This is the third of the series how to remake our agriculture to make it more productive, more competitive, and most importantly, more profitable to small farmers. Undoubtedly we need more farm-to-market roads, more irrigation systems, more post-harvest facilities, more processing and value-adding, better extension and stronger research support. But ultimately we need to organize our small farms into effective business units, which they are not due to their smallness and fragmentation.
Hence the proffered solutions of 1) broader adoption of contract growing as a business model, and 2) strengthening farmers cooperatives through corporate social responsibility (CSR) support.
Last week’s column elaborated on the pros and cons of contract growing. With contract growing, the farmers are assured of credit, inputs, improved technology and markets which are provided by the corporate integrators. The integrators for their part are assured of dependable supply of quality raw materials, are spared of labor and land tenure social problems and with less capital expenditures to boot. The downsides to the business model were described and how they have been dealt with elsewhere.
Philosophically contract growing should be the preferred route since this is business-driven and not dependent on charity, and should be more sustainable in the long run.
However, many of our larger corporations are not engaged in agri-business and therefore cannot incorporate contract farming in their business portfolios. Nevertheless, they can still significantly help address the national challenge of eliminating poverty by devoting a great part of their corporate giving to agriculture and rural development.
Much have been written on the advantages of organizing farmers into cooperatives which are in essence larger more efficient production and marketing units. In fact, in Europe and Northeast Asia some of them have been so successful they now own their own banks.
We too have tried the cooperative approach but with largely indifferent results. Most of our rural cooperatives have failed although a number of outstanding ones continue to flourish. But among the greater number which have failed, the recurring problems had been poor business management and loose financial controls.
This is where the intervention by the private sector could be strategically inserted to complement what had been historically, albeit ineffectively, government-led initiative. What the rural cooperatives need is not more regulation but better business development and management.
Priority for existing
Cooperatives development is necessarily a long-term social education and mobilization process. But we need not start from scratch all over again.
True that most rural cooperatives have completely folded up. But many numbering in the thousands continue to survive and struggle. Evidently they still enjoy the basic goodwill, patronage and support of their members. Turning them around should therefore be less problematic. And tactically should be the immediate target for corporate CSR support.
A good example are the irrigators associations whose members are linked by their common need for working water systems. They continue to receive agronomic support from the National Irrigation Administration (NIA) and the Bureau of Soil and Water Management (BSWM-DA). The water beneficiaries will be much better off if they can diversify into higher value crops. What they lack are new business plans and assured markets.
Immediate opportunities for
cooperatives business development
Following are three concrete examples of immediate opportunities for CSR support to cooperatives. Sizeable public funds are now being allocated for agriculture and rural development. Better organization and supervision of the recipient cooperatives will guarantee/facilitate the productive uses of these funds.
1. Organizing farm service providers
The recent Rice Tariffication Act provided P5 billion each year for the procurement and free distribution of farm machines and equipment to registered cooperatives and irrigators associations. If the previous mechanization programs of government were to be indicators, simply giving away these equipment to the cooperatives without any business plan and proper supervision will likely end up in disaster. In order to assure full and sustained utilization of the machines, the cooperatives need to organize business units with trained operators and mechanics who will provide farm operations/services to their members for a fee (to make the services self-sustaining).
The task was entrusted to Philippine Center for Postharvest Development and Mechanization (PhilMech), a research unit under the Department of Agriculture (DA). PhilMech has never handled this amount of funding, is short of experienced managers and is not organized for business. Thus, the agency will most likely be overwhelmed. The challenge of organizing the service provider business units could be assumed by the corporate foundations.
2. Organizing rice seed companies
The Rice Tariffication Act likewise provided P3 billion each year to provide seeds of high-yielding inbred varieties to rice farmers. Unlike with the farm machines, it was not stipulated whether the seeds will be given away free to farmers. What was clear through is for Philippine Rice Research Institute (PhilRice), the research institute dedicated for rice improvement, to provide research support and the initial BREEDER and FOUNDATION seed stocks to the selected farmers who are supposed to produce the seeds in commercial quantities.
Thus in addition to its regular scientific and technology support role, PhilRice is obliged to train the selected rice farmers to become into seed growers and eventually pool their efforts into seed companies. PhilRice is staffed with well-trained plant, soils, water and biotechnology scientists. But it has no business managers who will help organize the rice growers into seed companies which will process, distribute and market seeds in competition with other private seed producers.
The corporate foundations especially with many of their retired operations, finance and personnel managers, are in a much better position than PhilRice to help guide in the establishment of seed companies not only for rice, but also for other commodities.
3. Organizing village-level coconut processing enterprises
Coconut farmers are among the poorest of the poor. They are impoverished by their traditional exclusive reliance on dried copra. The solution is to switch to wet processing in order to fully utilize both the water and meat parts of the nut. The coconut water instead of being thrown away will be processed into healthy, fruit drinks which have huge export potential. The meat can be processed into virgin coconut oil, coconut milk drinks and smoothies, desiccated coconut and/or high protein coconut flour.
The husks will be converted into various native handicrafts, fiber boards, geotextiles or rooting materials for plant propagation (substitute for peat moss). The coconut shells can be processed into activated carbon which have many food, environment and industrial uses.
However, the processing facilities should be organized at the community level to reduce transport costs but more importantly to create more employment and value-added in the countryside.
Funds for these purposes will be available soon from the Coconut Levy Funds (CLF) as soon as Congress drafts a new coco levy fund bill to replace the previous one vetoed by the President. When finally approved the coconut levy funds are easily good for P5 billion each year for the next 25 years. For sure a good part of the CLF will have to go into the organization of small-to-medium scale enterprises at the village level, owned and operated by the coconut farmers themselves and their cooperatives.
The mandate of organizing the coconut village-level processing enterprises will reside in the Philippine Coconut Authority which like NIA, BSWM and PhilRice will not have the business expertise to manage these enterprises. This is another great opportunity for corporate foundations to help government attain our national social development and food security needs.
There are many other opportunities like commodity cooperatives for growing coffee, cacao, rubber, oil palm and mango and raising poultry, swine and dairy. Fish cooperatives in joint ventures with successful fishpond operators to manage/operate 50-hectare fishponds in Laguna de Bay is another.
Dr. Emil Q. Javier is a Member of the National Academy of Science and Technology (NAST) and also Chair of the Coalition for Agriculture Modernization in the Philippines (CAMP).
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