Home Editors' Picks Why is my coffee so expensive?

Why is my coffee so expensive?

MAP Insights

Supply chain woes of SMEs


I had recently been in touch with women coffee farmers from Mindanao and they all had the same issues about logistics. From the rugged road of their town to Davao City, a small farmer is at a loss on how to navigate the supply chain challenges. She can send her produce by bus and ask the conductor to drop the coffee off at a station in Pasay City, or go to a proper cargo agent. The cargo service will, of course, charge her volume weight, making her landed price uncompetitive.

Another woman farmer checked several ways to transport the produce: through a cargo agent, by hitching with a wingvan filled with bananas on its way to Balintawak market in Quezon City, or leaving it with a consolidator to figure out a way to Manila. I happened to check on their final decision: they decided on a truck that would travel three days from Davao to Manila, and one had to pay on a per sack basis.

Those are the options for the micro-, small- and medium-sized enterprises (MSMEs).

Now, let’s take a look at big business. They consolidate the goods in a container van, load it onto a barge or a boat, and do it the way multinationals and big corporations do. The result? Cheaper freight, and cheaper landed cost.

And for coffee, that is okay because green coffee is not perishable under a constant moisture level. But what about fruits? The truck the coffee farmer hitched with was full of crated green bananas on their way to Balintawak. Why should Balintawak in Luzon get bananas from Davao, you may ask? It is because the truck will be loaded with something to bring back from Manila — something not found in Davao. That is called trade. But for fresh fruits, this system does not support the “buy fresh, buy local” movement. I am sure the bananas were unripe, and then would be sprayed with ripening agents to be ready for the market when the tired bananas reached their destination.

As we were discussing this situation, I found out that since these indigenous people (IPs) own ancestral domains, they just give them up, sell their ancestral rights to big corporations, and stop being small farmers completely. Soon, we will no longer have small farmers because of these reasons: challenges in logistics, difficult access to markets, and lack of capital.

With coffee as the exception because it is not as perishable as bananas or tomatoes, we should really encourage buying only from nearby or local sources. Davao must sell its produce to Davao or anywhere else in Mindanao which has a great road network. But try sending produce from Cagayan de Oro to Manila. Try anywhere to Manila. You would no longer wonder why only big companies get to transport fruits from Davao to Manila supermarkets. It is more expensive to ship anything from Mindanao to Manila.

Is consolidation the only answer?

What happens to small producers if this is the case? You have to submit to consolidators if you want to reach Manila, or survive by just selling to local buyers in which case you do not need to find transport and have additional costs.

I got a call from a farmer who said I could also pay a driver who would take the goods to a sari-sari store near Balintawak. What? And how would I meet the driver and pay him for carrying my goods? Ingenious ways are the only recourse of a small producer. By chance, this farmer found a huge truck on its way to Manila which had room for her goods. The truck would take approximately three days to travel from Davao to Quezon City. If you loaded eggs, they would have hatched by now.

Of course, there are boats and cargo ships. But it costs a lot to ship and takes two to three weeks to be delivered to your doorstep. What can a small farmer do to participate in cross island trading?

Like I said, it is okay for coffee as it is not perishable in its raw state. But what about fruits and vegetables?

Here are two good examples of hope.

I found out about an app developed by a group which points you to a “bagsakan” or depot in Quezon province, and one would know in advance what vegetables or fruits are available by using the app. Now that is a good development for supply chain developers — to use technology to connect farmers to consumers, whether B to B or B to C. My friend said that using this app leads you to a depot in Sariaya, Quezon where the produce is gathered. Apparently, this depot was resurrected by former Agriculture Chief Proceso Alcala and now is managed professionally.

Another example is the Nueva Vizcaya Agricultural Terminal and Trading Center (NVAT) up north. A private company, Aboitiz Equity Ventures, Inc., has put up Fresh Depot which is a cold storage. This is a good development to prevent food waste and give farmers a leg up in maintaining the farmgate prices.

With these two developments in Luzon, what happens in Mindanao, the food basket of the country? With inter-island trade and logistics still inefficient, what will Mindanao do with its produce? Maybe we can replicate the successful models of Luzon in the South and start planning to do this before food shortages and El Niño sets in.

We should think about improving supply chain facilities for the small farmer, the IPs, and not just let them give up in favor of big business. Our development must be inclusive so we can still have farmers in the next generation and ensure food security.

In the meantime, for coffee farmers, we need access to better and more efficient supply chain options. Or you will just have to pay for it in the price of your daily brew. Next time you order Sulu coffee, please do not complain about its high price. It came from a faraway land and is benefiting a small producer who, despite the odds, keeps farming coffee. The price of coffee is a function of labor plus a lot of distribution costs.


Chit U. Juan is co-vice chair of the Management Association of the Philippines (MAP) Environment Committee. She was the chair of the ASEAN Women Entrepreneurs Network (AWEN) from 2016-2018 and is now a Philippine Women’s Economic Network trustee and member of AWEN’s Advisory Council. She is also 1st vice-president of the ASEAN Coffee Federation.