Consolidation key for small farmers seeking to climb value chains

SMALL FARMS must overcome their disadvantages in terms of scale and access to specialized equipment by consolidating if they are to be competitive enough to supply large buyers of produce and even join international value chains, former Agriculture Secretary William D. Dar said.

“We have small landholdings that are one hectare or even less on average. Farming at that level would be at a subsistence,” Mr. Dar said in a Zoom call. “That’s why farmers are not becoming richer as we would like them to be.”

Organizing into “clustered farms” can result in cooperative access to farm equipment, while exacting specifications laid down by big buyers could open doors to farming techniques that result in better produce and more efficient cultivation, Mr. Dar said.

Mr. Dar is a senior adviser to Kapatid Angat Lahat for Agriculture Program (KALAP), which seeks to position large agribusiness companies in mentorship roles to smallholder farmers, thereby improving their competitiveness.

The public-private sector initiative works under the Go Negosyo framework of providing farmers and micro, small, and medium enterprises (MSMEs) access to the so-called 3 Ms — money, markets, and mentoring.

“There is a need to consolidate farming towards clustered or cooperative farming, so they will become part of the value chain of the big brothers,” Mr. Dar said.

The Philippines represents a significant opportunity for investment, according to Christian Eyde Moeller, president and co-founder of Lionheart Farms Philippines Corp., which is affiliated with KALAP.

Lionheart Farms’ operations in Palawan encompass 3,500 hectares of land planted to coconut, consisting of individually-owned farms and clustered partner farms.

“Integrated management and scale are needed to take on the challenges; leaving the small farmers alone will not work — I think this is very clear,” Mr. Moeller said in an e-mail.  

“The answer is cultivating together for better economies of scale and specialized skills to deal with the complexities,” he said. “It is a simple reality, why should farming be any different.”

Specialized skills like agricultural engineering, biology, chemistry, food technology, and software development can be more easily rolled out onto agglomerations of farms, he added.

“We have a partner farming program with coconut farmers, which creates livelihood for almost one thousand people, on top of the one thousand plus people that we employ directly from the community of the Indigenous Peoples,” he told BusinessWorld.

Among the other KALAP participants are Yovel East Research and Development, Inc., a biotechnology research company, Universal Leaf Philippines, Inc., a tobacco growing and processing company, and Nestlé Philippines, Inc.

“A farmer having a hectare or two hectares, how can he compete against the large farmers in Cambodia, Vietnam, Thailand, and all these other ASEAN (Association of Southeast Asian Nations) countries, because they have scale,” said Jose Ma. A. Concepcion III, who founded GoNegosyo.

“The advantage of a big brother (approach) is really in the shepherding of these farmers, because they provide mentorship,” he said in a Zoom call.

Mr. Concepcion told BusinessWorld that the concept was similar to franchising.

In the Philippine Franchising Association, he said, individuals who buy a franchise are provided mentorship. The franchise also advertises the brand, which then provides a market for the franchisee.

“Once you have both a mentor and a market, the banks will fund you,” Mr. Concepcion added.

On March 31, banks and financial institutions — including the Development Bank of the Philippines, Land Bank of the Philippines, and Philippine National Bank — met with Mr. Concepcion and other participants in KALAP to discuss how to open up access to capital for farmers.

The challenges are structural, Mr. Moeller said of the coconut industry, which is burdened by poor yields, smaller plots, and the changing nature of market demand.

“Subsidies can no longer save the coconut farmers and is obviously not a sustainable path for anyone,” he said.

“We have brought a new mindset, new skills, technology, digitalization, as well as management into farming. Bringing all the required elements together is justified by scale,” Mr. Moeller said. “… there is no quick fix.”

The commodities that KALAP wants to focus on are rice, coconut, tobacco, coffee, cacao, sugarcane, corn, other feed crops, and livestock.

Farmers intending to join KALAP will need to be part of a collective of clustered farms, Mr. Dar told BusinessWorld.

“Areas will have to be identified (by the Department of Agriculture) in tandem with the big businesses, so it’s a long process,” he said.

For the coconut industry, specifically, “we have agreed to finish the joint roadmap development by the end of May.”

“June will be the anniversary of the Philippine Coconut Authority… they are ready to implement thereafter,” Mr. Dar added.

The program’s memorandum of agreement was signed on March 6 at Malacañang. President Ferdinand R. Marcos, Jr., who witnessed the signing, said it will help farmers and MSMEs become “productive, profitable, sustainable, and globally competitive.” — Patricia B. Mirasol