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The Philippine Vegetable Industry:

Trends, Issues and Policy Implications
1


1.0 Introduction

The Philippine vegetable industry is undergoing a gradual restructuring mainly brought
about by changing consumption patterns which in turn require changes in production and
the way vegetables are handled and delivered to consumption points. These changes
mean opportunities and challenges for the players in the industry. Some of them gain and
some lose, depending on how they respond to these changes. Small-scale vegetable
farmers in particular appear to be increasingly challenged as market requirements in
terms of quality and standards become stricter.

Issues and concerns in this changing scenario of the Philippine vegetable industry are
examined in this paper with the objective of identifying ways to improve its performance
not only in terms of efficiency but also in terms of equity where small scale producers
have the chance to compete and prosper.

This paper is part of a collaborative program of the International Federation of
Agricultural Producers (IFAP) through its local affiliate the Federation of Free Farmers
(FFF) in the Philippines and the Regoverning Markets Program (RMP) Southeast Asia.
2


The RMP is a multi-donor funded global initiative with a goal of helping secure more
equitable benefits for producers in response to the unprecedented and dynamic changes in
agri-food markets within developing countries. The program aims to provide strategic
advice and guidance to the public sector, agri-food chain actors, civil society organiza-
tions including economic organizations of producers, and development agencies on
approaches that can anticipate and manage the impacts of the dynamic changes in local
and regional markets particularly on small producers.

IFAPs collaborative program, entitled Participation of Producers in Dynamic Agri-food
Chains: A Program of Support to Producer Organisations, seeks to build on the research
outputs of the RMP, extract the major lessons learned, and utilize them to help its affi-
liates undertake advocacy and market linkage activities in their own countries. The
Philippines has been selected as a pilot country for this program, and the Federation of

1
Prepared by Larry Digal (University of the Philippines Mindanao and Regoverning Markets Program) and
Raul Montemayor (Federation of Free Farmers Philippines) under the project of the International Fede-
ration of Agricultural Products (IFAP) on the Participation of Producers in Dynamic Agri-Food Chains: A
Program of Support to Producer Organizations (Asia Component), September 2006-March 2007.

2
www.regoverningmarkets.org



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Free Farmers (FFF), as IFAPs affiliate in the country, has been designated to take the
lead in implementing a pilot phase in the country.

The paper is organized as follows. Key trends in the industry are discussed in section
2.0. Issues and concerns raised during a series of consultations conducted among
stakeholders in the industry and from those identified in previous studies are examined in
Section 3.0. Existing private and public sector initiatives in the industry are also
presented in this section. An example of an innovation in linking small vegetable farmers
to modern markets, the case of NorminVeggies in Southern Philippines, is discussed in
Section 4.0. From these three sections, industry strengths, weaknesses, challenges as well
as opportunities are extracted and summarized in section 5.0 which in turn form the basis
for development and policy options discussed in Section 6.0. Finally, concluding
comments are discussed in Section 7.0.

2.0 Demand and Supply Restructuring in the Vegetable Industry

2.1 Consumption patterns

2.1.1 Consumption exceeds domestic production of vegetables resulting to increasing
imports

Consumption of vegetables in the Philippines has steadily increased over time. However,
the increase of about 1.6% per year (from 1990-2005) exceeds the annual growth of
domestic production of 1.5% resulting in a deficit of about 408,000 metric tons per year
(Figure 1). Thus, it is not surprising to see imports increasing over time to fill up this
gap. Despite this, the country managed to export vegetables of 35,000 metric tons per
year during this period, albeit the growth rate for exports of 8% per year is lower than
that of imports of 11% per year (Figure 2).









Figure 1. Consumption and production of vegetables in the
Philippines,1990-2005 (FAO Statistics, 2007).

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Imported vegetables are posing increasing threats to Philippine vegetable growers (Maca-
basco, 2004). Imports of vegetables have grown sevenfold since 1996 to 2002. This is
due mainly to the reduction of tariff rates and the changing market dynamics of the
vegetable supply chain. Imported vegetables are said to be cheaper by 30-50% compared
to some of the locally produced ones. They are better packed and generally of better
quality. These attributes make them more attractive to the institutional markets and the
supermarkets that cater to the high-end consumer markets.

2.1.2 I ncreasing consumption of vegetables due to growing urban population and
demand for healthy food

Consumption of vegetables in the Philippines is increasing due to growing population
particularly in the urban areas and expanding demand for healthy foods such as
vegetables. Considering the vegetable consumption estimate of the Food and Nutrition
Research Institute (FNRI) in 1993 of about 39 kilos of vegetables per year per person,
one expects the increase in consumption to be coming from the urban population. A
survey conducted by Concepcion (2005) showed that vegetable consumption per person
in the cities of Davao, Cagayan de Oro and General Santos in 2004 was about 87 kilos
which is 123% more than the average consumption estimate in 1993. Urban consumption
of vegetables appears to be increasing as more consumers become health conscious.
Disaggregating population into urban and rural and using the FNRI estimate of per capita
vegetable consumption reveals this trend. Urban consumption of vegetables is estimated
to be increasing at 4.42% compared to only 0.2% in the rural areas based on data from
1980 to 2003 (Figure 3).

Figure 2. Imports and Exports of Vegetables in the
Philippines 1990-2005
0
200
400
600
800
1
9
9
0
1
9
9
2
1
9
9
4
1
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Year
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M
T
Export Quantity
Import Quantity
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Figure 3. Increasing vegetable consumption (Source: National Statistics Office)
2.1.3 Expanding demand for quality and processed vegetables due to increasing
income
Increasing incomes of Filipinos also contribute to increase in demand particularly for
high quality and processed vegetables. As Filipinos increase their income and more dual
income households exist, demand for convenience will grow. More Filipinos will shop
from supermarkets, consume ready-to-eat and processed foods and eat in fastfood outlets.
A survey made by Concepcion and Digal (2004) showed that the area devoted by
supermarkets for fresh vegetables has increased over time. Data also indicated grocery
sales which include food in modern distribution outlets such as supermarkets increased
by 22% from 2005 to 2006 (Table 1). In addition, fastfood outlets and other institutional
markets such as hotels have responded to this opportunity by increasing demand for high
quality vegetables and healthy foods. They offer products that require the use of fresh or
processed vegetables such as salads.
Table 1. Retail Market Indicators, 2004-2006 (Source: Planet Retail)
Retail market indicators
Year Growth rates (%)
2004 2005 2006 2004-05 2005-06
Retail sales (USD mn) 38,319 43,718 50,103 14 15
Retail sales / capita (USD) 444 498 560 12 12
Grocery retail sales ( USD mn) 24,172 27,284 30,948 13 13
Grocery retail sales / capita ( USD) 280 311 346 11 11
Modern grocery distribution, total sales (USD mn) 8,946 9,813 11,520 10 17
Modern grocery distribution, total sales /capita (USD) 104 112 129 8 15
Modern grocery distribution,Grocery sales (USD mn) 7,552 8,382 10,198 11 22
Modern grocery distribution,Grocery sales/capita(USD) 88 95 114 8 20
Vegetable Consumption in the Philippines 1980-
2003
0
1000000
2000000
3000000
4000000
1
9
8
0
1
9
8
3
1
9
8
6
1
9
8
9
1
9
9
2
1
9
9
5
1
9
9
8
2
0
0
1
Year
V
e
g
e
t
a
b
l
e

c
o
n
s
u
m
p
t
i
o
n
total vegetable
consumption
rural vegetable
consumption
urban vegetable
consumption
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2.2 Suppliers Restructuring

2.2.1 Majority of vegetables are still sold in the wet markets but the share of modern
markets such as supermarkets and fastfood chain is increasing

About seventy five (75%) of vegetables continue to be sold in traditional chain where
traders dominate and bulk of the produce is sold in so-called wet markets. On the other
hand, the modern chain which includes supermarkets, fastfood chains, hotels and
restaurants, accounts for twenty five percent (25%). This share is expected to increase as
consumers demand for convenience and ready-to-cook vegetable packages. The flow of
vegetables and the dualistic feature of traditional and modern chain are illustrated in
Figure 4.

Figure 4. Traditional Chain vs Modern Chain

2.2.2 High concentration in retail and processing

The Philippines has the highest four-firm concentration ratio in Asia with approximately
28% of the total sales in the processing sector accounted for by the top 4 firms in the
sector (Roy 2006) (Figure 5). Although not disaggregated by industry (i.e., vegetable
processing is lumped with the Philippine food processing sector as a whole), the four-
firm concentration ratio was recorded at 72% in 1994 from 64% in 1978, an increase of
about 39% (NSO, 1994, NSO, 1978, Digal 2001).






Vegetable
Farmer
Wholesalers from
Urban Wet
Markets
Traders/
Consolidators
Vegetable
Processors
Supermarkets
Fast Food Chains
Hotels and
Restaurants
Wet Market
retailers
Households
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Figure 5. Concentration ratio in Processing

The concentration ratio in the retail sector (i.e., supermarkets) as measured by the
National Statistics Office appears to be low at 1.1% in 1994 since this is computed based
on the sales of the top four individual supermarkets divided by the total sales
supermarkets in the country. However, supermarket chains are treated as one unit, the
concentration ratio would be higher. Data from Planet retail (2005) showed that the
market share of 181 stores of the SM group accounts for 12% of total supermarket retail
sales (Table 2).

Table 2. Top 5 Grocery Retailers in 2005
Company No. of
Stores
Sales Area
(sq.m)
Average
Sales Area
(sq. m)
Retail
Banner
Sales 2005
(USD mn)
Market
Share (%)
SM Group 181 438,250 2,421 1,163 11.9
Mercury Drug 510 153,000 300 879 9
Robinsons 224 287,600 1,284 562 5.7
Rustan 183 214,348 1,171 449 4.6
SHV Makro 16 134,400 8,400 332 3.4
Sub Total 1,114 1,227,598 3,385 34.5
Other 6,428 65.5
Total 9,813 100
Source: Planet Retail

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2.2.3 Fragmenting farms

While retail and processing sectors are becoming concentrated, farms are getting smaller
and fragmenting. The average Philippine farm size in 1971 was recorded at 3.6 hectares;
this has since shrunk to 2.2 hectares as of 1991, or a decrease of 64% (Roy 2006) (Figure
6). This is in contrast with the trend in developed countries such as the United States and
United Kingdom where the average farm size has been increasing over time (Figure 7).















Figure 6. Shrinking average farm size, various countries.



















Figure 7. Expanding average farm size, various countries

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2.2.4 Vegetable productivity increasing by 1.1% as volume (1.34%) increasing faster
than area (1.21%)
Average annual vegetable production for the last 25 years (1980 to 2005) is estimated at
3.6 million metric tons. Total area devoted to vegetable production during this period is
recorded at 438,962 hectares. This translates to an average annual yield of about 8.21
metric tons per hectare. From 1980 to 2005, production, area harvested and yield all
posted positive growth rates. Production increased by 1.34%, faster than the growth in
the area devoted to vegetable production which was 1.21%. This produced a positive
yield growth of 1.09% per year. These trends are shown in Figure 8 with data translated
into indices with base year at 1980.
Figure 8. Vegetable, Production, Area and Productivity in the Philippines

3.0 Issues Affecting Vegetable Industry Stakeholders: Results of
Consultations and Issues Identified From Previous Studies

This section presents the issues identified in a series of stakeholder consultations held in
various regions in the country in February 2007. These consulations were done in
Baguio for Northern Luzon regions, Manila for Southern Luzon, Cebu for Visayas and
Davao for the Mindanao regions. Issues identified in related studies are also discussed to
Trends in Production Volume, Yield, and Area Harvested of Vegetables in the Philippines: 1980-2005
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
1
9
8
0
1
9
8
1
1
9
8
2
1
9
8
3
1
9
8
4
1
9
8
5
1
9
8
6
1
9
8
7
1
9
8
8
1
9
8
9
1
9
9
0
1
9
9
1
1
9
9
2
1
9
9
3
1
9
9
4
1
9
9
5
1
9
9
6
1
9
9
7
1
9
9
8
1
9
9
9
2
0
0
0
2
0
0
1
2
0
0
2
2
0
0
3
2
0
0
4
2
0
0
5
Year
I
n
d
e
x

(
b
a
s
e

y
e
a
r

1
9
8
0
=
1
)
Production (Metric tons) Area Harvested (hectares) Yield (kg/ha)
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compare and validate issues raised during the consultations. Finally, current initiatives
by the government and private sector in the vegetable industry are also presented.

3.1 Key I ssues identified in stakeholder consultations

Various issues were identified by over 300 stakeholders in the vegetable industry that
included farmers, traders, input providers, representatives from producer organizations,
non-government and government organizations (local and national) and development
programs (i.e., Growth with Equity in Mindanao, Catholic Relief Service Small Farmers
Marketing Program). These issues can be grouped into marketing, trade, production,
finance, infrastructure and organizational issues by area of consultation. These are
presented in Appendix 1 and can be summarized as follows:

1. Gap on information

There appears to be a dearth of information on marketing particularly data on
consumption, quantity and quality requirements needed by different types of markets
(i.e., supermarkets, wet markets, and export markets). Supermarkets require a variety
of vegetables with specific quality requirements different from those sold in wet or
traditional markets. Moreover, information on production is needed such as volume
of production, soil and area suitability maps. Farmers plant vegetables without any
idea of the outcome on total volume of production resulting in overproduction and
dampening of prices.

2. Inadequate infrastructure facilities

Farmers complain about inadequate farm-to-market roads which increase marketing
costs due to spoilage and inaccessibility. Some farms do not have access to irrigation
facilities and water making it difficult for them to improve productivity. There are
areas that lack trading posts where farmers can bring their produce to sell to traders,
wholesalers and direct consumers.

3. Lack of promotion of vegetable consumption to address malnutrition particularly
among children

Filipinos consume less vegetables compared to other countries, with a per capita
consumption of only 39 kilos based on 1992 data from the Food and Nutrition
Research Institute. It is therefore important to promote vegetable consumption
particularly among children who suffer malnutrition.

4. High transportation cost (shipping)

The Philippine sea transport industry plays a crucial role in making domestic agri-
culture competitive. Because of the countrys geographic configuration comprising
more than 7,000 islands, it is heavily dependent on efficient water transport for
domestic and international trade and commerce. Presently, however, the industry is
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saddled with structural barriers and inefficiencies that result in part from the
Philippine Ports Authoritys (PPA) regulatory power. Port operations are usually
handled by monopolies. The majority of PPAs ports have become so inefficient that
their productivity is down to half of those of their ASEAN counterparts (MARINA,
1998). Moreover, foreign vessels are restricted to ply along domestic routes due to a
cabotage law thereby limiting competition.

5. Lack of organization (clustering and strengthening of producer organizations)

Despite the clear advantages of organizing through clustering, there is difficulty for
small farmers to venture into clustering due to many factors. These include among
others the lack of know-how on how to make clustering effective, inadequate support
from the government to start-up clustering and the strong dependence of small
farmers to traders.

6. Inadequate technology on vegetable processing

Farmers complain about high post-harvest losses in vegetables that significantly
lower their income. Processing could potentially extend the shelf-life of vegetables.
However, farmers lack the technology to venture into vegetable processing, particu-
larly those that do not require large capital investments.

7. Regulatory issues

A number of regulatory issues were identified that include certification of organic
vegetables, protection of farmers from buying fake seeds, exemption of vegetables
from the truck ban and illegal or excessive road toll fees. Farmers complain that the
lack of a credible certification system often most of the benefit from incentives that
are extended for farmers to venture into organic vegetable production

8. Transportation problems

Vegetable growers particularly those in the Northern part of the Philippines (Luzon
island) complain about the truck ban which is adding to the cost of delivering their
produce to consumers in Metro Manila. Because of the truck ban, vegetable farmers
are oftentimes forced to sell their produce to middlemen and traders who tack on an
additional cost to the vegetables. Since the vegetable growers are not allowed to let
their trucks enter Metro Manila during the crucial truck ban hours 6 AM to 9PM
some have to get smaller vans to deliver their produce. The cost of the smaller
vans, the drivers, helpers and fuel are added and eventually passed on to the
consumers. Even in cases where exemption from the truck ban is secured, separate
requests for exemptions have to be arranged with the different local government units
who exercise control over the roads on which the trucks pass. To compound the
problem, for areas where there are no truck bans, vegetable farmers often have to pay
fees to pass through check points without delay and inconvenience. These fees are
paid without receipts and therefore considered illegal or grease money.
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9. Inadequate access to credit and crop insurance (risk management, i.e., access to
ACEF funds, credit without collateral)

Access to credit continues to be a concern particularly among small farmers who find
requirements from formal financial institutions too stringent and their processes too
bureaucratic. It was suggested that farmers should have access to Agricultural
Competitiveness Enhancement Fund (ACEF). This special purpose fund was created
by Republic Act No. 8178 or the "Agricultural Tariffication Act" which allocates to
the fund all tariff proceeds of the MAV (minimum access volume) importations to
help the agricultural sector become globally competitive viable, efficient, and
sustainable. There have been complaints that the bulk of the ACEF loan releases
have not gone to small producers but instead have been cornered by large
agribusiness firms.

10. Inefficiency in the chain due to several layers

Farmers complain that their produce pass on too many hands before they reach the
markets especially when the products are sold in modern markets. In areas where
clustering is not being practiced, marketing functions are done by agents and traders.
Moreover, when marketing facilities such as trading posts or infrastructure facilities
are inadequate, agents and traders emerge to facilitate marketing or provide marketing
functions such as information about buyers, transporting products or even perform
washing, grading, storing and packaging of produce.

11. Need for Research and Development to match market requirements and needs of
farmers

The requirements of markets are changing. Farmers want to know how they can tap
opportunities and meet market requirements particularly in terms of quality.
However, these opportunities are often not known to them. Quality requirements of
different types of markets such as supermarkets and processors are not clear or known
to them. Research and development is needed to provide farmers information and
technology so they are able to adjust to changing market requirements.

12. High post production losses

Losses particularly in vegetable production are substantial and seriously affect the
income of farmers. These losses can be attributed to many factors such as inadequate
post-harvest technology, poor farm to market roads, absence of cold storage facilities,
etc.

13. High cost of inputs (chemicals, seeds)

Farmers continue to complain about high cost of production inputs such as fertilizers
and seeds. The cost of inputs becomes high especially when it is locked in with credit
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provided by traders. There are allegations that the fertilizer industry is inefficient due
the presence of cartels.

14. Lack of production programming and complementation across production areas
resulting to gluts in the market and dampening of prices

The dearth of information on production and the lack of market information
contribute to farmers producing vegetables in large volumes that dampen prices due
to oversupply.

15. Inadequate extension services

A number of farmers complain that local government units lack personnel to
adequately provide extension services. This problem is compounded by the fact that
there are extension officers who are not even graduates of agriculture courses. There
is also no effective advisory system for farmers on how they can access market.

3.2 I ssues identified in related studies

It is important to consider issues identified by other studies or organizations related to the
vegetable industry. As can be observed, a number of the issues identified by the stake-
holders in the recent consultations are consistent with the issues identified by previous
studies and other organizations.

For example, in the Mindanao RoadMap prepared by the Department of Agriculture
(2005), issues identified include the high cost of doing business because of high cost of
transport and handling, and expensive packaging materials and production inputs since
most of them are imported. The problem on high post-harvest losses was also noted as
well as the instability of prices. Access to credit was considered a roadblock and this is
primarily due to the non-bankability of farmers. Another issue identified was the lack of
market information system and weak database. Finally, it was observed that most produ-
cers are not agri-entrepreneurs.

The Small Farmers Marketing Program of the Catholic Relief Services (2005-2008), with
funding support by the United States Department of Agriculture, also highlighted a
number of issues not only faced by vegetable producers in the Philippines but also small
farmers in general. Problems identified include the following:

Fragmented farms & unorganized farmers for a market
Lack of business & market orientation thinking beyond the farm
High cost of production (inputs, packaging, freight & handling)
Unavailability of appropriate financing packages (trader finance limits room
for price negotiation)
High postharvest losses (packing sheds, harvest containers, tools)
Infrastructure constraints roads & irrigation
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Lack of farm technologies/knowhow (soil fertility & conservation measures,
crop protection, fertilization, postharvest)
Isolation lack of market information, weak bargaining position (price
takers), lack of access to extension services

It can be observed that post production losses are one of the most common issues
identified in the consultation and other studies. A survey conducted by the project on the
vegetable supply chain in Mindanao by the University of the Philippines (2004) in
Mindanao revealed that losses from cleaning, grading and storing vegetables account for
the bulk of post-production handling costs. In cabbage alone, it accounts for more than
50% of the post-production cost from farm to wholesale and retail outlets in wet market
(Table 3). On the other, hand while there are costs and losses incurred from grading due
to rejects, farmers also get better prices due to grading. In cabbage, for example, the
price of graded cabbage is 100% higher than that of ungraded cabbage (See Table 4)
(Digal 2005). Even better prices are fetched if products are naturally grown or organic
(Mindanao Vegetable RoadMap 2004).

Table 3. Post-production cost, cabbage, 2004








Source: UPMin-ACIAR (2004)

Another recurrent issue which has become a perennial complaint particularly of farmers
in Southern Philippines is the high cost of shipping which has substantially constrained
their linkage with the upstream industries (Digal and Concepcion 2004). Based on the
literature and key informants interviews, this issue is multidimensional in that it is related
to the lack of competition in both cargo and port handling services (i.e., cabotage law
restriction on foreign vessels), inadequacy of consolidation facilities, corruption within
the Philippine Ports Authority, etc.

The issue on the lack of competition in the cargo service is highlighted as the problem on
port handling service is now being addressed by the government with its policy to
encourage roll-on-roll off (RORO) technology. RORO being a substitute for lift-on-lift-
off technology (LOLO) enhances competition in the port handling business.



Activity Wholesale Retail
Cost/kilo % To total Cost/kilo % To total
Cleaning 0.49 4.7 0.30 3.4
Grading 0.59 5.6 0.11 1.2
Packing 0.55 5.3 0.17 1.9
Storing 0.19 1.8 0.17 1.9
Transportation 0.72 6.9 0.41 4.6
Loss (clean) 2.92 28.0 2.50 28.2
Loss (grade) 2.80 26.8 2.82 31.8
Loss (store) 2.19 21.0 2.39 26.9
Total 10.45 100.00 8.87 100.00
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Table 4. Price difference between graded and ungraded vegetables
Source: Digal (2005).

The high cost of inputs including packaging materials has also been identified as one
issue that constrains the competitiveness of vegetable producers. This does not only
increase the cost of products but also stunts the development of retail products. For
packaging materials, the current tariff is pegged at 15% which is expensive relative to
other Asian Countries such as Thailand. For fertilizer, there are a number of countries
that have lower tariffs than the Philippines such as Indonesia, Malaysia and Australia
which have practically zero tariffs.

In sum, the issues identified in the consultations, some of which have been identified in
previous studies, are issues that continue to affect stakeholders in the vegetable industry
particularly farmers.

3.3 On-going private and public sector initiatives

There are current private and government sector initiatives to develop the vegetable
industry (Mindanao Vegetable RoadMap 2005) and address some of the problems and
issues described above. These are listed below:

3.3.1 Private Sector Initiatives

Organization NorminVeggies and Vegetable Industry Council for Southern
Mindanao (VICSMIN) and the Philippine Vegetable Industry Devevelopment
Board (PVIDB)
Application of supply or value chain approach (i.e., NorminVeggies)
Vegetables

Prices (PhP)

% Difference between Graded
and Ungraded Prices

Ungraded (A)

First
Grade
(B)

Second
Grade (C)

B-A

C-A

Cabbage (per kilo)

4.50

19.83

13.50

340.67

200.00

Carrots (per kilo)

12.00

17.33

16.44

44.42

36.98

Potatoes (per kilo)

13.75

20.93

18.00

52.22

30.91

Tomatoes (in crates)

49.31

125.71

103.16

154.96

109.21

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Operation of cold chain and consolidation facilities
Business linkages market development, supporting business organizations and
clearing house
Partnerships with resource organizations and government agencies
Formation of marketing and production clusters.
Data banking and benchmarking

3.3.2 Existing Interventions (private-public partnerships)

Production of biocon agents
Purchase of assorted vegetable seeds
Quality assessment of vegetable that pass cold chain highway
Extension support, education and training services
Market development service (Market matching)
Credit facilitation
Policy formulation, planning and advocacy
Provision of post-harvest facilities
Refrigerated Van
Refrigerated Truck
Pre-cooler
Ice crusher
Trading posts
Provision of irrigation facilities
drip irrigation
small farm reservoirs
water pumps
Provision of Protective Cultivation
Greenhouse
Plastic sheets

4.0 Innovation of NorminVeggies

Organizing small farmers to meet the strict requirements of modern markets such as
supermarkets and fastfood outlets has been a challenge in development work. In the
Philippines, the usual response is to organize them into a cooperative but this approach in
most cases has not worked. There are, however, good examples to consider how this
challenge of organizing farmers can be tackled successfully. One such example is the
case of the Northern Mindanao Vegetable Producers Association (NorminVeggies), an
association of vegetable farmers and stakeholders in Southern Philippines who saw the
need to organize and implement strategies and innovations to access dynamic markets in
the Philippines, particularly fastfood outlets, supermarkets and vegetable processors.

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4.1 How it started: organizing for success

The key to NorminVeggies success is organizational innovation. It was organized in
1999 by the farmers in order to have a concerted effort in the development of the
vegetable industry in Northern Mindanao. NorminVeggies is composed of members
from farmer groups, corporate farms, input suppliers and other support agencies. The
farmer group is a combination of farmers who have the resources and those who need
resources and support. NorminVeggies acts a vehicle for networking and dialogue with
government and development agencies to access development support. NorminVeggies
becomes part of this organizational innovation as it is able to access support for technical
assistance, marketing and others crucial particularly for asset poor members.

Another aspect of organizational innovation is the setting up of a business entity (Normin
Corporation or NorminCorp) to handle the market facilitation of members produce. It is
not a trading company. It is a facilitator which charges a fixed percentage based on sales
rather than a flat rate which makes transaction more transparent. Farmers know the price
paid for their produce and can calculate exactly how much income goes to NorminCorp.

In 2006, NorminVeggies with the assistance of the Department of Agriculture (DA) and
the United States Assistance for International Development (USAID) established the
NorminVeggies Consolidation Center (NVCC) at the Agora wet market in Cagayan de
Oro City to consolidate the produce of members. This move doubled the volume sold. In
addition, the benefit of cash payment right after withdrawal from NVCC meant more
stable incomes for the farmers. There is no more trimming to factor in after the distribu-
tors get the vegetables because the ones left at the stall are also purchased by the local
retailers who slice the vegetables for the consumer market.

Finally, Normin adopts a clustering strategy that enables small farmers to be active
players in the supply chain and meet the basic requirements for volume, quality, timing,
assortment and consistency in supply.

A combination of these elements increases the chance of success for the inclusion of
small farmers in dynamic chains.

4.2 How small farmers benefit

The key benefit of farmers who are members of marketing clusters and sell to Normin-
corp is increased profit. This increase in profit is due to more stable markets, higher
value for quality vegetables, and a premium for reliability in supply. For these reasons,
Normincorp can get a price premium of 10% to 20% compared to that offered in the spot
wet market dominated by traders in the traditional supply chain.

For example, buyers want to source their carrots from Normincorp because of quality and
reliability. This means less cost for the buyers and higher recovery. Value for money
can be the main selling point.

-17-
Given all the work put into quality management and delivery reliability, Normincorp can
negotiate with the supermarket supplier for a good price that is enough to compensate for
the effort. The price for carrots, even if pegged weekly, is always above the Agora wet
market price. If the price of carrots at the wet market is P30 per kg, Normin quotes at
P38, to factor in the high recovery rate for the supermarket supplier. When the buyer
receives the carrots that are washed, air-dried, sorted, neatly packed in boxes, there are
immediate savings on handling labor since the vegetables are ready for chiller display.
When the buyer compares this to the wet market carrots that are unwashed, unsorted and
in sacks, a P8 per kg additional price is still less than the costs associated with sorting,
washing and preparing carrots for display, as well as the high reject level for the procured
vegetables (estimated at 8 kg for every 60 kg sack).

For quality supply, the farmers additional cost is P3.50 (with this breakdown: P1.50 for
washing, sorting and the cost of using a box instead of a sack for packaging, P1 for
NorminVeggies storage fee, and P1 for Normincorp as marketing facilitation fee). The
farmer still enjoys an additional income of P4.50 per kg. This is the case also for lettuce.
From Normincorp that has daily supply of lettuce, the price is 10% higher compared to
that in the wet market.

Higher income is also coming from the sorting of the vegetables. Carrots in the spot
market are usually sold all-in wherein the price is averaged from the big to the small
sizes. All-in carrots can mean a price difference of P18 per kg considering that big sized
carrots can command a price of P30. In most cases, the farmers resort to all-in trading
because carrots in the wet market are priced based on 6 sizes (large, big, medium,
standard, small, super-small) with a price range of P30 for the large to P3 for the super-
small sizes. In many cases, traders are arbitrary in their own sorting and farmers have no
choice but to accept their classification. In comparison, Normincorp being the only one
in the wet market handling high quality carrots was able to impose just 3 size categories
(big-medium, standard and small) with a price of P38, P30, P22 respectively. Super-
small carrots were excluded from sales to the high value market and instead were
unloaded to the wet market retailers that sliced vegetables as off-size carrots.

Increased sales, and accordingly income, is not only through better quality, sorting and
price, but also from better assortment and variety of products. The mix of independent
growers who have financial resources and small farmers with limited financial resources
becomes a source of competitive edge. Independent growers produce capital intensive
vegetables such as salad vegetables while small farmers produce those that are not capital
intensive such as cabbage, carrots and sweet peas. A wide assortment of vegetables
combined with stable volume and quality achieved through market clustering is important
in supplying to supermarkets and restaurants (or their consolidators) which require
assorted vegetables.

The Visayas vegetable supermarket consolidator or distributor takes in from Normincorp
an assortment of 20 products from a single shipment. From the independent farmers are
supplied the following: iceberg lettuce, romaine lettuce, salad tomato, cherry tomato, bell
pepper, strawberry, cucumber, sweet corn, young corn, herbs, etc. This set is combined
-18-
with products from the small farmers, namely: carrots, cabbage, sweet pea, sweet pepper,
squash, table tomato, eggplant and other tropical vegetables. This range of products
gives Normincorp the bargaining power in terms of pricing and sales volume. Handling
the transaction with a set of products provides leverage that all products have to be taken
in from both the independent and small farmers. This means for example that
Normincorp can agree to supply high-value difficult-to-get strawberry only if the
ordinary squash is also taken in.

Moreover, there are savings on costs. Since the production of those farmers involved in
the marketing clusters is programmed, storage fees are minimized. In other words,
they are sold even before harvesting. As a group and as members of Normin, the farmers
access resources that would help reduce their cost such as assistance on production,
marketing, institutional strengthening and benefits derived from advocacy such as
increased access to government support programs. They also save on logistics cost
because of volume or economies of scale.

The increase in price, the sorting, and the leverage of Normincorp in negotiation with
buyers both for higher prices and lower transaction costs, together with the savings from
better management of trimmings/rejects with the NVCC facility, are altogether estimated
to translate to an increase in the profit of the individual farmers ranging from 25% to
35%. This has encouraged more growers to join NorminVeggies. Since the opening of
the NVCC in May 2006, 10 new members have joined the association.

The key to these benefits is the organizational innovation which led to inclusion and
increased participation of the group in these dynamic markets. The cost involved in
organizing appears high for people who invest their time, efforts and money in meetings
and related activities. But by organizing, farmers are able to gain more benefits to lower
their cost thereby providing incentives to sustain the initiatives. They hire staff to run the
organization to minimize their efforts and continue the work of improving quality to get
better prices, access resources to reduce cost and ultimately increase profits.

4.3 Requirements for Successful Linkage

4.3.1 The clustering strategy

Normincorps regular supply is coming from 3 main clusters. Two of the 3 clusters are
single product clusters (lettuce and broccoli) while a third cluster supplying the Visayas
and Mindanao markets is a multiproduct one.

A cluster is an informal group of 5 to 10 small-scale farmers who commit to undertake a
common marketing plan for a particular product (or set of products) for pre-identified
markets. Each product cluster has a designated lead farmer who acts as the coordinator
of the production of all the farms involved in the cluster. Normally, the lead farmer is the
best farmer for that type of vegetable and is responsible for teaching the other farmers in
the cluster about applicable production techniques in order to maintain the quality
specified by the market. Usually, the lead farmer is one of the independent farmers, since
-19-
they are more educated and financially independent. The 3 clusters formed so far for the
year round markets are the lettuce cluster, broccoli cluster, and the Visayas market
cluster. These clusters are comprised of the core of 10 independent farmers and 50 small
farmers. The 50 small farmers are organized into 4 sub-cluster based in 4 barangays in
the municipality of Impasugong, Bukidnon.

A marketing cluster can be formed to take advantage of an opportunity at a certain period
of time. For the high demand of tomato from Manila during July to December, a tomato
cluster is formed just for the period. The next year, it can be formed again but not
necessarily with the same members/farmers. Similarly, servicing the Manila supermarket
distributors with a set of vegetables will require the formation of a Manila cluster just for
the season of supply. It has nevertheless been observed though that cluster members tend
to be the same in the succeeding years.

The cluster may appear loose but what holds it together is the commitment to supply and
the cluster agreements. Important cluster agreements are the volume of supply per
farmer, delivery schedule, and compliance with a common quality standard which
necessitates agreement on practices in plant/farm management, harvest and post-harvest
management. The cluster, therefore, is not just an ordinary grouping. It is one with a
marketing objective and a management system, requiring discipline from each farmer to
protect the reputation of the group in the market. Being a small group, it is capable of
quick response to buyer feedback and requirements.

Clustering is the strategy for farmers to become a valued supplier in the higher value and
growth markets, particularly the fast foods establishments, the processors, and the
supermarket distributors with the consolidators. In the cluster, farmers get to talk about
the market and the value addition in the supply chain, and farmers in the cluster decide
together on the markets to be served. This empowers farmers and enables them to
become a dynamic player in the market, share collective know-how (particularly the best
practices in the farm), resources, technologies, and market contacts, which otherwise
would be inaccessible or costly to them as individual farmers.

Indeed, the benefits of clustering include: (a) higher economies of scale and ability to
handle large product volumes at lower transaction costs, (b) access to good markets, (c)
business deals with service providers, (d) effective linkage with government and private
resource organizations.

4.3.2 A new business model

Normincorp was established in December 2003. Its formation signified a new develop-
ment in the marketing set-up for small farmers. While established as a stock corporation,
it functions more like a cooperative and has a social enterprise character. It was a set up
and operated with a keen business sense but also with full empathy for the small farmers.
An innovation is that Normincorp is not a trading company. Rather, it is a market
facilitator linking the farmer through the cluster direct to the buyer. The farmer is given
the buyers price is therefore accountable for the product. He/she retains ownership of
-20-
the product up to the institutional markets end. This encourages the farmer to supply the
best quality since the price is given to him/her and all sale proceeds are remitted directly
to him/her after deducting the market facilitation fee based on vegetables sold.
Conversely, all rejects are individually charged to the concerned farmer. Labelling of
products per farm or farmer provides this traceability.

The Market facilitation fee is charged by Normincorp based on the value of the product
and the type of vegetables. The table below shows the rates.

Table 5. Normincorp Facilitation Fees
Value/Kg (Php) Squash/
Ginger
Cabbages
(flat, round,
wongbok)
Other
Vegetables &
fruits
Table Tomato
Up to 2.00 0.20 0.20 0.20
2.05 to 5.00 0.25 0.20 0.20
5.05 to 10.00 0.50 0.50 0.75
10.05 to 20.00 0.75 1.00
20.05 to 50.00 2.00
>50.05 3.00
Up to 300/crate 5.00
>300/crate 10.00
Note: same rates apply for storage fees charged by NorminVeggies at the NVCC

As market facilitator, Normincorp saw to it that production is programmed by clusters
with the lead farmers coordinating activities in accordance with marketing plans, that
quality farm and post-harvest management can be and is done by each farmer in the
cluster, and that coordination can be provided for the sequence of activities that includes
order taking, outshipment logistics, billing/charging, collection and remittance to the
farmers. For these services, Normincorp earns a market facilitation fee based on the value
of the sale and uses the income to cover the marketing management overhead.

Breakeven operating levels require a significant volume of vegetables channelled through
the corporation. To operate in the Visayas market involves overhead costs of P50,000
which in turn will necessitate sales of at least P500,000 per month. Including a Manila
operation doubles this overhead requirement.

Normincorp devised a Cluster Map that specifies which farmers will participate in the
cluster, what crop they will produce and at what volumes. This is matched with a
Planting/Delivery Calendar (also called a Crop Ruler). The process of developing the
tools like the Cluster Map and the Harvest/Delivery Calendar came by trial and error and
in response to the management needs for efficiency and effectiveness. While the market
was being developed, the farmers were going through the learning curve in farm supply
management. To facilitate this process, the incorporators of Normincorp contributed
funds other than the facilitation fees they generated from operations. At certain times
when there were drastic declines in sales volumes (due to weather problems or to dyna-
-21-
mics of market competition), the incorporators shelled out additional fund contributions
to sustain the operations.

Without this readiness on the part of the incorporators to support the business
establishment needs, Normincorp would have folded up during its first year. It helped
that the incorporators were also farmers, albeit independent and relatively better off than
the ordinary small farmers, who shared a common vision to promote solidarity among
small scale producers to make a difference in the industry. Because of their sacrifice and
determination, Normincorp is presently financially sustainable from the market facili-
tation fees it earns from vegetable sales.

4.3.3 Supply chain management

NorminVeggies attempted to build a positive brand image by assuring the market of
reliability in quality and regularity of supply, as well as reasonableness in pricing.
Quality management was worked back to the farm itself. For example, when the market
asked that carrot should be deep orange with a small inner core, the carrot cluster looked
into the seed varieties to be used. When a particular size became a requirement, the
cluster checked planting distances and cultural management practices. No carrot came
out for the Visayas supermarket distributor that was not washed and air-dried as this was
the quality specification agreed upon. To guide the quality management in the field and
in post-harvest handling, the cluster came up with a Quality Assurance Plan that guided
each farmer.

For the market, i.e., the buyers for supermarkets or consolidators for the Visayas, Normin
related quality to reliability of supply from the farmers through the cluster. They tried to
build the image that NorminVeggies can be a valued supplier with whom buyers would
find the least problems or headaches with their buying transactions. This was opposite
to the prevailing market image of small farmers as unreliable. NorminVeggies farmers
were prepared to do the extra things which included flexibility in packing requirement,
lead time for them to be informed of changes in price or shortage in supply. This was
particularly important for consolidators of supermarkets or the fastfoods who stood to
incur huge losses in case products were not delivered on time or at very low quality.

Delivery reliability implied that inter-related activities such as production scheduling,
post-harvest requirements, logistics (transport, seaport and airport operations), farmer and
buyer communication, invoicing, payment collection and sale remittances to farmers
were properly attended to. Normincorp set up an office in Cagayan de Oro as its contact
point, and hired a fulltime cashier, part-time accountant, and a logistics in-charge who
handled the outshipment activities. In Manila, a marketing facilitator was also hired to
attend to the distribution needs in the area. The Vice-president of NorminVeggies
provided overall coordination as Manager of the group marketing program.

Whenever a shipment was prepared for the Visayas market for transport by boat on the
regular Tuesday and Saturday schedules, all the cluster farmers involved in the products
concerned harvested simultaneously and brought their vegetables to an agreed
-22-
consolidation area near the port by 5:30 pm at the latest. For the small farmers, the trucks
of the independent farmers nearest them handled the transport to the consolidation point.
Later on, the consolidation point was changed to the NorminVeggies Consolidation
Center (NVCC) when it was leased by NorminVeggies.

There is usually no time to check the quality of vegetables. It is presumed that the cluster
farmer, guided by a quality assurance plan, will comply with the agreed quality standards.
In case the buyer has complaints, it is however easy to identify the source of the products
in question since the vegetables are segregated by product and supplier, and all boxes
carry the name and label of the farmer who produced the vegetable. Each farmer also
fills up a Packing List that is recorded and kept at the Normincorp office.

When NVCC opened for spot market trading, the traders from the neighboring provinces
in Mindanao, particularly those servicing the supermarkets and the fastfoods, started to
procure the high quality vegetables from the center. From a core of 5 Normincorp
buyers who have been steady buyers from Visayas, new buyers came to NVCC and the
number of weekly buyers increased to 10 in just a span of about 3 months operation.
New buyers are coming in expressing interest to procure at the consolidation center for
outshipment areas.

4.3.4 Networking and linkages

Each farmer continues to operate his/her own small farmholdings but through Normin-
Veggies additionally enjoys access to competence enhancing linkages with (a) business,
(b) government, and (c) private resource organizations. Good relations are maintained
with the service providers for outshipment and packaging, with government agencies like
the Department of Agriculture (DA) and the Department of Trade and Industry (DTI),
and with their main private resource organization partner, GEM/USAID.

There is synergy in activities because of collaborative efforts. The co-sponsorship of the
government and private sector in the trainings, technology and product/market
development has enabled the association to achieve important breakthroughs. For
example, NorminVeggies was able to pursue cold chain development efforts by
successfully negotiating for an interest-free 5-year loan from the DA to acquire a reefer
truck and 2 chillers. During the simulation for cold storage shipment, the GEM support
allowed the farmers to travel and directly observe the results of refrigeration and also to
be in consultation with the buyers. While the bulk of resources came from the farmers,
these types of assistance filled the gaps that enabled the farmers to keep abreast of market
demands and maintain staying power in the market.

4.3.5 Development interventions

Normin had always wanted small farmers to be part of the marketing cluster. Several
attempts were made by individual small farmers to join but many eventually fell out due
to failure to deliver and poor reliability and sustainability. The hurdles small farmers
face in marketing their produce are simply too complex for small farmers to handle on
-23-
their own. What is needed is the support of development agencies that address the
vulnerabilities of small farmers and open the door of opportunity for them to be part of
the clustering effort.

The opportunity to work with small farmers as a group came when Kaanib Foundation,
Inc. (a member of NorminVeggies) together with Lutheran World Relief Services
requested Normincorp to evaluate their vegetable production assistance to an organized
group of vegetable farmers and asked for recommendation about how to make the project
take off the ground.

KFI and LWR allowed Normincorp to redesign the development interventions, not just in
marketing but in production assistance. A new group of 10 individual farmers who had
the experience in vegetable farming were formed. These were those who were not deeply
indebted to the localitys trader/financiers, and who were open to working in a group
along the concept of clustering. It was important that each farmer in the group
understood delivery reliability by agreeing to take turns in planting weekly so that a
stable volume could be produced weekly from them. This became the base of the
farmers clustering.

These 10 farmers increased to 25 by the last quarter of 2005, and into 30 farmers in
March 2006, with staggered production of cabbage and carrots. This supply goes into the
Visayas markets as part of the multiproduct cluster marketing. In effect, this group of
farmers called the Kitanglad Small Farmers Cluster is a sub-cluster of the Visayas market
cluster. In their January 2006 meeting, they came up with the plan to produce an
additional crop, namely sweet pepper.

KFI made available a production fund that creatively financed the farmers in a way
similar to the financier/traders. The fund was not made known as a project fund but it
was financing from KFI coursed through Green Haven Farm, a private agribusiness firm,
and Normincorp. This way, it was immediately perceived as a business transaction, and
not a dole out. The credit support covered the material inputs, one sack of rice after
planting, and a budget for harvest and post-harvest handling. Together with this credit
fund support was funding to hire a vegetable technician to guide the farmers and an
administrative person to handle the recording and marketing operations.

There was no talk of interest payments for the loans. Adopting the 50:50 sharing of net
proceeds scheme followed by the local traders/financiers, the farmers had to give 30% of
the net sale proceeds (i.e. after deducting the farm inputs and other costs borrowed) as
cost of money. This 30% was deposited in the local cooperative (Kauyagan Savers
Cooperative) and, together with the grant fund from LWR for production credit, will in
the future constitute a loan fund to be managed by the local coop. In January, the farmers
agreed to make it a 35% deduction from the net sale proceeds, with the 5% as fund source
for their sub-cluster.

The KFI intervention that is extended directly to the farmers is the irrigation support for
which they pay a rental fee per cropping for the use of the facility.
-24-

It was quite a challenge assisting the small farmers even if KFI/LWR fund support was
available. Aside from the problem of credit availability, there were major infrastructure
problems. Poor farm-to-market roads isolated their production areas and made it
expensive to transport their inputs and products. There were countless times when the
farmers cabbage and carrots could not be delivered in their required quality and
packaging standards as farmers did not have the ready access to water just to wash the
carrots.

Harvest operations were at times hampered by rains, and the products could not be
brought out from the fields that did not have all-weather roads. Every failure of product
delivery, or a delivery of poor quality, exerted pressure on the rest of the Visayas cluster
farmers since marketing was done as a group and the failure of an individual farmer was
viewed as a failure of the whole group. Expectedly, this brought about tensions and
doubts among the independent farmers as to the capability of small farmers to be in the
cluster.

Lately, however, KFI/LWR has extended support so that a consolidation area with a
packing facility can be put up at the location near and central to the farmers. This way,
farmers can harvest a day in advance and bring the products to this consolidation area
where they can implement the required quality management procedures. Hopefully, this
needed support system will ease up some of the tensions between the small farmers and
the better-resourced independent farmers and grouping them in clusters.

The other challenge had to do with changing small farmers values and attitudes. Used to
relying on the trader/financier for the one-time, big-time plantings where their capital
risk is very high, it takes time for farmers to understand that the secret to viability is
planting in small areas with high quality production and coming up with a crop-mix of at
least 3 vegetables. Convincing them of the economic module size of 500 square meters
per vegetable for 4 types of vegetables was difficult. It took the success of a few of them
to finally convince the rest that given their limitations, manageable areas with high
technical care and adequate inputs ultimately yielded higher returns.

Time was also needed to change their discipline in terms of compliance to quality
standards. Used to heavy application of agrochemical inputs under financing from the
local traders, small farmers tended to apply all the inputs on hand thinking this was the
best way to ensure that their crops would not be damaged and they would be able to pay
back their loans from the financier.

A technician was provided as part of the development support to guide small farmers
closely on integrated pest management using newer, safer inputs. Given their higher cost,
it was necessary for the technician to control the access of chemical inputs so that usage
could be kept to the minimum and chemical withdrawal periods were strictly followed.
This was important because the small farmers in the cluster had to comply with the
clusters definition of quality which involved not only freshness but also food safety.
-25-
The technician also helped diagnose problems as they arose so that farmers did not
immediately resort to chemical spraying when it was not necessary.

Technical guidance was very important not only in production but especially also in post-
harvest operations. Even when the farmers were shown how harvesting and post-harvest
handling ought to be done through visits to other farms, they still needed to be guided
very closely because at times, the problem was not the know-how but the discipline to
uphold the standards of performance and quality.

Given time, however, the farmers grew to appreciate the value of this discipline. With
the cost and returns computations given out to them where they could see in detail how
their product was unloaded, they realized that sorting paid in terms of the price
differentials, and that rejects or trimmings deducted from them affected their earnings
considerably.

Showing the farmers their costings was a major eye-opener for them; for many years,
their trader/financiers just wrote the figure of their net income (or loss) on a small piece
of paper, and they had no clear idea on how their farming actually turned out. This time,
they learned to be critical about their farm practices in terms of how they translated to
cost that reduced or increased their earnings.

Through all these processes, it was critical that the incorporators of Normincorp gave all
out support to the farmers. All sorts of innovative practices were tried out to maintain a
system whereby cabbage and carrots would continue to be supplied by small producers.
This at times meant that Normincorp would purchase at the wet market when there was a
supply gap from the small farmers in a particular week, instead of allowing an
independent or large-scale farmer to take over the production of these products earlier
allocated for small farmers. Since products from the wet market were usually of poorer
quality, private farms were for some time asked to plant extra volumes of vegetables
allotted to the small farmers as a supply back-up in case the small farmers were unable to
fulfil their delivery commitments.

After a year of operations, the management of the credit fund is now fully under KFI with
NorminCorp now just focusing on the marketing activities. KFI has recently provided
irrigation support which enables farmers to continuously produce even during the
summer months. Farmers pay service fees for the facility through rentals per cropping
season. Two months ago, KFI ventured to expand its vegetable production support to
include another 20 farmers in two other barangays. This support is in partnership with
another development resource organization, the Catholic Relief Services (CRS). In all,
KFI extends assistance to 50 farmers grouped into 4 clusters based in 4 barangays in the
municipality of Impasugong. There is discussion on a proposal whereby Catholic Relief
Services will put in a leverage production fund that the local cooperative (Kauyagan
Savers Cooperative) can manage based on the experience gained from the credit scheme
tried out in the LWR project.

-26-
5.0 Strengths, Weaknesses, Opportunities and Challenges

Based on the above discussion, it is apparent that the Philippine vegetable industry is
confronted with inherent weaknesses and challenges that need to be addressed. There
are, however, opportunities to be tapped as well as strengths to build on to help the
industry address the emerging issues and challenges. To categorize the issues that have
been identified, factors that are considered to be basically internal or within the vegetable
industry, such as production or supply issues, are treated as strengths and weaknesses.
On the other hand, opportunities and challenges, such as marketing and consumption
issues, are factors classified as external to the vegetable industry. (Table 6).

Table 6. SWOC of the Philippine Vegetable Industry







Opportunities
Increasing demand due to increasing population,
income & changing lifestyles towards healthy
food
Increasing demand for high quality vegetables for
modern markets in urban areas such as
supermarkets (i.e., ready to eat vegetable packs
and high quality, reasonably priced, reliable and
consistent delivery at the right volume) and
fastfood outlets (processed and pre-cut vegetables)
Higher price and increasing demand for naturally
grown (organic/pesticide free) vegetables
Off-season vegetable export window (i.e., Taiwan
during cold season)
Challenges
Increasing concentration in
processing and retailing
Requirements on quality
standards, volume,
traceability, reliability of
delivery particularly from
modern markets
Growing importation of
vegetables

Strengths
Increasing productivity
On-going private sector initiatives (see section 3.3.1)
On-going private-public sector initiatives (see section 3.3.2)
Presence of typhoon-free production areas in Southern Philippines
Development options/strategies:
How do can we use strengths to
exploit opportunities?
Development
options/strategies:
How do we use
strengths to address
challenges?
Weaknesses
Unstable/fluctuating prices due to many factors which include:
majority of the farmers/traders supply to traditional markets with pricing
based on spot markets (unlike modern markets where prices can be
negotiated and more stable)
lack of information on production and volume which result in
overproduction and underproduction
Fragmenting farms
Gap on information particularly on:
marketing consumption, quantity and quality requirements needed by
the market
production-real time statistics on volume & soil/area suitability
maps(GIS based)
Inadequate infrastructure facilities
farm to market roads, irrigation
Additional trading post (i.e., in barangays aside from La Trinidad)
Irrigation facilities
Lack of promotion of vegetable consumption to address malnutrition
particularly among children
High transportation cost (shipping)
Lack of organization (clustering and strengthening of producer
organizations)
Inadequate technology on vegetable processing
Regulatory issues
certification of organic vegetables
protection of farmers from buying fake seeds
Vegetables are not exempted from truck ban but DHL (courier) is
exempted
Development options/strategies:
How do we use opportunities to
address weaknesses
Development
options/strategies:
How address
challenges and
minimize
weaknesses?
-27-
Illegal toll fees (tong gates)
Inadequate access to credit and crop insurance (risk management, eg
access to ACEF funds, credit without collateral)
Inefficiency in the chain due to several layers
Need for Research and Development to match market requirements and
needs of farmers
High post production losses
High cost of inputs (credit,packaging, shipping/freight, chemicals, seeds)
Inadequate extension services
lack of personnel in extension and some extension officers are not even
graduate of agriculture courses)
advisory system on how small farmers can access market
Fragmented farms & unorganized farmers for a market
Lack of business & market orientation thinking beyond the farm
Lack of farm technologies/knowhow (soil fertility & conservation
measures, crop protection, fertilization, postharvest)

6.0 Development and Policy Options

Based on the SWOC matrix, development options can be mapped out by answering the
basic question of how the vegetable industry can make use of its strengths and
opportunities to address the weakness and challenges it faces.

Discussed below are key development options and policies which are reflected in the
policy resolutions provided to the organizers of the 5
th
National Vegetable Congress
3
and
the Philippine Vegetable Industry Development Board for their policy advocacy
initiatives (See Appendix 2 for these resolutions).

1. Establish functional, accessible, efficient and effective production and market
information system

This system should be accessible to users particularly producers and traders who make
decisions on what, when, where and how much vegetables to produce. The lack of
information on markets and volume of production (including soil and area suitability
maps) contributes to problems such as producing vegetables that do not meet market
requirements in terms of type and variety of vegetables, quality, volume, form and
delivery or frequency specifications. Information on prices that are timely, accurate and
in accessible form encourages competition and market efficiency and helps minimize or
avoid overpricing or underpricing of commodities. That is, the process of price discovery
is enhanced.

The proposed agribusiness centers to be established by the Department of Agriculture are
welcome moves towards enhancing efficiency by providing timely and accurate market
information. While there is clearly a need for an efficient and effective agribusiness
information system (on vegetables and other crops), it is also important to pay attention
to the design and management of this system or agribusiness center to ensure its
sustainability. Partnerships with industry associations in the implementation of this
information system is essential.

3
To maximize the impact of their studies, the consultants offered to provide support to organizers of the 5
th

National Vegetable Congress by developing policy options to help the vegetable industry and which could
be presented during the annual congress which was held on 7-9 March 2007 in Tagaytay City.
-28-

2. I mprove profitability through cluster formation & development

The organizational innovation of Normin has several elements: product consolidation
through cluster strategy, a new business model in the form of Normincorp, supply chain
and marketing management, networking and linkage, and development intervention for
greater inclusion of small farmers.

The clustering strategy enables small farmers to be active players in the supply chain,
meet the basic demands for volume and quality consistency in supply, and engage the
dynamic markets like the fastfood chains, processors and supermarkets.

It takes time to develop a functioning cluster. It starts with a random group of farmers
producing as individuals. Through time, those who can work in the cluster (particularly
in the sharing of best practices, commitment to quality and delivery reliability, willing-
ness to pay the costs of management) will become evident. Those who cannot will leave
as willingly as they came in. When growers come to understand and experience the
benefits of cooperation, only then can there be cohesion in the cluster.

The cluster is not an ordinary grouping. Rather, it is one that has marketing goals and
management systems. A business organization taking bold steps as a social enterprise is
needed to realize the goals that benefit a wide base of growers that include small farmers.
A core group of enterprising and agribusiness-oriented farmers is necessary to provide
the internal muscle to the organization and pull the small farmers along.

Small farmers have the productive potential because of their number and spread. How-
ever, infrastructure gaps, low productivity, attitudinal problems, and other constraints
mean that they need development interventions from private resource organizations and
government to address their limitations. There is also a slow maturation period required
as small farmers gradually are trained, learn new values and skills, and are primed for
business-like operations.

The key to successful marketing is effective management rather than the level of
sophistication of the marketing system. This implies that what counts are organizational
management (or how farmers can get their acts together) and operational efficiency (a
high level of coordination in a sequence of activities that move products cheaply from the
growers to the buyers).

Staying power in marketing is a result of how fast growers can keep up with continuous
changes in an evolving supply chain. Competition from vertically integrated suppliers
like corporate groups can exclude small farmers from the market. There is a need to
constantly invest in technology development, market research, communication, and good
financial management.

-29-
Competence enhancing investments can be within the reach of small farmers through
linkages with government agencies that can provide supportive programs and policies,
with the business sector, and with private resource organizations.

In sum, the development of clusters requires the provision of a package of development
interventions on:

Infrastructure - These include critical-farm-to-market road projects, provision of
additional cold chain facilities to minimize post-harvest losses, establishment of
additional but strategic trading posts
Support services - The Department of Agriculture can provide co-financing and
technical resources, together with industry groups and resource organizations, for the
establishment of market information systems that are accessible to the small farmers,
consolidation centers and critical support services like soil test kits, biocontrol agents,
pesticide analysis laboratories, and cold chain systems (portable coolers)
Capability building - This includes the provision of effective and efficient extension
services through the development and deployment of highly trained DA technicians,
including those under the local government units (LGUs), working in complement-
tation with industry groups/NGO projects. This can be supplemented by showcasing
farms with best practices, cross site visits and on-field seminars, and documentation
and publication of training materials like practical kits/tools. There should be a
focused agricultural research and development program involving by a consortium of
collaborating organizations (government-academe-industry groups, NGOs) to
identify, prioritize and implement research projects.
Best practices - production and postharvest technologies
Management - farm quality management approach, supply chain management, agro-
enterprise development

3. Strengthen and expand the food lane program for vegetables

Fresh vegetables are among the most perishable agricultural crops, and they are highly
sensitive to environmental conditions that lead to nutrient losses. Delays in transporting
these vegetables lead to significant losses in quality and volume. To facilitate the
transport of vegetables from the production areas to the urban markets in Metro Manila, a
food lane program was launched by exempting vegetable delivery vans from the truck
ban in Metro Manila roads. The truck ban is among a variety of programs implemented
by Metro Manila government agencies to ease traffic congestion in the metropolis
especially during rush hours; it bans certain delivery trucks and vans from using major
roads from 6AM to 9PM during weekdays.

Although the food lane was intended to assist truckers of vegetable products, it has been
fraught with implementation problems, and truckers of vegetables have not been
completely spared from extortion. There is a need for close monitoring to ensure that the
food lane program is consistently and uniformly implemented through trucking routes
from source to destination market. It is therefore recommended that the food lane
program coverage be extended throughout the country for all fresh vegetables subjected
-30-
to land transport. The Department of Interior and Local Government (DILG) should
ensure the resolute and consistent implementation of the food lane program in all
municipalities, and provide guidance in the issuance of ordinances where appropriate.
Transport vehicles used for vegetables should be marked prominently to ensure
consistent exemption from truck bans and similar ordinances and protect them against
extortion.

4. Strengthen the application of grades and standards to serve as a common language
for transactions covering vegetables

Article 2 of Republic Act No. 7394, otherwise known as The Consumer Act of the
Philippines, declares that it is the policy of the State to protect the interest of the
consumer, to promote his general welfare and to establish standards of conduct for
business and industry. In addition, evidence shows that on-farm sorting and grading
activities can enhance vegetable growers income. Smallholder vegetable producers need
guidance in producing quality vegetables meeting market requirements. Product grades
and standards play a key role in providing such guidance.

In this regard, it is important for the Department of Agriculture (DA), in collaboration
with the Department of Trade and Industry (DTI) and in consultation with the Philippine
Vegetable Industry Development Board, Inc. (PVIDB) and regional vegetable industry
organizations, to formulate and implement programs strengthening the application of
Philippine National Standards (PNS) covering vegetables. Moreover, the National
Consumer Affairs Council (NCAC) should monitor and coordinate programs promoting
the use and application of standards for vegetables.

The DA through the Bureau of Agriculture and Fisheries Product Standards (BAFPS) and
the Agribusiness Marketing Assistance Service (AMAS) should play an active role in
disseminating the standards covering vegetables and promoting their use. These national
standards should also be harmonized with international norms, particularly those of the
Codex Alimentarius. Further, the regulatory units of the DA and DTI, in consultation
with the PVIDB and regional vegetable industry organizations, should designate
mandatory minimum standards for vegetables and define compliance and sanctions for
non-compliance with these standards.

5. Government to commit P 1 billion funds from the agricultural competitiveness
enhancement fund (ACEF) to provide incentives and risk management measures
for new loan portfolios designed to enhance the productivity and profitability of
smallholder vegetable producers

While the production and marketing of short-gestating high-value vegetable crops is
recognized as appropriate to small farms, smallholder vegetable farmers are most
vulnerable to risks inherent to vegetable production and marketing. Clustering and
partnerships can play a strategic role in risk mitigation and modernization of vegetable
production in small farms. However, liquidity constraints faced by smallholder vegetable
producers limit their productivity and capacity to innovate to meet existing and emerging
-31-
requirements of the vegetable market. There is therefore a need for appropriate
government policy support measures and programs that provide for favorable investment
opportunities for smallholder vegetable farmers.

In this regard, government needs to assist private financial institutions in overcoming risk
perceptions associated with loans extended to smallholder vegetable producers. One
option involves the utilization of the Agriculture Comprehensiveness Enhancement Fund
(ACEF) which was created by law out of the proceeds of importations of minimum
access volumes (MAVS) of selected agricultural products. It is recommended that one
billion pesos (P1 B) from the ACEF be allotted to a loan guarantee program that will
partially protect banks from non-payment of loans extended to small farmers. This will
stimulate private banks to offer a new portfolio of loans with more innovative financing
terms to be extended to smallholder vegetable producers.

It is also recommended that 10 % of this amount be used for capacity building and
designing tools for risk assessment and management for use by banks offering this new
portfolio of loans. Moreover, the criteria for private banks to be covered in the guarantee
program will need to be defined to ensure the participation of responsible financial
pioneers who are willing to institute innovative measures to minimize the bureaucratic
red tape in loan processing. On the part of borrowing farmers and their organizations,
loan guarantee coverage will be contingent on the creditworthiness of the borrowers, their
involvement in clustering and similar modalities of partnerships, and their availment of
crop insurance coverage. With respect to the latter, the government must continue and
strengthen its subsidized crop insurance program by developing risk-sharing
arrangements with linkages with international re-insurers, provide timely insurance
premium subsidies, and promote the participation of private insurance companies and
other qualified entities in the underwriting of policies and settlement of claims.

6. Enhance the profitability of smallholder vegetable production through a package of
integrated technical assistance and promotion of vegetable consumption

Vegetable production based in small farms is faced with problems inherent to the nature
of this production system. There is a need to ensure that location- and situation-specific
technology needs of vegetable producers are appropriately and adequately addressed.
Also, there is a need for a stronger interface between research and extension to ensure
that research results are translated into applicable technologies. Extension services need
to be professionalized and strengthened through private-public partnership and a
sustained demand supported by increasing per capita consumption of vegetables.

It is essential therefore that the national government progressively decentralize the
delivery system for extension services, with local government units (LGUs) engaging
stakeholders in site- and location-specific extension programs. The Department of
Agriculture (DA) should ensure greater involvement of regional field units (RFUs) in
mid-stream research and extension programs, ensuring the availability of resources to
engage professional specialists in the design and implementation of a highly
decentralized extension program. Further, the DA, through the Agriculture Training
-32-
Institute and its RFUs, should provide guidance in the formulation and implementation of
an integrated, multidisciplinary extension programs.

The DA and LGUs should allocate funds and provide technical support for regional-level
trainors training and provincial-level farmers training on Good Agricultural Practices
(GAP) applicable for vegetable production. Capacity building in production and post-
harvest systems must be undertaken and sustained by LGUs, more specifically the
provincial government, with counterpart resources from the municipal governments. It is
also critical that smallholder vegetable producers entering into contracts, agreements or
clustering arrangements with corporate groups are given priority in the identification of
target beneficiaries in research and extension programs.

A nationwide program to promote the consumption of vegetables should be established
with the cooperation of the Departments of Health, Education, and Social Welfare,
together with consumer groups and the mass media.

7.0 Concluding comments

Clearly, there are many issues as well as opportunities that affect the performance of the
various stakeholders and players in the vegetable industry, particularly the small farmers.
The downstream sector players such as retailers, fastfood outlets and processors are
constantly adjusting to meet changing consumer requirements. This has wide-ranging
effects on how upstream players such as farmers can and should operate.

However, the ability of farmers to respond these changing market requirements and
opportunities is hindered by a number of issues that range from production to marketing.
This paper highlighted several development and policy options to address these issues as
well as best practice that can be undertaken to support the small vegetable farmers in
particular. A follow-up program to this initial research and advocacy activity is being
planned out with the objective that these results in the adoption of favorable policies and
programs and in the establishment of profitable and sustainable linkage activities between
small producers and modern markets.

-33-
References

Concepcion, S. and Digal, L. (2004). Upstream and Downstream Linkage: the Case of
Vegetable and Mango Industries in the Philippines, Regoverning Markets Program
Country Report.

Digal, Larry (2005), Quality Grading in the Food Chain: The Case of Vegetables in
Southern Philippines. Journal of International Food and Agribusiness Marketing, Vol 17
(1).

Digal, Larry (2001), Analysis of the Philippine Retail Food Industry Journal of
Philippine Development, Vol XVIII,2
FAO Statistics (Faostat), www.fao.org.
Macabasco, Ditas (2004), A Closer Look at Philippine Vegetable Imports, Agrifood
Trade Service, http://www.agr.gc.ca.

Mindanao RoadMap Presentation (2005), Department of Agriculture.

Planet retail Philippine Country report (2005). www.planetretail.com

Roy, Davesh (2005). International Food and Policy Research Institutes work on Modern
Marketing Channels, June 13th, 2006, Indian Institute of Management Ahmedabad

University of the Philippines in Mindanao and Australian Center for International
Agricultural Research ACIAR, Improving the Efficiency of the Agribusiness Supply
Chain and Quality Management for Small Agricultural Producers in Mindanao ASEM
2000/101, unpublished research documents, 2004.

-34-
Appendix 1. Issues and recommendations raised by stakeholders during regional consultations, February 2007
Marketing/Trade Production Finance Organization and Others
Baguio How to respond the
challenge of trade
liberalization
Construct additional
trading post in other
barangays and
municipalities aside
from La Trinidad
Eliminate 1 hour delay
and eliminate seven
layers (handlers and
traders) in marketing
vegetables
Mindanao is always
the 2
nd
option after
Benguet. Exporters
from Taiwan prefer
Benguet in terms of
cost, number of days of
delivery.
gap in marketing
information
(vegetable
consumption)
Complementation and need
for production
programming due to glut
of products
Internal competition
(Principle of comparative
advantage) Mindanao
should not compete with
Luzon (Baguio)
Cluster Marketing and
production presented in the
4
th
NVC didnt happen.
PVIDB?
Government to update data
in the production of
vegetable such as
suitability of soil (GIS),
rainfall distribution, real
time statistics on volume
and suitability maps.
Government to provide
road for strategic areas
Farmers who failed are
usually uneducated. Actual
Provincial government to
help farmers thru
municipality and national
counterpart in financing
Extend Micro credit
program
Clustering is a secret/key
which is a private sector
initiative
There is opportunity in
processed vegetable
Farmer organization
strengthening
Small farmers cannot attend
National Vegetable
Congress. Only the big
corporations
Barangay must be supported
in uniting small farmers in
the barangay
Strengthening of extension
services. Municipality has
the option to convert
position of extension
officers to non-extension
positions. Some extension
officers are not even
agriculture graduate
Benguet Federation should
be strengthened
There are unorganized
-35-

training for the farmers
rather than theories which
is difficult for uneducated.
Certification of organic
vegetables
farmers
To strengthen farmer
organizations, support
Benguet federation of
farmers and provide capital
by giving favorable access
to credit program
No MAO for some
municipalities
Manila Trade liberalization
(phytosanitary)
Information on
quantity and quality
needed by the market
Information on quality
requirements
Follow the export
experience of mango
Trading post not
operational (Laguna)

Genuine seed
identification. Vegetable
seed company to protect
small farmers from buying
fake seeds
Crop zoning and
programming
Having crop insurance-
Risk management
Dealing with truck ban in
different cities. Vegetables
are not exempted whereas
DHL is exempted from
truck ban.
Improve infrastructure
Transportation
To have agriculture funded
C5 food lane north going
Information on accessing
ACEF funds and having
credit w/o collateral. Cut
down red tape.
Access to credit
Assistance to small farmers
Small farmers cannot avail
ACEF Money of acef 1B
download for 20k accesss
When and where the small
farmers start to access the
market? The process,
methodology and advisory
system

-36-
to south to avoid truck ban
Over production. Cannot
meet contracts. Farmers
can meet quota and bond,
quality and packaging but
the expense in high
Technology for processing
Cebu Problem on
consumption. Sharp
decline in intake of
vegetables especially
children which
contributes to
malnutrition.
Department of
Education can start
health program in
schools and replicate in
other schools
Several layers in the
chain which is costly
Advertising vegetable
in tv.
Redefining curriculum
of schools to
encourage children to
Focus on Research and
Development to match
market requirements with
the needs of the farmers
Irrigation system. DENR
to relax watershed
utilization for more areas
to be cultivated and to
harmonize policies with
DA for they are conflicting
Very high cost of inputs
cartel; structure of the
market; breeding high
resistant varieties; role of
R and D (east west- private
sector)
off season planting to avail
opportunities of higher
prices but is more
Assistance of government
officials to small farmers
project using their pork
barrel
Problem in organization of
growers
Lot of trainings and projects
Attitude problem of farmers
and sustainability
Other Agencies aside from
DA should help educate the
farmers
National Vegetable
Congress is not able to
address resolutions because
of changing
people/management
handling the congress
-37-
consume vegetables
Competition with
China in carrots in
terms of price and
quality. Problem on
encouraging
consumers to patronize
Philippine products
Intensify promotion of
vegetable to increase
consumption through
advertising to the
children by
government station and
private sector eg.
Ajinomoto
Limit imports into the
country
Costly export
certification
expensive and riskier
Profitability of small
farmers in farming
Rain shelter
Davao High wastage/losses in
Bankerohan market
Empowerment of local
government and policy
makers to understand
macro overview so
they can improve the
DA & BRE to be ready to
give assistance
Regulation of vegetable
production in other
countries
When the price is high,
many farmers plant which
Private sector wants to
organize before they take
the cold chain project
Organization of the clusters
and stakeholders is key to
solve
overproduction/competing
-38-
local government
programs/capability in
marketing
Justification of putting
up Bagsakan project
including storage
facilities in
Bankerohan through
survey of volume of
vegetables
Marketing approach on
vegetables; improving
health; regulatory for
the consumers
(packaging etc.)
led to overproduction and
causing the prices to fall
LOI looking for supply of
vegetable asparagus;
Currently buying from
marsman;potential
partnership/alliance formed
Use of organic farming,
municipal ordinance of no
burning of excess parts of
corn and rice; needs the
support of the local
government for
implementation of penalty
Comprehensive farm to
market road for the
improvement of quality
and lower cost of
production, irrigation of
potable water
Transportation support
(high cost of shipping, etc)
crops.
Disorganization at the
national level
Using the system of zoning
vegetable crops and focus
on doables and clustering
Vicsmin practicing the
clustering method already
Other farmers not aware of
clustering and cold chain
project
Talk to LGUs for assistance
to organize clustering
Unsuccesful implementation
of government programs;
organization of VICSMIN
to solve marketing of
vegetables;
Livelihood improvement of
women in rural area
-39-
Appendix 2. Policy Resolutions for 5
th
National Vegetable Congress
March 8-9, 2007, Tagaytay City

RESOLUTION NO. 1

A RESOLUTION TO STRENGTHEN AND EXPAND THE
FOOD LANE PROGRAM FOR VEGETABLES


WHEREAS, fresh vegetables are among the most perishable agricultural crops sensitive
to conditions leading to nutrient losses, and therefore, need to be transported without
delay;

WHEREAS, undue extended exposure of fresh vegetables to transport conditions in
tropical environments, such as those found in the Philippines, favor losses in quality and
volume;

WHEREAS, the food lane project was launched to facilitate the delivery of agricultural
crops to the Metro Manila areas by exempting vegetable delivery vans from the truck ban
in Metro Manila roads;

WHEREAS, the food lane project is fraught with implementation problems, and truckers
of vegetables have not been completely spared from extortion;

WHEREAS, there is a need for close monitoring to ensure that the food lane program is
consistently and uniformly implemented through trucking routes from source to
destination market; and

WHEREAS, unfavorable land transport conditions exist throughout the Philippines

NOW RESOLVED, BE IT RESOLVED, as it is hereby resolved, that:

1. The food lane program coverage be extended throughout the country for all fresh
vegetables subjected to land transport;

2. The Department of Interior and Local Government (DILG) ensure resolute and
consistent implementation of the food lane program in all municipalities, providing
guidance in the issuance of ordinances, where appropriate;

3. Transport vehicles used for vegetables be marked prominently to ensure exemption
from truck bans and similar ordinances and protection against extortion;

4. That the DILG coordinate with other concerned Departments for the consistent
implementation of the food lane program;

-40-
5. That monitoring of the implementation of the food lane program be strengthened,
with all concerned agencies using technologies, including aerial systems, at their
disposal; and

6. Acts constituting violations be defined and sanctions for non-implementation and
violations be stiffened.

RESOLVED FINALLY, that copies of the resolution be furnished to the government
agencies concerned.

ADOPTED this 8th day of March 2007, during the Fifth National Vegetable Congress
held at Tagaytay City.


-41-
RESOLUTION NO. 2


A RESOLUTION TO STRENGTHEN THE APPLICATION OF
GRADES AND STANDARDS TO SERVE AS A COMMON
LANGUAGE FOR TRANSACTIONS COVERING
VEGETABLES


WHEREAS, Art. 2 of Republic Act No. 7394, otherwise known as The Consumer Act of
the Philippines declares that it is the policy of the State to protect the interest of the
consumer, to promote his general welfare and to establish standards of conduct for
business and industry;

WHEREAS, it is acknowledged that on-farm sorting and grading activities can enhance
vegetable growers income;

WHEREAS, smallholder vegetable producers urgently need guidance in producing
quality vegetables meeting market requirements, and that grades and standards play a key
role in providing such guidance;

WHEREAS, standards can facilitate trading in vegetables, designing appropriate
handling and packaging systems;

WHEREAS, the application of standards is essential in meeting Sanitary and
Phytosanitary (SPS) and Technical Barriers to Trade requirements for both locally
produced and imported vegetables;

WHEREAS, national standards for vegetables need to be harmonized with international
standards, e.g. Codex Alimentarius;

WHEREAS, grades and standards can be utilized for evaluating credit worthiness of
producers; and

WHEREAS, premiums for quality can only be realized where there are workable
standards applied across the vegetable industry

NOW RESOLVED, BE IT RESOLVED, as it is hereby resolved, that:

1. The Department of Agriculture (DA), in collaboration with the Department of Trade
and Industry (DTI) and in consultation with the Philippine Vegetable Industry
Development Board, Inc. (PVIDB) and regional vegetable industry organizations,
formulate and implement programs strengthening the application of Philippine
National Standards (PNS) covering vegetables;
-42-

2. The National Consumer Affairs Council (NCAC) monitor and coordinate programs
promoting the use of standards for vegetables;

3. The DA through the Bureau of Agriculture and Fisheries Product Standards (BAFPS)
and the Agribusiness Marketing Assistance Service, disseminate the standards
covering vegetables and promote their use;

4. BAFPS ensure that national standards are harmonized with international standards,
particularly those of the Codex Alimentarius;

5. The regulatory units of the DA and DTI, and in consultation with the PVIDB and
regional vegetable industry organizations, identify mandatory standards for
vegetables and define compliance and sanctions for non-compliance with these
standards;

6. The DA, through the Bureau of Plant Industry (BPI), to provide relevant and market-
required pesticide residue analysis services accessible to commercial vegetable
producers to assure their markets and consumers on the compliance with food safety
standards; and

7. Vegetable industry associations, civil society organizations, specifically those
advocating consumer protection and farmer organizations, define and implement
voluntary standards for industry-wide implementation.

RESOLVED FINALLY, that copies of the resolution be furnished to the government
agencies concerned.

ADOPTED this 8th day of March 2007, during the Fifth National Vegetable Congress
held at Tagaytay City.

-43-
RESOLUTION NO. 3

A RESOLUTION URGING THE GOVERNMENT TO
COMMIT P 1 BILLION FUNDS FROM THE AGRICULTURAL
COMPETITIVENESS ENHANCEMENT FUND (ACEF) TO
PROVIDE INCENTIVES AND RISK MANAGEMENT
MEASURES FOR NEW LOAN PORTFOLIOS DESIGNED
TO ENHANCE THE PRODUCTIVITY AND PROFITABILITY
OF SMALLHOLDER VEGETABLE PRODUCERS


WHEREAS, the production and marketing of short-gestating, high-value vegetable crops
is recognized as appropriate to small farms;

WHEREAS, smallholder vegetable farmers are most vulnerable to risks inherent to
vegetable production and marketing;

WHEREAS, clustering and partnerships can play a strategic role in risk mitigation and
modernization of vegetable production in small farms;

WHEREAS, liquidity constraints faced by smallholder vegetable producers limit their
productivity and capacity to innovate to meet existing and emerging requirements of the
vegetable market;

WHEREAS, there is a need for appropriate government policy support measures that
provide for private sector participation in providing and sustaining favourable investment
opportunities for smallholder vegetable farmers;

WHEREAS, government need to assist private financial institutions to overcome risk
perceptions associated with loans extended to smallholder vegetable producers;

WHEREAS, the extension of ACEF has been proposed in House Bill No. ____;

WHEREAS, the rules governing the utilization of the Agriculture Comprehensiveness
Enhancement Fund (ACEF) have been rationalized to ensure benefits to small farmers;
and

WHEREAS, market-directed and integrated approaches are needed to attain the
objectives of ACEF

NOW RESOLVED, BE IT RESOLVED, as it is hereby resolved, that:
-44-

1. House Bill No. ___ be certified as urgent;

2. That One Billion Pesos (P 1 B) from the ACEF be utilized in a partial loan guarantee
program to stimulate private banks to offer a new portfolio of loans with more
innovative financing terms to be extended to smallholder vegetable producers;

3. That 10 % of this amount be used for capacity building and designing tools for risk
assessment and management for use by banks offering this new portfolio of loans;

4. That the criteria for private banks to be covered in the guarantee program be defined
to ensure the participation of responsible financial pioneers, willing to institute
measures to minimize the bureaucratic red tape; and

5. That, as part of risk management, that covered banks

5.1 include among its criteria for creditworthiness of smallholders involvement
in clustering and similar modalities of partnerships; and
5.2 require coverage through a crop insurance program.

6. That, to further provide risk mitigating measures, the government continue a
subsidized crop insurance program, with linkages to international re-insurers that can
provide technical assistance to help facilitate a transition towards a crop insurance
program based in existing private insurance companies.

RESOLVED FINALLY, that copies of the resolution be furnished to the government
agencies concerned.

ADOPTED this 8th day of March 2007, during the Fourth National Vegetable Congress
held at Tagaytay.


-45-


RESOLUTION NO. 4


A RESOLUTION TO ENHANCE THE PROFITABILITY OF
SMALLHOLDER VEGETABLE PRODUCTION THROUGH A
PACKAGE OF INTEGRATED TECHNICAL ASSISTANCE
AND PROMOTION OF VEGETABLE CONSUMPTION


WHEREAS, vegetable production based in small farms is faced with problems inherent
to the nature of this production system;

WHEREAS, there is a need to ensure that location- and situation-specific technology
needs of vegetable producers are appropriately and adequately addressed;

WHEREAS, there is a need for a stronger interface between research and extension to
ensure that research results are translated into applicable technologies;

WHEREAS, there is a need to professionalize extension services extended to vegetable
producers and traders;

WHEREAS, there is a need to provide impetus for ensuring a strong research and
extension program directed at the vegetable industry through a sustained demand
supported by a increasing per capita consumption;

WHEREAS, the partnership between the government and private sector in extension
delivery systems needs to be strengthened; and

WHEREAS, clustering and similar partnerships can enhance access by small holder
vegetable producers to services

NOW RESOLVED, BE IT RESOLVED, as it is hereby resolved, that:

1. The national government progressively decentralize the delivery system for
extension services, with local government units (LGUs) engaging stakeholders in
site- and location-specific extension programs;

2. The Department of Agriculture (DA) ensure the greater involvement of regional field
units (RFUs) in mid-stream research and extension programs, ensuring the
availability of resources to engage professional specialists in the design and
implementation of a highly decentralized extension program;

-46-
3. The DA, through the Agriculture Training Institute and its RFUs, provide guidance
in the formulation and implementation of an integrated, multidisciplinary extension
programs;

4. The DA and LGUs to allocate funds and provide technical support for regional-level
trainors training and provincial-level farmers training on Good Agricultural
Practices (GAP) applicable for vegetable production;

5. Capacity building in production and postharvest systems be undertaken and sustained
by LGUs, more specifically the provincial government, with counterpart resources
from the municipal governments;

6. That smallholder vegetable producers entering into contracts, agreements or
clustering arrangements with corporate groups and other farmers with more resources
be given priority in the identification of target beneficiaries in research and extension
programs;

7. The government at the appropriate level match resources put up by the private sector
to mainstream and enhance the competitiveness of smallholder vegetable producers
who would otherwise be marginalized;

8. The DA to provide financial and technical support to the Philippine Vegetable
Industry Development Board, Inc. (PVIDB) and the regional vegetable industry
organizations for the development and implementation of an appropriate Market
Information System that will provide reliable, timely, and accessible information for
business decisions;

9. LGUs collect, organize and analyze information related to their local markets, to
better define target markets for vegetable producers; and

10. LGUs, with assistance from appropriate national agencies, particularly the
Departments of Health and Education, integrate the promotion of vegetable
consumption in site-specific nutrition program designed to improve the health status
of local communities.

RESOLVED FINALLY, that copies of the resolution be furnished to the government
agencies concerned.

ADOPTED this 8th day of March 2007, during the Fifth National Vegetable Congress
held at Tagaytay City.

-47-
RESOLUTION NO. 5


A RESOLUTION COMMENDING THE DEPARTMENT OF
AGRICULTURE, THE DEPARTMENT OF TRADE AND
INDUSTRY, CONCERNED LOCAL GOVERNMENT UNITS,
THE REGIONAL AGRICULTURE & FISHERIES COUNCILS,
THE USAID-FUNDED GROWTH WITH EQUITY IN
MINDANAO (GEM) PROGRAM, ACADEMIC
INSTITUTIONS, AND RESOURCE ORGANIZATIONS FOR
THEIR PRO-ACTIVE SUPPORT FOR THE PHILIPPINE
VEGETABLE INDUSTRY DEVELOPMENT


WHEREAS, the National Vegetable Congress has been successfully held annually since
2003 with the strong support of the Department of Agriculture (DA), through its regional
field units, the concerned local government units (specifically, Cagayan de Oro City, La
Trinidad Municipality in Benguet, Cebu City, Davao City, and now in Tagaytay City),
and the USAID-funded Growth with Equity in Mindanao (GEM) Program;

WHEREAS, the Philippine Vegetable Industry Development Board, Inc. (PVIDB) was
created as a result of the 1
st
National Vegetable Congress held in April 2002 in Cagayan
de Oro City and was endorsed for registration with the Securities and Exchange
Commission by then DA Secretary Luis P. Lorenzo, Jr.;

WHEREAS, the DA Head Office Units, RFUs, and Regional Agriculture & Fisheries
Councils (RAFCs) have been fully supportive of the organization and/or strengthening of
the different private-sector-led vegetable industry groups in the regions, provinces,
municipalities, and cities, and have been providing services and guidance in the conduct
of priority programs and activities of these industry groups;

WHEREAS, the Department of Trade and Industry (DTI) has initiated the clustering
program and the One-Town-One-Product (OTOP) program which are helping to focus
the efforts of vegetable industry players in improving the competitiveness of the
vegetable industry;

WHEREAS, the USAID-funded GEM Program has been providing secretariat and
technical support for the PVIDB, has been very instrumental in the capacity building of
various vegetable industry groups in Mindanao, and has provided co-funding and
technical assistance for the development of the Mindanao vegetable industry by
implementing a package of services, which includes innovative solutions to improving
the vegetable supply/value chain, market development and access, appropriate post-
-48-
harvest and cold chain technologies, and policy advocacy, to increase trade, investments,
and employment in the Mindanao vegetable industry;

WHEREAS, institutions such as the University of the Philippines in Los Baos, the
University of the Philippines in Mindanao, and the Benguet State University have
provided various research and academic studies for a more objective assessment of the
vegetable industry; and

WHEREAS, other resource organizations such as the Food & Agriculture Organization
(FAO), the Catholic Relief Services (CRS), the Australian Center for International
Agriculture Research (ACIAR), the Canadian Executive Service Officers Business
Assistance Program (CESO-BAP), the AusAids Philippine-Australian Short-Term
Training Program (PASTT), have, in one way of another, been a part of the growth of the
Philippine Vegetable Industry through its various programs.

NOW RESOLVED, BE IT RESOLVED, as it is hereby resolved, that:

1. Recognition be given to the support and services provided by DA and its various units
and RFUs, DTI, the RAFCs, the GEM Program, concerned academic institutions, and
concerned resource organizations given to vegetable farmers and other vegetable
industry stakeholders during the Fifth National Vegetable Congress on _ March 2007;

2. Who will act on this? Thanks and Appreciation be given to the DA, the RFUs, DTI,
the RAFCs, the GEM Program, the concerned academic institutions, and concerned
resource organizations; and

3. The DA, its bureaus and attached agencies; other relevant government agencies; and
resource organizations continue to provide support to PVIDB and e regional vegetable
industry groups in their endeavor to nurture multisectoralpartnerships and expand its
networks to be able to create a collaborative atmosphere and pro-active approach in
addressing industry challenges.


RESOLVED FINALLY, that copies of the resolution be furnished to the government
agencies, local government units, and private organizations concerned.

ADOPTED this 8th day of March 2007, during the Fifth National Vegetable Congress
held at Tagaytay City.