Value Chain of Rice (In Transition To Organic) in Region 02, Philippines
Value Chain of Rice (In Transition To Organic) in Region 02, Philippines
Value Chain of Rice (In Transition To Organic) in Region 02, Philippines
Abstract—The study was focused on Value Chain Analysis in 2006. This amount might even triple in 2012. Major
(VCA) of rice (in transition to organic) in Region 02. export markets are Japan, U.S.A., Canada and Europe [4].
Specifically, it aimed to: a) map out the value chain of rice in The demand for certified organic products by the foreign
transition to organic by identifying the processes, actors and and domestic market, and growing health-conscious
their roles from inputs to product consumption; b) identify and consumers has encouraged the shift to organic production by
analyze the constrains and issues affecting production and
marketing of organic rice; and, c) recommend policy options to
conventional farmers. In support to Organic farming, the
improve the production and marketing of rice in transition to Philippine National Organic Agricultural Board (PNOAB)
organic in Region 02. The study covered five (5) provinces was born in 2004, which supports among others: the
namely: Batanes, Cagayan, Isabela, Nueva Vizcaya and implementation of the Philippine National Organic
Quirino. There are six sectors covered by the study along the Standards and Certification system; and the establishment of
value chain of organic rice such as Business Development a Five-year Organic Industry Development Program for
Services (BDS) providers, farm input suppliers, farmer adoption by the respective units of DA in partnership with
producers, processors, traders/retailers, and consumers. the private sector [4].
Organic rice in Region 02 is in infant stage which the
Republic Act (RA) 10068, otherwise known as the
different sectors engage in small or minimal volume of
operation. There are few registered as organic rice producers
Organic Agriculture Act of 2010, was signed into law in
in the region. BDS is working effectively their role as provider April 2010. The IRR of RA 10068 states that initially, 50
of support services to other sectors in the value chain of rice. million pesos shall be allocated for the first year
Greater share of value added incurred by processers (millers) implementation of the Act and thereafter at least 2% of the
and institutional buyers/traders of finish product. DA’s annual budget shall be allocated for organic
All sectors in different provinces in the region need supports agriculture program and projects [5]. This will ensure the
on physical facilities, technological, financial and market sustainable development of organic agriculture through the
linkage from government and non-government organizations automatic appropriations from the DA’s annual budget
to strengthen their operations on production, processing and certain percent for organic farming. The crafting of the IRR
marketing of organic rice.
for RA 10068 is a clear demonstration of the new DA
Index Terms—Value Chain, Value Added, Organic, Sectors
administration’s resolve to cause a shift from conventional
and Awareness farming to organic agriculture [1].
Meanwhile, the study is one of the main research project
entitled Value Chain of Analysis of Selected Agricultural
I. RATIONALE Products (in transition to organic) in Region 02, undertaken
by the Isabela State University (ISU) and the Department of
Organic industry in the Philippines is still considered to Agriculture – Bureau of Agricultural Research (DA-BAR).
be in its infancy or emergent stage, its development and The DA-BAR provided funds, while ISU for manpower and
promotion have been spearheaded by the private sector, non- other logistics to facilitate the operation of research. VCA of
government organizations (NGOs) and people's rice (in transition to organic) in Region 02 is covering five
organizations [1]. More recently, efforts to develop the (5) provinces namely: Batanes, Cagayan, Isabela, Nueva
sector have expanded with the active participation of the Vizcaya and Quirino. There were six sectors covered by the
government and sustained collaboration among stakeholders study along the value chain of organic rice such as BDS
especially in Cagayan Valley Region [2]. providers, farm input suppliers, farmer producers,
To date, majority of the organic producers supplying the processors, traders/retailers, and consumers.
domestic market are community-based, small and medium
enterprises spread out in various parts of the country.
Exporters to the foreign market include multinationals, II. OBJECTIVES
medium and large-scale companies based in Mindanao,
Negros, Central and Southern Luzon. Enterprises obtain The study was focused on value chain analysis of rice (in
their organic certification from a local certifying body like transition to organic) in Region 02. Specifically, it aimed to:
the Organic Certification Center of the Philippines (OCCP) a) mapping out the value chain of rice in transition to
or international certifiers, which may have tie-ups with organic by identifying the processes, actors and their roles
locally-basedinspectors [3]. For the Philippines, unofficial from inputs to product consumption; b) identify and analyze
estimates placed the export value for organics at US$10 the constrains and issues affecting production and marketing
million or more in 2003, and at an estimated 20% annual of organic rice; and, c) recommend policy options to
growth rate, it would have reached US$18 million or more improve the production and marketing of rice in transition to
organic in Region 02.
1
Professor of the Agribusiness and Agricultural Economics, College of
Agriculture, Isabela State University, Echague, Isabela, Philippines.
([email protected]; [email protected])
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III. FRAMEWORK OF THE STUDY population [9]. The samples in the whole region for each
study were calculated using Slovin’s formula with 5%
Organic farming is considered as in the embryonic stage
margin of error for consumers [10]. The computed samples
today particularly in the Philippines [6]. It is projected by
were apportioned to provinces and qualified municipalities
some economies that will be a primordial development in
based on its number of consumers’ populations. The
agriculture in the coming decade due to increasing needs of
samples were drawn at random using Excel random
human and as contributory factors for the restoration of our
numbers.
environment. Production and marketing of organic rice is
The primary data were obtained using semi-structured
continuously expanding and with an increasing trend not
questionnaire floated to all actors (farm input suppliers,
only in the Philippines but also in the international market
producer, traders, processors, business providers and
[7].
consumers). Other types of data gathering employed were:
In the processes of organic production are affected with
Focus Group Discussion (FGD), Problem Analysis, Key
external and internal environments. These however, the
Informant Interviews (KII), Environmental Scanning and
quality and quantity of internal factors are within the control
Strength, Weaknesses, Opportunities and Threats (SWOT)
of the entrepreneurs/farmers which also influenced by the
analysis.
external factors like economic, technological,
Descriptive statistics were used to analyze the gathered
social/cultural, political/legal, environmental and organic
data. Cost analysis was employed to trace out the value
product accreditation conditions surrounded by the
producers. Performance of its production depends on the added in each level in value chain of organic rice from farm
conditions of the internal factors such as manpower, inputs utilization up to the consumption of the products. The
technical, physical facility, farm inputs and capability of cost and return analysis was undertaken in each level and
producers to sustain the needed funds of the operation [7]. conduct a comparative analysis.
Issues of organic product accreditation would also be
considered in this industry to make distinction to ordinary
products and that can provide advantages to V. RESULTS AND DISCUSSION
producers/traders in selling their products in the market. A. Demographic Profile of the Respondents
Value adding activities (processing, packaging, storing,
distribution and utilization) are made to increase further the The distribution of respondents of the study is shown in
potential of increasing income particularly during over Fig 2. All respondents except consumers were taken from
supply and low demand of it [8]. the reports of the Department of Agriculture - Local
At the end of the study, the following were realized: a) Government Units (DA-LGUs) in each province in the
map out value chain of organic rice; b) identified marketing region. There were more (667 or 84%) number of
system; c) identified constraints and opportunities in respondents from consumer sector in the value chain of rice
production and marketing of organic rice; and d) surveyed in the study, then farmer producers (69 or 9%),
implications and recommendations. The conceptual while the traders is the least respondents (7 or 1%).
framework of the study is depicted in Fig 1.
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(90%) like LGU-DA, Department of Trade and Industry farm input suppliers also provided financing in some extent
(DTI), Soil and Water Management (SWM), etc., while the to assure trading with farmers of their products.
rest (10%) were non-government institutions such as private There were eleven farm input retailers surveyed; four
company suppliers of products, Magsasaka at Siyentipiko (36.36%) from Isabela, three (27.27%) from Nueva Vizcaya,
para sa Pag-unlad ng Agrikultura (MASIPAG), Word two (18.18%) from Cagayan, and one (9.09%) from Quirino
Vision and others (See Table I). and Batanes provinces, respectively (Fig 4). Most of them
were males (81.82%), an age ranging from 40 to 54 years
old with an average age of 47.20 years (See Table III).
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the margin of profit from sales of the product which also Value Chain and Cost Mapping of Organic Rice in the
emphasized by [12] in their study. Province of Batanes
The value chain of the organic rice in Batanes is shown in
Table IXA and Appendix 1. Value chain mapping is
indicating the business service providers, value chain actors
and key stakeholders. DA, LGU, and DTI have played an
important role in pursuing the activities of different actors in
the value chain such as input suppliers, farmer producers,
processors and traders. In value added map of rice, farmer
producers obtained with Php22.46 (16.04%) value added to
the cost of farm inputs purchased from input suppliers,
Php55.00 (39.29%) per kg added by the processors from its
cost of goods, Php15.00 (10.71%) added by traders from its
cost of goods, and Php40.00 (28.57%) per kg added by the
institutional product processors to the cost of goods. The
final price of the organic rice is Php140.00 per kg.
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per kg of rice or Php9.00 per cup of cooked rice in upland supplier to final consumers of Php96.00, while on the red
organic rice. Of this cost structure, suppliers of farm inputs rice variety has a total accumulated value added cost of
contributed with Php19.75 or 18.29%, producers like Php108.00. The cost deferential is attributed to demand of
farmers were able to contribute of Php26.00 or 24.07%, the product. Institutional consumers like restaurants,
processors with Php15.00 or 13.89% and traders have canteens, caterers and the like have possessed with the
contributed with Php43.00 or 39.81% in the total cost highest percentage (Php46.00 or 47.92%) added to the total
structure of organic rice in the market niche. On the other cost chain of organic white rice variety, while other actors
hand, lowland organic rice has the same final cost like farmers contributed with Php20.18 or 21.02%,
(Php108.00/kg) with upland organic rice but with different processors with Php18.00 or 18.42% and traders with
cost allocations of actors involve in the value chain. There Php10.00 or 10.42%. There is the same pattern of actors in
was Php20.92 or 19.37% contributed by the suppliers of organic red rice variety where the institutional consumers
farm inputs, Php26.00 or 24.07% added by producers, contributed with the highest cost of Php48.00 or 44.44%
Php15.00 or 13.89% added by processors and Php43.00 or from the total cost structure in the chain. The farmers,
39.81% added by traders to the total product cost (Table processors, and traders contributed with Php21.18 or
IXA and Appendices 4 and 5). 19.61%, Php20.00 or 18.52% and Php17.00 or 15.74%,
respectively (Table IXB and Appendices 7 and 8).
Value Chain and Cost Mapping of Organic Rice in the
Province of Quirino C. Challenges/Constraints
To put credit to the DA, academe, other government Farm Input Suppliers:
agencies, Peoples Organization (PO’s) and Non-government
The farm input suppliers had encountered with the
Organization (NGO’s) who exerted their efforts in
following constraints that affect to their operation: a) lack of
promoting organic farming particularly in rice production
substrates/ materials and manpower that resulted to shortage
that made farmers and consumers aware of the benefits of
of supply, b) contaminated farm residues as substrates in
the products. There were various business service providers
producing organic fertilizers and pesticides, c) insufficient
from government and NGOs which made their supports to
knowledge in producing organic farm inputs like organic
rice organic industry actors along the value chain in the
fertilizers and botanical pesticides, d) lack of infrastructures,
province of Quirino.
equipment, transportation facilities that can help facilitate
On costs value adding analysis, the finish organic rice
the production and distribution of farm inputs, e)
product has reached to Php120.00 per kilo or Php10.00 per
competition of products among farm inputs suppliers, f)
cup as final price available to the ultimate consumers. In this
insufficient financial capital and technology disseminations
cost structure, farm input suppliers accounted with Php5.50
to prospective organic farm input suppliers, g) high cost
(4.58%) per kilo contribution and Php24.50 (20.41%),
equipment that can be used for production of organic
Php30.00 (25%), Php35.00 (29.17%) and Php25.00
fertilizer and other farm input products which the small
(20.83%) contributed by the farmers, product processors,
producers can’t afford, h) insufficient support of R&D in
traders and institutional consumers like restaurant, fast food
production and utilization of organic farm inputs especially
chain, etc., respectively. In this case, traders have the
its efficacy to plant growth and control of pests, i) too rigid
highest cost (29.17%) contribution to the ultimate price of
requirement of product evaluation and high cost of
organic rice in the market (Table IXB and Appendix 6).
accreditation/certification as organic farm input producer
Value Chain and Cost Mapping of Organic Rice in the imposed by the accrediting body, and j) organic farm inputs
Province of Nueva Vizcaya producers are not fully aware to RA # 10068 or Organic
In the province of Nueva Vizcaya, value chain of organic Agriculture Law.
has interrelationships of the different actors starting from the
supplier of farm inputs up to the traders of the products. TABLE IXA. VALUE ADDED CONTRIBUTED BY THE
Each actor is supported by different business service DIFFERENT ACTORS/SECTORS ALONG THE VALUE CHAIN OF
providers coming from public and private agencies in the RICE IN REGION 02.
province. They provided directly the needs of respective Particular
Batanes Isabela
actor in organic rice chain. It was observed that the actor Upland Lowland Upland
performing multiple functions in the chain e.g. farmers as Farm Input Suppliers 7.54 4.47 5.59
producers perform the function of input supplier since they 5.39% 6.16% 5.20%
produce their own and supply the excess produce to co- Producers 22.46 18.53 17.41
16.04% 17.25% 16.21%
farmers or even marketed. In like manner, farmers have go
Processors 55.00 37.00 37.00
into forward integration through processing their produce 39.29% 34.45% 34.45%
palay to milled rice and pack for market. The actors in the Traders 15.00 10.00 10.00
chain, business development service providers and the 10.71% 9.31% 9.31%
identified persons/organization in the chain. Institutional Consumers 40.00 37.40 37.40
There were two value adding assessment made from the 28.57% 34.82% 34.82%
organic rice products in the province due to price/cost Final Price (Php/kg) 140.00 107.40 107.40
variation incurred by each actor; one for the organic white
rice variety and the other one is red rice variety. Organic
white rice variety has cheaper cost value in the whole chain
as compared to organic red rice variety. The organic white
rice variety has a total value added accumulation from input
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TABLE IXB. VALUE ADDED CONTRIBUTED BY THE organic milled rice are sold in ordinary price in the market,
DIFFERENT ACTORS/SECTORS ALONG THE VALUE CHAIN OF g) low supply of organic milled rice, and h) insufficient
RICE IN REGION 02. market linkages of organic milled rice particularly outside
Cagayan Quirino Nueva Vizcaya the province.
Particular
Lowland Upland Upland White Red
Farm Input 3.08 4.25 5.50 1.82 1.82
Suppliers 2.85% 3.93% 4.58% 1.89% 1.68% Traders:
Producers 20.92 19.75 24.50 20.18 21.18 Trading operations of organic products in the region had
19.37% 18.29% 20.41% 21.02% 19.61% affected and hampered by the following constrains
Processors 26.00 26.00 30.00 18.00 20.00
24.07% 24.07% 25.00% 18.75% 18.52%
encountered by the traders like: a) no enough and
Traders 15.00 15.00 35.00 10.00 17.00 continuous supply of organic milled rice processors/
13.89% 13.89% 29.17% 10.42% 15.74% farmers, b) organic milled rice has short shelf life which
Institutional 43.00 43.00 25.00 46.00 48.00 cannot be stored in a longer period of time, c) limited supply
Consumers 39.81% 39.81% 20.83% 47.92% 44.44%
Final Price
of milled rice for trading, d) lack of market linkages for
108.00 108.00 120.00 96.00 108.00 market niche, and e) not prepared to buy by ordinary
(Php)
household consumers.
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marketing practices. The marketing and trading of organic financing, and access to product marketing.
rice is not yet well established unlike the conventional rice.
The different actors in the value chain in organic rice have
B. Farm Input Suppliers
played their roles in the chain like farm inputs suppliers
provide farm inputs needed by farmers. The farmer • They need technical, financial, and marketing supports for
producers are going to provide their produce to the their entrepreneurial endeavors. From among other
processors/millers, processors/millers then sells their milled concerned of the farm input suppliers are assistance of
rice products to the traders, while traders will supply their identification of organic farm input products, trainings on
products to institutional users and to household consumers. production, packaging, trade marking, and marketing
Transient consumers are then supplied by the institutional which includes product promotion and accessing the
rice food providers like restaurants, canteens, hotels, buyers. Financial support is likewise needed by them to
hospitals and fast food chains. finance the operation and sustenance of the business.
The value added mapping of costs of organic rice in • There must strict implementation of Organic Agriculture
different provinces, processors had contributed with the Law (RA # 10068) and other related Laws. Farm input
highest cost share of the total consumers price of organic suppliers can be benefited on this by proper
rice (Php140.00/kg) in Batanes with 39.29%. In Isabela, implementation of organic programs/protocols that must
farmer producers and institutional consumers had observed in production, processing and marketing of
contributed with the highest cost share to the final price organic farm inputs.
(Php107.40/kg) of upland produced organic rice with • They need support to conduct research and development
35.44% and 34.82%, respectively, while institutional of organic farm inputs. This endeavor will determine the
consumers and farmers had for lowland produced organic content, level of efficacy of the products e.g. botanical
rice with 34.82% and 34.45%, respectively. Traders had chemicals, and draw for proper recommendations in the
contributed much with 39.81% for upland produced organic use of the product.
rice, while processors contributed much with 39.81% for • Farm input producers/suppliers’ accreditation. They need
lowland produced organic rice to the total cost structure of accreditation of their business name and product for
Php108.00 per kg in Cagayan province. In Quirino province protection of the industry and they can be able to take
having with final price of organic rice to Php 120.00 per kg, advantage during marketing.
29.17% of this cost is contributed by the traders. Finally,
Nueva Vizcaya has final price of Php108.00 for organic red C. Farmer Producers
rice and Php96.00 for organic white rice. Institutional
consumers had contributed with highest cost share of about • There is a need to conduct training on organic farming,
47.92% for white and 44.44% for red rice variety. On final processing and marketing of the products. Most claimants
price of the product, Batanes organic rice has highest of this are farmers found in the far flung areas in the
obtained final price per kilogram. provinces of Region 02. Furthermore, other organic
There were various challenges/constraints faced by the farmer practitioners have not fully understood and
different sectors along the chain of organic rice production, internalized the concept of organic farming.
processing and marketing in Region 02 that affected to their • There should be readily available and enough volume of
operations. organic farm inputs in the market like organic rice seeds,
organic fertilizers, botanical chemicals (biospray), and
VII. RECOMMENDATIONS other supplies.
• Strict implementation and monitoring of Organic
Based from various challenges, problems and constraints Agriculture Law, and strengthen the implementation and
faced by all sectors along Value Chain of rice (in transition organization of NOAB particularly in municipal and
to organic) in Region 02, the following recommendations barangay level. People responsible of program
are set forward for government’s policy options: implementation must fully aware on it particularly to said
organization.
A. BDS Providers • Organization of organic producers in each province and
• There should be a need to improve the delivery system of region. The organization will facilitate their needs for
BDS to their clients. Proper programming of their technical, financial and marketing of products. Through
activities and review their priorities suit to the needs of this the organization will become responsible to access on
the clients (specifically to each sector in organic rice value it.
chain). Need more competent manpower and logistic • There is a need for organic rice producers’ accreditation.
supports for better delivery of services reaching to as far The government must provide support on accreditation of
as far-flung places in each province in Region 02. farmer producers particularly subsidizing the cost of the
• Strict implementation of Organic Agriculture Law (RA # registration.
10068) in the country and other related Laws. • The government will develop schemes to encourage
Implementing rules and regulations of the program must farmers to engage in organic farming particularly on rice
be reviewed and provide greater participation of those production. Through this will increase the production area
program implementers found at the tip most (e.g. LGU- of organic rice and increase available supply of products
DA) in organizational structure. in the market.
• Continuously provide the basic support services that are
needed by the client’s sectors along the value chain of rice D. Processors
in transition to organic. From among the highlighted • Provide technical, financial and marketing supports. They
support services are technology trainings on organic, need technical information on proper processing of the
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rice e.g. milling, to solve short shelf life of milled rice, APPENDIX 3. VALUE ADDED MAP OF RICE (IN TRANSITION TO ORGANIC)
FOR UPLAND IN ISABELA
and proper storage. They likewise needed a capital for the
operation, acquisition of processing equipment like de-
huller machine, and accessing the market of the product.
• Organization of small processors is necessary for
institutionalization of support delivery systems.
E. Traders/retailers
• Help access the market niche of organic rice products not
only in the province, region, and country but also in
foreign markets.
• There is a need for organic rice organization of
traders/retailers in the region for institutionalization of
support delivery system from GOs and NGOs. This would
be the venue for technical, financial, research and
marketing supports for the member traders of the
organization. APPENDIX 4. VALUE ADDED MAP OF RICE (IN TRANSITION TO ORGANIC)
FOR UPLAND IN CAGAYAN
F. Consumers
• The government concern agencies like DA, DTI and
DOST must conduct continuous education for product
utilization or consumption of organic products including
the benefits that they can get from it.
APPENDICES
APPENDIX 1. VALUE ADDED MAP OF RICE (IN TRANSITION TO ORGANIC)
FOR UPLAND IN BATANES
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APPENDIX 7. VALUE ADDED MAP OF RICE (IN TRANSITION TO ORGANIC) [9] Philippine Statistics Authority (2010). The 2010 Census of Population
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