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The hard truth about high-value crops

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Rolando T. Dy

M. A. P. Insights

The hard truth about high-value crops

High-value commercial crops refer to “those crops that have competitive returns on investment when traded in fresh form vis–a–vis alternative investment opportunities. These crops are characterized by defined regular or niche market or potential domestic and/or export markets, command high prices, with value added or are good foreign exchange earners. High-value commercial crops are also called non-traditional crops. (High Value Crops Farmer Guidelines – Department of Agriculture (DA) – CAR).

Some 20 high-value agricultural commodities were prioritized by the DA in 2014 under the World-Bank assisted Philippine Rural Development Program. These commodities include abaca, banana, cacao, calamansi, cassava, coconut, coffee, corn, mango, oil palm, onion, pineapple, rice, rubber, seaweeds, sugar, temperate vegetables, livestock and poultry (https://www.philstar.com/business/).

Certain high-value commercial crops were also identified by the Philippine Crop Insurance Corp. as eligible for insurance subject to their feasibility. These are abaca, ampalaya, asparagus, banana, cabbage, carrot, cassava, coconut, coffee, commercial trees, cotton, garlic, ginger, mango, mongo, onion, papaya, peanut, pineapple, sugarcane, sweet potato, tobacco, tomato, water melon, white potato, etc. (http://pcic.gov.ph/high-value-crop-insurance/Retrieved Nov. 3, 2018)

My take on the term high-value crops: I recall my personal conversation with former Prime Minister Cesar Virata, decades back, who said: High-value crops become low value when prices go down because of oversupply.

What is high value? Value is derived from productivity, expressed in quantity per hectare multiplied by farmgate price. Let us subject this to the 2017 data from the Philippine Statistics Authority (PSA).

What are the reality checks that will debunk “high value?” The exercise below shows that productivity is a major factor. Markets and costs are important as well, but these are not the focus of discussion (see table).




Farmgate prices of selected crops, 2017

High-priced products include: coffee, garlic, tobacco, abaca, peanut and mango. But low productivity takes its heavy toll. Garlic is high priced, but its yield is very low, and quality is not globally recognized. That is why garlic from China dominates as its yield is at 27 tons per ha vs. 3 tons for local garlic. Mango has lost market shares in Japan. Other countries, such as Mexico, Peru and Thailand, have brought in their own varieties.

Low yield products: Other crops similarly suffer from low productivity. If the coffee farmers produce 2,500 kg/ha (Vietnam average) instead of 270 kg/ha, the Filipino farmer will be earning P243,000/ha and will not be poor. Meanwhile, cassava yield is only about half that of Thailand. Doubling Philippine yield will double farmers’ income, and the country may not import cassava starch.

Irrigated palay farmers with two crops/year will earn P159,400/ha. But with the high cost of P12 per kilo, the farmers net less than P60,000 per ha per year.

High-value products: The leading crops in value per hectare are: Cavendish banana, mango, pineapple, onion, and cabbage. Banana and pineapple are export-driven and with intensive level of management. The latter’s prices are relatively low, but productivity is high and world market is not that volatile.

The bottomline is that the definition of high-value crops and the commodities classified as such can be misleading. Value depends on productivity and price.

The key factor is the general level of low productivity which makes a third (34%) of Filipino farmers poor. This is more than twice the ASEAN peers — Indonesia, Thailand and Vietnam.

Price cycle volatility is another force to reckon with. This is being faced now by coconut, rubber and oil palm farms. Low productivity and low price is a bitter combination.

This article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines or the MAP.

 

Rolando T. Dy is the vice chair of the M.A.P. AgriBusiness and Countryside Development Committee, and the executive director of the Center for Food and AgriBusiness of the University of Asia & the Pacific.

map@map.org.ph

rdyster@gmail.com

http://map.org.ph









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