Part III Cluster Stories to Tell - PinoyME · Part III Cluster Stories to Tell ... Thirty minutes after, ... He was located and arrived at the meeting place after about an hour

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Part III. Cluster Stories to Share

Part III

Cluster Stories to Tell

Part III compiles and shares the experiences of the different clusters through stories of the good and bad events that occurred especially during their infancy. Their experiences served as worthwhile lessons to the members as these made them more responsible and more forward-looking agroentrepreneurs.

It is hoped that these Cluster Stories can give some insights to those who intend to adopt the clustering approach to agroenterprise development. A story may find importance in one or more of the eight steps in the process.

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The reality of developing an agroenterprise is complex but they can be grasped by way of the stories that highlight the experiences of the different clusters as their members work together to prepare for a market, access and develop it under different situations. Part III presents some cluster stories that tell not only of the opportunities but also the challenges to eliminate the roadblocks to farmers’ access and hold on the market.

The initiative of the Maguindanao local traders of sayap(native hat) to link with the weavers show how two actors in a market chain can work together. The efforts in tilapia fish processing is to develop more attractive products so the farmers can access a higher value market as they take advantage of seasonal, abundant fish supply from the Ligawasan Marsh.

The Farmers Field School for Maguindanao rice farmers shows a first step in market development by improving farming skills in natural farming methods and reducing production costs. This will enable farmers to produce and supply organically grown rice that will be an attractive product to consumers. In a short market chain wherein the clusters link directly to the consumers, they can bypass the entrenched local traders and avoid a situation of conflict in an already volatile peace and order environment.

The Strawberry Clusters’ story in Sitio Epol (in Davao City) highlights the experience of farmers working on their existing market at the roadside for travelers, but confronting the challenge to come up with more strawberry products available in regular supply, and without which, their marketing enterprise will not take off.

The Maragusan Clusters’ story (in Compostela Valley) relate the perseverance of the farmers to consolidate vegetables per truckload to make it an economical move given the distance and the difficult infrastructure constraints. But this learning from the challenges experience has also given them the

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confidence to scale up by gradually moving into an additional market under a partnership arrangement with a supermarket.

In the Siay Calamansi Cluster story (in Zamboanga Sibugay), we see the example of clusters that have formalized into a cooperative after a build up of organizational fund from marketing. It also presents the reality that success in product consolidation for markets brings with it its own challenges one of which is the resistance of the traders who see their hold threatened if farmers start to participate actively in marketing.

The Impasugong Coffee Cluster story (in Bukidnon) provides a glimpse of how a cluster is managed for a high value market like Nestle and Serenity Coffee Corporation, types of markets that require high discipline because quality, traceability and delivery reliability are demanded in exchange for high price. An interesting story is that of the Impasugong Squash Clusters that demonstrate that through the support of bigger producers and the influence of an industry group like the vegetable association, farmers can immediately secure a hold on the markets that otherwise are reluctant to take in supply from small farmers.

In all the above stories, we can picture how dynamic is a market condition, what innovations are called for from the farmers so that they can respond and cope with the market situations, and what development interventions from intermediary organizations can be provided to support farmers’ needs in their agroenterprise development.

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Cluster Story No. 1

REAPING THE FRUITS OF IMPROVED TIMING AND QUALITY OF DELIVERIES

On June 27, 2007, 133 farmer-members from six communities in Maragusan, Compostela Valley Province gathered once again to assess the performance of their vegetable clusters. By that time, the clusters have already sold more than 150 tons of assorted vegetable worth about PhP 800,000. The members discussed the milestones, the good relations with their buyers in Cagayan de Oro, then planned how they could supply a new market opportunity that opened for them: a major supermarket in Tagum City located some 90 kilometers away.

A year earlier, six cluster leaders together with the staff from Kasilak Development Foundation, Inc., CRS and the Municipal Agriculture Office went to Tacloban City on May 20 to 23, 2006

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to verify the prospective vegetable markets. This market was considered first because it was the place where most of the local market agents sent their vegetables. Accompanying them in the trip was a vegetable market facilitator based in Cagayan de Oro City but who has market contacts in Sogod, Southern Leyte. The facilitator was interested in establishing a market in Sogod as a dropping point of vegetables on the way to Tacloban City.

In the analysis done after the Tacloban trip, the group saw the big potential of the Sogod-Tacloban markets in terms of price margins and volume capacity given that the region is not a vegetable producing area. However, they were concerned about the high risk of this particular market given its distance. The group, instead, decided to undertake trial runs to Cagayan de Oro to enable them to go through the experience of actual consolidation and delivery in a wet market. The choice of Cagayan de Oro was made considering the presence of NorminVeggies, a potential support system from the vegetable industry group that could be tapped.

Over the next four weeks after the Tacloban trip, the cluster leaders with the Kasilak marketing officer met weekly to discuss the preparations for the test delivery. The plan was a delivery scheduled to arrive in Cagayan de Oro in the morning of June 28. This date of arrival was targeted because it coincided with the peak market day in the City when majority of the “viajeros” from Visayas, Luzon, and the provinces of Butuan, Surigao and Zamboanga would procure the highest volume for the weekend market in their respective areas. Plans were made and reviewed by the group including the logistics, pricing, operational flow and financial analysis. The test delivery involved clusters from six barangays, namely: Magcagong, Saranga, Mahayahay, Parasanon, Tupas and New Albay.

During the consolidation

On the day of consolidation, the leaders confronted several daunting challenges. The wooden tomato crates that were

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supposed to be delivered to the members were sold by the manufacturer to another buyer. So the leaders had to look for other sources of crates.

The road leading to the upper barangays of Mahayahay and Parasanon were rendered impassable due to continuous rains for the past several days. The truck driver recommended that all vegetables be consolidated at the roadside in barangay Saranga, several kilometers away from the source of the vegetables. The implication was that instead of the truck passing by the different barangays to pick up the vegetables, the growers had to bring their products from their areas to the suggested consolidation site by way of motorcycles or carabaos and horses.

Then there was a heavy downpour starting at 1 o’clock in the afternoon which continued throughout the evening. So instead of the truck departing for the other three barangays at 11 o’clock in the morning as originally scheduled, it left the roadside consolidation area for these barangays at 6 o’clock in the evening. Thirty minutes after, the truck got stuck in the muddy road and it took volunteers five hours to get it out. In effect, the truck arrived at Magcagong, the next barangay, around 11 o’clock in the evening to pick up the vegetables from the clusters. By this time, based on the plan, the truck should have traveled half the distance to Cagayan de Oro.

At dawn, the truck proceeded to the two remaining barangays, New Albay and Tupas. Unfortunately, the squash at New Albay were not yet packed in sacks and weighed. So the leaders had to work together to facilitate so that it could be done fast.

By the time the group got to Barangay Tupas, the last barangay, it was already 4 o’clock of June 28 and there was another delay as the cluster leader had left after waiting for the truck the whole night. He was located and arrived at the meeting place after about an hour. It should be noted that by this time, the vegetables should have already arrived in Cagayan de Oro.

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Finally, at 6 o’clock in the morning, the group finally departed for Cagayan de Oro with the consolidated vegetables.

Along the road in Montevista, Compostela Valley, the inner rear tire of the truck got flat. The driver and his crew took about an hour to get the truck on its way. This was followed by another breakdown in Rosario, Agusan de Sur, caused by the damage of the rim of the outer rear tire. Altogether, this was a delay of another four hours.

At the buyer’s stall in the wholesale market

The group finally arrived in Cagayan de Oro at midnight on June 28. The contracted buyers had waited from 6 in the morning to 12 noon. By the time the delivery arrived, the buyers had procured from other sources because the vegetables were to be “outshipped” to other provinces as there was a cut-off time. The vegetables could be marketed only the next day, June 29, or a 24-hour delay from the negotiated delivery time. So the market facilitator in Cagayan de Oro had to look for new buyers in the local spot market.

Other buyers came but the price was subjected to the supply-demand conditions in the spot market for the day. By this time, tomatoes from the other supply sites in Bukidnon and Misamis Oriental were arriving and the price was reduced from PhP 180.00 in the morning to only PhP 110.00 per crate later in the day. A buyer negotiated for the price of PhP 140.00 but upon close inspection, he did not pursue the transaction as he noticed mixed sizes, ripened fruits, and presence of fruit damage.

This was the same case with the squash - several buyers had already negotiated at PhP 7.00 per kilo but upon close inspection when some sacks were opened, they did not continue with the purchase. For squash, the problems were: mixture of small with the big-medium sizes, mechanical damage with some having molds, and over maturity. In all, reduction of value was about half of the original intended price.

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On the other hand, the five other vegetables, Baguio beans, ampalaya, sweet pepper, sayote and eggplant, were easily sold in the spot market at good prices mainly because they were of good quality.

Assessment

The necessary plans were made by the clusters and the arrangements with the outshipment buyers were done by a market facilitator two days before the vegetable delivery in the Agora wet market of Cagayan de Oro. For this reason, the market facilitator already gave a price to the Kasilak Marketing Officer on the basis of her negotiated sale to the outshipment buyers.

There are two kinds of buyers in the Agora wet market. One is the group of outshipment buyers who are the “viajeros” from the other provinces in Mindanao, Visayas and Manila. They negotiate a price through an Agora-based market facilitator based on an agreed time of delivery, quality and volume. The other one represents the spot buyers - the local buyers who distribute in the neighboring provinces and whose price is dependent on the prevailing conditions of supply and demand for the day.

It was unfortunate that the vegetables did not arrive on time. The outshipment buyers stretched their waiting time from morning to noontime just to accommodate the request of the market facilitator. But during the cut-off time at noon in June 28, there was no way the clusters could deliver the promised vegetables as they were still in San Francisco, Agusan del Sur, about halfway to Cagayan de Oro. The outshipment buyers procured from other sources and when the clusters’ vegetables were finally unloaded the next day, the market facilitator had to look for new buyers and had no option but to undertake spot selling where the prices would fluctuate depending on the actual supply and demand situation.

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The Baguio beans, ampalaya, sweet pepper, sayote, and eggplant were of good quality so they were immediately sold within the day but at a slightly lower than negotiated outshipment price because the prices had to be pegged on the spot wet market price already. But it was a different case with the squash and the tomato. Several buyers (both outshipment and spot) were interested to purchase but because of quality issues, they did not pursue the transaction. In one case, the buyer had already paid but called off the deal when the she found out about the extent of the quality problem in the squash.

Eventually, the clusters had to settle at a price that the buyers would be willing to pay for all the remaining stocks or risk not getting any sale at all because the marketing time may catch up with the deteriorating vegetables. Also, fresh stocks were coming in every five to ten minutes.

On analysis, the problems can be grouped into two: timing and quality. Had the vegetables arrived on the agreed time, the clusters could have gotten the price agreed with the outshipment buyers. More importantly, had the quality been good, there would have been bargaining power during negotiations to sell in the wet market despite a spot market condition. There were several buyers who had wanted to buy the squash and tomato to add to their volume of procurement but their common feedback was the poor quality of the squash and tomato.

The participating cluster members were immediately convened to discuss the results of the test marketing where the circumstances and results were presented objectively. It was pointed out that most of the challenges like quality control, timing of harvesting, consolidation and coordination with suppliers and service providers can be addressed. The rest of the assessment was devoted to a planning session for the next delivery where all the improvements and adjustments in the operational plan were made. It was emphasized to the members that while agri-marketing is particularly challenging, they were able to bring a truckload of vegetable out of their

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farms to a major trading hub in Mindanao – not a small feat for small farmers in the uplands.

If the clusters had stopped after the first market delivery given the challenges they had to go through, they would not have celebrated their first year of anniversary with 150 tons of vegetables unloaded to the market. They would not be able to even consider a new market avenue, the supermarket. A year after their first market move, they started to enter J.S. Gaisano Supermarket and are into their 16th weekly delivery to this higher value market.

Contributed by: Lionel Mendoza, Vicente Gualberto, Ronnie

Fruto, Danylle Ann Pascual, Lily Naldoza and Albert Ventura

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Cluster Story No. 2

THE CLUSTER OF HAT MAKERS IN MAGUINDANAO

Keting Acob is a Maguindanaon trader who lives in SK Pendatun in Maguindanao Province. For almost two years, he has been buying sayap, the native hat produced by his Maguindanaon neighbors, and then selling them in the neighboring city of Tacurong every Wednesday and Sunday, the designated market days in this capital city.

For each market day, Keting buys 200 pieces of sayap at PhP 5.00 each and then sells them at PhP 6.00. He and his fellow sayap buyers organized an informal group of their own, and they connect to the various sayap makers to whom they supply the raw material needs. Each trader has a group of sayap makers. As an agreement, the indebted sayap makers can sell their sayap only to the traders who financed their

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respective raw material requirements. The former sets the buying price.

One day in December 2006 Keting learned that a respected Community Organizer of the Kadtuntaya Foundation, Inc was organizing the sayap makers into a cluster under a project supported by CRS. Keting decided to attend the first meeting. He saw this as an opportunity for him and his fellow buyers to be better linked with the suppliers’ end.

The Magungaya sa Ligawasan Multi Purpose Farmers Association (MALIMU) was formed with Keting and the other traders joining the sayap makers. With more women members, MALIMU is composed of clusters, each of which is led by a trader-member.

Now, Keting and the other trader-members buy sayap at PhP 6.00 a piece, thus, increasing the income of the other members by PhP 1.00. With this development, the makers of sayap are increasing in number as children and other community members are joining the trade. This may not be a big income but the other benefits are as important: how the small producers can start to get their acts together and relate with other market actors such as Keting in the local trade.

CRS and KFI are trying to build on this local initiative. As part of product support, they have explored the possibility of the raw material of sayap, which is the leaf of the romblon plant, to be semi-processed for the needs of the exporters in the furniture industry capital of the country in the Visayas island of Cebu. Also, they are studying how Keting’s and other sayap

buyers’ role can be transformed from a trader into a business service provider, organizing the product supply consolidation and the quality control for a service fee which could be generated from the addition earnings from a higher value market.

Short term objectives have to be secured with long term concerns. Thus, the project assistance also includes as part

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of the Natural Resource Management, the continued planting of the romblon plant for the sustainable supply of raw materials for the budding handicraft business in the community. This effort was foreseen by MALIMU to be a key in the sustained business. Full of hopes, the sayap clusters sent their first sample of dried romblon leaves to a Cebu furniture exporter for product development and designing. And the effort to plant more romblon is also ongoing.

Contributed by: Marynisa S. Paglala, MALIMU Marketing Officer, Hai Arap and Floro Israel

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Cluster Story No. 3

ORGANIZING AND TRAINING FOR THE STRAWBERRY MARKET

Baganihan is an upland Barangay of Davao City near the boundary with Bukidnon Province. Its cool climate supports the growing of semi-temperate crops which puts this area and its neighboring barangays in a competitive advantage. Some of the crops grown are strawberry, potato, crucifers, tomato, sweet pepper and cutflowers. The asphalting of the national highway that passes by Baganihan some seven years ago greatly enhanced the marketing of farm products.

One of the sitios or sub-villages of Baganihan is Epol which is home to farmers belonging to the B’laan and Matigsalog tribes. Bilma Fuertes, a Matigsalog, and an elected member of the Barangay Council, is one of the farmers. Her membership in the Council gave her the name as Kagawad Bilma.

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With her strong leadership, Bilma paved the way for the organization a group of women-farmers producing strawberries in Epol. The group expanded its farming activities and eventually became the Baganihan Agri-Eco Venture Cooperative or BAVC. The members decided to produce and market vegetables, strawberries and ornamental plants. Through the leadership of Bilma, BAVC received assistance from different projects.

One of the crops that benefited from external assistance was strawberry. The trainings provided by the projects initiated a small strawberry jam processing endeavor.

In 2005, the People Collaborating for Environmental and Economic Management in Davao (PCEEM) Foundation and the Catholic Relief Services (CRS) – Philippines through the Timely Intervention and Natural Approaches to Watershed (TIN-AW) Management Project provided production assistance to BAVC and formed clusters among the members. Upon the approval of the cooperative's Board of Directors, three clusters were developed representing three farm commodities to be produced and marketed, namely: vegetables, cut flowers and strawberries. BAVC also benefited from institutional development assistance and has signed a Memorandum of Agreement with PCEEM for a grant for strawberry production. Thirty one members were able to avail of the production assistance.

PCEEM and CRS-Philippines also provided training to BAVC on Biodynamic and Natural Farming Technology Systems or NFTS. The members also underwent a series of lectures that gave them helpful tips including study of different types and climatic requirements of strawberries. They were also taught the basics of land preparation, strawberry runner segregation, establishment of nurseries, planting, fertilization, irrigation, mulching, pruning and disease and pest control, proper harvest and post-harvest practices, and farm record management.

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Prior to the trainings provided by PCEEM and CRS, the members were trained by SDC-Asia on the clean and acceptable ways of processing jams, marmalades and syrups through a special training on Good Manufacturing Practices or GMP. They were also given processing equipment for group use.

With the integration of NFTS in their production practices, Bilma observed marked improvements in the fruiting patterns of the strawberry plants even during days of heavy rains.

”Our trainings have made a great difference for our group from planting to processing. Our products are fast gaining popularity after they have been introduced in trade fairs. Motorists plying Davao-Bukidnon route now make it a habit to stop by and buy strawberry jam, marmalade, syrup, or fresh strawberries." Bilma proudly said.

Currently, fresh and processed strawberries are in demand at the roadside in Epol. These products are also becoming popular during festivals and other celebrations such as Kadayawan and Araw ng Davao. Other institutional markets like hotels, restaurants and supermarkets are also lining up at BAVC’s door asking for consistent supply.

Kagawad Bilma shares that finding a market for strawberry is not a problem, but rather a challenge to produce it in a continuous manner in order to respond to the needs of their buyers not only along the highway but in the expanding and more stable institutional markets.

Contributed by: Bilma Fuertes, Linus Miranda and Lionel

Mendoza

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Cluster Story No. 4

TESTING THE WATERS WITH DRIED FISH

At certain months of the year (May to August), tilapia fish supply from the Ligwasan Marsh in the Province of Maguindanao is abundant. Prices would drop, and the small producers would have to take in whatever prices were given to them by the local traders. If only tilapia fish could be processed at the peak supply months. During the community based research activities conducted as part of the development support of Catholic Relief Service (CRS) with its partner, Kadtuntaya Foundation, Inc. (KFI), tilapia fish in processed form surfaced as a product with an untapped opportunity.

Twenty (20) small producers decided to pursue this window of opportunity for processed dried tilapia, tapping an available product from its natural resource, the Ligwasan Marsh. They formed a cluster after which the members agreed to

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consolidate a portion of their tilapia catch to be dried as their new product for the market.

CRS and KFI facilitated that appropriate skills and knowledge in fish drying through hands-on demonstration could be extended to the cluster from the Department of Agriculture through its Agricultural Training Institute (ATI) and the Bureau of Fish and Aquatic Resources). Specific improvements introduced were the manner of cleaning the fish and the hygienic handling during processing. It was emphasized during the training that for processed products, it is extremely important to assure the customers with food safety.

The first test market was the Kadtuntaya Foundation, Inc. (KFI) staff and their friends. In the test marketing done, KFI helped assess the quality of the product in terms of palatability and pricing. From the assessments done, it was determined from customer feedback that the visual quality of the dried product was well received. But the dried fish was found to be too salty, which necessitated adjustments in the brine solution (i.e. salt in water) used. Also, the price that the product was offered at PhP 150/kg was rated by customers as too high relative to competition.

A careful review led the cluster members to make adjustments in their fish procurement practice and in the processing activities to bring down the selling price to only PhP 125/kg. Then an innovation was discussed to come up with a diversified product that would be higher value for the high end market: marinated-deboned-dried tilapia fish and for which product development assistance was requested from the Food Technology Center of the Xavier University College of Agriculture in Cagayan de Oro City. The new product was also well received during the food tasting activity done.

In anticipation of the abundant tilapia coming up in a few months, these two directions for dried fish, one that would be affordable and the other a special, niche product for the high end market will be pursued. In the meantime, CRS and KFI

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have been assisting the community in building awareness of the ways to protect the ecology of the Ligwasan Marsh for sustainable supply of fish and other products.

Contributed by: Hai Arap, Jim Dalgan and Floro Israel

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Cluster Story No. 5

THE CLUSTER MOVES FOREST COFFEE (AND OTHER FARMERS) TO THE

MARKET STREAM

Dumalaguing is a highland barangay in Impasugong town, Province of Bukidnon. It is where Romeo Saplian lives. Popularly known as Mimi, Romeo is one of the Higaonon tribe farmers who are growing coffee in the forest.

The hilly terrain and poor roads of Dumalaguing, as well as the Tagoloan River that divides the barangay from Poblacion, or the center of the town, make transport of goods into and out of the community difficult and expensive.

Given this situation, Mimi and over 100 other coffee farmers in his barangay opted to just sell unsorted coffee beans to the barangay traders at whatever price is given to them. These

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traders in turn transport the coffee across the river on a raft and bring them to the nearby Poblacion trader. The coffee is then sorted and re-dried to meet the requirements of Nestle Philippines located in the nearest commercial center of Cagayan de Oro City, about 80 kilometers away from Impasugong. This has been the market chain until the Catholic Relief Services, or CRS, in partnership with Kaanib Foundation, Inc., or KFI, and the Local Government Unit extended development support for these producers and linked them directly to high value markets.

Mimi is now a coffee cluster leader of Dumalaguing where 25 farmers formed two clusters. Their clusters, together with those of the neighboring barangays of Guihean and Sayawan, consolidated 6,600 kilograms of coffee beans during the recent harvest season, December 2006 to March 2007. The coffee delivered were all of Grade 1 quality, earning for the cluster members an additional price per kilogram as incentive.

As cluster leader, Mimi makes sure that his members have a cluster plan for an agreed market and volume each harvest season, and that each member has filled up a product commitment form which he summarizes into a matrix called the harvest calendar. He convenes several meetings before the first harvest for the cluster’s agreements on quality, pricing and payment procedures. He makes them understand that joining the cluster is a voluntary decision but once a member; they must abide by their agreements. He makes sure that they can have regular meetings to discuss their activities.

The high price that Serenity Coffee Corporation offered in the recent coffee season, December 2006 to March 2007, was 28 percent higher than the barangay trader. The offer came with stringent quality standards and procedures for coffee traceability per farmer. To ensure quality coffee delivery, a Coffee Consolidator was assigned in each barangay. He/she is tasked to accept only Grades 1 and 2 coffee, and manage the physical consolidation and the payments. For marketing

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capital, KFI got a PhP 500, 000 short term loan from the Federation of People’s Sustainable Development Cooperative of which it is a member. The marketing is operated like a business, with the Consolidator getting paid with a management fee equivalent to five percent of the net sale value.

Given his long experience in coffee and the high trust in him, Mimi was chosen by the cluster as the barangay’s Coffee Consolidator. His residence became the collection area and housed the weighing scale, sacks, needles and twine, marking pens for labeling and coding, and the receiving forms that contain information on the quality and sale computation.

Having reached Grade 4 only of formal education, Mimi found it difficult to compute using the calculator and coefficients for quality determination. Fortunately, his family can help him. His daughter who reached high school does the computations, while his wife acts as the cashier. Mimi focuses on segregating a sample from each farmer’s delivery and subjecting it to quality evaluation as he, together with the Consolidators of other barangays, was trained to do.

Mimi and all the other cluster leaders for coffee, abaca and vegetables in the municipality are assisted by KFI’s project staff, the CRS Agroenterprise Coordinator and the Agricultural Technologists of the local government. Their role in the project is clear to Mimi. They are just facilitators helping the clusters do the actual marketing themselves. And this is why the cluster leaders had to meet the buyers and directly transact with them.

After assessing their coffee agroenterprise, Mimi reported to the members their combined sales, costs covering transport, labor, consolidator’s fee, management fee, and the resulting net income. Of the net income, 80 percent was returned to the clusters while the remaining 20 percent was retained as the cluster fund. Reflects Mimi, “When we think of our total

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sales at over half million pesos, then we begin to feel that our clusters can be as big as the trader.”

Compared to unorganized farmers, Mimi and all the other farmers in the coffee cluster enjoy more benefits because they actively participate in the market chain. They are involved not only in producing coffee but also in value adding activities like drying, grading, sorting, and labeling before selling their product. In addition, they are taking more control over the management of the chain itself by seeking new markets, controlling product quality, negotiating for a better price, and building trust through a good track record in product supply.

The results are encouraging. During the first coffee season, November 2005 to March 2006, 25 farmers organized in three clusters in three barangays and agreed to test joint marketing. Altogether they delivered two tons of Grade 1 quality coffee to Nestle. In the next season, November 2006 to March 2007, they increased their membership to75 with a corresponding three-fold increase in product volume consolidated. These were of Grade 1 quality and delivered to Serenity Coffee Corporation. In the coming coffee season, more farmers are expected to join the clusters with estimated volume of no less than 15 tons.

It is a long journey of possibilities as the clusters feel confident to engage in more economic activities. They are now studying their market moves with new products, namely: semi-processed non-timber forest products for the Cebu furniture exporters, and vegetables for the supermarkets. According to them, this will further diversify and strengthen their income base. Moreover, they hope that their stories will echo to other farmers who are still unorganized and realize that they need not feel so helpless with their “smallness” and their constraints because clustering can simply make them big.

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Contributed by: Dennis Pace, KFI Project Coordinator; Lou

Ann Gomez, KFI Marketing Officer; and Juanito Barsomo,

CRS Agroenterprise Coordinator for Bukidnon

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Cluster Story No. 6

MISSING THE BOAT, MISSING THE MARKET

Calamansi (Citrofortunella microcarpa) is a popular economic crop in the municipality of Siay in Zamboanga Sibugay Province. Located in Western Philippines, Sibugay has the climate favorable for year round production of calamansi. Sometime in October 2005, a group of 94 calamansi growers formed themselves into seven clusters distributed in three barangays. Their objective was to find access to the buyers in the demand center of Manila market that could absorb their substantial production from the area. From the clusters, calamansi volume was as much as 15 tons weekly which they intended to consolidate for the Manila buyers through a Cagayan de Oro-based Market Facilitator.

The formation of clusters for common calamansi marketing was assisted by the Xavier Agricultural Extension Service of

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the College of Agriculture Complex of Xavier University and the Catholic Relief Services - Philippines. Majority of the cluster members are Visayan growers, predominantly women. But about 20 percent of the cluster membership was comprised of an indigenous group, the Subanens.

Despite the extensive planning done, the first four product deliveries to Cagayan de Oro City, a 10 to 12-hour travel from Siay, were challenged by problems. During the first delivery, the truck that the cluster hired was not able to catch the boat at the Cagayan de Oro port. So discouraged were the clusters because their calamansi arrived at the port just as the ship for Manila was departing. The clusters were compelled to unload the calamansi at the local wholesale market at only 60 percent of the agreed price with the market facilitator.

The Facilitators made sure to immediately convene an assessment because the clusters had doubts they could make it. A few weeks before their first test marketing, the local agents and assemblers of the long established trader in the community had told them it would be too complicated for the farmers to undertake it. The cluster leaders realized from the assessment that the main problem was the operational flow, i.e. the agreed time for the truck departure from Siay at eight o’clock in the evening was not followed. And this was traced that not all the clusters could comply with the agreed consolidation time of six in the evening. The clusters made improvements in their operational flow that is part of their clusters’ supply plan.

While the operational flow was improved, the second delivery a week after was confronted by another problem. The buyers complained that not all the calamansi sent to them was not standardized at 25 kg/wooden crate as agreed. This was costly on their part because they were the ones who paid for the ship freight from Cagayan de Oro to Manila. Again, the clusters addressed the problem by ensuring that all cluster members use a weighing scale to standardize wooden crate

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content, and that a label traceable to each grower and cluster should be implemented to impose discipline because an agreement with the buyer is a promise to deliver on a commitment.

On the third delivery, another problem surfaced. The truck hired broke down in transit. A rescue truck had to be immediately hired. While the calamansi still arrived in time at the Cagayan de Oro port, the trucking cost was 50 percent higher which affected significantly the net returns of the growers. So in the assessment before the next delivery, a cluster leader was assigned to survey the different truckers and ensure that the truck hired would be in good condition.

By the time the clusters made the fourth delivery, most of the problems were resolved. But a different one came up. The local trader had reacted with a price war. By this time, the clusters had already become confident to confront the new problem. The regular assessments had taught the clusters that marketing is such a dynamic activity and they would succeed if their management would be that of constant improvements. Their early experiences made the cluster more forward-looking and proactive in its agroenterprise activities.

About two years after the first delivery, the clusters had delivered a total of 482 tons of calamansi and accumulated a total of PhP 278,700 organizational funds from the management fees and the savings. The growers organized a formal cooperative called Zamboanga Sibugay High Value Crop Marketing Cooperative (ZASHIVAC) to be able to enter into business agreements with the institutional market, the processors. In the course of their marketing experiences over the past two years, the clusters realized that the wholesalers’ market is not stable because it was always determined by the market forces of demand and supply. The institutional market would be a predictable market and they are willing to come up with two annual “lock in” prices (for the dry and the wet seasons) as well as commit to a regular supply by adjusting their farm activities to be able to address the need of this type

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of market. And they are hopeful that their organization, the systems they have installed and their track record of supply would convince the institutional buyers that they need not worry in having to deal with small growers.

Contributed by: Earl Villota, Bert Sabar, Mirza Rivas, Analiza Digdigan and Floro Israel

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Cluster Story No. 7

SMALL, STEADY STEPS TO BUILD A MARKETING ENTERPRISE FOR MAGUINDANAO’S

ORGANICALLY GROWN, TRADITIONAL RICE

The rice farmers of Maguindanao have been growing their traditional rice varieties, mostly the Kawilan and Tibi-tibi varieties but have depended entirely on rains as their source of water. In this condition, they have been so disadvantaged in the market. Traditional rice varieties are not considered “premium rice” compared to the new so-called “high yielding” varieties. Although better tasting, they are assigned a lower price by the traders compared to the new “high yielding” varieties. Also, rice millers say that the palay (i.e. the rice in raw form) from rainfed farms yield low milling recovery compared to those from the irrigated fields when converted to milled rice.

Exacerbated by other limitations such as lack of adequate postharvest facilities like solar dryers, storage building and transportation, and being unorganized, the farmers are forced

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to sell their wet palay during the peak harvest times when the prices are at their lowest. Without good returns, farmers have had little incentive to improve production.

In Year 2005, with the support of the Catholic Relief Services (CRS), Kadtuntaya Foundation, Inc. through the Peace and Agricultural Development for Sustainable Livelihood in Central Mindanao (PADSLCM) extended production improvement and marketing assistance to the rice farmers. The farmers from 6 barangays (Bulod, Damalusay, Adsoy, Damakling, Poblacion and U. Idtig), all in 2 municipalities (Paglat and SK Pendatun) of predominant Muslim Maguindanao Province were organized into clusters. In this small group, farmers went through the learning process of understanding their production and marketing conditions, and then proceeded to establish improvements in their production practices. This was a basic important step recognized before the actual joint marketing is to be done.

The Farmers’ Field School (FFS) was set up using a 1 hectare demo farm. Twenty five farmers representing the clusters in the 6 barangays involved in the project got practical knowledge and skills on the Natural Farming Technology System (NFTS) approach. They were guided by the CRS Agri Extension Staff from land preparation to post harvest activities, incorporating the formulation & applications of organic concoctions as fertilizer, insecticides & pesticides for crop care and protection.

The learnings in the FFS were applied by the participants in their own family rice fields that in effect became also the demonstration sites for other farmers in the community. So far, of the 34 clusters formed involving 444 rice farmers distributed in 6 barangays, close to 65 percent have already adopted NFTS technologies. For the NFTS adoptors, their production costs have reduced dramatically and they have also reduced their dependence on outside financing for inorganic inputs from the traders/financiers. This core of independently producing rice farmers was envisioned to pave

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the way for a collective marketing effort to have more chances of success.

While the NFTS technology adoption was fast, the marketing activities were done with much caution. Maguindanao is an area with well-entrenched traders and it was difficult for a project to introduce a situation of tension in an area that was already experiencing a volatile peace and order situation. Thus, the marketing chain favored in the strategizing was to work with existing “friendly” traders and market chain actors to be able to sell the bulk of the wet palay produced by the clusters, but to also gradually build the market chain of processing the palay into milled organically grown rice directed at consumers so that Maguindanao rice as premium product could be communicated to the consumers.

In the first harvest season of joint marketing last September to October 2006, only 11,500 kilos (230 sacks) of palay was consolidated as majority of the farmers are still tied up with the traders that provided them inorganic inputs. This quantity of rice was facilitated by KFI to be processed into milled rice marketed, and were then sold under test marketing to in Cotabato City where KFI holds its office. The financial performance of this first marketing venture was however a loss. CRS staff then assisted that a value chain analysis could be done to pinpoint the bottlenecks in the marketing activities that needed to be addressed, as well as to understand the cost and returns in every product move from the farms to the consumers.

With the confidence gained from the lessons of the earlier marketing experience, the cluster leaders for the current harvest season (September to October 2007) set a higher target of 2,000 sacks of consolidated palay (with a modest contribution of about 5 sacks from each cluster member into the joint marketing venture). This volume targeted would be 10% of the member’s potential harvest but it was a good target in terms of working out a transition for marketing in a community long dominated by traders.

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Operationally, the 30 clusters are organized into 6 Peoples Organizations or POs who carried out the purchasing and consolidation of fresh palay in their respective barangays. The palay is picked-up by KFI for postharvest processing utilizing the facility available in the nearby city of Tacurong. For now, the well-milled rice marketing activity is principally managed by KFI but along the process, as efficiency levels are established, the PO Marketing Officer from the barangay of Adsoy, Marynisa Paglala, is learning the business together with the KFI staff in preparation for the eventual transfer of functions to the POs.

In the future, federating the six POs is the logical step to take to consolidate and market with efficiency, invest economically in joint postharvest facilities, as well as cater to the demand of buyers for quality and delivery reliability. On the part of KFI facilitating market outlets, it has developed its own market strategy for the fast turn-over of the milled rice. CRS has also provided small infrastructure support such as solar dryers, shallow tube wells for water supply, modest storage buildings, and trailers.

In the midst of challenges, the assessment and reflection activities on the various activities have been helpful in KFI staff with the cluster leaders being able to come up with the necessary improvements. Indeed, teamwork is at work and this is one of the strengths recognized in the partnership. It is half way the harvest season, and the clusters have so far consolidated 30,077 kg (601 sacks), looking ahead that they can reach their 2000 sack target level of marketable palay. Small gains but moving towards a clear positive direction in bringing the farmers actively involved in the market up to the consumers’ end.

Contributed by: Hai Arap, Nonita Alim, Jim Dalgan and Floro

Israel

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Cluster Story No. 8

SMALL IMPASUGONG SQUASH FARMERS MOVING INTO THE MARKET WITH THE

VEGETABLE INDUSTRY GROUP IN NORTHERN MINDANAO

The Municipality of Impasugong in Bukidnon is a highland blessed with cool temperature suitable for vegetable production. Twenty five (25) small farmers in the municipality have organized 4 squash clusters in 4 barangays. The cluster members take turns planting squash beside their corn plants. Each cluster member is assigned a particular week when to plant based on a planting calendar so that there is a weekly harvest. So that the farmer has his farm requirements at the time of planting, he can borrow production capital for farm inputs from the local cooperative, the Kauyagan Savers Cooperative (KSC).

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The Catholic Relief Services (CRS) in partnership with Kaanib Foundation, Inc.(KFI) and the local government through its Municipal Economic Enterprise Development Office (MEEDO) has collaborated to assist small farmers in production and marketing support. CRS provided a fund deposit in KSC which is used as leverage fund, and KSC directly lends production capital to the farmers equivalent to two times the leverage fund.

Every Wednesday morning, a cluster member harvests squash. This is brought to the nearby City of Cagayan de Oro, about 2 hours drive from Impasugong. The squash is unloaded at the consolidation center of the Northern Mindanao Vegetable Producers Association, Inc. (NVCC). KFI is a member of the NorminVeggies that owns the facility established with counterpart support from the vegetable association’s development partners, particularly the Department of Agriculture (DA) and the Growth with Equity in Mindanao Program (GEM-USAID). As member, KFI gets an allocation of NorminVeggies market for its assisted farmers not only for squash but for 4 other vegetables, namely: sweet pea, eggplant, ampalaya and spring onions and for which clusters have been formed.

Every Thursday, the cluster member’s squash is marketed by NorminCorp (the marketing group for NorminVeggies’ members) together with 10 other items to a supermarket in the neighboring island of Cebu. It is loaded in the boat and upon arrival in Cebu, the supermarket representative withdraws the vegetables from the port and brings them to the supermarket’s warehouse where Normincorp’s representative will have them received, and then will issue a charge invoice that is the basis for the admin staff to work on the payment transfers by bank a week after the vegetables are received. Normincorp forwards all payments to KFI that facilitates that KSC’s loans are paid and net payments are given to the cluster members.

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For its marketing service, Normincorp charges a service fee at the rate of 5 percent of the sale value. With the marketing fee, the cluster member is also charged another 5 percent of the sale value for the management fee provided by the cluster in consolidating the product. Based on experience, the cluster members are willing to pay the fees as long as they can be covered by the additional earnings generated from organized marketing to targeted buyers. Normincorp uses its bargaining influence in handling high volumes of assorted vegetables to get the best price possible for the supermarket and wholesale market where price is pegged weekly and daily, respectively.

On October 11, 2007 when the price of squash negotiated with the Cebu supermarket reached PhP 9.50 per kilo, the price of the Cagayan de Oro spot market traders was only at PhP 5.00 per kilo Deducting Cebu shipping and handling costs at PhP1.50 per kilo plus the Normincorp marketing fee (5 percent of sale value) at PhP 0.48 per kilo, as well as that of the cluster’s management fee at PhP 0.48 per kilo, the cluster member still has a net price of PhP 7.04 per kilo which is way above the trader’s price of PhP 5.00 per kilo at the Cagayan de Oro wholesale point.

Only 2 tons of squash with weight of a minimum of 2 kilos are sent to the Cebu supermarket. The rest are sold by Normincorp to its network of 30 wholesaler/buyers from the neighboring provinces in Mindanao that are not vegetable producing. At times when the clusters cannot deliver due to weather problems, Normincorp taps from other NorminVeggies’ members so that its market supply agreements to the supermarket can be complied. This back-up support has been very helpful that the Impasugong clusters can sustain and hold the markets.

Only about a year ago, the cluster members were individual producers with no bargaining influence relative to the markets. Lacking information on market players, and an understanding of how markets can work to their advantage,

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they just involved themselves up to production and sold their vegetables to the local assemblers or agents of the wholesaler/traders in the nearby Agora wholesale market in Cagayan de Oro City.

With the CRS program support where farmers could be organized into clusters and could undertake production programs, they have become a part of a value chain. But while there is benefit in being part of the value chain, there is also the work, the problems and the risks. And it has not been easy complying with the supply commitments when some farmers got affected with the white fly problem that reduced the yields and when there was too much rain in September that affected production. These challenges encountered made it necessary that the clusters work within a vegetable association where back-up supply could be provided as the farmers were still learning about their production systems and when uncontrollable factors like the climate adversely affected yields.

As part of the chain moving to the supermarket with other suppliers in NorminVeggies, the Impasugong cluster farmers could undertake various activities (planting, crop management, harvesting, sorting, grading, packaging, shipping, selling to choiced markets) that give them higher earnings which individually would be difficult for them all to do. And the more the value chain is studied and discussed with them, the more incentive is for them to work together to earn more through joint marketing.

Contributed by Denis Pace, KFI Project Coordinator; Lou Ann Gomez, KFI Marketing Officer and Juanito Barsomo, CRS

Agroenterprise Coordinator for Bukidnon

Documents

Part III Cluster Stories to Tell - PinoyME · Part III Cluster Stories to Tell ... Thirty minutes after, ... He was located and arrived at the meeting place after about an hour