How Agriculture Business Can Eradicate Poverty in The Philippines

Introduction

Department of tourism said, “It’s more fun in the Philippines”. One of the reasons that it is fun in the Philippines is because of it is some of the world’s greatest biodiversity and its abundance of natural resources. The natural topology and climate in the Philippines make it is so compatible for agriculture.

According to World Bank, agriculture in the Philippines employs 27.7% of the Filipino Workforce as of 2017, making it the 8th largest rice producer in the world, accounting for 2.8% of global rice production based on Food and Agriculture Organization statistics in march 2011, then followed by other major agricultural crops like corn, sugarcane, coconut, coffee, mangoes, pineapple, tobacco, bananas, and abaca.

Having all of these resources given to use by nature, Poverty is still one reason Philippines is “not fun”. The Philippines' poverty rate diminished from 25.2 percent in 2012 to 21.6 percent in 2015, as indicated by the Family Income and Expenditure Survey (FIES) directed by the Philippine Statistics Authority (PSA). In any case, notwithstanding the decrease in these numbers, there are as yet glaring issues in regards to the issue of poverty. One of the more conspicuous ones is the continued prevalence of poverty within most of the basic sectors in the country.

According to Philippine Statistics Authority’s Poverty Incidence for Basic Sectors: 2006, 2009, 2012 and 2015 table, Five of the nine essential divisions controlled by the PSA — farmers (34.3 percent), fishermen (34.0), children who belongs to families with income below the official poverty threshold (31.4), independently employed and unpaid family workers (25.0) and women belonging poor families (22.5) — have higher destitution rates than the overall public (at 21.6 percent). Farmers and fishermen consistently registered as the two sectors with the highest poverty incidence since 2006. Farming is not considered sexy in most countries. Rather, it is seen as a one - way ticket to poverty and drudgery. Young people leave the countryside to seek better opportunities in urban areas.

The critical role of the agriculture sector in a country’s overall economic development as stylized in economic development literature is well known. First, it provides food in the country and raw materials for the rest of the economy. Second, it provides a significant market for the products of the non-agricultural economy, as one of the buyers of farm inputs as well as consumer goods and services produced in the non-agricultural economy. And last, as the sector grows and modernizes in the face of limited supplies of agricultural land, it releases surplus labor to the industry and services sectors. It provides job and source of living of the farmers and employment, although they work hard enough for their family, many of the farmers are poor in the rural areas where agriculture is the main source of livelihood and employment.

Thirty years on people tend to still find that people in developing countries who depend on agriculture for their living are typically much poorer even though they work hard than people who work in other sectors of the economy and that they represent a significant share, often the majority, of the total number of poor people in the countries where they live. Although, farming and agricultural living is one of the best and famous work in most of the countries, farmers do not have enough money offered by their partners. Every three months, prices received by farmers increased by at least 2%. Products are crops, livestock, fisheries and farmgate.

Developed countries such as Singapore is rich, even though they are not focused in agriculture. Singapore even held a conference which entitled Ag-Con Asia at Marina Bay Sands Expo and Convention Centre, it is mainly on producing innovative technology and business. As it has a climate for innovation, strategic location and strong skills which can transform agriculture and aquaculture in the Asia-Pacific Region.

This research paper is about the study of agribusiness and innovation of technology throughout the years. Countries who produce and import agriculture products in the Philippines and if in the later years will it overcome the poverty of the Philippines or the country stay where it were being one of the third world countries.

Advantages and disadvantages of Contract Farming

As stated by Dr. Rolando Dy in his Article “Changing World”, contract farming is where the farmers and buyers have their conditions of the products, its production and how it is sold and imported in other countries. Contract farming is famous and applied all over Southeast Asia, especially in the products of oil palm, dairy, seeds, vegetable and broiler chicken. In the Philippines, most of the chicken produced is in contract-grown by San Miguel and Bounty’s farm from day-old-chicks to hatching and growing.

Advantages of this contract farming is that the seller has a choice to negotiate the terms and conditions when it comes to exporting the farm products, they can also have this kind of trial and when it failed they can search for a new buyer that matches their needs. It also increased farm incomes because they have a lot of buyers to choose from, with their conditions applying to it. As buyer agrees to the condition of the seller’s contract, they have the supply of the products on time as they export it to the respective buyers. It also introduces to a higher-value and quality of crops, as the supplier will go through a stage process where they will pick the products carefully that satisfies the buyer’s needs. Buyers also has a market access whenever they are choosing or just browsing through a farm products that can add up to their market stocks.

Contract farming also has its disadvantages, example of this is the buyer’s monopoly power where the degree of price setting held by a supplier on the basis of its market share. The buyer can negotiate the price when they are satisfied depending on the price on the market and its demand of supply. Farmer’s owners can also be changed to any family farms. Bias of company towards large farms where smaller farms can also be given a chance but also has its limited payments. Looking up to other industries like sugar companies, they have a problematic issue that selling by contract farmers to other buyers who offer higher prices, thus neglecting the first one who offered because they do not have enough money to provide.

Over the years, companies have the ability to change the contract and the standards of it, like having a higher standards and strict policies, payments by other companies also causes delay when the farmers do not have anything to do, they just have to wait for them to have their income received with their both hands. While other companies’ demands to use a certain type of fertilizers, of course farmers would have to buy and look for that certain kind of fertilizers that the company wants. Farmers require to have a new equipment even though they do not have enough money to buy new technologies for them to have a much easier workload. Workers also forces to go on overtime at different times, the company also demands to have the product be delivered at a specific time.

Escaping the Poverty Through Agribusiness

Demand and supply of the products do not have a balance when it comes to exporting a group of companies. The demand of a certain product to produce unlimited supplies that he can sell everything what was being made. In the long run, this causes in excess of supply. Since farm products have its expiration date, negotiating and market powers are weakened because farmers are under pressure when selling their products before it becomes spoiled. They are then forced to accept low offered payments by buyers. This causes the farmers to be remained poor.

Escaping farmers from this poverty trap in agriculture. Mass poverty advanced among farmers of developed and innovative countries, it is when they tried to adopt the free-market policy, this poverty decreased upon research when they decided to adopt a public utility policy. Our country is currently trying this under free market, having the farmers’ hopes up to change the system, as Mr. Edward Tayengco stated. Changes observed when this public utility policy of symbiotic relationship between the agriculture and industry sector is strengthened. They noticed that the supplier of food and raw materials, and an adequate market for products and services from industries becomes economically healthy, this strengthened relationship can contribute to the rapid and stable economic growth of developing countries.

A new policy called “producer-controlled marketing boards.” Involves organizing and training farmers into compulsory cooperatives and legally vesting them with monopoly powers to organize the marketing commodities and policies. This new policy allows them to negotiate with companies and buyers who offers them low money that cannot sustain or not enough to their budget when exporting goods. The objective of this policy is to control supply, in order to not produce unlimited supply that will only cause the products to spoil and be offered at a low price, to raise their farm within the price range and income of the laborers, produce market power that it can be known and trusted, and lastly is to increase production and marketing efficiency with producing high quality and trusted products to be distributed.

Knowing Poverty and a Success in Decreasing It

Knowing the poverty should have a list of countries where agriculture or agribusiness is being implemented. Researchers’ type of study includes the data of expenses when it comes to producing farm goods. This data of prices and exchange rates will be used within a given computation that it will then be result of the comparison of the expenditures of each countries. If the given amount is less than the chosen poverty threshold, then that individual is considered to be in a state of poverty.

The change in real expenditures between any two time periods will reflect changes in income or prices between those two periods, the poverty head-count and the poverty rate. If in some case the capita income rises, expenditures on goods and services will also rise. The mathematical relationship between consumer expenditures and income, the marginal propensity to consume, tends to be higher for poor than for rich people. Therefore, as the income of the poor rises, some of them will begin to spend the money wisely and to spend more than the threshold expenditure per day leading it to a lower poverty head count and rate. There will also be a decreased in consumer prices that the consumers will purchase more goods and services with a high quality standard with the same budget and will also tell that an increase in real expenditures leading to a lower number of people in the poverty state.

Excellent agricultural performances lead to reduce measured poverty through both income and the price range. A high share of the poor depends on the agriculture of their incomes, higher demand is equal to higher supply. It is a natural thinking of a person that an increase of demand means that it can lower the poverty, perhaps as findings from previous research recommends, even more so than a general increase in incomes of the farmers. Similarly, because food companies such as a high share of consumer expenditures by the poor it is also tempting to think that lower food prices, such as might accompany increased food production per capita. This research is not guaranteed, an ambiguity arises precisely because so many poor people depend on farming for a living. Thus depending on what causes prices to daily. These possibilities put a question mark on the relationship between poverty and food production as an area requiring further exploration and research.

Applying technology on Agribusiness in Latin America

Laboratories in Argentina launched its first Agtech Acceleration Program, called “Agrotech” to identify with “agro: slang for agribusiness, in the region in 2016 with a group of no more than 10 startups with almost no funding and only early adoption from farmers. Agtech Week culminated in Congreso Aapresid, with an audience and listeners of over 5,000 farmers in Córdoba paid attention to the possibility of Blockchain and other frontier technologies by both local and international entrepreneurs and technology companies. Last year, Agtech also partnered to develop with Pulse, an innovation hub in Piracicaba, Brazil, together with Raizen, Brazil’s largest ethanol producer, to develop pilots with agtech startups.

Although there are many interested local companies, institutions and farmers trying to understand the implications of new technological developments – most of the initial interest in Blockchain, for example of this if which cryptocurrency they should invest in, technology is yet to be disrupt in the agribusiness value chain. If global agricultural production needs to grow by 60% by 2050 to meet the global demand, Latin America’s production needs to grow by 80%, according to its statistical computation, market participation and growth potential. This results in a bigger focus on yield increases, versus land expansion or higher crop intensity. In some factors, Latin America has pioneered agribusiness technology adoption by their innovation. An aspect engrained in Argentina’s Aapresid farmer association is the adoption of direct sowing practice which is no till, which lowers the soil erosion; now at 81% of Argentina’s arable land. Partnering with high technology adoption with market share, local companies have think of an opportunity to grow globally under the shadows of global leaders in their key markets.

As the venture company of Agtech focused on technology opportunities in Latin America, NXTP Labs is looking for new technology firms capturing large market opportunities where local entrepreneurs may have a competitive advantage compared to the international one. Latin America agribusiness is relevant in the global food export market, and it already has examples of successful entrepreneurs by using the innovative technology in both applying technology and agribusiness sectors to serve as role models. Latin America plays a key role in the food and agribusiness value chain and is yet to launch with prominent and high quality agtech players that can leverage regional advantages to become dominant in terms of global players. It lacks the venture liquidity track record of the United States when its market is less integrated. However, several sub-sectors provide an edge for local entrepreneurs to develop local solutions for problems shared by farmers, suppliers, processors and distributors in the certain region.

Agribusiness throughout the years

People know that agribusiness is important to many countries, as the people there is farming and agriculture is their income and source of living. Over the years, agriculture changes, technology adaptation and many farmers gained a lot of buyers with the ease of farm production. Comparisons with international experience suggest that the country is an average performer in terms of land productivity. According to Rosegrant and Hazell (2000), from 1967 to 1995, yield growth in developing Asia averaged 3.3 percent per year, with the highest growth in one of the largest population in the world which is China, Indonesia, Pakistan, and Vietnam. The lowest growth performance occurred in Nepal; the Philippines is somewhat in the middle in productivity, yield growth in the Philippines coincided with the period of the Green Revolution.

There are many changes in Agriculture within the span of 50 years, Travis Miller said and conducted a research which He finds fascinating. He discovered some key advancement when it comes to agriculture. Farmers are annoyed with the pest that destructs their farms, but through the years there are pest management through genetically modified plants; institution of integrated pest management programs. Farmers discovered plant breeding that allows high plant populations for faster productivity and supplies. Precision planting equipment so that farmers would not be bothered planting hardly and to ease their nature of work. People also came up with the good idea to a better formulated fertilizer and application equipment for a higher quality of farm products. Also global positioning system agriculture that has faster, larger and more efficient tractors and combines, mapping plant genomes that allows more rapid breeding; rapid and more accurate soil testing; and semi-dwarf wheat varieties.

Effects of this advancement in farm products includes that wheat producers have benefitted from semi-dwarf varieties, Hessian-fly, cereal-mite, and greenbug resistance that hinders pest from destructing plants. Crop management advances have made increased yields possible, when weather cooperates of course there are more products will be supplied. With the use of commercial and better formulated fertilizers also helped farmers increase yields. Soil test technology improved and aided farmers in identifying fertility of the plants needed. Innovated pest management equipment started in Texas in the year around 1972. Advances in agricultural mechanization and in reduced-till and no-till equipment has also been observed. Planting equipment does a lot of work and has come a long way from the “busters planters of the 1950s”

This advancement also increased in efficiency. Way back when a farmer only feeds 25 people to 155 in 50 years is a totally achievement to the agricultural or agribusiness industry. The reason that they have their source of living is because of the exponential growth from increased productivity.

Conclusion

My recommendation would be that the Philippine Department of Agriculture should organize and create a team to research the desirability organizing and operating producer-controlled marketing boards in the model of developed countries. In this way, maybe the Philippines would be a step closer to eradicating mass poverty in agriculture or agribusiness. Improvements and innovative advancement in terms of producing farm products, example of this is the ease of the workload of the farmers, although not all the works would be made by machines, farmers should be educated and trained to have an innovative and advanced mind when it comes to producing or creating new equipment. Suggesting new machine and farm products that can help them produce more goods with a high quality standard. Companies also should consider buying or negotiating to small farm, they can benefit through that with the same to large farm that the companies or industries only want.

Small farms need more partnership so that they can expand their farms and produce more goods. Introduction to new materials should not scare the farmers to try, instead they should be willing to learn and with that they can think of more innovative products to their respective business. Government should fund equally and negotiate more with other countries so that the products of the Philippines would be exported to other countries and this will result to decrease of poverty of the farmers because of the many countries would trust the high quality and efficient products of the Philippines. Farmers and government should talk about the program structure to match their missions and budget of the goods. Government should provide enough budget to the farmers and not buying their products with a very low money.

References

1. “2015 Poverty Statistics for Basic Sectors - Summary Tables”. National Statistics Office, 2015
2. “Changing World.” Manila Bulletin, August 17, 2018
3. “Dissecting the poverty trap in agriculture: An Agribusiness Approach” Seameo Searca, Jan 12, 2010
4. “Economic Importance of Agriculture for Poverty Reduction” OECD Publishing, 2010
5. “Eight major factors that have changed agriculture in the last 50 years” Southwest FarmPress, August 5, 2016
6. “Performance of Philippine Agriculture, October-December 2018” Philippine Statistics Authority, January 23, 2019
7. '2009 Crop Production Statistics'. FAO Stat. FAO Statistics. Retrieved 30 March 2011.
8. “Philippine Agriculture over the Years: Performance, Policies and Pitfalls” Cielito F. Habito and Roehlano M. Briones, 2010
9. “Singapore aiming to become region’s urban agriculture technology hub: Koh Poh Koon.” The Straits Times, Jan 15, 2019
10. “The Gaps and Opportunities for Agribusiness Technology in Latin America” AgFunder News, October 9, 2018