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Increasing the agricultural production of smallholders through clustering and organizing into co-operatives and different types of producer organizations, as well as partnering with agribusiness companies, can help increase their incomes and then drive socio-economic change in the Philippine landscape.
A report entitled “Realizing Scale in Smallholder-Based Agriculture: Policy Options for the Philippines” – jointly launched by the World Bank and the Department of Agriculture (DA) – said that there are rich lessons to be learned from this pooling and consolidation of activities at home and abroad can be pulled on-farm and along the value chain in order to be successful and to change the agricultural sector.
A notable example of this approach, according to the report, is the Philippine Rural Development Project (PRDP) currently being carried out by the DA. The PRDP bundles or organizes producers into companies that take a business-oriented approach to agriculture and fisheries, supported by complementary investments in infrastructure such as farm-to-market roads, irrigation, post-harvest facilities and cold storage.
“To be successful, clustering and consolidation efforts must be voluntary, based on trust and confidence, and collaborative relationships between stakeholders – whether they are farmers, communities, municipalities, other local government units, or small and large agribusinesses.” said Ndiame Diop, World Bank country director for Brunei, Malaysia, Thailand and the Philippines.
“Where different approaches to pooling land management are not feasible, supporting agricultural mechanization and post-harvest operations can be an alternative or complementary strategy to smallholder systems to increase the productivity and income of farmers both on and off the farm. “ said Diop.
Filipino agriculture is dominated by smallholders and fishermen who work independently, mostly use traditional production methods and have low incomes. A typical farmer earns an average of 100,000 pesos each year, well below the poverty line (based on 2015 PSA numbers).
The average farm size decreased from three hectares (ha) per family and farm in the 1980s to just 0.9 hectares per family and farm in 2012. These smaller and smaller businesses are often broken down into more fragmented blocks. The country has around 5.56 million agricultural holdings with a total area of 7.2 million hectares, of which more than half (57 percent) are on one hectare or less, 32 percent on one to three hectares, 9 percent on three to seven Hectares and only two percent to seven hectares or larger.
Agriculture Secretary William Dar highlighted that the use of modern technology, programs like block farming, trust farming and contract farming can make farming more efficient and profitable for farmers and their partners in agribusiness. With higher and better quality production, it will become easier to connect agriculture with domestic and global manufacturing and access to markets will be easier, he said.
“Finding ways to pool and consolidate small and medium-sized farms, and partnering with agribusinesses – to achieve economies of scale (and lower unit production costs), especially for crops that require mechanization and extensive use of technology. – is part of the ‘new thinking’ of the Ministry of Agriculture “, said Secretary Dar.
“We want to enable farmers, fishermen and the private sector together to increase agricultural productivity and profitability while taking sustainability and resilience into account.” added the DA chief.
Global experience shows that forcing farmers and agribusinesses to work together through regulations or subsidies (top-down approach) does not usually work, but those that emerge from bottom-up collective initiatives by farmers produce good results.
According to the report, based on global experience, the country can consider various agreements, including:
- Realize scaling in primary production. In the Philippines, selected irrigation systems, where water user associations are already well established, may be the most promising areas for clustering; and within agrarian reform communities supported by the Agrarian Reform Department.
- Support to market-oriented producer organizations. Promote the growth of cooperatives and producer organizations. In the East Asia region, Japan, South Korea and Taiwan have had particularly rich experiences in promoting groups of farmers or cooperatives.
- Promote contract farming, productive alliances or other links between farmer groups and agricultural enterprises. These are well known in the Philippines and can be scaled up.
Elsewhere in the region, contract farming has become increasingly established in some value chains, including value chains for specialized rice varieties or rice production systems.
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