This project was established to find ways to improve the success rate of cooperatives in the Philippines. It aimed to demonstrate that the marketing system used by a group of farm families in Mindanao might be improved through the establishment of well run producer cooperatives.
The establishment of cooperative marketing groups is one mechanism by which small farmers can improve the marketing of their produce and potentially add value to it, and can also reduce their dependence on rural traders. This project targeted a group of around 3000 farmers in Mindanao working farms located at mid-elevation on mountain slopes. They supply tomatoes and other temperate vegetables to the Luzon and Visayas markets during the typhoon season and to the Mindanao market all year round. Farmers’ incomes were low, partly due to poor marketing practices and poor access to markets and information. They were also vulnerable to the market power of rural traders, retailers and processors.
In Mindanao and other areas of the Philippines many cooperatives have failed, due to problems such as poor infrastructure, lack of market information, poor management and inadequate quality control. However, the Philippine government, recognising the social benefits arising from establishment of cooperatives, has given a high priority to their development.
1. A survey of 209 farm households was conducted during 2002. This comprised three elements:
Social organisation - which focused on the socio-economic aspects of the farm household and its inter-relationships with others in the vegetable supply chain.
Crop production - focused on the farming practices adopted and input-output relationships
Marketing - investigated the marketing activities employed by the farmers including the role of relationships, and costs and returns.
All data have been encoded and initial analysis is now complete. Data from all of the surveys is being used to develop a detailed mathematical programming model of the farm household complex. Crop production information has been utilised to select a series of case study farm households, which will have more data collected in 2003 to confirm and expand on existing data (see ‘4’ below). Initial data analysis has confirmed the earlier conclusions reached from the development of the ‘rich picture’ of the problem i.e. lack of finance/capital; imbalance in power relationships; poor knowledge and application of knowledge; poor technical quality of product - outputs from supply chain; poor functional quality in the supply chain - roads, irrigation, cool chain; and poor market information
2. The relationship data collected in the marketing survey has been analysed by principal component and factor analysis and is currently being developed into explanatory models using structural equation modelling. A summary of the outcomes is presented as Appendix 1 to this report. Briefly the findings are that the majority of traders are unable to provide the farmers with the prices they expect for the vegetables they have harvested. Potentially, this suggests that there may be some conflict in the farmer’s relationship with their preferred trading partner. It is also abundantly clear, that most traders are either unwilling or unable to provide market information or to help the farmer grow better crops by providing technical information or training programs.
Since most traders are also small family enterprises, the traders may experience some difficulty in providing adequate support for the farmers. However, traders have no apparent difficulty in providing credit or in providing favourable terms of repayment for those farmers who need credit facilities. The majority of traders are perceived to be at some distance from the farm and to visit the farm less frequently than the farmer would desire. This is anticipated to present difficulties in communication and information exchange and is no doubt also related to the seasonality of supply and demand.
3. Case studies of other Mindanao vegetable production areas - Visits were made to farmers in Marilog, Marahan, Malaybalay, Sumilao, Valencia, Claveria, Maragusan, and Nabunturan in order to validate the information derived from the Kapagatan study. Observations and interviews with key informants were conducted. This activity allowed the researchers to benchmark Kapatagan with other vegetable producing areas of Mindanao. A report is attached as Appendix 2. A number of issues surfaced in this assessment of post-production activities. These are:
Inadequate post harvest facilities and the seeming lack of quality awareness on the part of the vegetable producers are clear indicators that post harvest is a major concern in the area. The problem, however, does not end there owing to a difference in opinion as to what facilities are needed (cold storage or refrigerated trucks) and how these needs can be prioritised. If this conflict is not appropriately addressed it will not lead to improvement in the supply chain although the objectives of both approaches are geared towards the same goal, that of improving the quality of Mindanao’s produce.
Farming decisions are greatly anchored on the availability and source of finance - Land-use decision-making is dictated by the financial requirements for growing the crop and if these are met further dictated by source. In the same way, harvest and marketing decisions are influenced by the mode of payment for harvested product.
4. A total of 27 farms have been selected to carry out an in-depth analysis of farming practices and their environmental impacts. Data collected includes - collection, identification and determination of the severity of insect pests, weeds and crop diseases. Soils will also be tested on each farm. This work will be complete by mid 2003 and data used in the mathematical programming model of the farm household as well as background for designing extension packages and interventions.
5. Eight workshops were carried out to assist the farm households create a comprehensive local features and resource map of Kapatagan. Participants used their local knowledge to create a map of the Barangay. While there are technical maps of the area available these were found to be ineffective for farm-level decision makers in identifying their resource constraints. A major outcome of these workshops was that farmers were for the first time able to see that availability of water was a major constraint.
Objective 1: Understand the systems small farmers in Mindanao employ to produce and market selected fresh vegetables
Farm-household and downstream surveys were used to collect information & data on: socio-demographic profiles; farmer production, harvest, marketing, post-harvest management systems; distribution and logistics systems; financial, credit, input and information flows along the supply chain; and product quality. To support this case studies and associated soil analyses were used to: describe the existing production practices for vegetable crops; relate these practices to productivity and profitability of vegetable farming; evaluate the suitability of production practices from a scientific perspective; and recommend sustainable production practices and policies to encourage these. Data from the farm-household and downstream surveys were also used for the farm-household model, which was then used to determine the optimum mix of activities at the farm level as well as identify the most profitable chain for farmers.
Objective 2: Examine the efficiency of the agribusiness supply chain for selected fresh vegetables in Mindana
Drawing on the survey information mentioned above, analyses were conducted of the efficiency of the Kapatagan vegetable supply chain. Impediments to the operation of a more efficient supply chain and marketing margins across the supply chain for selected fresh vegetables were examined to analyse factors that affect marketing margins and determine price transmission policy implications.
Objective 3: Identify the extent to which small farmers are able to meet and satisfy the needs of market intermediaries and the extent to which market intermediaries are able to meet and satisfy the farmers’ needs and to facilitate the flow of timely market information in the supply chain.
Farm-household and downstream surveys mentioned above were used to collect information and data on: criteria used by farmers and market intermediaries in choosing trading partners. Other criteria included the importance of the product offer and quality dimensions The importance of long-term buyer seller relationships, the mode, frequency and content of communication between farmers and market intermediaries were revealed along with the value of accuracy and timeliness of market information along the supply chain.
Objective 5: Facilitate the establishment, maintenance and management of quality management systems
Members of the project believe that the greatest gains in welfare for stakeholders in the Kapatagan vegetable supply chain will occur when they are able to develop linkages with supermarkets to establish new quality chains. Supermarkets are able to set and enforce quality standards and extract premiums for quality product that would be extremely difficult for small farmers acting on their own, or even when organised as a cooperative. To this end discussions have s begun with the Mindanao Business Council, VICSMIN (Vegetable Industry Council of Southern Mindanao), KALIDECO (Kapatagan Livelihood Development Cooperative), and Kapatagan farmers about the possibilities for cooperation along these lines.
Objective 6: Suggest to government and other interested agencies, appropriate policies and strategies to reduce the impediments in the operation of an efficient supply chain
A number of steps have been taken to implement this objective. These include:
Linkages developed by UP Mindanao with the Department of Agriculture, the Growth with Equity in Mindanao Project (USAID), Philippine Institute for Development Studies, Vegetable Industry Council of Southern Mindanao and KALIDECO
Support and major participant in the 1st Mindanao Policy Review Forum, Davao, in June 2003, a forum aimed at identifying possible policy recommendations for the agriculture sector
Policy document presented at the Fifth Mindanao Food Congress and to be taken up by Department of Agriculture Sec. Luis Lorenzo
Presented research results to farmers in Kapatagan to gather suggestions from them on policy recommendations they feel would work best in their reality.
Presented the SEARCA Forum, Los Baos in November 2003 on: ‘Towards a more efficient vegetable supply chain: prospects and challenges (a policy forum).
The impacts of the project can be seen at the farm-household level (higher income, changes in marketing and agronomic practices), the institutional level (improvements in farmer groups/cooperatives and vegetable industry councils) and the community level (increased awareness of vegetables). A key component of the project has been the encouragement and support it has provided to farmer groups and cooperatives. The impact of this is reflected in the changes occurring in the operations of the Vegetable Industry Council of Southern Mindanao (VICSMIN), KALIDECO Cooperative (which at the beginning of the project was the only remaining cooperative and on the verge of collapse), Maharlika Farmer’s Cooperative and Kapatagan Upland Farmers’ Development Cooperative.
Farmers who were members of cooperatives or were participants in the workshops now have higher incomes than the farmers without direct involvement in the project. Newly established Maharlika Cooperative is lifting prices to farmers and improving use of pesticides. The councils of Davao City implemented a vegetable awareness campaign, a village vegetable garden program and a vegetable garden contest. VICSMIN has also registered a marketing and trading arm.
Key findings of the agronomic work in Kapatagan were low soil pH, overuse of phosphorus and potassium fertilisers, low soil organic matter and micronutrient deficiencies (e.g. boron). Discussion with farmers resulted in a dramatic increase in the use of lime to lift the pH. Farmers are now soil testing (with the encouragement of the local council), they make better use of fertilisers, and micronutrient use has increased. Follow-up soil tests conducted in 2004 found a shift towards optimum pH values in the soils in Barangay Kapatagan. Use of boron helped overcome defects in cauliflowers and broccoli.
The project staff assisted the Department of Agriculture to promote the use of biocontrol agents such as the diadegma parasitic wasp as a strategy for environmental sustainability, product differentiation and cost reduction. Kapatagan project data on pesticides and prevalence of natural enemies were useful in support of the strategies.
The University of the Philippines in Mindanao has lifted its capacity to conduct research on complex agribusiness systems. Project members from the University have been asked to participate in a number of Mindanao Policy Review Forums, make recommendations to the President on policy changes and to participate in Mindanao Vegetable Congresses.
This is thought to be the first study in the world to address agricultural development issues using the concept of a supply chain embedded in a dualistic agribusiness systems framework. It is also the first study to develop and implement a methodological framework that integrates diverse methodologies to analyse an agribusiness supply chain and its associated systems. The project provided the first research on supply chain management of agricultural product produced by smallholders in the Philippines. Previous studies were done only by multinational companies for their own corporate use and were not available to policy makers. And it was the first detailed investigation of the impact of vegetable farming and different soil management practices on soil properties in Mindanao.
A number of popular myths were found to have no basis. These were:
Pesticide use is a serious health risk to consumers: residues are at relatively low levels and the pesticides used tend not to be ones that cause serious health problems,
Low crop productivity is due to use of low inputs: on the contrary, farmers tended to put on excess of the wrong inputs, and insufficient of other inputs,
Farmers are being taken advantage of by financiers: this was not a major issue. Farmers prefer to transact with those market intermediaries who pay cash and, with many traders to choose from, they may also act opportunistically, and
Market information is lacking: farmers talk amongst themselves, and while information on the prevailing market prices is widely known they are often unable to respond.