Republic of the Philippines

DEPARTMENT OF AGRARIAN REFORM

ARB Agribusiness Entrepreneurship Development Program
th
4 Floor, FAPsO Building, DAR Central Office, Elliptical Road, Diliman, Quezon City
Tel No. (02) 426-7484 / 86 Fax (02) 426-7489 Email: aredp_technical @yahoo.com

INITIAL IMPACT OF THE GRAINSYS PROJECT

BACKGROUND INFORMATION
The Grains Production and Marketing System for Food Security (GrainSys)
Project is a Government – Civil Society – Business Sector undertaking of
the DAR Agribusiness Entrepreneurship Development Program (DAR-
AREDP intended to wean agrarian reform beneficiaries in Community
Organizing for Land Tenure Improvement (COLT-1) Project areas from
traders that supply them farm inputs at 5-7% interest per month payable
with the farmers harvest.
The implementing organization for the COLT-1 Project, Cagayan Valley
Center for Rural Development Empowerment (CREDO), is the also the
proponent of this AREDP Project through its social enterprise arm – the
CREDO Savings and Agrarian Reform Cooperative – which is now a large
primary cooperative that was recently re-registered under the Philippine
Cooperative Code of 2008 as consisting of districts and governed through
a representative assembly.

1ST COMMERCIAL PRODUCTION RUN TARGETS AND OUTCOMES

After large plot hybrid corn seed validation trials in four half-hectare sites
in Cagayan and Isabela in February to May 2008 and a 6-hectare pilot
cluster demonstration farm in July to October 2009, the CREDO Coop
engaged in its first commercial production run on late November to
December 2009. Corn production inputs with group crop insurance
premium for 2000 thousand hectares was advanced on supplier credit by
Planters Products Inc. at 2% interest per month. The output was to be
delivered to the corn silo facility of Mindanao Grains Corporation of the
La Filipina Uygongco Group of Companies that was scheduled to be
completed on February 2010.
The target yield of the 1st commercial production run is 7.5 MT of yellow
corn as against the previous year’s 2nd quarter average yield of 3.752 MT
in Cagayan, 3.745 MT in Isabela at and 4.400 MT in Apayao as per the
CountryStat online database of the Department of Agriculture. However,
due to the El Niño episode that started in August 2009 which extended to
June 2010, the average harvest of the project in Cagayan dropped to
2.725 MT in Cagayan and 1.327 MT in Isabela. Late-planted Apayao
experience an increase in yield to 5.184 MT due to occurrence of fluke
rainfall (i.e., summer rain) in March 2010 just before flowering of the
corn plants in that area.
ASSESSMENT OF INITIAL PROJECT IMPACT

In terms of the stage of development of the enterprise, the AREDP

National Program Management Office assessed the corn component of the
GrainSys Project as Stage 4 and the rice component as Stage 3. With the
outcome of the hybrid rice pilot test, under El Niño conditions, yielding
116 cavans following farmer’s practice of applying 11 bags of inorganic
fertilizer while the TriKombi + 4 bags of fertilizer yielding 175 cavans, for
a net benefit of Php 51,600 per hectare, the rice component is now in the
process of negotiation with Leads Agricultural Development Corporation
for implementation using Stage 4 indicators.

4. Project: Grains Production System for Food Security Project

Hectares Covered: 2,000 No. of Households Covered: 1,187

Enterprise Province Market Stage of Development

4 - Build up
• Improvement of
enterprise operation
and management
4.1 Corn Cagayan, • Market build up
La Filipina Uycongco
Production Isabela and • Capital enhancement
Group of Companies
& Marketing Apayao
• System and
organization
strengthening
• Product showcasing in
fairs, show, etc.

3 - Start up
• Pilot testing of the
product
• Feasibility analysis of
the product/
4.2 Rice Metro Manila
Cagayan, enterprise
Production cooperatives and
Isabela
& Marketing teachers associations • Installation of system
and procedures
• Securing FDA permits
(for food), other
certifications (for
non-food)

The preliminary assessment of the impact of the project, under El Niño

conditions, is difficult. However, the participating farmers were better off
than those who obtained their farm input requirements from traders as
shown below:
 Trader-
Profit (Loss) Statement Participating
Supplied
CAGAYAN Farmer
Farmer
Corn Harvest, in kg 2725 2725
Farm Gate Price per kg 8.27 8.27
Gross Sales 22,535.75 22,535.75
Less: Labor Cost 13,000.00 13,000.00
Less: Farm Inputs 21,000.00 21,000.00
Less: Interest Expense 2,085.00 5,250.00
Less: Insurance Premium 1,800.00 0.00
Less: Postharvest Expense 1,880.75 1,880.75
Net Income -17,230.00 -18,595.00
Plus: PCIC Indemnity 18,000.00 0.00
Adjusted Farmer Profit/Loss 770.00 -18,595.00
Add-Back: 50% of Labor Cost 6,500.00 6,500.00
Net Farmer Profit (Loss) 7,270.00 -12,095.00

As can seen above, the participating farmers in Cagayan still made a profit with
their farm input supply debt almost paid for by the crop insurance indemnity. In
the case of the trader-supplied farmers, they are caught in a debt trap
worrying if the trader will again supply them farm inputs for the next cropping
season on credit.
In the case of the Apayao farmers who were not severely affected by the El
Niño episode, the comparative profit and loss statement on per average yield
for the area and the above-average yield reported is shown below:

Participating Participating
Trader-
Profit (Loss) Statement Farmer Farmer
Supplied
APAYAO Average Highest
Farmer
Yield Yield
Corn Harvest, in kg 5184 5184 8451
Farm Gate Price per kg 8.60 8.60 8.60
Gross Sales 44,582.40 44,582.40 72,678.60
Less: Labor Cost 13,000.00 13,000.00 13,000.00
Less: Farm Inputs 21,000.00 21,000.00 21,000.00
Less: Interest Expense 2,085.00 5,250.00 5,250.00
Less: Insurance Premium 1,800.00 0.00 0.00
Less: Postharvest Expense 1,880.75 1,880.75 1,880.75
Net Income 4,816.65 3,451.65 31,547.85
Plus: PCIC Indemnity 16,000.00 0.00 0.00
Adjusted Farmer Profit/Loss 20,816.65 3,451.65 31,547.85
Add-Back: 50% of Labor Cost 6,500.00 6,500.00 6,500.00
Net Farmer Profit (Loss) 27,316.65 9,951.65 38,047.85
Please note that the PCIC indemnified the participating farmers in Apayao as
the inspection of their adjusters were conducted before the unexpected
summer rainfall that allowed the corn plants that are yet to flower at that time
to recover. The farmers claimed that rainfall dissolved the urea with muriate of
potash top-dress and believe that the large grains harvested were due to the
application of the potash when they compared the yield of those that applied it
and those did not.

SUMMARY AND CONCLUSION

The difference in the income of participating farmers as against those of
trader-supplied farmers can be attributed to the following:
1. The CornCheck production protocol that was designed with Mr. Severino
Tumamang of the DA Cagayan Valley Integrated Agricultural Research
Center in Ilagan, Isabela and Mr. Joey Rala of Planters Products Inc.
included not only the use of non-GMO hybrid corn seeds but also the pre-
planting treatment of the seeds with Enhance™ nitrogen-fixing microbial
seed inoculants as well as the introduction of the application of muriate
of potash with urea as top-dress.
2. The loss of the pilot corn production cluster in Bgy. San Mariano, Lal-lo,
Cagayan due to Typhoon Pepeng convinced management and farmer-
members of CREDO Coop of the need for inclusion of the crop insurance
coverage in the PPI farm inputs supplier credit package. Except that,
PPI arranged only for Php 25,000 crop insurance coverage to cover its
exposure in the project instead of Php 35,000 as per the CornCheck farm
plan and budget.
Although the above-average yield has surpassed the 7.5 MT per hectare target,
it is, however, an exception and thus too early to say that the CornCheck farm
plan and budget will result in an average of 8.4 MT in this wet season crop
involving 1,200 hectares. As of the report from CREDO Coop last 11 August
2010, harvesting already started in Lasam, Cagayan with a half-hectare parcel
planted following CornCheck (without insurance cover) yielding 4.5 MT.

THE NEXT STEPS

The steps that shall be undertaken by the CREDO Coop are aimed attaining the
5th Stage of Development – Take-off Stage – as per the following objectively
verifiable indicators:
1. Increase independence in business decision-making
2. Backward-forward integration (i.e., horizontal & vertical linkage) in the
value chain
3. Accessing additional equipment and machineries
4. Upgrading quality control measures
5. Intensify product promotion in national and international markets
6. Enhance organization image
7. Strengthen relationship with support service providers

Norberto Digitally signed by Norberto Rillera

DN: cn=Norberto Rillera, o=DAR,
ou=AREDP,

Rillera
email=norbertrillera@yahoo.com,
c=PH
Date: 2010.09.09 10:30:42 +08'00'