Until he passed away in 2020, Dr. Rolando Dy was one of the most influential agribusiness economists who advised both government officials and top business executives on matters related to policies and strategies in the field of agriculture. In fact, when he was working at the World Bank in the 1980s, he was part of a team of experts sent to Thailand and Malaysia to give expert advise on developing a long-term agricultural development plan.  It was partly due to the advice given by his team that these two countries are among the most productive in supplying the world with high-value food crops.  Ironically, when he returned to the Philippines and established the think tank, Center for Food and Agri Business, some of his most valuable advice—like that of not  pursuing self-sufficiency in rice—fell on deaf ears among government officials.

              One piece of advice he gave to both government officials and investors in agriculture that are now being seriously considered and actually being implemented by some more enlightened agribusiness entrepreneurs is the consolidation of fragmented land holdings so that they can be commercially viable and worthy recipients of long-term credit from our financial enterprises.  In fact, it was notorious how most banks in the  past preferred to pay penalties amounting to hundreds of millions of pesos rather than be obliged to give loans to agricultural projects as mandated by the Agri-Agra Law.  Dr. Dy noted that fragmented landholdings often limit farmers’ ability to adopt modern technologies, attract sizable investments or achieve economies of scale.  By consolidating lands—through ownership or well-managed clustering programs—farmers can increase productivity,  reduce production costs, and participate more effectively in domestic and global markets.  Dr. Dy further highlighted that consolidation should be coupled with access to credit, extension services, and market linkages in order to ensure sustainability and   inclusivity, demonstrating that structural reforms are essential to the long-term success of Philippine agriculture. 

              The question is how can the millions of small landholdings that resulted from the controversial but socially justified agrarian reform program be effectively and efficiently consolidated by allowing farmers to remain as landowners while collectively achieving economies of scale.  Among the most prominent approaches, successfully implemented among our Southeast Asian neighbors and elsewhere, are cooperatives, clustering and block farming, nucleus estates (the Malaysian FELDA-FELCRA model), and corporate partnerships.

              Let’s start with Cooperatives and Farmer Associations.  Cooperatives, that are especially successful in Europe and Taiwan, are member-owned groups that enable farmers to pool resources, lower their costs and collectively market their produce.  They are promoted as a form of horizontal integration that strengthens smallholders’ bargaining power and improve access to credit.  Unfortunately, cooperation in economic matters is not a strength of Filipino culture, despite the much vaunted “bayanihan.”  Cooperatives in this country are more known for failure than for success.  Some notable exceptions, however are the Sorosoro Ibaba Development Cooperative in  Batangas and CARD in Laguna.  There are also the dairy cooperatives in Cebu supplying the Milk Feeding Program and banana agrarian reform beneficiaries (ARBs) cooperatives in Mindanao maintaining export-oriented contracts with Dole and Del Monte.  Evidence also shows that agrarian reform beneficiaries have secured more favorable lease terms with corporate partners when organized as cooperatives, compared with individual partners.  Despite this potential, many cooperatives face challenges such as weak governance, limited capitalization, and ageing leadership, leaving only a small pool that can operate on a commercial scale.  Even so, cooperatives remain central to efforts aimed at overcoming land fragmentation and enabling smallholders to compete in modern markets.  There should be continuing efforts to seek technical assistance from countries well known for very successful cooperatives like Spain (e.g. Mondragon), Germany (Genossenschaften and Raiffeisen) and Israel (Kibbutz and Moshav), not to mention our Asian neighbors like Taiwan, Thailand and Vietnam.

              Then there is the approach of farm clustering and block farming.  Farm clustering organizes small holders into coordinated production units while preserving individual ownership.  The F2C2 program of the Department of Agriculture institutionalized this approach to improve competitiveness.  Sugar cane block farming illustrates its benefit:  consolidated 30-to-50-hectare plots, like the ARB Block Farm in the province of Quezon, improved yields and farmer incomes.  International experience under the Philippine Rural Development Project (PRDP) also showed that clustering boosts market access when paired with infrastructure support.  Success, however, depends on voluntary cooperation, trust, and facilitation by local governments.  As a consultant then of the Victorias Milling Corporation in the 1980s, I personally witnessed the disastrous failure of block farming because of the practice of pole vaulting, the selfish practice of breaking the contract to supply a specific mill to get better prices from another far away mill that gives more attractive benefits.  Even relatively large land holders could not sacrifice their individual selfish interests for the common good.

              The Malaysian palm oil industry contributed a very successful approach to land consolidation.  Literally thousands of hectares of land were consolidated by large agribusiness corporations in Malaysia through the so-called nucleus estate approach. A nucleus estate links small holders to a large agribusiness unit (like Guthrie or Sime Darby) that provides capital, technology, and secure markets. In the town of Rizal, Palawan, Lionheart Farms that is owned and managed by a Danish citizen married to a Filipina, developed a nucleus estate by leasing coconut farms, offering farmers steady rent, employment, and processing access.  This model has proven effective in plantation crops such as bananas, pineapples and coconuts, where scale and long-term capital are essential.   It is necessary, however, to have strong safeguards and regulatory oversight to make sure that inequitable contracts do not deepen farmer dependency. In the case of Lionheart Farms which I visited personally and talked to the farmers and farm workers, the results have been very positive for the farmers and their families.  One of them said that the rental he is getting from Lionheart has exceeded whatever he was earning when he was just selling copra from his farm before he joined the nucleus estate.  I also talked to the other members of the farmers’ households who are now gainfully employed in the various operations of the nucleus estate, adding significantly to the total income of each household.

              The third model involves corporate partnerships and contract growing.  Corporate partnerships include contract farming, joint ventures and lease agreements.  These arrangements formalize supply relationships between farmers and buyers of their products.  These usually fall under the Department of Agrarian Reform’s Agribusiness Venture Arrangements (AVAs).  In Mindanao, ARB cooperatives supply bananas and pineapple to Dole and Del Monte, while companies like San Miguel and Bounty Fresh relay on contract growers for poultry and livestock.  The Jollibee Group Foundation’s Farmer Entrepreneurship Program also connects vegetable cooperatives to the company’s fast-food supply network, enabling smallholders to deliver onions, tomatoes, and other vegetables to Jollibee Group brands.  In fact, Jollibee in partnership with Cargill has put up the largest poultry project in Asia in the City of Sto. Tomas, Batangas, relying on this contract growing model.  Another prime example is Axelum, a coconut processing plant in Misamis Oriental, that heavily relies on contract farmers for its supply of raw materials.  The First Pacific group just bought significant shares in Axelum.

              These various schemes of consolidating small land holdings reduce market risks and integrate the small units into value chains.  They, however, expose the small farmers to potential imbalances in bargaining power and stringent buyer requirements.  Organized farmer groups are better positioned to negotiate fair terms and initiatives like the World Bank-supported Inclusive Partnerships for Agricultural Competitiveness (IPAC) project which helps to build capacity for more equitable contracts.

              Cases abroad provide additional insights and experiences.  For example, Japan’s farm leasing models show how consolidation can improve efficiency while keeping land ownership in the hands of the farmers.  Cooperative and cluster-based approaches in other ASEAN countries demonstrate ways of integrating smallholders into efficient value chains.  An outstanding example, which a group of Filipino agribusiness investors witnessed last April 2025, is the manner the Vietnamese Government was able to mobilize small farmers into cooperatives that successfully developed the coffee industry in Vietnam almost from scratch in order to make the country the second largest exporter of this product in the world, dethroning Colombia, and second only to Brazil.  As mentioned earlier, the average small farm in Vietnam is less than one hectare per unit.  To be continued.