The Rubber Agribusiness Project in the Salipyasin ARC Cluster of Zamboanga Sibugay is among the enterprises supported by Project ConVERGE. The cluster has six municipalities: Kabasalan, Naga, Ipil, R.T. Lim, Tungawan, and Titay. In their value chain model, lead consolidator Agrarian Reform Beneficiaries Organizations (ARBOs) in each municipality consolidate rubber lumps from ARBs and smallholder farmers in their area.
Recently, a Lead Cluster ARBO has taken the initiative to market their rubber innovatively: through a Competitive Rubber Bidding Scheme done primarily through SMS. This solves the geographical concerns for many organizations while also providing convenience for the bidders to be informed and place their bids before consolidation. The Lumbia Rubber Producers’ Association is one of the ARBOs in the rubber cluster that brought forth a significant improvement in their organization through the implementation of the said practice.
As the chairman of said organization, Raul Rocamora shares his insights on how competitive rubber bidding works, and how they made it work for them.
“For the Competitive Rubber Bidding, essentially, we choose bidding participants, or anyone we have contact details of like existing buyers, strikers, traders, and invite them to participate in the bid,” he said.
“Firstly, we have a process called the pre-qualification which is part of our policy. We discuss this with our prospective bidder, so they can agree on it, sign it, and then pay a one-time fee of 500 pesos. Essentially, it’s just to be on the same page with the bidders on the policy that we have: in terms of our product, quality, criteria on awarding and failing bids, and other logistical matters.”
Once the bidders have agreed and signed, they are now eligible to be included in the pool of bidders where LURPA can broadcast their messages.
LURPA anchors every bidding process and pricing on the reference price of Malaysian Rubber Exchange and Banko Sentral ng Pilipinas (BSP) to ensure that bidders don’t take advantage of the scheme by offering prices lower than the global rate. When the bid prices do not meet the MRE/BSP rate, the bid is considered ‘failed’, where no bidder acquires the rubber lumps. This, therefore, puts the power of negotiation in the hands of the LURPA, as opposed to the traditional rubber trading scenario years prior.
How it works
With the weighing schedule of rubber done every 2nd and 17th of the month, Raul shares the process of the scheme.
“At 9:00 AM, we execute the broadcast of the bidding along with my bidding committee — there are three of us — and we will send a message inviting the participants. So I specify the estimated quantity and settlement date. The bidders are given 3-4 hours to respond.
“At 1 PM, I will send another message to close the bid. And for that closure, I will indicate that the winning bid result will be announced shortly. After that, I will collect their bids and research their RME reference, and the information needed. I will put them in a new message and send it to the bidding committee. Everything is done via SMS. I will also send my recommendation that it is awarded to whoever has the highest price. I will wait for the committee’s reply and will send the reward to every one of the bidders who participated.”
During the awarding, LURPA ensures transparency. Raul informs the participants of their respective bidding prices, and who the winner is. The participants will see all information in the message. Raul also calls the winning bidder for final preparations prior to the weighing that will be done the next day.
Bringing forth improvements
The scheme had brought improvements for LURPA, coming a long way from their previous strategies before the scheme came to place.
Since its implementation last 2019, LURPA was able to address the low volume of rubber lumps sold. They have since traded a total volume of 288MT. An average volume of 6.7 MT is being consolidated every 15 days as of 2021. Cluster-wide, a 35% increase in the gross value of traded cup lumps has been recorded in the duration of this best practice.
“In our experience here in LURPA, early 2017-2018, a lot [of farmers] are already selling their produce in the market. We didn’t practice the bidding scheme yet; this was under a normal market way back. A lot of members already came and went,” Raul shared.
“The production used to be slow as well because the volumes depleted, and the income of LURPA depended on the volume.
“My personal view is market forces; that the farmers are very sensitive with the price. If they see a 1 peso difference [increase] from a striker, they would go with that. Especially for those who don’t have loans to pay. They are very sensitive that even with just a small difference, they will not hesitate to line up [or sell] there.
“On my part, the only way that we can encourage them to remain in the organization is if you give them a better price — better than anyone else around you. So that’s how we decided to implement the competitive bidding scheme.”
Prices have not been dropping below 25pesos with an average of 26.82 pesos per kilo of rubber lumps. This is at least 5% higher than the bidding rates collected when the practice was not yet executed.
The challenges during the pandemic
Meanwhile, for LURPA, bidding continued despite lockdowns as communication with their target markets has been routinary through SMS, although challenges were encountered since the start of the pandemic.
“March was very drastic: the prices dropped from 23 something to 14pesos per kilo. It was very critical, so that was the immediate impact — the world [or lives] of the farmers changed because of that [the pandemic]. Then it worsened by the first week of April because Sibugay was under ECQ, so we had to [really] stop the buying, so that’s even worse.”
“Prices really dropped, and we couldn’t really market the product because of the pandemic. After that, we were able to slowly sell, and the market slowly came back. That was the impact.”
In July 2020, LURPA had seen the volume go back to normal as well as the participation of the bidders, thus seeing an increase.
The importance of technology
The advent of technology has indeed enabled this best practice’s success. While the global rate of rubber continues to be unpredictable, especially during the height of the pandemic and has gravely affected the local buying price, the existence and use of reference points like the MRE cushions the farmers from further drops in the prices. The constant communication with industry partners like the Department of Trade and Industry and the Philippine Rubber Research Institute also helped empower the organizations with the knowledge of proper rates and practices for rubber trading.
These ARBOs paved the way for an increase in competitiveness in the marketing of their products through the use of technology. Rubber farmers are also assured that they are paid rightfully for the value of their quality produce. Gone were the days when buyers dictate the prices of their rubber lumps on the very day of their trading.
An added benefit is the realization of the association and Project ConVERGE’s objectives in producing high-quality products. To meet the global rate, good agricultural practices like fertilization, the use of formic acid, and proper farm maintenance were introduced. With better rubber quality and a proper trading system, this monumental growth for the enterprise was made possible.
Rocamora looks forward to where he and his organization will be headed, and the goals they’ll get to achieve. He also aims to apply the lessons learned to expand their market outside the hands of striker traders that includes the dry rubber market.
“Bottom line: access to market, because our market here is controlled by them [strikers/monopoly] so if we can access a market bigger than the group here/outside of this market, it would be a bigger opportunity. [This is the dry rubber market]”
“For me, the ideal would that the ARBO itself could produce dry rubber output instead of rubber cuplump. It can be challenging, but it would be better if the ARBOs could produce it. The only challenge would be the logistics because we would need trucks and manpower.”
As a PARBO Consolidator of the Salipyasin Cluster, LURPA’s goals stretch for miles for their members and rubber farmers
“In general, my objective for our group is to uplift our rubber farmers’ income level. Not only the rubber farmers, but we try to expand. For now, we focus on the rubber farmers but eventually, this will expand to anything aside from rubber, like coconut or anything,” Raul said.
Rubber has been in a different league when it comes to marketing its rubber products, but the competitive bidding scheme introduces an innovation that can be replicated as it has yielded fruitful results. Finally, the power of negotiation is found at the farmers’ fingertips.
By Katrin Anne Arcala and Jullienne Veronica Tuazon, Project ConVERGE Region 9