articles > print and website articles > The Philippine Business.com.ph >

Fruits of Farming

Senen Bacani and Luis Lorenzo Jr. have one thing in common – involvement in the fresh fruits business in resource-rich Mindanao. Their leadership has enabled the private sector to take the lead in further developing the area.

Before serving as Agriculture Secretary in 1990-1992 during the Aquino Administration, Senen Bacani spent years working and living in the countryside of Southern Philippines where he ran the rigorous operations of DOLE Philippines. After his government stint, he helped form a management company which set up T’Boli Agro-Industrial Development, Inc. — a company which is into contract-growing of pineapples and papaya involving the small farmers of South Cotabato.

In 1997, he led a multinational company to invest in Datu Paglas, Maguindanao, a predominantly Muslim area in Mindanao. La Frutera, Inc., a 1,000-hectare banana plantation, is the biggest investment so far in the Muslim areas of Mindanao. T’Boli is also in Mindanao but is located in a “Christian area.” Ninety-five percent of its 1,700 workers are Muslims, many of whom are rebel returnees from the Moro Islamic Liberation Front (MILF) and the Moro National Liberation Front (MNLF). Bacani and his business partners envisioned La Frutera as a model of how Christians and Muslims can work together.

“We are very close to making La Frutera one of the best farms in the country and in the Autonomous Region of Muslim Mindanao at that. In La Frutera, we make sure that we produce at competitive quality and cost because the exclusive buyer of our products is Chiquita Brands, a global leader in banana production,” Bacani explains. Indeed, La Frutera’s relatively modest-sized plantation has produced bottomline profits from the start of operations.

"It is more satisfying when you see something living , growing, and producing some value", Bacani notes that since the time that La Frutera established its plantation in Datu Paglas, there have been follow-up investments from others, albeit slower than what he originally expected. The once secluded, war-torn town now boasts of a mini-mall and a development bank. The crime rate is reportedly down. Bacani wants to inspire others to follow their lead and not be deterred by the negative perception about the peace and order situation in the Muslim areas. “Peace and development go together. We cannot keep on waiting for peace to come first. The reason why there is no peace is that there is no development. Fact is, if there is no livelihood, people can do anything as there is nothing to lose on their end. Now that we have given the Datu Paglas townsfolk gainful employment, they do not even want to lose even a few days’ wages.”

To drive the point, Bacani related a story. During the height of the conflict when former President Estrada ordered a full-blast assault against the MILF, some of their workers were called to re-join the forces of the MILF Muslim rebels, but they passed up on the challenge. The workers told the recruiters that they were tired of war. “After they got used to peaceful living, earning some money, having some conveniences here and there, being able to send their kids to school, they may have realized that that was all they needed. I am sure there is some ideology in their going to war, but most part of it is answered by having some livelihood because our needs are all the same — food, shelter, and clothing. Our workers’ families have also started buying appliances. But, if they stop working, they know it will be a big change again, and it will be a reversal of the simple, adequate and peaceful life they now live.”

More Challenging

Talking about the sector as a whole, Bacani elaborates that agriculture is much more challenging than industry because there are more variables in agribusiness. He elaborates that, “When you are dealing with something living, you cannot just neglect it. You have to nurture it properly with the right inputs and care so that whatever you get is maximized. It is more satisfying when you see something living, growing, and producing some value. If you do not love what you are doing, it would be difficult, for example, to go to Mindanao every so often. I fly to Mindanao every other week. When I was with DOLE, I lived in Mindanao. You cannot manage by remote control. You have to walk the farms because it is relatively complicated as compared to a factory. When you run factories, you just buy raw materials to use and just depend on a lot of machinery to churn out the final product. In the fresh business, you are not even sure when you will get the raw material because you are still growing it.”

Bacani points out that agribusinesses should integrate to gain economies of scale. “If you have to compete in the world, you have to look at the whole system from seed-to-shelf – improve the productivities in the different areas of the chain, and then integrate the whole thing. Fact is, buyers are getting bigger; even the supermarket chains are consolidating to have very efficient purchasing and logistics systems. They would rather talk to fewer people who can give them volume and service. Worse, if you are small, you will not have any bargaining leverage – you will just be a price-taker.”

Seed-to-Shelf

Presidential Adviser on Job-Creation in Agriculture Luis Lorenzo Jr. cannot agree more with Bacani in the need to apply the “seed-to-shelf” formula on agricultural processes. Lorenzo’s battlecry for the sector’s upliftment calls for using international best standards in improving processes from the time that seeds are prepared to the time the farm produce are sold in the market. Lapanday Farms, which his family owns, has indeed, for years now, epitomized farm production processes which are at par with the world’s best.

Lorenzo’s task to generate jobs in agriculture has entailed a lot of trips to the countryside, involving such activities from hybrid rice production, to coffee production, among many others. He explains that agriculture is in his family’s blood. “I am a third-generation Mindanaoan, from a family that has struggled over the years to use agriculture as a vehicle for both business growth and social responsibility. I saw the difficulties as well as the opportunities in this sector as a young boy, growing up in Cagayan de Oro.” This background gave him the right perspective on how agriculture can improve the lives of his countrymen. He says, “Our experiences in the private sector convinced me that agricultural development and livelihood could quell the forces of conflict – as shown when we achieved industrial and community peace in Davao by working with the people in turning around the banana farms. Now I see the challenge in replicating those solutions and successful formula for the benefit of other commodity sectors and farmers across the country.”

Lorenzo has equal passion for agribusiness development and community development. He believes that, “Ultimately, the best measure of success in these business endeavors is the benefit delivered in terms of a better quality of life for the farmers and their families. I believe that the first responsibility of business is economic success; its profitability contributes to the prosperity of the communities surrounding it and ultimately to the economic welfare of the country. But the social aspect is equally important: the other half of economic success is socio-civic involvement. Companies that do well cannot be islands of prosperity isolated in a sea of poverty; they must impart their lessons for the betterment of others, and expand the “islands” so that majority can gain from it and not try to sink it. They must take the responsibility of teaching the smaller players the skills and techniques to survive and perform better in today’s dynamic and competitive environment.”

Lorenzo describes himself as one who is striving to be “the farmer of the future – one who successfully exemplifies the paradigm shift from a production-oriented to a market-driven, technology-based, and globally competitive agriculture.” He works on this by focusing on supply chain evaluation, benchmarking on each link, and aiming to be the best across the attributes of cost, consistent quality, supply reliability, customer service, and appropriate product innovation. He adds that, “I am always aware of the intensely competitive environment today: the markets are more dynamic, the trends change at a faster pace, so we have to make every effort to stay at the forefront of the industry – even be a step ahead of everyone else.”

The odds are great especially in the global scene. Lorenzo cites that, “as a participant in globalization under WTO, we are still struggling to gain entry into international markets because of tariff and non-tariff barriers”. He dreams of the time that other countries would recognize the Philippines as a country that wants trade, not aid.

Fortunately, he has the President’s ear especially when it comes to the important issues concerning the sector. “President Arroyo understands globally-competitive agriculture; she understands when we say, ‘Let us address the emerging opportunities today.’ For instance, we are attaining success in her hybrid rice flagship program. We need to roll out more of her flagship programs, with a key focus on supply chain economics. What we successfully carried out in hybrid rice – teaching farmers the total system, helping them understand benchmarking and supply chain competitiveness – let us implement in all the other commodities to help achieve food self-sufficiency, build a modernized agriculture founded on social equity, and decrease rural poverty by raising the farmers’ incomes.”

In the meantime, does one have to be a plant or fruit lover to be able to successfully run agriculture-oriented businesses the way he does? Lorenzo says, “Not necessarily, though it helps; for me, it makes the work even more fulfilling.” For him, agribusiness shows just one path but it is key to the development of the country’s food sector. He enjoins businessmen: “Come and join us in the farms. The challenges of agribusiness are best shown by experience. Even farmers who have been immersed in this sector for years are discovering new challenges, and new ways to meet them.”

Science as a Tool

Lorenzo also has good appreciation for the science aspect of agribusiness. “Science is playing a greater role in agriculture today. Biotechnology, biodegradable plastics, and integrated pest management are just some of the fields we need to explore further. In particular, biotechnology has been showing evidence that, if harnessed properly, it can improve productivity, increase efficiency, raise food quality, lower chemical and energy inputs (and thus lower costs), and lead to novel and more effective medical treatment. Biotechnology can therefore increase the competitiveness of our agricultural sector tremendously. We have to be open to it and search for the proper balance that will benefit the farmer as well as secure public health and safety.” Related to this, Lorenzo laments that the global economy is taking leaps forward given new and emerging digital and biological technologies, while the Philippines continues to lag behind in many areas. He suggests, therefore, that “Along with building a critical mass of infrastructure, harnessing technology properly can make us more globally competitive.”

Lorenzo emphasizes: “There’s a lot of work to be done and not one person or one sector can do it alone. We need teamwork between government and private sector, between industry leaders and farmers.”

For his part, Bacani cites the two things that government needs to give agriculture: more investments in water and easier access to credit. “A lot of crops are dependent on rainfall and farmers generally plant during the rainy season. Problem is when they plant at the same time, they harvest at the same time and this creates a situation where prices become pretty bad. This is why you need to have irrigation systems or water that you can manage. This will enable you to manipulate the supply. On the need for financing, a very small percentage of credit goes to agriculture and fisheries when in fact the sector represents one-fourth of the economy. Credit is the sector’s decades-old problem. This is because financial institutions have always considered agriculture as a very risky business because of the vagaries of weather and other things. Agricultural land is not even acceptable as collateral. As a result, there is a very low percentage of farmers who have access to formal credit. If they do not have credit, they cannot even buy the right inputs even if they have the right know-how and skills. In the agribusinesses that we manage, we help in facilitating the credit and sometimes even bridging it.”

Lorenzo sums up what can nourish the sector: “We all have to focus and move with urgency towards strengthening a commodity- and market-based drive to be the best. Being one of the best agricultural economies means raising the bar and benchmarking against the global best throughout the supply chain; in today’s dynamic environment, it also means being flexible in responding to what the customers demand. The benefits should of course translate into better incomes for the farmers, as well as fair price, food quality and safety, and reliability for the consumers.”