suppliers.

“There’s one in Kelantan, which is under the Bukit Awang Farmers Association and another in Perak, an individual entrepreneur,” he said.

Nestle chose these areas because it wanted to go into the lesser- developed places and provide opportunities to farmers there.

Yong said fertigation (application of nutrients through the irrigation system) was also introduced during the flood seasons in Kelantan.

He said Nestle provided the market for the goods as well as the technical support while the government is providing the infrastructure for fertigation.

“By providing the infrastructure for fertigation, the government is allowing private companies like us to venture into contract farming.”

Another company that supports contract farming is Tesco.

A price drop is so unheard of these days that when it happened, there was more disbelief than relief.

This was what happened in March last year when Tesco stores in Malaysia brought down the price of prawns from RM15.99 per kg to RM9.99 per kg. Naturally, Tesco had repeat customers and the average prawn price dropped further.

Consumers had contract farming to thank for this because when Tesco contract-farmed its prawns, it cut off the middleman – hence the lower price.

But price isn’t the sole benefit of contract farming, practised worldwide by Tesco. By determining the standard of fruits, vegetables and meat, it controls quality and food safety – something consumers will appreciate. It even rents baskets and trays for collection to the farmers so that the produce are only handled minimally.

Tesco used to source their fresh produce from wholesalers, but when it realised product quality could not be controlled, it got farmers to plant according to its specifications.

Now, 20 to 25 per cent of fresh produce including poultry, fruits, vegetables and meat, are contract farmed.

Tesco’s corporate and legal affairs director Azlam Shah Alias says the farms are all over the peninsula, from Johor to Kedah to Terengganu and the company aims to increase the number by 30 per cent.

“We are negotiating with farmers in Perak to plant lowland vegetables like spinach and sawi,” said Azlam.

(c) 2007 New Straits Times. Provided by ProQuest Information and Learning. All rights Reserved.