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Getting rich through agribusiness

March 15, 2010

Thinking Global

By Dr. Bernardo Villegas First Posted 17:26:00 09/02/2009 Filed Under: Agriculture

MANILA, Philippines—Over the last ten years, there has been a significant improvement in rural and agricultural infrastructures.

There is the Philippine nautical highway which has made it possible, for example, for agricultural products such as rice, calamansi, and bananas from the island of Mindoro to be transported more efficiently and cost-effectively, not only to the traditional urban market of Metro Manila and Calabarzon but also to the southern islands of Panay, Negros, and Mindanao.

There are the modern highways that have connected Clark, Subic, and Tarlac in Central Luzon and the numerous farm-to-market roads completed in Northern Mindanao and Southern Mindanao. Through the efforts of Senator Angara and other members of his family who occupy government positions, the historically depressed province of Aurora is being endowed with better roads, post-harvest facilities, and seaports.

We have to do much more in the next ten years to address the problem of rural poverty. But there are already clear signs of rural dwellers getting richer, thanks to improved infrastructures that are enabling them to benefit from what is known as agribusiness. It is in agribusiness that there is no conflict between agriculture and industry. In agribusiness the two are symbiotic and reinforce the strengths of one another. Agribusiness comprises farming, post-harvest technology, food processing or manufacturing, wholesaling, and retailing. Although it is not limited to food products, since it may also involve the production of agricultural commodities for biofuels, pharmaceuticals, and chemicals, agribusiness is mainly involved in bringing food from the farm to the plate. It can also encompass a large share of industry, which includes construction, public utility, and manufacturing.

In the past, because of the utter neglect of rural infrastructures, the products from Filipino farmers were extremely high cost because of both low productivity at the farm level and prohibitive transport and distribution costs. It was very difficult to industrialize the food industry because of the high cost of raw materials. In fact, most of our large food manufacturing enterprises had to import their raw materials.

However, with improved rural infrastructures, we can now witness a proliferation of businesses processing food products for both the local and export markets. We have gone beyond just exporting coconut oil and raw sugar. There are both large and small enterprises that make money selling food products manufactured from the raw materials that our farmers grow.

An outstanding example can be found in the province of Bulacan where the Tatak Bulacan brand can be found in beautifully packaged polvorones, pastillas de leche, peanut brittle, buko pie, and numerous Filipino delicacies that can now be found in supermarkets both here and abroad. Thanks to the technical help from the Department of Science and Technology, these traditional food items are now better packaged so that it will be a matter of time before we can compete with similar products from Thailand, whose entrepreneurs have had a head start because of the much earlier support that they got from their government that gave the highest priority to agricultural development in the last century.

Thanks to their proximity to the very lucrative market of more than 10 million consumers in the Metro Manila region, many farmers in Cavite, Laguna, Batangas, and Quezon are able to significantly improve their meager incomes from such traditional crops as rice, coconut, and sugar by growing high-value crops that can produce net earnings of P500,000 to Pl,000,000 per hectare of land.

In addition to reasonably good roads, irrigation, and post-harvest facilities in these provinces, the farmers are ably assisted by private seed companies like East West Seed and Harbest with the best technology from Europe and Taiwan. During the early phase of the rise of Taiwan from poverty to richness, the Taiwanese assigned the highest priority to endowing their small farmers with the rural infrastructures they need to make money on their respective farms.

Now that Taiwan is phasing out a lot of its agriculture because of the scarcity of both land and labor, Harbest is bringing to the Philippines the Taiwanese technology of growing such profitable crops as sweet papaya, ampalaya, eggplant, lettuce, etc. In Cavite, there is the traditional small and very sweet pineapple that small farmers are growing. In both Batangas and Cavite, companies like Nestle are helping small farmer return to the coffee growing that these provinces were very famous for before the Second World War.

Thanks to companies like Del Monte and Dole in Mindanao, the Philippines is becoming a major provider of high-value food products for China. Close to 60 percent of the bananas imported by China already comes from Mindanao. Pineapple is also a major export to our northeast Asian neighbors, including Japan. A third fruit that has great potentials is mango, as more small- and medium-scale farmers from Bataan, Zambales, Camiguin, Cebu, and other mango-growing provinces improve their farm management practices.

Thanks to new ways of organizing the farm workers in banana, pineapple, and other plantations, the incomes of thousands of these rural dwellers are being significantly improved through their being organized as cooperatives by innovative companies like AsiaPro. Contract farm workers who used to be underemployed and lacked security of tenure are now being organized by companies like AsiaPro into workers’ cooperatives that allow full and permanent employment.

Large distribution companies like Agrinurture Inc. are now helping small farmers, either individually or organized as cooperatives, to sell their high-value vegetables and fruits to the supermarkets and other retail outlets. Agrinurture also lends to landowners farm inputs like seeds, fertilizers, pesticides, and herbicides and contracts to purchase their produce at a guaranteed price. With improved rural infrastructures, these distribution companies are willing to take the risks inherent to farming, thus helping to improve the incomes of farmers and farm workers. The same guarantee is also being given by large corporations like San Miguel Corporation and Nestle in the purchase of such farm products as corn, cassava, and coffee. Such arrangements link directly the farming operations with the manufacturing and supply chain sectors. Industrialization based on agricultural development would have been possible twenty or more years ago if our leaders gave first priority to investing in rural infrastructures.

For overseas workers who have been away for the last ten years, these significant changes in conditions prevailing in the countryside may convince those with agricultural lands to come back to seek their fortune in agribusiness. They can start first by serving the ever expanding domestic market. As they perfect their systems of production, they may be ready in the near future to take advantage of the rapidly increasing demand for food products in China, Taiwan, South Korea, Hong Kong, and Japan. At last, we can talk about making money and perhaps getting rich in agribusiness. We have gone a long way in the last ten years.

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