THE Cold Chain Association of the Philippines (CCAP) on Monday said it requires at least P6 billion to double the industry’s storage capacity for onions and slash the disparity between the total supply annually and storage capacity.
CCAP President Anthony S. Dizon said the estimated capacity of cold storages dedicated for onions nationwide is about 100,000 metric tons (MT), which is only 27 percent of the annual 360,000-MT supply.
Dizon said cold storages for onions have a “unique” design and conditions to cater to the commodity, which entail high humidity and moderate air circulation.
“There is an obvious disparity between demand and capacity,” Dizon told reporters in a press briefing on Monday.
Dizon said his group accounts for about 25,000 MT of the nationwide estimated 100,000 MT cold storage capacity for onions.
Dizon emphasized that in order to properly cater to the storage needs of the country’s onion supplies, the total cold storage capacity nationwide must be doubled to 200,000 MT.
To do this, he pointed out, the private sector alone cannot do it and the government must help through possible fiscal interventions.
Dizon said a cold storage facility with a capacity of 2,500 MT of onions cost about P150 million. To close the supply and cold storage capacity gap, a total of 40 cold storage facilities must be constructed with a total investment cost of P6 billion.
The cost estimates do not include yet the cost of real estate, Dizon added.
Government interventions
Dizon proposed that the government consider various fiscal interventions such as loan packages to boost the country’s cold storage capacity.
Another option the government can explore is that it will be the one building the cold storage facilities but shall be managed by private sector experts or pursue public-private partnerships, Dizon said.
The national government, he added, may consider importing onions through its state-run entities to ensure timely arrival of supplies since the country suffers annually from shortage of the commodity. If not, the government may opt to improve local productivity to reduce the annual onion shortfall.
“The government needs to develop and implement a holistic policy and strategic methodologies to balance supply and demand and mitigate undue market volatility,” he said.
“This can be undertaken as a concerted effort among concerned government agencies, government financial institutions and private sector stakeholders working together towards the realization of the National Agriculture and Fisheries Modernization and Industrialization Plan,” he added.
Boosting the cold storage facilities for onions would improve competition in the industry, ensure the country’s supplies are managed and stored properly,and remove the possibility for price manipulation, Dizon said.
Some of the cold storage operators in Nueva Ecija, he explained, have also become traders to ensure financial survivability of their facilities due to tight margins.
Dizon said the monthly operating cost of a 2,500-MT cold storage facility is approximately P1.5 million to P2 million, while its gross profit is at P2.5 million given a P1 per kilogram of onion per month storage fee.
“These [storage] rates may have changed as of late because of the increase in the costs of power,” he said.
“The financial data shows that if the business model is anchored purely on storage revenues, the business viability cannot be defended; ergo, it is necessary and convenient to adopt a complementary business strategy to justify the capital investment. This is where the trading role comes into the picture,” he added.
Image credits: Nonoy Lacza