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Challenging opportunities in agribusiness

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Teresa S. Abesamis

Grassroots & Governance

Agrarian reform should not be a hindrance to corporate farming. Agribusiness does not require ownership of land. Modern corporations such as Del Monte developed contractual relationships with small holder farmers which supplied produce which the corporate agribusiness venture turned into packaged consumer goods through value-adding technologies. Given the aging population of our farmers, who are now reported to be 60 years on the average, government should seriously take a look at the situation; and sooner rather than later take steps to make it easier for corporate investors to risk good money in agribusiness.

I do not know what Hacienda Luisita is doing these days; but it seemed to me that its traditional and feudal thinking on land ownership as necessary for agribusiness has become obsolete. It could have re-oriented its relationships with its erstwhile tenants and dealt with them as contract growers who provide land and labor. The agribusiness venture, e.g., Hacienda Luisita, could provide capital, technology and access to markets. They could have negotiated an “everybody happy” business relationship where the gains from the business are shared justly. With enough imagination and constructive negotiations, much of the hostilities could have been avoided.

Agriculture, given climate change, is a risky business; and I guess this is one major reason why investors shy away from its challenges. Therefore, government should seriously consider providing incentives such as tax holidays, lower income taxes, and easier access to bank loans. Perhaps crops insurance can be mandatory, if it is not yet, to make it easier for the banks to take risks.

To make it worthwhile, agribusiness ventures must have expertise in value adding. There are so many missed opportunities because big business does not seem to look beyond low-risk ventures in franchise businesses such as power generation, or public works projects, which are risk-free money makers. Perhaps government can also consider encouraging investments in agribusiness for big businesses that are into highly profitable public works and franchise businesses.

Or, better yet, big businesses can get together to help address poverty and food security issues by mobilizing venture capital into corporate agribusiness. Small-holder farms are a threatened species; more and more are being converted into housing subdivisions. Strategic and imaginative policies must be formulated and implemented, the sooner, the better. Children of farmers do not want to be farmers. Neither are their aging parents encouraging them to get their hands dirty for back-breaking work.

Dr. Justino Arboleda’s coconet technology which works with coconut farmers in the provinces to convert coconut husks into coir, and to process these on-farm into twine and soil erosion control nets, is an example of imaginative use of technology to turn what would otherwise be thrown away as garbage into a tool for environmental protection. Arboleda does not need to own land to thrive in this business. The coir is also exported to China, Japan, and parts of Europe as materials for mattresses and upholstery; markets to which Arboleda has gained access. Coconut shells are turned into peat and sold in Australia as “flooring” for cattle farms. The peat and manure mix then becomes fertilizer. The great thing is that this coconut-based business has provided value adding incomes in rural areas. It is unbelievable that the United Coconut Planters Bank turned down Dr. Arboleda’s loan application to fund his expansion in order to meet the huge demand for his products. Then Public Works Secretary Babes Singson had been encouraged by then President Noynoy Aquino to adopt the coconet for use on its public works projects. Arboleda finally obtained expansion funding with the help of the late, great Washington SyCip.




Disruption is reaching the farming business, with information technology making it easier for farmers to keep up to date on the latest techniques to increase their productivity. But mechanization has become more and more mandatory for farming because of the aging population and the demands for higher productivity. This can only happen if economies of scale are achieved through agribusiness ventures. There are a few successful cooperatives that have become large agribusinesses, such as the CAFFMACO (Cavite Farmers Feedmilling & Marketing Cooperative) in Silang, Cavite, which started out as a joint effort among farmers to produce their own feeds when they diversified into raising poultry, cattle and piggery. They had been victimized by corrupt agriculture technicians who were required by the rural banks to endorse their loan requests, and who required them to buy from specific suppliers who diluted their feeds. Unfortunately, the cooperatives sector has few success stories. Today, CAFFMACO is more than a hundred-million peso enterprise.

A successful agribusiness venture in Vietnam hires agricultural technicians whom they train to become “farmers’ friends” to their contract rice-growers who were organized by community. This rice production venture has been so successful that Standard Chartered Bank invested almost $100 million for minority shares in it. This is incredible, given that Vietnam has a communist government.

Big business is making too much money on low-risk ventures. The business community must get into agribusiness to help fight poverty and provide food security. It is difficult, but it challenges imagination, courage, creativity and compassion. We are running out of options to ensure our food security and to help reduce poverty among our people who are mostly in rural areas. Besides, if done right, agribusiness can be profitable.

 

Teresa S. Abesamis is a former professor at the Asian Institute of Management and an independent development management consultant.

tsabesamis0114@yahoo.com