Executive Director's Corner

The SONA and coconut farmers

Posted on October 21, 2013 08:51:45 PM Business World

The SONA and coconut farmers


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Map Insights
Rolando Dy

IN THE recent State of the Nation Address (SONA), President Aquino specially cited the coconut farmers. He said that the typical coconut farmer earns only P20,000 per hectare per year. With intercropping, he can earn P89,000 per hectare with cacao, and P172,400 per hectare with coffee. President Aquino said his government has already begun laying down initiatives for this. In 2012, there were some 5,500 hectares of land for intercropping in 90 different locations throughout the country. This program covered 10,000 farmers. The target for 2013: an additional 434 sites for coconut intercropping. These are modest targets given the high poverty rate in coconut provinces.

The income figures appear optimistic, but the President’s recognition of the high poverty rate in the coconut areas is a major step in the right direction. This is also a strategic step forward in the current debate on the use of the coconut levy.

This article will analyze the options on how to bring coconut farmers and workers out of poverty. It must be recognized that as in all commodities, the coconut farmers are price-takers in the world market.

There are about three million farmers and farm workers (plus or minus depending on the source) on 3.5 million hectares of coconut farms. Some claim higher figures but they can be dubious. With an average farm productivity of about 4,000 nuts per hectare, these make one ton of copra per hectare. With cellar-dwelling productivity, the coconut farmer will remain poor, unless he has income from other sources. The low harvest from coconut also does not bring full-time work. An estimate of labor demand for coconut is at best only 40 days of work per hectare a year for a typical farm, as compared to about 500 days of family labor supply!

Analysis will show that reliance on coconut alone will not lift farmers above the poverty line. There must be other compelling solutions. The coconut industry cannot be sustained if the farmers have their heads below water. The target is income of at least P90,000 per family a year. Let us do some ball park analytics.

• Coconut only. Today, a typical farm of two hectares will give 2,000 kilograms (kg) of copra or about P30,000 a year at the current farm price of P15 per kg of copra. The farmer is very poor indeed. This assumes that he owns the land. If the land is a leasehold, deduct 25% for lease payment to the landowner.

If the farm is fertilized with salt, the income can only increase by, say, 50% to P40,000. If multi-nutrient fertilizer is applied, the yield can go up 2.5 times, or P75,000 for farmer-owned land, and P56,000 for a leasehold. Less the cost of fertilizer and the net income will be P36,000 to P55,000 a year. The farmer is still poor.

If new hybrid clones are planted and properly fertilized, copra yield can increase to 5,000 kg per hectare, or 10,000 kg of copra for a typical farm. This means P150,000 per farm. Subtract the fertilizer cost of about P20,000, the net income will be P130,000. If he is on a leasehold, his net income will be about P92,000. Either way, the farmer is moved out of poverty. But getting 5,000 kg of copra per hectare is not easy, especially in poor soil. It also requires a high standard of plantation management, from good seedlings to good maintenance.

What are the options? Three things come up: (a.) intercropping of coconut trees with other crop (s), (b.) avoiding copra and going for value adding; and, (c.) sending unemployed family members to work in the towns, cities, or overseas.

Let us now do an analysis of intercropping. The system means planting other crops (mainly tree crops) in between the coconut trees. The figures are ball park estimates.

• Coconut with cacao. With modern farm management, existing coconut trees’ yield can increase to 2,500 kg of copra per hectare, bringing about P45,000 in sales for a two-hectare farm. Cacao plantings (about 500 trees per hectare) underneath the coconut trees can yield 1,500 kg beans per farm or P112,500 in sales at the price of P75 per kg. Overall, the sales (copra and cacao) would be P157,500. Farm inputs can eat up to P60,000, allowing the farmer to net P97,500. Cacao becomes the primary crop. The farmer will no longer be poor.

• Coconut with coffee. At 2,500 kg of copra (P45,000), and 900 coffee trees per hectare. Coffee yield will be about one kg of green beans per tree or a total of 1,800 kg for two hectares or about P144,000 per farm. Total sales will reach P189,000 per farm. Deduct input costs of about P80,000. Net farm income will be P109,000 per farm. The farmer is no longer poor. Coffee becomes the primary crop.

• Coconut with cacao and banana. This option will add about 10,000 kg of saba banana valued at P40,000. Total sales will be about P198,000 per farm. With farm inputs, the net will be near P120,000 per farm. This is the better option. In Silang, Cavite, farmers intercrop with pineapple. The crop is feasible due to the area’s nearness to markets.

Caveat: The above solutions are easier said than done. Site analysis of factors such as soil and rainfall are important. Achieving those yields and incomes requires starting from good seedlings, planting and fertilizing according to specifications, and following good harvest and post-harvest practices. Tree crop agriculture is not just giving away seedlings (many of them with poor genetics). Achieving high yields requires a full package. Certainly, the management expertise lies with the private sector. Perhaps public-private partnership (PPP) in technical services with private firms and NGOs with good track records must be explored. Small farmers must be clustered, or even consolidated into estates following the Malaysian model.

Meanwhile, the push for farmers to have control of value adding, and avoid selling copra altogether is laudable. There are many products to make: coconut water, virgin coconut oil, desiccated coconut, etc. However, the transition will be very tough. Farmers are tied to the trader system of advances. The markets of these products are fast growing but the base is small. The farmer groups will need joint venture partners, or a well-paid management team to nurture them for some time.

Coconut farmers and advocates have called for the creation of a Fund Management Council for the levy funds. This must be heard by the halls of government. The terms of reference are not difficult. There is no need to look far. Just use the charters of the India Rubber Board or the Malaysian Palm Oil Board for starters. However, levy earnings alone will not be sufficient to revitalize the industry, but it is a good start to fund priority and viable projects. The private sector can choose its participation under PPP following development models such as the Federal Land Consolidation and Rehabilitation Authority (FELCRA) of Malaysia or other clustering schemes to achieve economies of scale. The Government can provide annual budget support to complement the levy earnings. Also, a convergence framework of agriculture and infrastructure investment is important. There is no single silver bullet to solve rural poverty. But the high poverty calls for urgency. The political-economic elite must not continue to procrastinate.

(The article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines. The author is the Executive Director of the Center for Food and AgriBusiness of the University of Asia & the Pacific. Send feedback at [email protected] and [email protected]. For previous articles, visit map.org.ph.)