Toward productivity and inclusiveness in PHL coffee

Photo from http://philcoffeeboard.com

Coffee is one of the most popular choices of drink for many Filipinos. In fact, 9 out of 10 Filipino households consume coffee on a regular basis. But from being a household drink, coffee is fast becoming a lifestyle beverage. Buoyed by the rising income prospects of Filipinos and increasing number of international coffee chains and independent “third-wave coffee,” Filipinos have spurred new dynamics in coffee consumption.

Demand for coffee today far outpaces what the country can produce. In fact, domestic consumption is currently at 100,000 metric tons a year, yet local output is only at 25,000 metric tons. This ranks the Philippines 110th in the world in terms of coffee output.  In the early-1990s the Philippines was a net exporter of coffee alongside Vietnam and Indonesia, two of Asia’s coffee giants. But 20 years later the sector faltered and the country now stands as a net importer of coffee.

Challenges

The coffee industry is dampened by challenge, such as the lack of high-quality plantlets and available post-harvest facilities and processing equipment. It is also seriously affected by climate change and decreasing agricultural land due to residential and commercial conversions. Small farmers are also discouraged by low market prices and by old trees that limit coffee yield.

According to the latest survey of the Philippine Statistics Authority (PSA) published in the latest Philippine Coffee Industry Roadmap for 2017-2022, these intersecting challenges made production volume and yield decrease by 2.87 percent per year and 2.23 percent per year, respectively, over the last 10 years.

Coffee growers are the most burdened by the supply-gap challenge affecting the sector. Farming in the country as a whole is dominated by small farmers. In fact, according to the 2016 survey of the PSA, the whole agriculture sector is a major player in terms of its contribution to overall employment, employing 29 percent of the total workforce in the country. Despite the abundance of labor, its economic share to the whole GDP of the country remains at 10 percent, making it the sector most vulnerable to poverty.

Two major yet overlapping constraints thus appear to affect the overall lackluster performance of the coffee sector—the need to improve farm productivity and the need to increase farmer’s income to sustain a comfortable standard of living.

Value-chain approach

In recent years, the coffee sector, especially led by the private sector, has gradually recognized the importance of considering the entire agricultural value chain from financing and provision of farm inputs, to market access and getting products to consumers in order to address the twin challenge of agricultural productivity and farmer profitability.

As the leading buyer of green coffee and manufacturer of instant coffee in the country, Nestlé, for one, has been boosting coffee supply while making the livelihoods of farmers profitable. Through the Nescafé Plan, a nationwide plan that seeks to achieve self-sufficiency in coffee, Nestlé, together with the Department of Agriculture, distributes to farmers high-yielding, pest-resistant and low-maintenance planting materials, and teaches them the best available techniques in coffee planting, which both, in turn, seek to increase the quantity and quality of yield. The Nescafé Plan also allows small-scale farmers to sell their produce at a price aligned with the world market by locating satellite and mobile buying stations near coffee-growing areas across the country. Through this mechanism, growers are able to reap quickly from the benefits of their produce. The value-chain approach is a balanced pursuit that develops a resilient and competitive coffee sector while at the same time including farmers in the whole supply chain. In a predominantly smallholder-based agriculture, the ability of farmers to directly transact with the supply chain offers them, as well, the opportunity to share in the final value of their product and thus raise their incomes and welfare of their families.

 

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