Bernardo M. Villegas
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Addressing Poverty of Coconut Farmers (Part 2)

          Bright prospects face the coconut industry that is slowly diversifying into higher-value export products.  There are opportunities to invest more on Research and Development on the various uses of coconut-based products and by-products that have medicinal, dietary, agro-ecological and bio-energy uses which will enable the industry to diversify revenue streams along the coconut value chain away from the dominant and traditional crude coconut oil.  Consumers in high-income countries are increasingly willing to pay for new, dietary products.  There are also expanded possibilities of intercropping in order to increase the incomes of farmers.

         With the opportunities, though, there are threats.  Low productivity in our coconut farms is caused by the ageing of trees. The preference for organic products can be a double-edged sword.  Coconuts by default can be claimed to be organic since fertilization has been limited to the application of salt to the soil, if at all.  This limited use of inorganic fertilizers may be reversed if, to improve the incomes of the farmers, some intercrops will be planted below the coconut trees.  These intercrops would most probably need inorganic fertilizers to reach their productivity potentials.  This would pose a dilemma since organic products carry a price premium in the world market.

         The challenges would include the planting/replanting of better and high-yielding varieties; the availability of enough good quality seed nuts; diversifying the revenue streams from other parts of the coconut tree such as the water, husks, fiber, shell and the wastes; climate change (e.g. drought, typhoons); and the occurrence of pests and diseases.  But the biggest challenge in the Philippine setting is the attainment or economies of scale in the face of the highly fragmented nature of coconut farms as a result of the agrarian reform program of the past twenty years.  That is where business models like AXELUM will have to be replicated, together with other ways of consolidating the small farms into larger units for economies of scale.

         Only large businesses can have the capital and the advanced technology to move away from the traditional coconut exports into the non-traditional ones like coconut water, coconut milk, coconut sugar. virgin coconut oil, etc.  We must find more ways in which the small coconut farmers can partner with large companies like AXELUM by selling directly their produce to these processors instead of to the traditional middlemen who have added very little value to the coconut.  There must be some way by which the small coconut farmers can directly lease their farms to a large business unit along the nucleus estate model that the Malaysians perfected in the palm oil industry.  The lease agreement could be between the large corporation and each farmer individually or with the farmers organized as cooperatives.  Despite the difficulty of organizing cooperatives in this country, the latter would be preferable.  This is what has been called as the “corporative” system.  Once the leasehold agreement is signed, then the corporation has the freedom to manage the farms employing more productive methods and even to redesign the consolidated farm units to devote some parts to other high-value products such as fruit trees, coffee, cacao, sorghum and some other intercrops.  The farmers (or members of their households) can, in addition to the regular rentals they will receive as a result of the leasehold, can earn wages as workers for the corporation.  Finally, they can have   a third source of income from the dividends if they form part of the “corporative.”  There can be two types of cooperatives that can be formed in these situations:  a farmers’ cooperative and a workers’ cooperatives among those members of the farm households who are wage workers.

         The coconut industry can lead the way in showing how the fragmented farms that resulted in the Comprehensive Agrarian Reform Program (CARP) can now be reconsolidated in order to attain economies of scale, not by taking back the farms from the small farmers but by organizing farmers into cooperatives that can work closely with large agribusiness corporations who can significantly increase the value added to the raw materials coming from the farms.  In contrast with what has happened in the Philippines because of the agrarian reform program, a country like Indonesia continues to have huge tracts of land, owned by a single proprietor, planted to coconuts.  If we don’t find ways of reconsolidating our coconut farms, Indonesian producers of coconut are poised to take over the coconut market as they can sell their goods at lower price.  It is imperative that we find ways of attaining economies of scale in the coconut industry.  (To be continued).