There are plenty of programs implemented for rice enterprises and farmers, yet problems continue to plague the very producers of this Filipino staple food. Such is the case of the Salug Valley ARC Cluster in Zamboanga del Sur, a rice enterprise supported by Project ConVERGE. Despite its contribution to rice production in Mindanao, farmers are constantly worried by access to quality inputs and fertilizers. This primary issue is the root cause of an intervention created through the collaborative work of farmers leaders, project staff, and DAR representatives.
The cluster operates an integrator-consolidator value chain scheme that optimizes the palay received from the farmer-members and markets them at a broader scale to achieve a better price. However, various problems were identified during the implementation of this scheme such as the need for financial assistance to support their production and household needs, and the lying problem of farmers being binded to agent-dictated price as the rice traders would predominate the buying of palay from the farmers and are also responsible for the provision and production loans in the area.
The issues identified led to the birth of the Production Rollover Scheme.
The Production Rollover Scheme
For ConVERGE provincial coordinator Engr. Josephine Sisican, the conceptualization of the Rollover Scheme started with a meeting with the agrarian reform beneficiary organizations (ARBOs) in the project.
“We have considered the following in comping up with this intervention. First, we have to take out the farmers from the corner where they are tied up with the high interest rates of the loan sharks. Second, we also saw this scheme as an one of the services of the ARBOs under the project,” she said.
The production rollover scheme provides farmer-preferred inputs and fertilizers to the members without obligating them to pay in cash. Instead, the agreement between farmer-members and the organization is that during the harvest period, they can pay their production loan in the form of their palay produce. The farmer-members who availed of the production loan are recommended to sell 40% of their yield to the lead organizations. This varies on the parts of the participating organizations who can sometimes require a lower percent based on their requirements or needs. It is also subject to the organization’s financial capacity to absorb the produce.
So far, the scheme has benefitted a total of 1,692 farmers, covering 2,337 hectares. The total amount of the production inputs is now valued at around 15 million pesos.
A Contribution to the Salug Valley Cluster Value Chain
More than the increase in gross value of production, which was recently recorded at 35%, the rollover scheme also contributes to the accomplishment of the cluster’s value chain.
In Salug Valley, four identified cooperatives are involved to intensify rice production and marketing. Three of which are the integrators and one as the consolidator. The first node is the input supply where ARBOs provide the production loans to aid the second node, which is rice production. On the third segment of the chain, processing takes place. The project has provided equipment for the quality processing and storage of the palay and milled rice. Eventually, these producers are engaged in the buying and trading of palay in the integration segment. And finally, when able, all integrator ARBOs are expected to join in the consolidation with the lead ARBO. The goal is to complete this map and practice profit sharing through the provision of dividends/rebates to the integrator cooperatives.
In this cluster, the consolidator cooperative is the Mahayag Farmers’ Multi-Purpose Cooperative (MAFAMCO). Through the scheme, palay yield has increased by 26%. And with the ramped-up consolidation, the ARBO was able to sign 11 institutional buyers in the locality.
According to Errol Majorenos, the HR Manager of MAFAMCO, the scheme had brought forth an income of around PHP 10 million as of June 2022.
“We have members who sell their palay to us after harvest, and the value [of which] will be deducted from their production loan. We store their palay in our warehouse. As of the recent cropping season, we have collected around 126 metric tons of palay from our farmer-members,” he said.
Jose Balulao, Jr., one of the members of MAFMACO, shared how production has significantly increased for his farm. At the same time, the ability of the cooperatives to supply the production loan, instead of having to rely on third-party agents, cushioned them from the steep increase in the price of production inputs and consequent high-interest rates.
“Walay mag uuma na wala mag antos sa kamahal sa abono. Ang abono karon nag times two. Atong balansehon, layo kaayos tinuod. Pasalamat mi sa project ug sa coop,” he said. (Every rice farmer is suffering from the very high price of production inputs. The rates have doubled now. It doesn’t balance the reality of production versus income. This is why we are grateful to the rollover scheme, Project ConVERGE, and our Cooperative.)
“Labi na karon na ang basakan ga-depende nas abuno, katong minus ang abuno, naa ra sa 60 per hectare pero karon naa sa gatos kapin. Basta haom ang abuno sa imong basakan,” he also added. (Fertilizers are needed in each rice farm. More so now that rice farms rely on these production inputs. If you do not use inputs, your yield is only at 60 bags per hectare. But with the appropriate inputs and farming practices, you can yield more than 100 bags per hectare.)
An Impactful Increase for the Enterprise
A 35% increase in the volume of palay consolidated and marketed has been recorded since the scheme’s implementation. Moreover, the ARBOs are now trading with leverage on the pricing as they deal their goods at a higher volume and quality. While only applied to bridge the gap in production for the participating party in the cluster, the rollover scheme implemented has provided a solid foundation for the program’s integrator-consolidator approach.
Aside from bridging the needs of the recipients, the scheme helped to form part of the value chain enterprise as it created the arrangement for farmers to commit 40% of their produce to the ARBO, and likewise, the ARBO commits to purchase the same amount from the farmer producers. This strengthened the value chain map of the project and fostered the relationship between the members and the ARBOs. With this groundwork, the rice enterprise of Salug Valley Cluster is now able consolidators to trade their rice produce moving forward.
For the Provincial Project Director Atty. Judith Mantos, the rollover scheme thrived amid the crisis of the COVID-19 pandemic: “While the pandemic brought unfortunate results in other sources of income, the cluster found favor in the effects of this best practice. With the closing of borders, local institutional buyers had to purchase rice from the closest distributors. MAFAMCO, being able to consolidate some 50.9 MT of milled rice in 2020, was able to score deals with 3 LGUs and government offices. Through their increased rice consolidation and marketing, a result brought about by their rollover scheme, the organization had a record-high increase in sales.”
Moving forward, the management also emphasized that the final piece that can cement the impact of the rollover scheme is the identification of a reliable and consistent market for the entire enterprise.
“We will continue to support them, especially in the marketing of their products. Despite the operationalization of this value chain enterprise, the very concern on the market outlets is still an issue. Especially because in terms of rice, the market is always a factor to be considered,” Mantos added.
With the Rollover scheme as one of the Project’s first interventions in the rice enterprise of the Salug Valley Cluster, it has served as the enterprise’s stepping stone to an even wider market reach. And this didn’t just happen with the Project alone — all of the progress and achievements the scheme has made are also thanks to the collaboration with the ARBOs who participated in the scheme.
(The case study was conducted in 2021. As of the latest, the price of fertilizers has increased steadily and thus continued to torment rice farmers. Nonetheless, the organizations still pursued the scheme to assist members in their production)
By: Katrin Anne Arcala and Jullienne Veronica Tuazon