June 1, 2020
Small Mindanao vegetable farmers and the Dong Lieu cassava starch farmer-processors in Vietnam have levelled up to global competitiveness, being now success models of “agricultural clustering” and of achieving efficiencies through ‘economies of scale.’
The Mindanao farmers have raised income by 47% after having been aided by a project of the Australian Centre for International Agricultural Research (ACIAR) focused on organizing them to become somehow “big.”
The Catholic Relief Services was also an institutional support.
The Mindanao model, along with the Dong Lieu Root Crop Center (DLRCC-Vietnam) and the Malaysian Rice Cluster (MRC) are also now success models of the more profitable agricultural clustering.
This was reported by think tank Southeast Asian Regional Center for Graduate Study and Research in Agriculture (SEARCA) in a study authored by Dr. Glenn M. Gregorio and six researchers.
“Small is beautiful. But big is powerful,” said Gregorio, also SEARCA director.
Upon having been organized, Mindanao farmers collectively raised their production for nine vegetables out of a total of 11 that they grow.
The increased volume of produce was accompanied by an increase in value.
This is as the united group captured the market of institutional buyers— supermarkets, hotels, hospitals, restaurants, and fast food chains.
Selling to these bigger customers became possible as the combined farmers had a bigger volume of produce. This empowered them to negotiate for a higher price.
They raised revenue from sweet pepper from (figures approximated) P27,000 when they were yet disorganized to P39,000 upon clustering; bitter gourd, from P5,100 to P13,000; squash, from P1,000 to P10,000; and eggplant, from P4,500 to P41,000.
The other gainers were chayote, from P3,000 to P28,000; string beans, from P3,000 to P3,500; tomato, from 9,000 to P42,000; okra, and from 2,000 to 4,000.
The winning was also true in terms of net income for each of the vegetables. For sweet pepper, bottomline recovered from a loss of (figures approximated) P11,000 to a positive earnings of P22,000; bitter gourd, from P2,000 to P9,000; squash, from a loss of P1,000 to a net income of P7,000.
For chayote, it was a leap of net gain from P1,000 to P27,000; string beans, from P1,000 to P2,000; tomato, from P4,000 to P24,000; and okra, from P500 to P2,000.
At the Dong Lieu Root Crop Processing Center in Vietnam, farmers succeeded as the cluster enabled them to produce h igher-valued, higher-priced cassava starch.
They used to just grow raw cassava and canna roots. Now they are not just farmers but food processors.
“They extracted and processed the starch through grating, filtering, and sedimentation. The actors of the clusters extended from root crop producers, root crop traders, starch processors,” said SEARCA.
Their association with each other empowered them to use technology in farming to produce bigger quantity of the root crops.
“It also introduced the use of equipment, such as mechanical filtration, root washer, water filters, and tiling of tank walls with ceramic tiles to improve quality. The diffusion of technology were greatly influenced by the linkages built with local engineers.”
The cluster became an organized group of not only farmers but root traders (built links with cassava and canna production zones in other provinces; communal engineers (repaired old and built new machines); and residue collectors (collected root processing by-product from household processors).
The other cluster players are fish/pig raisers (utilized by-product of residue collector in fish and pig production as feeds) and maltose processor (purchased starch from household processors for maltose production.
There are also candy manufacturer that make candy from maltose, starch refiners and traders, and canna noodle makers.
. In another success model, the Malaysian Rice Cluster remained to be producers of the Asian staple— rice– before and after organizing themselves.
The difference that raised their productivity and competitiveness is knowledge transfer between farmers and the ability to produce more. This was after having availed of credit from Agrobank. They also received government subsidy.
“(Knowledge transfer) pertains to appropriate input use. Information was obtained through informal channels such as observation of good practices from neighboring farmers. This also includes information about the prevailing market risk, source of inputs, and awareness of new technologies.”
The Malaysian cluster was able to attract more winning stakeholders that support each other– local enterprises and market, research and development agencies, financial institutions, government agencies, and other marketing firms.
The success of these organized farmers were attributable to several factors, according to Gregorio and co-authors Rodolfo V. Vicerra, Rico C. Ancog, Nikka Marie P. Billedo, Rebeka A. Paller, Ma. Christina G. Corales, and Imelda L. Batangantang.
First, farmers were linked to each other. They were able to share the same techniques and best practices in farming- exchanging innovation in production.
Marketing-wise, they have been able to commit a fixed quantity and a level of quality of produce to institutional buyers that demand a bigger volume of quality supply. Their ability to supply the quantity and quality enabled them to negotiate for the higher price.
Small farms that are “clustered” to achieve economies of scale face vast economic opportunities from the globalized market—only if they are aided to organize.
“There are 500 million small and medium farms worldwide, 87 percent of which are in Asia Pacific. Majority are in remote locations and are geographically dispersed, making it harder for them to access modern technology, services, and information. Their profit margin is negatively affected by the market intermediaries involved in the value chain who could take advantage of the farmers’ limited knowledge of the market.”
“They face difficulty in entering bigger and overseas markets where they can sell their produce at a higher price. They experience higher transaction costs due to changing preferences of the consumers, which resulted in different and new sets of standards and regulations set by larger firms. Smallholder farms lose competitiveness, relative to the commercial farms, due to difficulty in accessing financial institutions and modern innovations that would help boost their productivity.” Melody Mendoza Aguiba