New breed of Mindanao grower-entrepreneurs masters the supply chain

Posted on Tuesday, March 13th, 2012 and is filed under Feature. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

KORONADAL, SOUTH COTABATO—Associations of growers in Mindanao are becoming increasingly competitive in the expanding fruit and vegetable supply chain by adopting a farsighted, corporate approach towards production and marketing.

These market-savvy groups include smallhold farmers with limited production areas, such as the Dynamic Vegetable Growers Association based in Tagum, Davao del Norte.

Dynamic, which was formed in 2005, currently has 130 shareholder-members with a production area totalling 105 hectares, as well as 200 affiliate growers with about 200 hectares.

Despite its relatively small size, Dynamic directly delivers an average of eight to 10 metric tons of assorted quality vegetables weekly, all year round to clients ranging from an international chain hotel and the penitentiary system, to wholesalers in the Visayas region.

“Farmers can become entrepreneurs themselves,” said the group’s president, Ray Acain.

Another group the South Cotabato Banana Creations, Inc. (SCBCI), has evolved in five years from a informal alliance of smallhold farmers selling to wet-market traders, into a seasoned corporation that grows, consolidates and markets a variety of vegetables for high-end supermarket clients.

Bernadette de Jesus, co-founder and corporate secretary of SCBCI, wryly admits that the group’s name no longer quite fits its profile.

“We started out just like other farmers, selling saba bananas to local traders. But they would dictate the terms, and take their time to pay us,” she said. “So we thought of dealing directly with the market ourselves, and started figuring out what fruit and vegetable products would sell best.”

SCBCI established itself as a produce concessionaire in a mall in nearby General Santos City. Today, the company procures and retails up to five metric tons of about 70 varieties of fruit and vegetables weekly, through outlets in four high-end mall supermarkets.

The group has remained relatively compact throughout its existence. Currently it has 15 active members with a total growing area of 40 hectares, and 15 affiliate growers, according to SCBCI co-founder and treasurer Victoria Motril. Its largest farm is eight hectares.

Dynamic and SCBCI credit the U.S. Agency for International Development (USAID) for giving them technical assistance at critical junctures in their development.

USAID works with growers’ associations, farm cooperatives, including cooperatives composed of former combatants of the Moro National Liberation Front, industry councils, and other business support organizations to strengthen the competitiveness of Mindanao’s agriculture sector.

Through its Growth with Equity in Mindanao Program, which is implemented under the oversight of the Mindanao Development Authority, USAID provided Dynamic and SCBCI with training and on-site technical advice to improve production quality and post-harvest handling, as well as marketing support.

USAID partnered with local government units, the Department of Agriculture (DA) and other agencies in order to maximize this assistance.

A crucial step for both growers’ groups was learning to diversify and to create economies of scale.

“Our problem at first was that we could not consistently provide the volumes required by our clients,” said De Jesus.

USAID provided training in the practice of commodity clustering, in which groups of farmers focus on cultivating a specific commodity according to strict protocols, following delivery schedules and volume specifications agreed upon by both growers and clients.

“In this way, we can regularly deliver products of consistently good quality to our clients,” said Motril.

“We also help each group of farmers select a second commodity for intercropping,” said Acain. “This diversification provides a safety net.”

Acain laments the fact that there are still smallhold farmers in Mindanao who would go hungry if they didn’t hire themselves out as labourers, in addition to working their land.

This doesn’t have to be the case, he said.

“If production and distribution are planned and handled well, vegetables can bring in a big return on investment,” Acain noted. “Consider that the cost of production for a kilo of eggplant is just five pesos, while the current farmgate sale price ranges between 20 and 25 pesos per kilo.”

Dynamic’s members in Davao have seen their incomes rise by more than 50 percent from vegetable production and marketing alone, according to Acain. “These are small farmers who have been able to buy their own vehicles, and put their children through college.”

The ability to market their own produce also brings in quicker returns, said De Jesus. “We established a corporate cash flow system, and pay our members cash upon delivery,” she said.

Once they’d hit their stride, both groups began marketing their produce further afield. USAID assisted Acain’s group in conducting market reconnaissance trips in the Visayas region, where Dynamic succeeded in establishing supply agreements with a bulk buyer.

USAID also facilitated meetings which led to supply agreements being established between SCBCI and leading mall chains.

Acain and Motril note that their experience has helped to empower other farmers.

“People believe what they can see for themselves,” said Acain. He said that the demonstration farm established by Dynamic in partnership with USAID, the DA and other support agencies was a critical factor in bringing more farmers on board as members. “Gaya-gaya lang yan. It’s a process of imitating what works well.”

“In the past people were content to simply plant anything, going by the season. Now they are becoming more market-driven, focusing on varieties selected for specific volumes, harvest schedules, and shelf life. There’s emphasis on quality and year-round production planning,” he added.

But they do have to go through a learning curve, Acain said. “We advise them to start with a small cash outlay, and be ready to learn their craft.”

In the last five years, Dynamic’s members—many of whom had been subsistence farmers–have improved their land management, planting systems, and financial planning.

“They’ve learned to estimate precisely the costs of each cropping, and to set aside part of their proceeds for the next planting,” Acain said.

The operations of groups like Dynamic and SCBCI also created a ripple effect on the rural logistics side of the supply chain.

“We negotiate with jeepney drivers plying regular routes to serve as our transport system. For a smaller fee [than hired trucks] they pick up and deliver produce left by the roadside at agreed hours, without the farmer having to hire vehicles and spend time waiting to load the cargo,” Acain said. “Developing this routine and this kind of trust was possible only because of daily production.”

Through the steady improvement of their supply chain skills, these grower associations are also helping to bring about a paradigm shift in Mindanao agriculture.

“They’ve become adept at working with different industry stakeholders, from the DA to local governments and wet-market traders to institutional buyers,” said Acain. “But they are essentially self-reliant and ‘corporate’ in the way they carefully assess the market before making any investment.”

SCBCI and Dynamic are already planning to expand their processing operations, which would add yet more value to their produce.

Acain said. “When we succeeded in expanding our market, our farmers likewise expanded production, because they had seen for themselves the rewards.”

Nakakatuwa [It’s heartening] to see our members so enthusiastic,” said De Jesus. “Now they want to increase our capitalization and go after opportunities.” (Ref:  USAID-GEM)

Comments are closed.

Photo Gallery