A SUMMARY REPORT ON THE MARKETING EFFICIENCY STUDY ON KEY COMMODITIES IN SOUTHERN MINDANAO

Transcription

1 Republic of the Philippines Department of Agriculture Upland Development Programme in Southern Mindanao (UDP) A SUMMARY REPORT ON THE MARKETING EFFICIENCY STUDY ON KEY COMMODITIES IN SOUTHERN MINDANAO Marketing Series: Number 09 May 2001

2 PREFACE This is the summary report on a series of market efficiency studies conducted in the UDP-covered areas for selected commodities. The marketing efficiency of the following commodities were evaluated : Compostela Valley Cardava Coffee Durian Davao Oriental Abaca Copra Tomatoes Davao del Sur Abaca Carrots Mangoes Saranggani Chicken Corn Lacatan South Cotabato Peanuts Potatoes Swine Recommendations to improve marketing efficiency are herein offered. This report was prepared by: Jaymee Alcos Elizabeth Supangco Julianne Revilleza May 2001 i

3 ACKNOWLEDGEMENTS Report data were gathered from a series of personal and group interviews with farmers and traders of the key commodities in Southern Mindanao. The time and effort that the respondents have placed into this study are acknowledged. For the valuable assistance extended to the researchers on the duration of this study, the following are recognized: Dr. Isabelita M. Pabuayon Department of Agricultural Economics, UPLB Bagangga Municipal Agriculturist s Office Bureau of Agricultural Statistics-Southern Mindanao Cabuyo-an Barangay Council Caraga Municipal Agriculturist s Office Fiber Industry Development Authority Glan Municipal Agriculturist s Office Kablon Barangay Council Mabini Municipal Agriculturist s Office Mahan-ub Barangay Council Maitum Municipal Agriculturist s Office Malalag Municipal Agriculturist s Office Maragusan Municipal Agriculturist s Office Mati Municipal Agriculturist s Office New La Union Barangay Council Palo 19 Barangay Council Pamintaran Barangay Council Philippine Council for Agriculture Research and Rural Development Pitu Barangay Council Sobrecarey Barangay Council Sufa-tubo Barangay Council Taguibo Barangay Council Tampakan Municipal Agriculturist s Office Tupi Municipal Agriculturist s Office UDP-Compostela Valley UDP-Davao del Sur UDP-Davao Oriental UDP-Provincial Management Office UDP-Saranggani UDP-South Cotabato ii

4 TABLE OF CONTENTS Page number Preface i Acknowledgements ii Table of Contents iii Definition of Terms iv Introduction 1 Conceptual Framework 2 Research Methodology 4 Results and Discussion 7 Conclusion 27 Recommendations 30 References 32 Appendix A. The Terms of Reference for 34 Consultancy Services-Marketing Efficiency Study iii

5 DEFINITION OF TERMS Cash costs - costs where actual money is involved. Cash returns - the earnings, where actual money is involved, from the sale of the farm produce. Depreciation - the expense brought about by the wear and tear of a piece of equipment, building or tool used in an enterprise for a given period of time. Economies of scale - the economic concept wherein production at a larger scale (more output) can be achieved at a lower cost. Exchange labor - the value, non-monetary in nature, of the work (in mandays) put in by neighbors, friends or other laborers in exchange for the farmers help with similar farm activities in their respective farms. Given away - the value, non-monetary in nature, of the farm produce given out by the farmer to others without any monetary payment. Hired labor - the cash expense for engaging the services of farm laborers. Home consumption - the value, non-monetary in nature, of the farm produce consumed by the farmer and his family. Losses/shrinkage of produce - the value, non-monetary in nature, of the damages and spoilage sustained by the produce. Market information - basic information on prices and quantities traded of major commodities, from all markets assembly, wholesale and retail. Marketing channel - the inter-organizational system composed of interdependent institutions tasked in moving the product from production to consumption. Marketing efficiency - the maximization of the input-output relationship where inputs refer to resources (land, labor, capital) used in moving the products from point of consumption to the point of production and output referring to consumer satisfaction on goods and services made available in the iv

6 market. Marketing margin - the difference in prices between the different levels of the marketing system. Marketing - series of services performed in moving the product from the point of production to the point of consumption. Net farm income - returns of the use of capital and labor. The overall profit of the farm after all the expenses, cash and non-cash, have been paid off. Non-cash costs - costs items used in the production process wherein no direct outlays occurred or the costs incurred are not monetary in nature. Non-cash returns - the value, non-monetary in nature, of the farm produce consumed by the farmer and his family or those given away. Opportunity cost of capital - the price of foregone opportunity in the use of the capital invested in the enterprise. It is usually pegged at the current savings interest rate. Point of consumption - last sale of the product. Point of production - point of first sale. Profit margin - the return to the middlemen for their entrepreneurship, the risks and the cost of money. Return on investment - measures the amount of cash that the entrepreneur gets from the capital investment after first paying the opportunity expenses on the value of family labor and management. It also determines how much money the producer got in return for every one peso invested. Saved for seeds - the value, non-monetary in nature, of the farm produce kept by the farmer for use as planting material in the following production cycles. Unpaid family labor - also called own labor. The value, non-monetary in nature, of work (valued in man-days) by the farmer and his family. v

7 INTRODUCTION 1. The Upland Development Programme (UDP) is an integrated area development program whose overall objective is to develop a replicable methodology for sustaining the upland resource base and improving the living standards and prosperity of upland communities who derive most of their income from upland farming (UDP Global Work Plan ver.5, 1999). The programme has six (6) interdependent components, one of which is the Marketing and Enterprise Development (MED), which aims to improve upland farmers income through the implementation of market-led on- and off-farm enterprise. 2. One of the strategies in achieving this objective the Component is tasked to set up a market information system (AMIS) which would regularly supply farmers, traders and other marketing participants with basic information on prices and quantities traded of key commodities, from relevant markets assembly, wholesale and retail. 3. An effective agricultural market information system is necessary to provide farmers information on the market potential of commodities planned for production. It is also needed to provide price updates on the nearest and key markets to negotiate better prices for their produce. Lastly, market information is necessary for farmers to decide to which markets they could sell their produce (Dumon, 2000). 4. On the part of the traders, market information could allow them to move produce from a surplus to a different market and make decisions about the viability of storage where technically feasible (Cunningham, Feb. 2000). 5. In line with this, a marketing efficiency study is essential in designing an AMIS. Information on the marketing decisions at each level of the marketing chain of a commodity system would be necessary in determining the extent to which marketing interventions can be implemented (Terms of Reference for a Marketing Efficiency Study of Key Commodities in Southern Mindanao, 2000). 6. This study therefore aims to assess the impact of existing marketing systems of key commodities vis-à-vis income of the farmers. 7. Specifically, the study aims to determine the levels of participants in the marketing chain of a particular commodity; 8. Determine the marketing practices involved in terms of storage, handling, pricing, delivery systems and terms of payment; 9. Deconstruct marketing margins of commodities at each level in the system to determine the percentage of consumer price that the producer receives, exclusive of production costs;

8 10. Identify strengths and weaknesses of the existing marketing system of key commodities; and 11. Determine appropriate marketing interventions needed to improve economic efficiency of the key commodities. CONCEPTUAL FRAMEWORK 12. Production is a technical process of transforming resources such as land, labor, capital and management into goods and services. This process cannot be possible without any of these factors, although each production varies depending on the amount of resource endowments used by the farmers. The production process entails a good decision of the farmer in the different aspects, which eventually affects his farm income. 13. After inducing an increase in production, a good marketing system must be at hand to facilitate the distribution of the products. 14. Marketing itself is a complex process that includes the operations, institutions and economic factors involved in the distribution of the product. Marketing involves the movement of the products from the point of production to the point of consumption after passing through various intermediaries. These market intermediaries are responsible in performing the different marketing processes such as transferring, sorting, storing and grading. The costs incurred din the marketing practices including inefficiencies and along with the profit, makes up the marketing margin. The magnitude of the marketing margin in relation to the farm price will determine the value of the different selling prices. Thus, a wider marketing margin would entail higher selling prices while the narrower marketing margin means lower prices. 15. Finally, the factors that may influence the entire marketing system are physical/climatic, legal/political, socio-cultural and economic/technical factors. Drought and typhoon are considered physical/climatic factors. Government intervention such as employment laws, wage rates, seed subsidies and taxes also affect the marketing system. Socio-cultural factors involve age, educational attainment, lifestyle, tastes and preferences, which influence the marketing practices. Economic growth, levels of investment, levels of government and non-government spending compromise the economic/technical factors. These factors could directly or indirectly affect the production and marketing system of the key commodities. 2

9 PRODUCERS FACTORS OF PRODUCTION Land Labor Capital Management PRODUCTION MARKETING PRACTICES Transferring Sorting/Grading Storing MARKETING COST MARKETING MARGIN FARM PRICE TRADERS Assemblers Assembler- Wholesalers Wholesaler- Retailers Retailers INEFFICIENCIES Losses High marketing cost PROFIT MARGIN SELLING PRICE RETURNS Entreprenuership Risks Cost of money invested CONSUMERS Figure 1. Conceptual framework of the production and marketing of key commodities in Southern Mindanao. RESEARCH METHODOLOGY Types and Sources of Data 16. The study used both primary and secondary data in analysing the marketing efficiency of key commodities in the selected project sites. 17. Primary data were also gathered through personal interviews of farmers, traders and other marketing participants of the selected key commodities with the aid of questionnaires. Four sets of questionnaires were utilized in the study, one for 3

10 farmers, for traders, institutional buyers and for key informants or authorized personnel from different government agencies. 18. The farmers were asked about their production and marketing practices, sales, production and marketing costs of their commodities. They were also asked on available market information with emphasis on what they need to know to improve their production and marketing practices. 19. The traders were, in turn, asked about their marketing, costs, sales and the problems and constraints they have encountered in the marketing of the commodities. 20. Moreover, focused group discussions with key informants and selected farmers were conducted to probe the importance and the demand for market information in each province. This provided rapid feedback on the available market information, information dissemination strategies and the existing in the area. 21. Secondary data on the study area, the volume and value production and other pertinent data related to production and marketing of selected key commodities were obtained from several government agencies such as the Department of Agriculture (DA), Department of Trade and Industry (DTI), Bureau of Agricultural Statistics (BAS), Office of the Provincial Agriculturists (OPAs), Municipal Agricultural Office (MAOs) and the Upland Development Programme (UDP). 22. The baseline interview obtained the following information from respondents: a. The socio-cultural characteristics of farmers and traders of key commodities in selected provinces of Southern Mindanao; b. The production and marketing practices and strategies; c. Production and marketing costs incurred; d. Volume purchased and sold; e. Marketing margins; f. Seasonal market prices; g. Problems and constraints encountered by the producers and the traders; h. Existing production and market information and their respective sources; and i. Problems in production and market information dissemination. Sampling Procedure 23. The study was conducted in selected UDP area. Using the UDP agribusiness profile, each province was evaluated and the sitio/barangay with the most producers of the predetermined key commodities were chosen as the study areas. Purposive 4

11 sampling was done in each area, and 20 to 100% of the target population were interviewed. Their respective agents, assemblers and/or buyers were then traced accordingly. Margin of Error 24. For those commodities where the current population were determined (in this case durian, cardava and peanut) the margin of error at a 95% confidence level was determined. Analytical Tools 25. In analysing the production and marketing of the selected commodities, the descriptive method analysis was used in describing the management practices, sources of financing, production and marketing strategies and problems of farmers and traders. In addition, flow charts were used to present the product and geographic flow of the commodities. 26. On the production side, costs and returns analysis were employed. The production costs incurred included the cost of inputs, labor, tools and equipment, farm supply, transportation, fuel and oil, tax, planting material or animal stocks, opportunity cost of capital and depreciation costs. These data, along with others, were analysed to determine the profit in relation to the returns of the farm. Net cash returns were computed by deducting the cash expenses from the total receipts. This showed the cash balance after cash costs were deducted from the cash returns. 27. The Net Farm Income (NFI) is the most important measure of profitability and efficiency on the part of farmer as the more complicated input-output efficiencies cannot be determined given the time and resource constraints of the study. The NFI is obtained by subtracting the Total Returns with the Total Costs. A positive NFI (greater than zero) would mean that the farm is profitable and efficient while a negative value NFI (less than zero) would mean that the farm is at a loss and is inefficient in both production and marketing. 28. The Return on Investment (ROI) was also used to assess the profitability of the trader s enterprise. ROI measures the income that the trader gets from the capital investment. It also determines how much money the enterprise earns in return for every one peso invested. The ROI was computed using the formula: ROI = Net Income / Capital Investment x On the marketing side, the inter-organizational system composed of interdependent institutions tasked in moving the product from production to consumption, or the marketing channel, was traced for every key commodity of which marketing costs (MC), marketing margins (MM) and percentages, pricing and profit margins (PM) at every marketing level were analysed. 30. The formula of which are as follows: 5

12 (BP) Marketing Margin (MM) = Selling Price (SP) Buying Price MC as % of MM = Marketing Cost (MC)/MM x 100 PM as % of MM = Profit Margin (PM)/MM x The marketing costs represent the value of the marketing practices and product loss in the market while marketing margin is the difference in prices between the selling and the buying price. 32. High marketing costs can be attributed to high wastage or losses due to poor infrastructure and management inefficiencies. 33. In the study of marketing margins, the returns and marketing costs are analysed. If the costs are high, it is possible that the enterprise performed more marketing services than usual, the enterprise suffered from excessive losses due to poor handling of produce, or other inefficiencies of the enterprise. 34. The marketing efficiency refers to the maximization of the input-output relationship, where inputs refer to resources (land, labor and capital) used in moving the products from the point of production to consumption. Output, on the other hand, refers to the consumer satisfaction on goods and services made available in the market. 35. One way of measuring the marketing efficiency is through the analysis of price (buying and selling prices) at each level. By getting the ROI of the enterprise and comparing it with the opportunity cost of capital of 8% per annum, it could be determined if the marketing activities done by the firm is more profitable than just investing the money in a bank. 36. In addition, the percent profit margin (relative to the marketing margin) was also compared with the percent marketing cost (relative to the marketing margin). If the percent profit margin is found to be higher than the percent marketing cost, the marketing activities of the trader is considered efficient. 37. Lastly, the percent share to the consumer peso of each marketing participant was also determined by getting the percentage of the marketing participant s selling price relative to the final buying price of the consumer (in the case of traders, less their buying price). This indicates the proportion of the final buying price that goes to each marketing participant in the chain. Limitations of the Study 38. During the interviews, it was observed that the farmers relied on their memories in recalling their past production level, income, farm tools and equipment. There were no record-keeping practices. Thus the cost and return that were analysed were only estimates. The Return on Investment (ROI) was excluded on the analysis of the farmer s income due to the ambiguity of the values arrived at. This is mainly due 6

13 to the fact that some factors on capital investment were not properly quantified in the study. For instance, land valuation was excluded because none of the farmers hold titles to the land that they cultivate. Land, therefore, was not considered a fixed investment in this enterprise and was merely considered as an expense through the credit of land cost (land tax if owned, rent if tenanted). 39. In the marketing aspect, the respondents interviewed were the middlemen named by the farmers. Most of them also based their answers on their memories since they do not keep records regarding their marketing operations. 40. On the analysis of the marketing efficiency on the part of the farmers, only the Net Farm Income (NFI) analysis was utilized since the available data could only allow for this kind of analysis and not the more complicated input-output efficiency analyses. 41. Lastly, the size of the commodity markets, specifically, the estimation of demand was not included in the study. Cardava RESULTS AND DISCUSSION Compostela Valley 42. Barangay Cabuyo-an, Mabini was identified to be the UDP area with the most cardava farmers in Compostela Valley. The marketing efficiency study on cardava in Barangay Cabuyo-an, Mabini was conducted last March 21, It was established that production in the area is low, with a yield of 136 kilograms for the month of February The cardava marketing system in the area has long marketing chain with four participants namely, the farmer, municipal assembler, provincial assembler and the processor. 45. All the cardava sold by the Cabuyo-an farmers were eventually sold to maruya and banana-que makers in the Mabini public market or banana chips processors in Tagum City. 46. The farmers receive a farm-gate price of P2.25 per kilogram of cardava. However, this amount is not enough to cover the farmer s cost of production and marketing which total P3.20 per kilogram. The marketing cost, which involves the value of labor in cleaning the fruit and carrying it to the barangay center is P0.59 per kilogram. 7

14 47. At the P2.25 per kilogram price of cardava, the farmer has a 77.5% share in processor s peso. This means that 77.5% of the processor s buying price goes to the farmer while the rest is shared between the municipal and provincial assembler. 48. Only 15-20% of the traders marketing margins are attributable to profit. This indicates that the traders earn very little profit compared to their respective marketing costs. 49. However, analysis of the ROI show that both the municipal and provincial assemblers market cardava efficiently since their ROIs were determined to be greater than the 8% opportunity cost of capital. 50. It was also determined that the processor is willing to buy the cardava from the farmers, thereby shortening the marketing chain and reducing marketing costs. The processor willing to buy the cardava from the farmers at P2.55 per kilogram if it is delivered to them and P2.35 to 2.40 per kilogram if the cardava are to be picked up from the farm. However, this is under the condition that the volume of sale is relatively large. 51. The recommendations therefore are as follows: Increase the cardava production to lessen costs through economies of scale; Encourage the collective marketing among farmers so that a larger volume could be achieved to sell to the processor; and Conduct a study on cardava production and the factors, which could lead to an increase in production and decrease in costs. Durian 52. Barangay Cabuyo-an Mabini was identified to be the UDP area with the most number of durian farmers in Compostela Valley. The marketing efficiency study on durian in Barangay Cabuyo-an, Mabini was conducted last March 20, Based on farmer interviews, it was established that most of the farmers sell the durian directly to the consumers by peddling the fruits along the National Highway. It was only in one case that a farmer sold his produce to a retailer in Sto. Tomas, Davao del Norte. This very short marketing chain gives the farmer more bargaining power on setting the price of his produce. 54. For the farmers who sold the fruits directly to the consumers, the average selling price piece is P51.72 with a marketing cost of P0.72 apiece. The selling price of the farmer who sold to the retailer, however, is P50 apiece. The marketing cost per piece for this farmer is P

15 55. The NFI per piece of durian for the first type of farmer is P42.33 and P40.28 for the second farmer. The positive NFIs indicate that durian production and marketing in Barangay Cabuyo-an is very profitable and efficient. 56. On the part of the retailer, it was determined that with a profit of P4.83 per piece of durian, ROI is 76.7%. This indicates that the marketing of durian by the retailer is efficient. 57. During the course of this study, it was established that the main strength of the durian market is the fruit s inherent rarity, which causes its relatively high demand. For Cabuyo-an durian farmers, however, the weakness is in the fact that the farmers are limited to selling the fruits in Mabini, Tagum and Sto. Tomas when they could sell the fruits at the more populated urban areas such as Davao City, where the price of durian is perceived to be higher. 58. Also, productivity was determined to be low compared to the ideal yield of 100 to 1000 fruits per tree (as established from the local Agricultural Technicians). This is due to the poor cultural and management practices aggravated by the minimal use of production inputs. 59. Based on the findings of this study, it is recommended that trainings on proper cultural practices and inputs to improve and increase production should be conducted. 60. Also, information on the prices of durian in urban areas such as Tagum, Panabo, Davao City, along with the per unit transportation cost to these areas should be regularly made available to farmers so that they would be encouraged to bring and sell their produce to other areas. Coffee 61. Barangay Pamintaran, Maragusan was identified as the UDP area with the most coffee producers in Compostela Valley. The marketing efficiency study on copra in the area was conducted last March 19, Based on farmer and trader interviews, it was established that there are three (3) participants in the marketing system of coffee, namely the coffee farmer, municipal assembler and a processor. In this case, all of the coffee went to one processor, which is Nestle Phils. 63. The coffee beans are sorted immediately after being picked off the tree, after which they are delpulped, ground, dried and sacked. Another type of processing practiced by the coffee growers in Maragusan is by drying the beans first before it is hulled, ground and sacked. After sacking, the ground coffee beans are brought down from the farm to the Maragusan poblacion where they are sold to the municipal assemblers. The total marketing cost incurred by the farmer from sorting until delivery to the municipal assembler is P9.27 per kilogram. 9

16 64. At the time of purchase, the municipal assembler tests the coffee for moisture content and percent bad grains, after which price adjustments are made to determine the corresponding buying price of the delivered coffee. The average buying price of the municipal assembler from the farmers is P27.38 per kilogram. 65. The P27.38 per kilogram selling price of the farmer gives him a P11.47 per kilogram NFI. This NFI, being greater than zero (0), indicates that coffee production and marketing Barangay Pamintaran is profitable and efficient. 66. From Maragusan poblacion, where the municipal assembler is based, the coffee is then delivered to the Sasa buying station of Nestle Philippines. There, the coffee undergoes a stricter testing and grading system where the coffee is tested for moisture content, percent bad grains, stinker and moldy grains. As with the pricing scheme of the municipal assemblers, Nestle also adjusts their buying price according to the quality of the coffee delivered to them. 67. An analysis of the municipal assembler s marketing margin show that with a profit of P1.60 per kilogram, which is 41% of his marketing margin, the ROI is 62.64%. This high ROI indicates that the municipal assembler s coffee-marketing activities are efficient. 68. Further analysis established that the farmer receives 88% of the buying price of Nestle Phils. This means that for every peso paid by Nestle Phils. for the coffee bought from the municipal assembler, P0.88 goes to the farmer. 69. On the matter of strengths and weakness of the coffee marketing system, it was established that the coffee farmers and traders benefit from the existence of Nestle Phils. as this processor is a sure buyer of their produce. Also, the proximity of Nestlé s Sasa buying station has helped reduce the assembler s transportation cost, thereby increasing his income. 70. However, the apparent dominance of Nestle leads to the reliance of the local industry s pricing system on Nestle s buying price. This condition is aggravated by the fact that Nestle depends on world prices so it is possible that coffee prices would still be low, if the world market prices were low, despite a relative low local supply. 71. It was also determined that the farmers do not put much importance on the grading standards of coffee, as set by the assemblers and Nestle. This leads to a lower quality coffee produced by the farmers and, consequently, reducing their income. 72. To reduce the dependence of the farmers on Nestle as their sole buyer, the farmers are encouraged to look for alternative buyers such as local processors of coffee and other coffee processors such as Consolidated Foods Corporation, Commonwealth Foods Corporation and General Milling Corporation. A study on the feasibility of selling to such alternative buyer should also be conducted to determine if it would be more profitable to sell to these buyers rather than to Nestle. 10

17 73. Also it is recommended that training on the grading standards and requirements of Nestle should be conducted to allow farmers to produce betterquality, high-priced coffee. Copra Davao Oriental 74. Sitio Coog, Mahan-ub, Bagangga was identified as the UDP area with the most copra producers in Davao Oriental. The marketing efficiency study on copra in the area was conducted last March 15, Based on farmer and trader interviews, it was established that there are three (3) participants in the marketing system of copra, namely the copra producer, barangay assembler and a processor. In the case of Sitio Coog, all of the copra went to one processor, which is INTERCO in Mati. 76. Copra undergoes several post-harvest and processing activities from harvest as coconut until its sale as copra. First, the harvested coconuts are cracked open to obtain the meat. The meat is then dried, either by sun drying or kiln drying, until it reaches the ideal moisture content of 16%. The copra are then put into sacks and sold. 77. Some Sitio Coog farmers enter a agreement with farm laborers such that the laborers get 60% of the net sales if they assume all the responsibility and costs from harvesting the coconuts to sacking the copra. 78. It was determined that the average farm-gate price of copra is P3.93 per kilogram. The copra is brought and sold by the farmers to the barangay assembler based in Bagangga proper, during which the transportation cost incurred is P0.86 per kilogram. The total marketing cost for the farmer, including the cost of processing the copra is P3.17 per kilogram. 79. The NFI of the copra producer was established at P This value, being less than zero, indicates that copra production and marketing in Sitio Coog is neither profitable nor efficient. 80. An analysis of the assembler s operations, however, shows that he is earning a profit of P0.59 per kilogram. This profit makes up 55% of his profit margin, which implies that he is getting relatively large profit considering that it is almost the same value as his costs. Further analysis show that with an ROI of 0.05%, the assembler has a high capital investment relative to his profits. It can be concluded, therefore, that the assembler is inefficient in selling copra. 81. A major weakness identified in the copra marketing system is the gradual decrease in copra world prices brought about by increasing alternative sources of oil. 11

18 82. Another weakness that was identified during the study was the split payments made by the processor to the assembler. Since the processor only pays 70% of the buying price upon purchase and only pays the remaining 30% after two weeks, the duration of which, the copra s moisture content is determined, it causes inefficiency in payment. This is due to the fact that the remaining 30%, if given during the time of purchase, could be used by the assembler as capital in other profitable activities. 83. As previously discussed, the major factor in the inefficiency of the copra marketing system is the price, it is recommended, therefore, that farmers should be encouraged to diversify their use of coconuts. Livelihood projects on handicraft making, the materials of which should come from the coconut, should be established. Other industries that can be instituted locally are fiber-making and charcoal production. Tomato 84. Barangay Taguibo, Mati was identified as the sole UDP area producing tomatoes. The marketing efficiency study on tomatoes in the area was conducted last March 12, Based on farmer and trader interviews, it was established that the farmer and the retailers based in Mati comprise the marketing channel for tomato. 86. It was determined that farmers bring and sell the tomatoes in Mati, during which they incur a marketing cost of P0.44 per kilogram. Since they sell the tomatoes at an average price of P5.00 per kilogram, the NFI is P0.09. This value, being greater than zero, indicates that tomato production and marketing in Barangay Taguibo is both profitable and efficient. 87. On the part of the tomato retailers, it was determined that the tomatoes are retailed at an average price of P8.00 per kilogram. The retailer s profit was further established at P2.30 per kilogram, which is 77% of his price mark up, or marketing margin. Lastly, the retailer s 40% ROI, being greater than the 8% opportunity cost of capital, means that the retailer s tomato marketing activities are efficient. 88. The tomato farmers, despite producing and marketing tomatoes efficiently, are faced with the threat of competition by the Maragusan tomato producers, as the tomatoes delivered from Maragusan are perceived to be cheaper. 89. Another problem in marketing tomato is the poor packaging system that the Taguibo farmers employ. The use of sacks and kaing as containers make the produce susceptible to bruising and spoilage. 90. It is recommended, therefore, that the farmer s use improved packaging materials such as bamboo boxes and specially designed plastic bags to reduce tomato losses. 12

19 91. Lastly, a market study on the size of the tomato market in Mati, along with the size of the Maragusan production and its destinations should be conducted to determine if the Mati market could still accommodate any increase in production on the side of the Taguibo tomato farmers. Abaca 92. Barangay Sobrecarey, Caraga was identified as the UDP area with the most abaca producers in Davao Oriental. The marketing efficiency study on abaca in the area was conducted last March 14, Based on farmer and trader interviews, 3,800 kilograms of abaca was traced from the farm to the processor. It was established that the there are four participants in the abaca marketing system, namely the farmer, barangay assembler, municipal assembler and the processor. 94. The marketing practices on the part of the farmer involve peeling, stripping and drying to produce the abaca fiber. It is then graded and bundled before transported to the barangay poblacion where it is bought by the barangay assembler. The barangay assembler then brings the abaca to the municipal assembler based in Manay who then delivers and sells it to the processor in Davao City. 95. The farmer incurs an average marketing cost of 8.68 per kilogram of abaca. This cost includes all the expenses of processing the abaca and transporting it to the barangay assembler. At an average P14 selling price per kilogram of abaca, it was determined that the NFI per kilogram is P3.41. The abaca farmer s NFI, having a value greater than zero (0), indicates that abaca production and marketing in Barangay Sobrecarey is profitable and efficient. 96. On the part of the traders, their respective marketing margins were analysed and it was determined that the P0.92 profit per kilogram of barangay assembler makes up 61% of his marketing margin. This means that the barangay assembler is able to minimize his marketing costs, which gives him a larger margin of profit. 97. The municipal assembler, on the other hand, has only a P0.17 per kilogram profit. This makes up 21% of his marketing margin, which indicates that, his marketing cost, relative to his profit, is high. 98. The traders respective ROIs were further analysed and it was determined that with the barangay assembler s 14% ROI, abaca marketing on a barangay level is efficient. The Manay assembler, however, has only a 2.72% ROI which, being lower than the 8% opportunity cost of capital, indicates that his marketing activities are inefficient. 99. Aside from the abaca fiber industry s established market, another strength identified was the presence of improved post-harvest practices and technologies. 13

20 100. Nevertheless, this technology is not properly disseminated among the abaca farmers. Consequently, the farmers are stuck with antiquated production and postharvest facilities and knowledge. This leads a high production and marketing cost on the part of the farmers It was also established that the farmers have inadequate knowledge on the grading classifications set by the Fiber Industry Development Authority. This results to a lower income for the farmers since they are not able to produce good quality, high priced abaca Another problem for the Sobrecarey abaca farmers is the poor condition of the Caraga Highway-Sobrecarey tertiary road. This has led the farmers to depend on the assemblers to buy their produce, as they do not have the facilities to transport the abaca themselves Lastly, it was established the farmers face production related problems such as the high production cost. In addition, it was revealed that the farms are already old, disease-infected and damaged by typhoons The recommendations offered are as follows: Provision of post-harvest facilities to the farmers that would help them reduce costs, thereby, increase income; Improvement of the Caraga highway-sobrecarey road to ease the transfer of goods to the processing area, thus decreasing transportation costs; Provision of proper information on the grading standards of abaca; and Provision of training on other uses of abaca such as handicraft making, tinalak production and the like, to increase the value of their produce. Carrot Davao del Sur 105. The marketing efficiency study in Barangay Pitu, Malalag, identified as the UDP area with the most carrots farmers, was conducted last March 13, A total of 4,230 kilograms of carrots sold for two (2) production seasons were traced from Barangay Pitu to the consumers. All of the carrots from Barangay Pitu were shipped to General Santos City and were retailed there. It was established that the marketing channel of carrot in area has four (4) participants namely, the farmer, assembler-shipper, wholesaler and the retailer. 14

21 107. It was also established that the farmer sold the carrots at a price of P4.00 per kilogram with marketing cost of P1.67 per kilogram. The marketing cost includes the expenses incurred in cleaning, grading and packing the produce By further accounting for the production cost, it was determined that the farmers receive a Net Farm Income (NFI) of P0.70 per kilogram. This indicates that production and marketing of carrots in Barangay Pitu, Malalag is both profitable and efficient Further analysis of the marketing chain showed that the all the traders (Assembler-shipper, Wholesaler and Retailer) operate efficiently as their respective Return on Investments (ROIs) range from 12 to 18% An analysis of the consumer peso resulted in the conclusion that the carrot farmer receives 18% of the total consumer price. This means that for every peso spent by the consumer on carrots, the farmer receives P One of the weaknesses or problems identified in the carrot marketing system is the poor road system in the area It was also determined that there was an absence of information on grading, price, supply and demand on the part of the farmers. This lack of information has led to the farmer s weak bargaining power, such that he is not able to negotiate with the buyers for a higher price To resolve these problems it is recommended that the road system in the barangay should be improved to reduce the transportation costs in marketing the produce. It is also recommended that and organized market information system providing regular statistics on the price, supply and demand and the requirements for carrots in General Santos City. This information should be posted on the Barangay Bulletin board for the farmers to see. Mango 114. The marketing efficiency study of Mango in Barangay Pitu, Malalag was conducted last March 12, Based on farmer interviews, it was established that there are four (4) participants in the mango marketing system in Barangay Pitu, namely, the farmer, municipal assembler-wholesaler, assembler-shipper and the retailer There are two types of farmers classified according to their marketing practices, the independent farmer (Farmer 1) who grows, harvests and sells the mango himself; and the contract-growing farmer (Farmer 2) who is in a agreement with a contract grower. In this agreement, the farmer s investments are land, the mango trees, cost of cultivation and maintenance of the farm while the contract grower assumes the cost of floral induction, harvesting and marketing. For this 15

22 agreement, the farmer receives 40% of the net sales in mango while the rest goes to the contract grower The final destinations of the mangoes from Barangay Pitu are the Malalag poblacion, Digos City, Davao City and Manila It was established that, on the average, the Pitu mango farmer sells the mangoes at P18 per kilogram. By considering the marketing costs, which is P1.88 per kilogram, the Net Farm Income per kilogram of mango was determined to be P9.39 for Farmer 1 and P4.35 for Farmer 2. This indicates that mango production and marketing in Barangay Pitu, for both cases, is profitable and efficient On the part of the traders, it was established that their percent profit margins relative to their respective marketing margins range from 77% to 98%. This indicates that the profit of the traders are relatively higher then their marketing costs Further analysis of the marketing system showed that the municipal assembler-wholesaler, with an ROI of 5%, is inefficiently marketing mangoes. The assembler-shipper and the retailer, on the other hand, operate efficiently since their ROIs were established to be greater than the opportunity cost of capital The analysis of the consumer peso shows that 45% of the consumer price goes to the farmer while 28% goes to the assembler-wholesaler and 27% goes to the retailer The mango market was found to be suffering from poor post-harvest handling practices, which contribute to losses and consequently reduce the income of the farmers. Lack of knowledge and technology on the packaging of mangoes is the main concern of farmers in post-harvest handling Recommendations to improve the marketing of mango include: The construction of a 13-kilometer road leading to Barangay Pitu, Malalag. This is important to reduce the transportation cost and reduce losses in transportation; The use of proper packaging materials such as styrophore nets and boxes rather than the existing kaing; Trainings on proper harvesting practices, Hot Water Treatment (HWT) and other production and cultural practices should be made readily available to farmers; and Regular information on prices demand and supply in different markets (Malalag, Digos City, Davao City and Manila) should be posted on the barangay bulletin such that it is accessible to farmers. 16

23 Abaca 124. The marketing efficiency study of abaca in Barangay Pitu, Malalag was conducted last March 12, It was determined that the participants in the abaca marketing system in Barangay Pitu are the farmers, assemblers, and an assembler-shipper A monopoly, on the part of the assembler-shipper, in the buying of abaca in Davao del Sur was revealed during the course of this study. The assembler-shipper brings the abaca to Iligan City, Davao City and Manila It was also determined that the farmer sells the abaca for P20 per kilogram and incurs a cost P9.63 per kilogram in marketing the produce. This marketing cost is due to the labor-intensive processing practices, which involves peeling, stripping, drying and bundling of the abaca By considering the production and marketing costs, the NFI was determined to be P-6.12 per kilogram. The NFI, being less than zero (0), indicate that the production and marketing of abaca in the area is neither profitable nor efficient An analysis of the traders operations shows the assembler is operating inefficiently as his ROI is only 1.65%. The assembler-wholesaler, on the other hand, is marketing abaca efficiently since his ROI is 15.77%, which is higher than the 8% opportunity cost of capital. Also, the assembler-wholesaler was determined to be receiving a high profit of P6.92 per kilogram) The study reveals that farmers are burdened with the low price of abaca. Furthermore, the existing monopoly of the assembler-shipper allows him to receive a large profit while the farmer is producing at a loss Another factor that led to the farmer s negative profit is the high costs input and labor as abaca production is labor-intensive It is recommended, therefore, that studies on mechanization and its feasibility should be conducted to determine if the mechanization of abaca production could reduce costs of the farmer Also, it is recommended that farmers increase production such that they would be able to lessen costs through economies of scale Lastly, farmers should be given information and trained on different abaca processing activities so that they would be able to add value to their product, thereby increasing their income. 17

24 Saranggani Chicken 135. Sitio Campao, Sufa-tubo, Glan was identified to be the UDP area with the most chicken raisers in Saranggani. The marketing efficiency study on chicken in the area was conducted last March 5, Based on farmer and trader interviews, it was established that the there are three participants in the chicken marketing system, namely the farmer, assembler and the processor Mostly native chicken is raised in Sitio Campao, and the average chicken ownership per farmer is three to four heads. However, more than half of the chicken raised in the area is consumed at home. This is due to the chicken raiser s reluctance to transport and sell the chicken because transporting live birds is troublesome For the few chicken, which are sold, however, there are two buyers--- the Sufa-tubo-based assembler or the Glan-based retailers As the buyers prefer to sell live chicken, the chicken is sold live from the farmers to the retailers. Consequently, marketing costs for all marketing participants comprise mainly of transportation expenses, ropes and cages for the chicken The farmer sells the chicken at P70 per kilogram, incurring an average marketing cost of P1.27 per kilogram in the process. This gives him a P27.97 per kilogram NFI. The chicken raiser s NFI, being greater than zero, indicates that chicken raising and marketing in Sitio Campao is profitable and efficient On the part of the traders, it was determined that the assembler is earning a profit of P6.38 per kilogram from selling the chicken in General Santos City. Furthermore, it was established that at the assembler s ROI of 16.75%, his marketing activities are efficient The Glan-based retailer, however, is only earning P3.04 per kilogram. Despite earning a profit, it was determined that the retailer s ROI, at 1.93%, is lower than the 8% opportunity cost of capital. This indicates that the retailer s capital investments are larger than his profits. This leads to the conclusion that the retailer s marketing activities are inefficient An analysis of the consumer peso show that the chicken raisers get 40% of the final consumer price. This means that for every peso paid by the consumer for the chicken, P0.40 goes to the farmer It was also established in the study that native chicken is preferred by the consumers for its distinctive flavor. 18

25 145. Furthermore, it was revealed that the chicken raisers have equal bargaining power with the buyers on the matter of price determination. This means that the farmers could equally bargain with the assemblers or retailers for a higher buying price. This shows efficiency in the overall pricing system in chicken Despite these advantages and strengths, chicken raising in Sitio Campao is small since few chicken raisers bother to sell their produce. During the study, chicken raisers often mentioned that they would rather eat the chicken themselves rather than bring it to the assembler or the Glan public market. This is largely due to the fact that the sitio is located far from the barangay poblacion and inaccessible to any motorized public transportation during the time of the study Another problem faced by the chicken raisers is the high losses brought about by weight loss and mortality of the animals during transport. This is aggravated by their production-related problem of high mortality during the rainy season Based on the findings of the study, it is recommended that: An organized buying system for the assemblers should be done so that the farmers need not travel too far to sell their produce, thereby reducing transportation costs on the part of the farmers. This would also encourage the farmers to sell their produce; The condition of the Sitio Campao-Glan tertiary road should be improved to encourage farmers to market their produce. Lastly, seminars on disease prevention and other management techniques should be conducted to improve the technical know-how of the chicken raisers; Corn 149. Barangay New La Union, Maitum was identified as the UDP area with the most corn farmers in Saranggani. The marketing efficiency study on corn in the area was conducted last March 7, The local white corn or taniguib was established as the main variety produced in the area After harvest, corn is dried, graded, sorted and packed into sacks. Shelling of corn is rarely done as this process is found by the farmers to be tedious and expensive. The average marketing cost of the farmer, including drying to sacking, is P0.63 per kilogram Based on farmer and trader interviews, 5,960 kilograms of corn produced during the most recent cropping season of 2000 were traced from the farmers to the 19