Bernardo M. Villegas
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Addressing Poverty of Coconut Farmers (Part 3)

          The State, including the Local Government Units, can have a crucial role in assisting the small coconut farmers derive the greatest economic benefits from their possible partnership with large agribusiness companies in shifting to higher-value coconut products like coconut water, coconut milk, coconut sugar, virgin coconut oil, nata de coco, etc.  From the experience of AXELUM in Misamis Oriental, small coconut farmers are still at the mercy of the traditional middlemen who are the only ones with the necessary financial and logistic capabilities of bringing their coconut products to the market.  Most of the coconuts are found in the uplands.  Farmers encounter extreme difficulty and cost in getting the nuts to the roadside.  Having zip lines would ease significantly the handling of the coconuts and would be the most efficient way to get the coconuts down from the mountain.  These zip lines could be constructed by the Local Government Units as part of the infrastructures that can be built in partnership with the private sector through the Private Public Partnership (PPP) mode. 

         Both national and local government agencies can also devote more resources to farm-to-market roads in the coconut regions which have been completely neglected in contrast with the rice regions that have received the bulk of rural infrastructures.  It is about time that the coconut regions also get more attention as regards such rural infrastructures as roads, irrigation facilities, post-harvest facilities and other services that have been concentrated in rice growing regions.  In addition to physical infrastructures, the Government can also help the organization of cooperatives within the barangays.  These cooperatives can have greater leverage in dealing with traders who very often take advantage of their monopsony power.  It is usual for a trader to sell a nut at P6 while paying only P2.5 to the farmer.  The challenge today in organizing cooperatives is underwriting the cost of an organization to do the extension services in the process of organizing the farmers.  Individual farmers can hardly afford to “donate” their time to do the organizing work as they are busy tilling the land.

         The Government can also supplement the efforts of the private sector in micro-financing which has been a tried and true method in many developing countries in the alleviation of poverty, especially rural poverty.  Traders usually control the buying and selling of coconuts by extending micro financing to the farmers through the notorious five-six practice.   There must be some way the Government, in tandem with some microfinance institutions from the private sector, can free the farmers from the clutches of some abusive middlemen.  There could also be a mechanism for price stabilization similar to that of rice. There is the coco levy fund accumulated during the martial law years.  These funds have not been used productively.  Even only the interest from the fund can be used to stabilize prices during tumultuous times as we are now experiencing.

         Another important way the Government can help the coconut farmers is to continue the present ban on exporting unprocessed coconuts despite the lobbying to lift the ban.  There is no credible study showing that the coconut farmers will benefit from better farm gate prices if unprocessed coconuts are allowed to be exported.  In fact, the following cases illustrate that it would be counterproductive to lift the ban:

         --In the early 1990s, “young” coconuts were exported to Taiwan.  In no time at all, the Taiwanese used these as seedlings to develop plantations of coconuts in the tropical regions of their islands.  Not surprisingly, Taiwan eventually stopped importing coconut products from the Philippines.

         --In recent times, China has imported coconuts from Vietnam.  The coconut processing industry of Vietnam suffered from the buying activity of the Chinese who could afford to buy at a premium at the start.  The premium was removed eventually after creating chaos in the markets of Vietnam.

         --Similarly, in Indonesia traders divert coconuts they have purchased from the farmers to Malaysia, Thailand, or China, squeezing the supply of processors, without any real benefits to the small farmers.

         --In the Philippines, the Department of Trade and Industry (DTI) recently caught an exporter selling coconuts in the international black market.  After investigation, it was found out that the buying price abroad is no different from the buying price of the local processors.

         The export of whole coconuts does not increase the price offered to the small farmers.  It just creates instability in the market.  It is highly probable that the Chinese, as happened in the case of Taiwan, will just use the nuts to build plantations in their sub-tropical regions.  The Philippine coconut industry dreads the day when Filipinos will be drinking coconut water or using coconut milk imported from China.  For comments, my email address is bernardo.villegas@uap.asia.