ICAEM2015 ICOOP2015 The Joint International Conference on Agribusiness and Cooperatives

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1 ICAEM2015 ICOOP2015 The Joint International Conference on Agribusiness and Cooperatives Theme: The Future of Agribusiness and Cooperative Enterprises: Examining Local and Global Contexts CITATION Lizada, Joy C.*, and Reynold Tan Supply Chain Analysis of Muscovado Sugar Industry in Antique Paper presented at the Joint International Conference on Agribusiness and Cooperatives, Davao City, Philippines, October. OPEN ACCESS POLICY This material was presented during a conference organized by the Institute of Cooperatives and Bio-Enterprise Development (ICOPED), College of Economics and Management, University of the Philippines Los Baños, and the Office of Research of the University of the Philippines Mindanao. In support of the open access initiative, the organizers provide unrestricted access to these materials to foment wider dissemination and exchange of ideas. Authors are encouraged to practice selfarchiving of their presentations for public use in a noncommercial repository. Copyright of this uploaded material remains with its author. For more downloadable materials, visit

2 Supply Chain Analysis of Muscovado Sugar Industry in Antique Joy C. Lizada and Reynold Tan College of Management University of the Philippines Visayas

3 Introduction Muscovado sugar is a type of unrefined brown sugar with a strong molasses flavor. It has a high nutritional content comprise of calories, protein, fat, carbohydrates, calcium, phosphorous, sodium, and vitamins such as thiamine, riboflavin and niacin. Muscovado sugar was one of the major export products of the Philippines from the time the Iloilo port opened in the 18 th century. This trend came to an end in 1929 when the refined sugar production was introduced and dominated the sugar industry, especially when the Philippines gained access to US market.

4 Introduction The Province of Antique used to be the key producer of muscovado sugar in the 1960s producing 70% of the country s total muscovado sugar. Production of muscovado sugar has declined attributed to factors such as: domination of refined sugar to the over-all sugar industry; decline in volume and quality of sugar due to neglect; inefficient milling practices and; underdeveloped milling channels.

5 Introduction Currently, muscovado sugar is being promoted because of its strong potential as a high value product both at the local and internatinal markets. The big challenge, however, is how to develop the industry particularly concerning farm productivity and mill output quality, among many industry concerns.

6 Introduction This paper documents the muscovado sugar supply chain in the Province of Antique The paper maps out the supply chain of muscovado sugar in the Province of Antique showing Key processes Actors Flow of product Payment Information External influences along the chain Issues and concerns Appropriate recommendations were made in accordance to the objective of increasing the industry s level of performance and competitiveness. Provide basis for policy makers and industry players towards industry revitalization eventually increasing its level of competitiveness.

7 6 Core Processes of Muscovado Industry, Province of Antique 1) Input acquisition 2) Sugarcane production 3) Primary processing 4) Secondary processing 5) Distribution 6) Consumption

8 Input Acquisition Production Primary Processing Secondary Processing Distribution Consumption Figure 1. Supply Chain Map of Muscovado Sugar in Antique, 2012

9 Key player for each major process Core Processes 1) Input acquisition 2) Sugarcane production 3) Primary processing 4) Secondary processing 5) Distribution 6) Consumption Key players 1) Input suppliers 2) Farmer-producers 3) Millers 4) Secondary processors 5) Transport providers; Traders 6) Institutional buyers; Household consumers.

10 Key Players 1) Input suppliers - distributors and dealers who buy and sell farm inputs Based in San Jose, capital of Antique Distributors have large capital outlay for storage and distribution of stocks to municipal dealers buy directly from manufacturing companies and operate province wide Dealers source farm inputs from distributors for local distribution within the municipality capital requirement and area of coverage is smaller vis-avis to distributors

11 Key Players 1) Input suppliers - distributors and dealers who buy and sell farm inputs Fertilizer is the only production input sourced from input suppliers. 83% of the sugarcane farmers buy inputs from retail outlets within the municipality Payment terms solely on cash basis only.

12 2) Farmer-producers Landowner 50.63% Key Players some are recipients of Certificate Land Transfer (CLT) Leaseholder 46.84% Both owner and leaseholder 2.53% Ave. production area/per farmer 1.34 hectares Ave. no. of years engaged in sugarcane production 22 years. Full-time farmers 92.4% Prevalence of farmer/family labor in sugar production was observed.

13 Key Players 3) Millers Primary processors responsible for the conversion of sugarcane to muscovado sugar which involves sugar milling/juicing screening/filtration pre-heating/liming settling/clarification evaporation/cooking drying Nature of ownership for all mills is single proprietorship 91% engage in selling muscovado on whole sale basis in local markets

14 Key Players 4) Secondary processors Perform higher levels of processing where new or modified food products are produced (i.e. involves any step in the production process that improves or adds value to the food products such as bandi, butong-butong and local sweets for the customers. 5) a) Transport providers b)traders (Retailers) 6) a) Institutional buyers i.e. AFFCUI b) Household consumers

15 Institutional Buyers Sugarcane Farmers Wholesalers Retailers Processors Muscovado Millers Households Consumers Figure 2. Marketing Channels of Muscovado in Antique, 2012.

16 Muscovado Trading Practices, Antique, 2012 Practice* Frequency % Practice the Suki System Open-market Transactions *multiple answers Total

17 Figure 3. Geographic flow of muscovado produced in Antique.

18 Market Information Information on price, supply and demand situation, and technical information are very critical knowledge in the formulation of strategic decisions by industry participants. It is apparent that there is information asymmetry. It is only the traders or millers, those directly involved in the trading operation, are the only ones who have the knowledge of the market information such as prices, volume and seasonality of supply and demand, among many others.

19 How Millers and Buyers Meet Mode of meeting Freq % SMS cellphone 6 15 Referred by other farmers 2 5 Referred by a friend Trade fairs 2 5 Referred by gov't agency 2 5 Total

20 External Influences along the Chain Sugar Regulatory Administration (SRA) training on good agricultural practices (GAP) to sugarcane farmers financial assistance to millers for the improvements of mills. Department of Science and Technology (DOST) assisted the millers financially and technically for the improvement of equipment wherein stainless materials were used instead of the traditional cast iron which bring forth metal impurities to muscovado sugar. evaporating vats (kawa) cooling pan drying table mixing spade for sediment-free muscovado sugar

21 External Influences along the Chain Department of Trade and Industry (DTI) facilitated series of training related to the marketing, packaging and distribution of the muscovado products Bureau of Agriculture and Fisheries Product Standards (BAFPS) spearheaded the standardization of the muscovado sugar of the province of Antique National Economic Development Authority (NEDA) based Regional Development Council (RDC) VI through its Economic Development Committee (EDC) included the development of muscovado sugar industry as one of its priority programs fpr Western Visayas. In 2008, a technical working committee was organized to look into the muscovado industry of Region VI.

22 External Influences along the Chain Office of the Provincial Agriculturist (OPA), Province of Antique facilitated the introduction of new varieties of sugarcane in Antique from Passi, Iloilo and La Carlota, Negros Occidental. conducted varietal trials for location specific adaptation and distributed canepoints to identified cooperators. Muscovado Industry Council (MUSICO) a group of muscovado millers, farmers and government sectors from all over the country that look into the - state of the muscovado sugar industry; financing institutions and cooperatives which provided financial assistance to sugarcane farmers and millers; research, extension and academic institutions which provide technical assistance in the production, marketing and management of muscovado sugar.

23 External Influences along the Chain Surprisingly, 95% of the respondents noted that national government agencies, local government units and non-government organizations had not given any assistance for Antique muscovado program. Three respondents mentioned that they were provided technical assistance by the national and local governments Two respondents availed of financial capital from a non-government organization.

24 Problems/Challenges of Antique Muscovado Sugar Industry as Perceived by Respondents Problems/Challenges* Freq % Farm to market roads Financial resources High cost of farm inputs Low price of muscovado Pests and diseases Unstable prices of muscovado Weather Water supply Poor production *multiple answers

25 Opportunities for Muscovado Industry Respondents Perception on Opportunities of Antique Muscovado Industry, 2012 Opportunities Freq % No opportunities Demand in local market Expansion of market Export quality High profit Processing of muscovado into other products (bandi, etc.) Strong collaboration among growers and millers Assistance from the gov't Expansion of farm Processing of muscovado into other products (bandi, etc.) *multiple answer

26 Recommendation In the light of the aforementioned issues and opportunities it is therefore recommended that various players comprising of government agencies and private sectors should have a rationalized framework of intervention programs to improve productivity in sugarcane production and quality of production of muscovado sugar Improve access of industry players to intervention programs both government and private such as timely and affordable credit windows, post-harvest facilities, etc. Value adding mechanisms should be further explored. Provide assistance in marketing (i.e. linkages with buyers, product packaging, pricing, industry standards,market intermediation,market intelligence).