CASE STUDY ON BANANA PRODUCTION AND

PURCHASE AGREEMENT:
DAPCO UNITED SMALL GROWERS MULTIPURPOSE
COOPERATIVE (DUSGROW MPC) AND DOLE PHILIPPINES,
INC.-STANFILCO
IN BARANGAY DAPCO, PANABO CITY, DAVAO DEL
NORTE
(Banana)

DEPARTMENT OF AGRARIAN REFORM

Policy and Strategic Research Service
Economic and Socio-Cultural Research Division
February 2006

DAR-Policy and Strategic Research Service (PSRS), February 2006

TABLE OF CONTENTS
Page

I.

Profile of the Study Area

1. Davao del Norte
2. Panabo City
3. Barangay DAPCO

1
2
3

II.

The DAPCO United Small Growers Multipurpose Cooperative

(DUSGROW MPC)

III.

DOLE PHILIPPINES, Inc.-Stanfilco: The Marketing Arm of

DUSGROW MPC

10

IV.

The Process and Dynamics of Entering into Banana

Production and Purchase Agreement by the DUSGROW MPC

11

V.

Benefits Derived by the ARBs from the Agribusiness

Venture Arrangement (AVA)

15

VI.

Perceptions of ARBs and Investors in Entering into

Agribusiness Venture Arrangement (AVA)

16

VII.

Factors that Contributed to the Successful Implementation

of the Agribusiness Venture Arrangement (AVA)

18

VIII.

Lessons Learned

18

IX.

Recommendations

20

DAR-Policy and Strategic Research Service (PSRS), February 2006

Case Study on Banana Production and Purchase Agreement:

DAPCO United Small Growers Multipurpose Cooperative
(DUSGROW MPC) and Dole Philippines, Inc.-Stanfilco
in Barangay DAPCO, Panabo City, Davao del Norte
I.

Profile of the Study Area

1.

Davao Del Norte

Location. The province of Davao del Norte is strategically located at the southern
part of Mindanao and at the northern part of Region XI. It is bounded by Agusan
del Sur on the north, Bukidnon on the west, Davao City on the southwest, Davao
Gulf on the south and the Province of Compostela Valley on the east.
Topography. The topography of the province is generally rugged, mountainous
and moderately to steeply sloping areas on the western part and wide alluvial
plains on the central lowland area. Comprising the major portion of the alluvial
plain is a flat tract of land. However, some areas are gently undulating and exhibit
a rolling topography.
Water Resources. There are 15 rivers and 12 creeks that traverse the province.
The bigger rivers such as the Lasang, Tuganay, Libuganon and Saug Rivers drain
the broad plain west and north of Davao Gulf. All these rivers flow into the Davao
Gulf.
The abundant water supply is used for irrigation, domestic water supply and
complementary flood control. Furthermore, the water resources of Davao del Norte
also promise aesthetic pleasure and recreation. The Tagbaobo Falls in Kaputian,
the Panas Falls in New Corella, the Binancian Falls in Asuncion and the Tagtagan
Falls in Kapalong are scenic spots that are potentials for tourism and industrial
purposes.
Land Area and Resources. Davao del Norte has a total land area of 364,056
hectares. Of the total area, 57 percent or 206,913 hectares are classified as
alienable and disposable (A&D) lands and 43 percent or 157,143 hectares are
classified as forestlands.
Population. Davao del Norte is a growing province in terms of population. The
latest census conducted in May 1, 2000 reported a population of 743,811. The
males comprised about 51 percent or a total of 381,303, while the females were
around 49 percent or a head count of 362,508. With a total land area of
3,640.5672 square kilometers, its population density was 204 persons per square
kilometer.

DAR-Policy and Strategic Research Service (PSRS), February 2006

Agriculture and Fisheries. The potentials of the Province in agriculture are

reflected through its vast area devoted to agricultural activities. Agricultural land
use accounts for 35 percent or 127,416 hectares of the total land area of Davao
del Norte.
Major crops grown in the province include paddy rice, corn, coconut, banana
(commercial export and local consumption), and fruit trees. Vegetables, root crops
and other temporary and permanent crops are also grown though mostly not on a
commercial scale.
Agrarian Reform. Based on the data from the Department of Agrarian Reform
(DAR) Planning Service, Davao del Norte has a total of 115,170 hectares of land
that are targeted for land distribution. As of December 2004, the total land
distributed is equivalent to 96,599 hectares or eighty four percent (84%) of the
total target. For private agricultural lands (PAL), the total hectares of land
distributed are: 5,004 hectares under Operation Land Transfer (OLT); 3,312
hectares under government financial institution (GFI); 22,844 hectares under
Voluntary Offer to Sell (VOS); 8,739 hectares under compulsory acquisition (CA);
and 19,750 hectares under voluntary land transfer (VLT). On the other hand, for
non-private agricultural lands (Non-PAL), the total hectares of land distributed are:
16,923 hectares under settlements and 20,027 hectares for government owned
lands (GOL) and Kilusan Kabuhayan sa Kaunlaran (KKK). The KKK lands were
specifically set aside for distribution during the Marcos regime.
2.

Panabo City

Geographic Location. The City of Panabo lies between the two (2) bustling cities
of Tagum and Davao City. It is bounded on the northeast and northwest by the
Municipality of Carmen, on the southwest by Davao Gulf and on the west by Davao
City.
The City proper is located along Daang Maharlika (Pan-Philippines Highways) and
accessible by land transportation and other vehicles plying the Davao-Butuan and
Cagayan routes. It is 32 kilometers from Davao City and 28 kilometers from Tagum
City. It is also 45 minutes ride from Davao and thirty minutes (30) from Tagum
City.
Land Area. Based on the data of the Land Management Bureau (LMB), the total
land area of Panabo City is 25,123 hectares, which is only 29 percent of the total
land area of Davao Province.
Population. Population growth rate remarkably increased since census and
statistical reports started in 1960. From a population of 42,509 in 1960, it had
increased to 133,950 during the last census year in 2000. Male population consists
of 51 percent of the total population while female is only 49 percent. It has a sex
ratio of 100:96, which means that there are 100 males for every 96 females.

DAR-Policy and Strategic Research Service (PSRS), February 2006

Literacy. Based on the 2000 census data, more males had gone to school but
only few had finished a college degree. Literacy rate in Panabo is higher
considering the presence of educational institutions not only within the urban
barangays but also in all of its 40 barangays. About 96 percent are literate and
only four percent are illiterate.
Agrarian Reform. The total CARPable area in the City of Panabo is 4,627.6827
hectares, which is 18 percent of the citys total land area of 25,123 hectares. These
are found in the 32 barangays with a total of 3,932 beneficiaries. Barangay DAPCO
has a total CARPable area of 1,004.0144 hectares, which is the biggest among the
32 barangays. On the other hand, Barangay San Francisco has the least CARPable
area of 4.7660 hectares.
3. Barangay DAPCO
Location. Barangay DAPCO is located in the City of Panabo, province of Davao del
Norte. It is consists of six puroks with three- kilometer distance in-between puroks.
Barangay DAPCO is 17 kilometers from the town proper of Panabo City. It can be
reached through the national highway going to the Municipality of Sto. Tomas and
the proposed Davao to Bukidnon Highway.
Land Area. Barangay DAPCO has a total land area of 1,024.0144 hectares. Of this
figure, 98 percent or 1,004.0144 hectares are classified as cropland and two
percent or 20.0 hectares as residential.
Population. Based on the 2000 census, the population of DAPCO totaled to 3,971.
Of these figures, 48 percent or 1,924 are males and 52 percent or 2,047 are
females. There are 736 households with an average size of five members per
household.
Agricultural and Livelihood Activities. The predominant economic activity is
agriculture. Of the total land area, 98 percent or 1,004.0144 hectares are devoted
to agricultural production. Banana is the major crop grown with 971 hectares
planted with Ecuador, a banana of export quality, while another 33 hectares are
planted with Lacatan.
Poultry and piggery are of small-scale and are generally raised in the backyard.
Only few housewives are engaged in other income generating activities like sarisari stores and dressmaking.
Health Services. There is only one health center in the barangay. However,
majority of the households perceive health services to be both accessible and
affordable. This can be attributed to 12 Barangay Health Workers (BHWs) and one
Barangay Nutrition Scholar who conduct regular activities such as Operation
Timbang for 0 to 18 months old children. Free medicines are usually given to minor
illnesses like fever, cough and diarrhea. There is also a midwife who regularly visits
some households who are in need of health services.
DAR-Policy and Strategic Research Service (PSRS), February 2006

Education. There is only one complete elementary school in the barangay. It has
14 classrooms with 14 teachers serving 541 pupils. Secondary education is also
provided in the barangay. It has 13 classrooms with 28 teachers serving 1,040
students.
Peoples Organization. There are five active peoples organizations in Barangay
DAPCO. These are the Stanfilco Employees Agrarian Reform Beneficiaries
Multipurpose Cooperative (SEARBEMPCO), the DAPCO Agrarian Reform
Beneficiaries Cooperative (DARBCO), the DAPCO United Small Growers MultiPurpose Cooperative (DUSGROW MPC), the First Individual Agrarian Reform
Beneficiaries Multi-Purpose Cooperative (FIARBEMCO) and the Agrarian Reform
Beneficiaries Individual Self-Managed Multi-Purpose Cooperative (ARBISM).
Agrarian Reform. The Davao Abaca Plantation Corporation (DAPCO), formerly
owned by the Jabellana Family, was considered as the first and largest abaca
plantation not only in the municipality of Panabo but throughout the province of
Davao del Norte until the land was leased by a multi-national company that is
engaged in fruits and vegetables exporting business. The company, Stanfilco, a
division of DOLE Philippines, planted the area with export variety of bananas,
which made it known as the number one banana exporter of the country. As a
multi-million dollar company, it employed more than a thousand plantation
workers. In 1994, when the area was covered under the Comprehensive Agrarian
Reform Program (CARP), the 1,004.0144 hectares banana plantation was awarded
to the qualified farmworkers.

II.

The DAPCO United Small Growers Multipurpose Cooperative

(DUSGROW MPC)

1.

Profile

The Agrarian Reform Beneficiaries (ARBs) of the DAPCO United Small Growers
Multipurpose Cooperative (DUSGROW MPC) were originally part of the ALDA
Cooperative, one of the three cooperatives that emerged from Stanfilco Employees
Agrarian Reform Beneficiaries Association, Inc. (SEARBAI). ALDA was composed of
123 ARBs working on a total land area of 126 hectares. However, ALDA split into
two cooperatives, namely, the Agrarian Reform Beneficiaries Individual SelfManaged Multi-Purpose Cooperative (ARBISM) and DUSGROW MPC. DUSGROW
MPC entered into an agribusiness venture arrangement (AVA) with Stanfilco known
as the Banana Production and Purchase Agreement. The contract was signed in
October 1998 at Tagum City, Davao del Norte with a duration of ten years and is
supposed to end by 2008.
The DUSGROW MPC was duly registered with the Cooperative Development
Authority (CDA) on May 29, 1998 under a registration number RN 5465DVO. Its

DAR-Policy and Strategic Research Service (PSRS), February 2006

farm operation is situated at Farm 1, Barangay DAPCO and has an office address
at Room 305, Deco Building, Panabo City, Philippines.
The cooperative started its operation with only 14 ARB-members working on a
total land area of 16.24 hectares (each ARB-member is entitled to 1.13 hectares)
under a collective Certificate of Land Ownership Award (CLOA) issued to SEARBAI.
These 14 ARB-members were subsequently issued their individual CLOAs on
September 29, 1999.
In July 2004, seven ARBs joined DUSGROW MPC, which brings the total to 21 ARBmembers. The additional members of DUSGROW MPC are de-listed members of
another cooperative, the DAPCO Agrarian Reform Beneficiaries Cooperative
(DARBCO). They were de-listed as members because they did not give in to the
demand of the said cooperative to resign from their current jobs as office workers
and instead work either at their respective farms or at the cooperative. However,
these ARBs invoked their rights as legal owners of the land and argued that they
could still work in other companies as long as they do not abandon their lands.
Hence, the additional seven ARB-members have appealed to the DARAB that they
also be given individual CLOAs since they are now individually managing their
farms. During the interview, no decision had yet been made by the DARAB.
As in the case of the 14 original members of DUSGROW MPC, the seven additional
ARB-members are also entitled to 1.13 hectares each. Hence, the total land area of
DUSGROW MPC has increased from 16.24 to 23.75 hectares.
2.

Duration of the Contract

As former employees of Stanfilco, the ARBs of DUSGROW MPC chose to secure a

contract with Stanfilco because they believe that it would be more favorable to
them than the other companies. Moreover, they also believe that Stanfilco ranks
first in the banana industry. Thus, they have confidence in Stanfilco.
DUSGROW MPC ARBs decided that their contract with Stanfilco would be within 10
to 11 years since they saw that they have an assurance from Stanfilco as
compared to other buyers. It is stated in their contract that whatever happens (for
instance, when suddenly there is no market for bananas), Stanfilco would still pay
for the bananas at half of their original price.
3.

The Operation of DUSGROW MPC

Under the umbrella of DUSGROW MPC, the ARBs opted to engage in individual
farming, that is, taking care of their individual lots. They find this form of farming
more beneficial than a cooperative-managed type because they exercise full
ownership and management of their lands and obtain higher farm incomes.
These ARBs state that they individually work on their farms but their main
responsibility is to supervise over-all farm operations since they employ farm
DAR-Policy and Strategic Research Service (PSRS), February 2006

laborers or help-outs to work in the farm. Almost all the ARBs of DUSGROW MPC
employ help-outs since 2001 when Stanfilco turned over their lands to them.
However, they claim that they are present at their respective farms to supervise
the work of their help-outs. The Provincial Agrarian Reform Officer (PARO) of
Davao del Norte said that the employment of help-outs started when the ARBs
began to engage in individual farming. Under the supervision of the ARBs, the
help-outs do the following activities: maintenance of the lands, de-silting of canal,
application of fertilizers, and supervision of harvesting and packing activities. The
help-outs also inform the ARBs with regard to the need for additional help-outs
when there is additional work to do. Thus, aside from the regular help-outs they
employ, the ARBs sometimes employ an additional worker.
According to the Municipal Agrarian Reform Officer (MARO) of Panabo City, these
help-outs are usually neighbors of the ARBs who are neither trained nor
knowledgeable in growing bananas. There is also a case where household maids
are even employed as help-outs in the farm. However, the ARBs refute this claim
and cite that the help-outs that they employ are introduced by Stanfilco, who
either work as plantation workers, lead man or foreman in the company. These
help-outs do farm activities on a daily basis. Each receives a salary of PhP2,000 to
PhP2,500 for two-weeks work. In the case of permanent help-o u t s , t he
compensation package includes a salary of PhP2,500 for 15-days work, cost of
living allowance (COLA) of PhP25 per day, membership in Social Security System
(SSS) and Philippine Health Insurance (PhilHealth), Christmas Bonus and
separation pay. However, the ARBs adopted a policy of no work, no pay to these
help-outs.
While some activities are individually done by the ARBs (with their help-outs), the
cooperative handles most of the major farm activities such as aerial spray,
harvesting, packing and payment of hauling expenses. It hires selected members
and their dependents to perform the said activities. In harvesting, the cooperative
hires a harvesting chairman who supervises 28 harvesters who are divided into
four groups to perform the harvesting activities. The cooperative pays the salary of
the harvesting chairman at PhP200 per day plus COLA of PhP25 per day and an
overtime of PhP60 per hour or 30 percent of his daily rate. The harvesters on the
other hand, are paid by the ARBs at PhP5.50 per stem of banana that they harvest.
To monitor the volume of production, an ARB maintains an individual account
where the number of stems harvested in their individual lots are reflected for
purposes of deducting the harvesting expenses by the company from the individual
proceeds of the ARBs.
After harvesting, the harvested bananas go directly to the packing plant. The
cooperative also hires a packing plant chairman, who monitors the packing plant
operation, specifically the work of the 18 packers who pack the bananas in boxes.
The packing plant chairman also receives a daily rate of PhP200 plus COLA of
PhP25 and overtime pay of PhP60 per hour or 30 percent of his daily rate. He is
paid through the cooperative funds. On the other hand, the 18 packers are paid
DAR-Policy and Strategic Research Service (PSRS), February 2006

PhP7.80 per box for Class A bananas and PhP4.50 per box for Class B bananas by
the ARBs.
DUSGROW MPC also hires other employees like the box checker, purchaser, water
tender supply operator and an office clerk. The box checker, who is a dependent of
a cooperative member, ensures the quality of the individual boxes to be used by
the packers. The purchaser, during harvest time, checks and monitors the
plantation area and records the number of stems that are harvested to ensure to
whom the harvested stems belong or who the rightful owners of the stems are. He
also does the color-coding of plastics of bananas. The water tender supply
operator checks the chemicals applied on the plantation while the office clerk takes
care of the clerical work at the cooperative office and other cooperative-related
matters.
The purchaser, a seasonal worker, receives a minimum daily rate of PhP195 plus
cost of living allowance (COLA) of PhP25 per day. On the average, he usually
works five days a week. On the other hand, the box checker receives a salary of
PhP200.00 per day. Both of them receive an overtime pay, which is equivalent to
30 percent of their daily wages.
Aside from their salaries, these employees receive the following benefits and/or
incentives: 13th Month Pay and year-end incentives, membership in Social Security
System (SSS) and the Philippine Health Insurance (PhilHealth).
The salaries of the cooperative employees specifically the harvesting chairman,
packing plant chairman and office clerk come from the cooperatives common
funds. The common fund is raised from the PhP5.00 per box that is deducted from
each box of bananas produced by the ARBs. On the other hand, the salaries of the
water tender supply operator, purchaser and the box checker come from the
proceeds of the theoretical boxes.
Theoretical Boxes correspond to the 18-cluster special product boxes that are
produced by the ARBs. It comprises four to seven fingers of bananas and weighs
between 750 to 900 grams. The number of theoretical boxes is not fixed since it is
dependent on the number of special product boxes produced. Hence, the more
special product boxes produced, the more the theoretical boxes are and
consequently the greater income from theoretical boxes.
The role of DUSGROW MPC is only up to the packing operations. Previously, after
the bananas are packed, the cooperative delivers the packed bananas at the
wharf. At present, Stanfilco hauls the banana produce of the ARBs but the
cooperative pays the hauling cost of $0.70 per box.
Although the ARBs are engaged in individual farming, they still have to abide by
the standard operating procedures (SOPs) of Stanfilco. The application of
chemicals has been done following certain rules and regulations and the ARBs
must adhere to the schedule of farm activities set by the company.
DAR-Policy and Strategic Research Service (PSRS), February 2006

The ARBs individually procure all the prescribed farm inputs from the company.
However, they have the option to buy farm inputs from other sellers as long as the
requirements set by the company are followed. Each ARB gets inputs from
Stanfilco through Memorandum of Requisition (MR) after which they withdraw the
materials. The company maintains a copy of the list of withdrawn materials by the
ARBs, which they later confirm from the records of the cooperative for purposes of
deducting from the proceeds of the produce of the individual ARB.
4.

Sources of Funds

DUSGROW MPC has two sources of funds that are utilized for the expenses
incurred by the cooperative, the common fund and the proceeds from the
theoretical boxes. It utilizes the income derived from the theoretical boxes for the
overhead costs incurred by the cooperative and the salaries of the water tender
supply operator, purchaser, and box checker. After deducting the overhead costs
of the cooperative and respective salaries, the excess income is equally divided
among members during year-end. On the other hand, the common fund is utilized
for the salaries of the harvesting chairman, packing plant chairman, officer clerk
and for other cooperative-related matters.
The common fund is the amount that accrues from the PhP5.00 that is deducted
from each box of Class A bananas produced by the ARBs. However, there is a limit
on the charging of the amount deducted, that is, up to only 5,000 boxes of Class A
bananas produced could be charged of PhP5.00. If the bananas produced by an
ARB exceed 5,000 boxes, the excess boxes have no more charges.
5.

Production

Stanfilco aims to achieve an average production of 5,000 boxes per hectare per
year. However, not all ARBs meet this average production target as production of
bananas depends on the fertility of the land. If the soil is sandy, the tendency is for
production to be quite low. The other contributory factors to the differences in
production include soil maintenance, farm operations, and packing plant operation.
When the ARBs meet the required production and their income is sizeable, they
give bonuses to their help-outs.
6.

Benefits Extended to its Members

DUSGROW MPC provides the following benefits to its members:

a. The DUSGROW MPC negotiated with one of the hospitals in Panabo City to
provide them a credit line in case of hospitalization of its members and
dependents. Thus, once admitted at the hospital, a medical pass is given which
serves as a guarantee that the cooperative would be billed after 30 days and
not the individual ARB. The cooperative shoulders the hospital expenses from

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10

its common fund, which is replenished after every deduction is made on the
concerned member during billing period.
b. The cooperative also set up a Mortuary Fund giving each ARB and his
dependent PhP5,000 in case of death. This amount is equally divided among
the non-affected ARBs through deductions from their billing statements.
c. A Credit Fund is established by the cooperative from the contribution of each
member. Generally, each member contributes PhP500 to PhP1,000 every
billing period. However, each member may contribute a minimum amount of
only PhP100 per billing period. Thus, each member could borrow as much as
PhP15,000 depending on the amount that they have contributed to the Fund.
The amount borrowed is payable within five months with an interest rate of
three percent.
d. The cooperative officers are also sent to seminars and trainings on cooperativerelated matters.
7. Future Plans
The DUSGROW MPC co-owns a mobile packing plant with the ARBISM cooperative.
However, the packing plant is housed at the ARBISM cooperative and is far from
the plantation of DUSGROW MPC. As a result, the bananas that are transported
from the plantation to the packing plant at ARBISM incur damages. Likewise, the
cooperative incurs a high overhead cost as each ARB is charged PhP700 for
electricity everytime the said packing plant is utilized. Hence, in November 2004,
the ARBs of DUSGROW MPC decided to rent a mobile packing plant. The mobile
packing plant is situated at the plantation of DUSGROW MPC. Each ARB is charged
PhP3.40 more or less per box of banana that is packed, depending on the dollar
exchange rate per harvest day.
One of the future plans of the ARBs of DUSGROW MPC is to finance the installation
of their own packing plant through a loan in the amount of PhP1.5M. Since the
proposed packing plant would be located within the plantation of the ARBs of
DUSGROW MPC, the ARBs believe that there would be lesser product damage and
lower overhead cost. If the plan of the ARBs of DUSGROW MPC would push
through, they would still pay for the amortization fee of the packing plant, which
they co-own with ARBISM ARBs even if they will not utilize it. The Landbank of the
Philippines suggested to both ARBs of DUSGROW MPC and ARBISM that whoever
would utilize the packing plant at ARBISM would be charged a certain rental fee.
The net income would be equally divided among the ARBs who co-own the packing
plant.
Another plan of the ARBs of DUSGROW MPC is to expand their area of production
by buying other parcels of land where they could also plant bananas. They also
plan to include the improvement of its lending program and to engage in rice
production.
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III.

DOLE PHILIPPINES, Inc.-Stanfilco: The Marketing Ar m o f

DUSGROW MPC

DOLE Philippines, Inc. is a subsidiary of DOLE Food Company, the worlds largest
producer and marketer of high quality fresh fruits, fresh vegetables, fresh-cut
flowers, and a growing line of packaged and frozen foods based in the United
States. In the Philippines, its operations are located in Mindanao areas. Fruit
farming in the Philippines began over 35 years ago with the establishment of
pineapple production at DOLEFIL, the DOLE subsidiary in Polomolok. DOLEFIL
currently produces almost half a million tons of fresh and processed pineapple per
year.
Banana farming operations soon followed the pineapple production, with the
establishment of Stanfilco, the DOLE banana subsidiary on the southern part of
Mindanao. From an initial crop of just one hundred boxes in 1968, Stanfilco has
established itself as one of the largest exporters of quality bananas to various
markets in the Asia-Pacific Region, with an annual production topping more than
25 million boxes annually.
Stanfilco grows bananas on a 1,004-hectare banana plantation it had leased from a
local landowner since the 1960s. Under the CARP, the qualified 800 farm and office
workers employed by Stanfilco received Certificates of Land Ownership Award
(CLOAs) to the land in early 1995 and through their cooperative, took-over the
management of the land. They agreed to sell bananas to the company at prices
that is too low according to critics.
The Philippine banana industry earned $140M from exports in 1996, and DOLE
PHILIPPINES, Inc.-Stanfilco accounted for 42 percent (42%), or $59M of the total
amount earned.
In January of 1999, Stanfilco became certified to ISO 14001*, the environmental
management standard based on the principles of management and employee
commitment, a policy to comply with all environmental laws, continuous
improvement in environmental performance with regular performance reviews and
training and communication on environmental issues. The Stanfilco certification
covers the growing, harvesting, packing and marketing of bananas in various
locations within the Philippine archipelago.
Transportation and port facilities serving the export of bananas from Stanfilco were
also certified to ISO 14001 in conjunction with banana production. The scope of
these operations includes transportation and communications, warehousing,
cooling, operation of terminal facilities and vessel discharging and loading. This

* ISO stands for International Organization for Standardization. It is a voluntary, non-treaty

organization founded in 1946 to promote the development of standardization facilitating in trade.
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12

achievement linking production and distribution signifies a quality approach to

environmental protection at all stages along the supply chain.

IV.

The Process and Dynamics of Entering into Banana

Production and Purchase Agreement by the DUSGROW MPC

In 1978, the owner of DAPCO leased its 1,004.0144 hectares of abaca plantation to
DOLE PHILIPPINES, INC. a multi-national company engaged in fruits and
vegetables exporting business. The company planted the area with an export
variety of bananas, which made it known as the number one banana exporter of
the country. In 1994, the 1,004.0144 hectares banana plantation was awarded to
around 800 qualified farm and office workers under the Comprehensive Agrarian
Reform Program (CARP) of the Department of Agrarian Reform. The beneficiaries
of the land organized themselves into a cooperative, which they named as
Stanfilco Employees Agrarian Reform Beneficiaries Association Incorporated
(SEARBAI). With the awarding of the land, SEARBAI eventually managed the
plantation.
On November 13, 1994, the Chairman of SEARBAI entered into a Memorandum of
Understanding (MOU) with DOLE PHILIPPINES, INC.-Stanfilco. The MOU stipulated
that SEARBAI shall grow and produce bananas on the 1,004.0144 hectares banana
plantation while Stanfilco shall buy all the produced export quality fruits.
However, majority of ARBs of SEARBAI rejected some provisions in the MOU and
considered the contract as less beneficial to them. Primarily, they contested the
agreed price per box of bananas as relatively low, that is, PhP22.50 per 13kilogram box of Class A Cavendish bananas as compared to some other companies
who pay PhP60. They also questioned the 25-year term of contract with the
company as too long.
Aside from the aforementioned issues, several ARBs showed their preference for
individual farming instead of the cooperative-managed type of plantation. They
also brought up their sentiments as regards disparity in the sharing of the
proceeds of the land because of alleged differences on the workload among the
members. The ARBs argued that while they owned same size of lands, their
incomes were not the same because of differences in workload. Those ARBs who
were occupying higher positions in the plantation/cooperative such as the
cooperative officers and supervisors have higher incentives than regular farm
workers.
Because of the aforementioned problems, some groups of farmers broke up from
SEARBAI and formed three cooperatives, namely: 1) Arica Labajo Dayot and Arlos
(ALDA) Cooperative, which was named after the family names of its leaders, 2)
DAPCO Agrarian Reform Beneficiaries Cooperative (DARBCO) and 3) Stanfilco
Employees
Agrarian
Reform
Beneficiaries
Multipurpose
Cooperative
(SEARBEMPCO).
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The ALDA Cooperative with 123 members and a total land area of 126 hectares
further split into two cooperatives. These groups of ARBs separated from ALDA
because they preferred individual farming. The said cooperative was unable to
enter into marketing contract with Stanfilco, allegedly because its leader was
among the four hard-core leaders identified with a leftist organization and the
approach of the ALDA leaders was the most radical during the process of their
Collective Bargaining Agreement (CBA) negotiation with Stanfilco. Due to lack of
market outlet, the ARB-members of ALDA abandoned its area, which caused the
stoppage of the plantations operation. As a consequence, the ARBs and their
families suffered, as there was no production during the time that ALDA was
negotiating with Stanfilco. Because of this situation, the ARBs broke away from
ALDA and organized two cooperatives, the ARBISM Cooperative and the
DUSGROW MPC.
In early part of 1998, the 16 ARBs who formed the DUSGROW MPC began
negotiating with Stanfilco. Apparently, they wanted to enter into contract with the
company because they were still bound by the old contract between SEARBAI and
Stanfilco. Since the MOU between the two parties stipulates a 25-year term
contract, they could not easily get away or look for other buyers until the contract
is rescinded. Therefore, ARBs of DUSGROW MPC could only enter into contract
with Stanfilco and not with other buyers. On the part of Stanfilco, since the area
covered by DUSGROW MPC is part of the 1,004.0144 hectares of SEARBAI, which
had a previous contract with the company, it wanted to cover the whole area
(1,004.0144 hectares) to maintain the economies of scale of operating the
plantation.
To be able to secure a contract, the ARBs who were formerly members of ALDA
complied with the requirements of the company to be under the umbrella of a
cooperative even though they would engage in individual farming. Hence, they
organized themselves into a cooperative, named DUSGROW MPC. Thereafter, they
filed a petition for individual partition of their landholdings with the Department of
Agrarian Reform Adjudication Board (DARAB) in July 1998. Its founding chairman
took-charge of the filing of petition with the help of a private lawyer. Throughout
the filing of the petition, DUSGROW MPC continuously negotiated with Stanfilco,
that in case they would be granted individual partition of their landholdings, they
would want to engage in an individual contract growing arrangement with them.
Aside from organizing themselves into a cooperative, Stanfilco required the
contiguity of the landholdings that were to be covered by the contract. Thus, part
of the petition of the ARBs to the DARAB was the granting of a contiguous area.
However, in order for the petition to be granted, the local government unit (LGU)
required a Development Plan for which the company willingly offered its assistance
in its preparation. When the petition of the ARBs of DUSGROW MPC was approved
and when the individual CLOAs were issued, Blocks 14 and 15 of SEARBAI
plantation were given to them by the DARAB. The two blocks were equally

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apportioned among the first 14 members of DUSGROW MPC with each ARB having
an area of 1.13 hectares.
During its negotiations with Stanfilco, the Chairman and one member of the
cooperative headed the negotiating panel of DUSGROW MPC. However, they had a
private legal counsel who assisted them on legal matters. They did not seek
support or assistance from other parties as they fully trusted the management
because they were previous workers of the company.
Stanfilco, through its Legal Division, initiated the drafting of the contract. Its
officers who were involved in the negotiation process reviewed the draft contract
before it was forwarded to the ARBs of DUSGROW MPC for validation and
necessary revisions. The concerned officers of the cooperative studied the draft
contract and made the necessary revisions, after which they returned it to the
lawyer of the company for finalization. The finalized contract on Banana Production
and Purchase Agreement was signed by concerned officers and members of the
DUSGROW MPC and by the management of DOLE PHILIPPINES, INC. - Stanfilco in
October 1998, the main features of which are the following:
1. The Agreement covers an area of 16.24 hectares owned by the ARBs of
DUSGROW MPC, which is a portion of the SEARBAI banana plantation.
2. The initial term of the agreement is 11 years, starting October 1998 and shall
be automatically be extended from year to year thereafter, unless written
notice of cancellation is served during the last three-month period of the 10th
year.
3. DUSGROW MPC shall exclusively sell to Stanfilco all Cavendish bananas, which
they produce under the required specifications and quality. On the other hand,
the company agrees to pay for the boxed bananas that meet the required
specifications and quality by Stanfilco at the designated wharf, at a rate of US
$2.60 Freight on Board (FOB) ex-vessel for every 13 kg. standard box of
export-quality bananas.
4. DUSGROW MPC shall handle and fund the production and operating costs of
the plantation.
5. The cooperative shall rent from Stanfilco, at a rate of $ 0.05 per 13 kg. box of
banana produce, the following infrastructures and equipment: cable way
harvesting system, overhead cable propping, irrigation system, and electrical
system.
6. To lower the field cost, Stanfilco has the option but not the obligation to supply
and deliver to DUSGROW MPC plastics, fertilizers and such other items, which
shall be charged at cost and shall be deducted from the FOB proceeds of
bananas due to the cooperative.

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7. DUSGROW MPC shall adopt Stanfilcos sigatoka* control practices including the
availment of the services of the same spray outfit for the uniformity of practices
and timing, the cost of which shall be exclusively borne by DUSGROW MPC.
8. Stanfilco shall provide DUSGROW MPC with technical service at no cost. Thus,
the latter shall permit authorized representatives of Stanfilco to enter at any
time and to observe all operations involved in growing, packing and shipping
bananas and to give such advice and assistance as may be necessary. It shall
also provide knocked down (KD) boxes and label for packaging at no cost to
the cooperative.
Since the landholdings of DUSGROW MPC were abandoned for two years when it
was still part of ALDA cooperative, the area had to undergo rehabilitation. On April
8, 1998, DUSGROW MPCs membership approved a resolution authorizing the
management of Stanfilco to use relay-cropping as the most appropriate method to
rehabilitate the DUSGROW MPC Farm. Since the cooperative was not financially
capable to rehabilitate the said farm, the company agreed to rehabilitate the farm
shouldering full cost, with the idea of using relay-cropping method so as to meet
large volume of production. Thus, a Supplemental Agreement was executed
stipulating that Stanfilco would maintain and rehabilitate the farm of the ARBs of
DUSGROW MPC for two crop years, which is basically equivalent to three years,
that is, from 1998 to 2001. Since the Banana Production and Purchase Agreement
between Stanfilco and DUSGROW MPC was signed in October 1998, the contract
was actually implemented in June 2001.
It was also stipulated in the Supplemental Agreement that the ARBs were provided
a guaranteed income of PhP30,000 per hectare per year. Likewise, Stanfilco
committed to give a one-time financial assistance of PhP3,128 per memberbeneficiary as assistance to DUSGROW MPCs rehabilitation of its 16.24 hectares
banana plantation and as signing bonus. Thus, the provisions in the Banana
Production and Purchase Agreement that were in conflict with the Relay Cropping
Program of Stanfilco were suspended and the Relay Cropping Program governed
the relations of the parties during the said two crop-year period.
After the two-crop year period, the two parties implemented the Banana
Production and Purchase Agreement. During the implementation of the contract,
the ARBs of DUSGROW MPC followed the standard operating procedures (SOPs) of
Stanfilco in producing bananas. In order to improve the production and marketing
of the agricultural produce of the ARBs, the company extended financial and
technical support to the ARBs. In terms of financial support, the company helped
the ARBs of DUSGROW MPC in securing loans from banks for which it served as
guarantor. With regard to technical support, Stanfilco trained DUSGROW MPC
*

Sigatoka is one of the major diseases that the banana industry has to deal with. It is a leaf spot
disease caused by Mycosphaerella musicola. This causes the premature death of leaves. In severe
cases, the size of bunches and fingers is reduced. The fruit also ripens prematurely and develops
abnormal flavor and smell. To prevent the disease, plants are usually sprayed with Bordeaux
mixture. Badly spotted leaves are removed to avoid contamination.

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members on various farm practices which include basic farm management, quality
control, chemical handling, and 4) planting and harvesting techniques.
The price of Class A bananas since the start of the Banana Production and
Purchase Agreement between Stanfilco and DUSGROW MPC in 1998 is US$2.60.
This price prevailed up to 2002. In 2003 the price per box of Class A bananas had
increased to US$2.70. The increase of US$0.10 centavos is an incentive given by
Stanfilco to DUSGROW MPC for also selling its Class B bananas to them. At
present, Stanfilco does not increase the price per box of bananas because the price
of dollar increases.
Moreover, assistance provided by Stanfilco to ARBs includes the renting out of
haulers and rollers, and the provision of manufacturing coaches that are used
during packaging and hauling operations.
The DAR and a non-government organization (NGO) - Foundation for Agrarian
Reform Movement extended assistance to the ARBs in the establishment and
implementation of the agribusiness venture arrangement. The DAR extended
assistance through the distribution of lands to the ARBs, while the NGO through
provision of technical support and seminars that enhanced the knowledge and
skills of the ARBs.

V.

Benefits Derived by the ARBs from the Agribusiness Venture

Arrangement (AVA)

The benefits derived by the ARBs are mainly financial, specifically high incomes
from the farms they are individually taking care of and are covered by the Banana
Production and Purchase Agreement with Stanfilco through their cooperative.
The ARBs perceive that the primary benefit derived by them is the improvement of
their financial status. Their incomes significantly increased compared to when they
were still employees of Stanfilco where they earned daily fixed wage ranging from
PhP150 to PhP292.
For 2004, each of the 13 ARBs who entered into a Banana Production and
Purchase Agreement with Stanfilco earned a gross income ranging from
PhP538,198 to PhP1,225,036 or an average of PhP721,385. However, the following
items were deducted from their gross incomes: withholding taxes, farm inputs such
as chemicals and fertilizers, aerial spray (Sigatoka), bank loans (if any), electric bill,
land amortization, land deductions for the subdivision lot that they amortize, labor
costs for Class A and B bananas, Operation Repair and Maintenance (ORM),
common fund, packing, and overhead and labor cost for harvesting. Likewise, the
salary of one help-out amounting to about PhP66,000 excluding benefits was also
deducted. After deducting the aforementioned items, the ARBs annual net
average income amounted to PhP393,822 with an income which ranges from
PhP213,310 to PhP522,766.
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Based on these data, the ARBs incomes have significantly improved.

Individual Gross and Net Income of 13 ARBs of DUSGROW MPC for Year 2004
ARB No.
1
2
3
4
5
6
7
8
9
10
11
12
13

Gross Income
807,237.93
720,807.31
538,198.68
888,379.42
688,604.65
766,368.33
642,570.73
595,155.60
1,225,036.47
718,212.11
782,928.22
630,729.59
775,766.64

Net Income
243,398.45
485,105.55
315,495.48
384,474.09
393,890.93
366,224.55
341,691.35
390,326.69
522,766.87
475,649.92
492,712.64
213,310.72
494,643.04

Source: Data provided by Mr. Alexander Sienes, Chairman of DUSGROW MPC.

Another perceived benefit derived by the ARBs from their partnership with a
multinational company like Stanfilco is the stability or the sustainability of their
cooperatives operation. Likewise, they acknowledge that through the partnership,
they gain substantial management experience and technology transfer to the
cooperative.
Through the initiative of their cooperative, a four-hectare land was developed into
a subdivision. The land was subdivided among the interested members whose
payments are being deducted every billing period from the concerned individual
ARBs.

VI.

Perceptions of ARBs and Investors

Agribusiness Venture Arrangement (AVA)

in

Entering

into

The ARBs of DUSGROW MPC perceive that their AVA with Stanfilco is favorable
because of the improvement in their financial status. They say that their lives are
now better off compared to when they were still employees of Stanfilco. They can
now exercise their rights as landowners and directly manage their lands. They
even compared their status with other ARBs in other cooperatives, where the ARBs
are still tillers of their lands and only get dividends during year-end, amounting to
as low as PhP8,000. Thus, the ARBs of DUSGROW MPC feel that they now enjoy
the full ownership of their lands and are relieved from the bondage of poverty.
The ARBs of DUSGROW MPC perceive their venture with Stanfilco as successful
since no problems were encountered in the implementation of the agreement.

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They claim that the company is very supportive and their contract with Stanfilco
assures them of security of income.
As such, they want the AVA with Stanfilco to continue even after the duration of
the contract since they are not yet financially stable and have not established any
marketing contact with other companies. Thus, they want to maintain the AVA
because they are already satisfied and secured in their arrangements with the
company.
Even the barangay captain at DAPCO cited several advantages that were brought
about by the AVA between DUSGROW MPC and Stanfilco. He says that through the
AVA, the ARBs derive economic benefits, that is, increased and stable income.
Thus, the ARBs are now able to finance their household expenses and at the same
time send their children to school. Moreover, he says that the ARBs have a secured
contract with the buyer, which ensures a market for their produce.
On the other hand, the primary advantage brought about by the AVA to the
community is the generation of employment and the achievement of peace and
order in the community.
The barangay captain did not perceive any disadvantages brought about by the
AVA in the community. He believes that the AVA entered by the ARBs succeeded
because it provides economic and financial stability for the ARBs and employment
for the residents.
On the part of Stanfilco, its Growers Relation Manager believes that the AVA with
the ARBs of DUSGROW MPC is successful because of its harmonious relationship
with the ARBs. He finds it easy to communicate with the ARBs of DUSGROW MPC,
specifically in following farm-related instructions given to them.
After the expiration of its contract with DUSGROW MPC, Stanfilco intends to renew
the contract since it does not want the cooperative to transfer to other
buyers/investors because of the cooperation the ARBs give to the management of
the company. Likewise, the company does not have the luxury of time to
negotiate with other growers. If DUSGROW MPC would decide to transfer or have
a tie-up with other buyers, Stanfilco would find it difficult to look for a different
farm that would replace the plantation of DUSGROW MPC. If ever it would find
another farm, Stanfilco would again start all over in developing the said farm.
The Growers Relation Manager of Stanfilco identified the following benefits
provided by the company to the ARBs of DUSGROW MPC: higher price per box of
banana to DUSGROW ARBs that is, $2.60 per box, compared to other growers in
the area who only receive $2.50 per box. From $2.60, the price of Class A
bananas produced by DUSGROW ARBs was increased to $2.70 as a result of also
selling their Class B bananas to Stanfilco. The company motivated DUSGROW
ARBs to also sell their Class B bananas to them to avoid the entry of third parties in

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the plantation as these third parties did not invest or contribute anything in the
development of the plantation.
Other benefits given to the ARBs includes the trainings they acquired from
STANFILCO and the financial assistance it provided in the crafting of its
Development Plan. Because of the trainings provided, the ARBs did not encounter
many problems with regard to farm practices and changes in packaging
specifications.
In terms of benefits derived by the community, Stanfilco gives donations to the
church and likewise adopted one school in the community where it donates
computers and conduct seminars for teachers.

VII. Factors that Contributed to the Successful Implementation of

the Agribusiness Venture Arrangement (AVA)
The ARB members of DUSGROW MPC believe that being former employees of
Stanfilco is the foremost factor that contributed to the successful implementation
of the AVA. The ARBs consider themselves as good managers of their respective
farms because of the trainings that they acquired when they were still employees
of Stanfilco. This claim is supported by the management of the company which
believes that the ARBs have technical and managerial skills in managing their
landholdings. In terms of the technical aspect, the ARBs are well trained already
because of the trainings afforded by them. With regard to the managerial aspect,
most of the members of DUSGROW MPC are professional and some continuously
work at the office of Stanfilco.
The high educational background of the officers of the cooperative contributes to
the success of their partnership with Stanfilco. Likewise, their several years of
work experience with Stanfilco as office staff helped them in carrying out their
present functions in the cooperative. Because of their education and experience,
they managed to negotiate with the company. The trainings they acquired when
still with the company also helped them in performing their present functions.
The last factor that contributed to the successful implementation of the AVA is the
open communication lines between the two parties. Whenever the ARBs have
problems relating to their farms, the company is open to help them.

VIII. Lessons Learned

1. The Banana Production and Purchase Agreement that is implemented through
individual farming by the ARBs of DUSGROW MPC seems to be a successful
type of AVA as shown by its smooth implementation, the higher incomes
derived by the ARBs, and the satisfaction of the ARBs over the arrangement.

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The individual farming experience of the ARB members of DUSGROW MPC in

implementing the Banana Production and Purchase Agreement shows
improvement in the ARBs standard of living as indicated by a significant
increase in their household incomes. As a consequence, they were able to
finance the education of their children and other various household expenses.
Likewise, the ARBs did not encounter problems in the implementation of the
Agreement as the company is very supportive of the ARBs undertakings. Thus,
the ARBs feel satisfied and secure with the present arrangement and intend to
renew their contract with Stanfilco upon expiration.
2. There is a growing trend among ARBs in banana plantations in Davao del Norte
to shift from the cooperative-managed plantations to individual farming of lands
awarded to them under CARP.
The PARO of Davao del Norte claims that about 30 percent of the ARBs at
Barangay DAPCO, Panabo City are now engaged in individual farming. There
are also ongoing petitions from other ARBs towards the issuance of individual
CLOAs for them to engage in individual farming thereafter. The ARBs prefer
individual farming because based on the experiences of the ARBs who opted for
this type of practice, they derive higher incomes as compared to ARBs in
cooperative-managed plantations.
The ARB members of DUSGROW MPC are among those who have opted for
individual farming due to higher incomes derived from their farms and the
exercise of their rights as landowners who enjoy the full ownership of the
lands. They also believe that they had become highly empowered as they
make all farm management decisions.
3. The PARO and concerned MARO in Davao del Norte expressed some misgivings
on the sustainability of banana production in the long run under an individual
farming system because of variations in some individual farming practices of
ARBs, like the lack of uniformity in the application of chemicals in individual
farms. However, the ARBs claimed that while they are engaged in individual
farming, they strictly abide by the standard operating procedures (SOPs) and
industry prescriptions of Stanfilco.
4. The lack of full control on the decisions of the ARBs engaged in individual
farming may result to the practice of pole-vaulting.
Because of the lack of full control on the decisions of the individual ARBs,
individual farming may result in the practice of pole-vaulting. Pole-vaulting
happens when the ARB finds another investor offers a better price and the ARB
reneges on his earlier agreement of sale to the investor that invested in the
production of a particular crop. Considering the previous experiences of ARB
members of DUSGROW MPC of leaving their former cooperative (i.e. ALDA), the
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possibility of pole-vaulting of ARBs may occur when they are faced with
opportunity of getting relatively higher prices per box of bananas.
The ARB members of DUSGROW MPC were original members of the ALDA
cooperative, one of the three cooperatives that emerged when ARB members
broke away from the Stanfilco Employees Agrarian Reform Beneficiaries
Association, Inc. (SEARBAI). The splitting of SEARBAI members into three
cooperatives (ALDA, SEARBEMPCO, and DARBCO) was due to disagreements
on some provisions of the Agreement entered into by the officers of the original
cooperative. Since the ALDA cooperative was unable to enter into marketing
contract with Stanfilco, it further split into two cooperatives, namely, the
Agrarian Reform Beneficiaries Individual Self-Managed Multi-Purpose
Cooperative (ARBISM) and DUSGROW MPC. Thereafter, in the case of ARB
members of DUSGROW MPC, they opted for individual farming and eventually
entered into the Banana Purchase and Marketing Agreement with Stanfilco
under the umbrella of DUSGROW MPC.
5. The employment of farm laborers or help-outs by the ARBs raises contradicting
issues.
One issue relates to the intent of CARP to give control of land to ARBs, that is
empowering them to become farm managers of their own lands and thus
make decisions regarding the operations of their land. On this premise, it
justifies the ARBs decision of employing farm laborers or help-outs in their land
which is an indicator of ARBs improvement of their social and financial status.
Another issue is on the ARBs becoming the second-generation landowners
who may revert back to unjust tenurial arrangements on sharing practices
among the farmworkers who did not have the access to directly own the land
they till.

IX.

Recommendations

The experience of ARB members of DUSGROW MPC in implementing a Banana

Production and Purchase Agreement through individual farming is a showcase of
successful implementation of an AVA. Through this arrangement, they derive
significantly higher incomes and have become managers of their own farms.
the following should be undertaken:
1. Institute Safeguard Mechanisms to Sustain the Gains Achieved by the ARBs.
Considering the misgivings on the sustainability of banana production under
individual farming, the officers and ARB members of DUSGROW MPC and
Stanfilco have to institute safeguard mechanisms to ensure the sustainability of
producing the quantity and quality of bananas that meet the export market
requirements.
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Likewise, Stanfilco, which heavily invests in the business, should conduct close
supervision of key operations of individual ARBs to ensure maximum yield. A
close coordination with its officers and members must be done to mitigate the
practice of pole-vaulting by the ARBs. Pole-vaulting is another factor which may
affect the gains achieved by the ARBs.
2. Come up with a Framework or Working Model for Monitoring of ARBs Status.
For its part, DAR should come up with a framework or working model for
monitoring the performance and status of ARBs and the ARB cooperatives
engaged in AVAs so that specific policy actions can be formulated and
implemented to address the possible emergence of second generation
problems and to ensure the sustainability of gains that have already been
achieved.
3. Conduct Further Studies on the Viability and Sustainability of Individual Farming
in Commercial Farms and Plantations.
There is a growing trend among ARBs in banana plantations in Davao del Norte
to engage in individual farming of lands awarded to them under the CARP. In
fact, about 30 percent of the ARBs in Barangay DAPCO are already engaged in
individual farming and there are ongoing petitions from ARBs in other areas.
This happens because of the economic gains it has brought to the ARBs who
have engaged in individual farming.
For this reason, there is a need to conduct further studies on the viability and
sustainability of individual farming as applied in commercial plantations with the
end view of utilizing findings on best practices in individual farming for policy
and program direction setting.

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