The lack of productivity of our agriculture has many proximate causes: Non-adoption of modern inputs (good seeds, breeding stock, fertilizers, feeds, etc.); farmers’ lack of credit with which to acquire these inputs; insufficient farmers knowledge due to weak extension services; low mechanization and high post-harvest losses; poor transport and high logistics costs, and periodic adverse natural phenomena like strong winds, floods, drought, and pest and disease outbreaks.
This lack of productivity is characteristic of the majority of our farmers who operate small, fragmented landholdings but not of the larger farmers and corporate growers. The latter are able to overcome the constraints and are generally productive, profitable and are able to compete with imports. In fact, for some commodities like bananas, pineapple, and mango, they are world-beaters.
Thus, the ultimate cause of lack of productivity has to do with the smallness and fragmentation of our farmlands. Small farms, by and large, are not economic to operate and are constrained by high costs in delivery of credit and extension services, inefficiencies in cultivation and post-harvest operations, and high costs in the assembly and transport of produce to the market.
The problem of smallness was aggravated by agrarian reform and can only get worse as farmlands are further subdivided among heirs with each passing generation.
If we were to enable our small farmers to enjoy the benefits and modernization and inclusion, priority should be accorded to measures that will overcome the lack of economies of scale of the great majority of our farmers. Our small farms need to be operated as larger management units through various means of land consolidation. And they should be integrated fully and equitably in the modern agriculture supply chain, not simply as suppliers of raw materials, but ideally as equal partners in joint ventures.
I hope this narrative was not lost among the participants at the 10th Sulong Pilipinas 2019 conference (Agribusiness Summit) held last Tuesday at Davao City because except for the amending the retention limits under the agrarian reform law which is a political decision, resolving the constraints of smallness rest largely in the hands of the captains of industry.
Ways to overcome
smallness of our farms
Following are ways with which to overcome the smallness of our farms. They are not mutually exclusive and in fact complementary:
1.Declare victory in agrarian reform and lift the 5-hectare limit to farm holdings,
2.Popularize and provide incentives to contract-growing arrangements between small farmers and wholesalers, supermarkets, processors and exporters,
3. Further empower farmers through cooperatives, irrigators associations and farmers associations by coursing all public and private support through them, and
4. Further develop and provide incentives to the corporative hybrid business model where the farmers and their cooperatives enroll their lands collectively in joint ventures with corporate investors.
Lifting the limits
to farm holdings
The long term solution to the smallness of our farms and their continuing fragmentation is to lift the limits to farm holdings which has been set at five hectares by RA 6657 of 1988. This would allow those with very small farms and those not inclined to remain in farming anymore to sell their farms to other farmers with commitment and capital to invest in farming.
From the original agriculture reform code of 1963 to date, we have distributed more than eight million hectares to small farmers out of about 10 million hectares of farmlands. We have therefore essentially attained the political objectives of equity and social justice in the countryside but the economic objective of higher farm productivity remains elusive.
Even as the Department of Agrarian Reform (DAR) distributes the last remaining “carpable” coconut and sugar lands which have been given notices of coverage, we should declare victory as far as agrarian equity and social justice are concerned and move on to address the now more pressing issues of rural productivity and poverty alleviation.
Congress should amend Section 6 Retention Limits of RA 6657 accordingly.
Contract growing is increasingly an attractive business model the world over to integrate the disorganized millions of small producers into the mainstream supply chains of various commodities. Subject to various modalities, the small producers agree to raise crops/livestock/fish for corporate integrators in exchange for a guaranteed, fair price at harvest.
In order to assure themselves of the availability of raw materials in the quantity, quality and time of delivery required by their business, the corporate integrators advance the seeds and breeding stock and other modern inputs. The corporate integrators provide as well training and on-farm extension services, normally provided by government.
In studies after studies in many countries, the contract growers-producers consistently derive higher and more reliable income compared with their independent grower counterparts. The corporate integrators for their part, in addition to being assured of availability of raw materials, are spared the problems of labor, land tenure and to the some extent capital expenditure for housing for livestock and fishpond development for aquaculture.
We have successful contract-growing schemes for broilers, swine, banana, pineapple and tobacco. The challenge is to provide incentives and encouragement to the food and beverage industries and the supermarkets to embark on similar arrangements for other commodities. The vigor of Thai agriculture can be traced to a large extent to the prevalence of contract growing schemes for practically all commodities.
Further empower farmers
by strengthening cooperatives,
and farmers associations
The delivery of extension and veterinary services; provision of credit and production inputs, delivery of water and management of irrigation facilities are all facilitated if the farmers were organized into cooperatives, irrigators associations and other farmers associations. Individual farmers generally cannot economically justify the acquisition of most farm equipment. Organized farmers with larger volumes of produce have better leverage in the market. They likewise incur less unit costs in assembly, handling and storage of produce and get better farm gate prices. The corporate integrators naturally prefer to deal with organized groups rather than piece meal with hundreds of individual farmers.
It is imperative therefore that small producers are further empowered by strengthening their cooperatives, irrigators associations and other farmers associations. To begin, all public support e.g. the inputs of seeds, equipment, credit, training and extension provided in the Rice Competitive Enhancement Fund should be coursed through cooperatives, irrigators associations and other farmers associations. The prospective public support to coconut farmers from the Coconut Levy Funds should be treated similarly.
Further in order to avoid mis-governance and enhance entrepreneurship of the cooperatives and irrigators associations, government should deploy professional business managers/coaches/consultants to advise and help the farmer groups. The corporate foundations should consider hiring/fielding these professional business managers/coaches in their respective corporate social responsibility (CSR) portfolios.
Promote joint ventures between farmer-owners with corporate investors (corporatives)
Finally, it will be ideal if the small farmers graduate from raw material suppliers or as lessors/petite landlords into part-owners of agribusiness enterprises. Their income stream will be derived not only from wages as salaried employees but also, prospectively greater, from dividends/earnings of the joint venture.
Land Bank of the Philippines can be asked to advance the equity for the small farmers in the joint venture which the farmers can gradually take out over time from deductions of dividends proportionate to their land holdings. The small farmers may remain as passive investors with Land Bank officers representing and protecting their interests in the corporative boards.
Dr. Emil Q. Javier is a member of the National Academy of Science and Technology (NAST) and also chairman of the Coalition for Agriculture Modernization in the Philippines (CAMP).
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