Your SlideShare is downloading. ×
Bb supplychains 2013-08-13pm
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×

Introducing the official SlideShare app

Stunning, full-screen experience for iPhone and Android

Text the download link to your phone

Standard text messaging rates apply

Bb supplychains 2013-08-13pm

70
views

Published on

Published in: Health & Medicine, Technology

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
70
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
0
Comments
0
Likes
0
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. Small Farmers in High Value Chains The impact of contract growing on tobacco farmers in Ilocos Briones, Roehlano M. Galang, Ivory Myka R. 1
  • 2. What to expect O Aims and scope O Issues and context O Hypotheses O Method O Results O Conclusion and policy recommendations 2
  • 3. Aims and scope O Agriculture: employs one-third of the labor force. O Poverty incidence: in 2009, 57% among agricultural households, 17% among non- agricultural households. (Reyes et al., 2012)agricultural households. (Reyes et al., 2012) O To raise incomes of agricultural households, one strategy is to promote the use of high value crops O Parallel strategy: increase production of traditional crops, e.g. targeting rice self-sufficiency O Where should priorities lie? 3
  • 4. Aims and scope O Such high value crops are often produced within organized value chains. O A value chain refers to the set of linked economic activities that successively increaseeconomic activities that successively increase value added of the output of the chain. O A supply chain is an organized value chain O Typically structured as contract growing O Contrast is traditional marketing channel (i.e. roving trader, spot transaction; common in most crops) 4
  • 5. Aims and scope O Does contract growing raise farm income? O Goal 1 of PDP Ch. 3: “Food Security Improved and Incomes Increased” O Help define priorities: diversification vsO Help define priorities: diversification vs increased production of now-dominant crops O What factors determine inclusion of small farmers in high value chains? elements of an agricultural diversification strategy 5
  • 6. Issues and context O Skeptics, e.g. Borras and Franco: [Contract farming] is perhaps the most commonly cited type of incorporation of poor peasants and small farmers into large-scale agri-industrial schemesfarmers into large-scale agri-industrial schemes and is thought to result in win-win scenarios. Over time and in many diverse settings, however, this has proved not to be the casethis has proved not to be the casethis has proved not to be the casethis has proved not to be the case. Instead, such arrangements generally result in processes and outcomes that mainly favor the transnational companies…” [underscoring supplied] 6
  • 7. Issues and context O Literature on contract farming: contract farming has positive impact on income O Concerns that smallholderssmallholderssmallholderssmallholders are excluded in modern supply chainsmodern supply chains O Huang et al: modern marketing chains biased towards more capable farmersmore capable farmersmore capable farmersmore capable farmers O Impact confounded by selection effects O Addressed in some studies, e.g. Madagascar, China; no study in the Philippinesno study in the Philippinesno study in the Philippinesno study in the Philippines 7
  • 8. Context: Tobacco Industry • One of the important commercial crops • Significant supply chains (exports, domestic processing) TOBACCO TYPE 2011 2012 Number of Tobacco Farmers and Areas (2011-2012) 8 No. of FCs Area (ha) No. of FCs Area (ha) Virginia Tobacco 26,839 20,794.32 27,858 21,317.02 Burley Tobacco 14,426 9,383.74 10,944 6,969.63 Native/Dark Tobacco 14,268 8,096.72 13,142 7,443.39 GRAND TOTAL 55,533 38,274.78 51,944 35,730.04 TOBACCO TYPE 2011 2012
  • 9. Production trends ProductionProductionProductionProduction VolumeVolumeVolumeVolume AreaAreaAreaArea harvestedharvestedharvestedharvested 40 50 60 30 35 40 45 9 0 10 20 30 40 2001 2004 2007 2010 ‘000‘000‘000‘000mtmtmtmt 0 5 10 15 20 25 30 2001 2004 2007 2010 ‘000has‘000has‘000has‘000has Source: BAS Source: BAS
  • 10. Regional distribution Ilocos Sur Cagayan 2% Others 17% Pangasin an 7% Cagayan 7% Others 9% Area harvested by regionArea harvested by regionArea harvested by regionArea harvested by region 10 Ilocos Sur 33% Isabela 9% Ilocos Norte 7% La Union 16% Pangasin an 16% 17% 2001200120012001 Ilocos Sur 42% Isabela 17% Ilocos Norte 9% La Union 9% 7% 2011201120112011 Source: BAS
  • 11. Export trends O Value O Volume 200 250 219 MillionsMillionsMillionsMillions 35 40 45 33 43 MillionsMillionsMillionsMillions 11 0 50 100 150 200 2009 2010 2011 97 106 123 109 161 MillionsMillionsMillionsMillions Unmanufactured Manufactured 0 5 10 15 20 25 30 35 2009 2010 2011 30 33 17 23 29 MillionsMillionsMillionsMillions Unmanufactured Manufactured Unit: USD Unit: kg Source: NSO 2009-10 & NTA Reg. Dept for 2011
  • 12. O Value O Volume 300 350 332 293 348 MillionsMillionsMillionsMillions 80 90 100 73 73 94 MillionsMillionsMillionsMillions Import trends 12Unit: USD Unit: kg 0 50 100 150 200 250 2009 2010 2011 6 13 5 MillionsMillionsMillionsMillions Unmanufactured Manufactured 0 10 20 30 40 50 60 70 80 2009 2010 2011 0 2 0 MillionsMillionsMillionsMillions Unmanufactured Manufactured Source: NTA Regulation Department
  • 13. Taxes, Duties and other Fees collected on Tobacco and Tobacco Products YEAR EXCISE TAXES DUTIES, VAT, INSPECTION MONITORING AND OTHER CORPORATE TAXES GRAND TOTAL 13 Source: NSO, NTA Unit: billion pesos FEES 2010 31.506 2.42 5.09 39.02 2011 25.504 1.55 4.06 31.11 2012 32.181
  • 14. NTA programs O Tobacco Growers Cooperative Program O Tobacco Free Public Education Program O Research and Development ProgramResearch and Development Program O Tobacco Contract Growing System O Regulatory Services Program O Quality Assurance/Analytical Services 14
  • 15. NTA: other programs, services O Tobacco Seed Varieties Collection, Purification and Maintenance O Production Technology Enhancement O Curing Structures and Management Improvement Production, Evaluation and Application ofO Production, Evaluation and Application of Vermicompost on Tobacco O Integrated Pest Management Technology Enhancement O Tobacco Pest Clinic/ Quick Response System O Setting of Tobacco Floor Prices/Tripartite Consultation Conference 15
  • 16. Hypotheses 1. Small farmers who are participating in the supply chains have relatively higher net farm income per hectare than similar farmers not participating in supply chains.participating in supply chains. 2. Farmer characteristics such as educational attainment, asset endowment, experience in farming, and so on, determine the likelihood of participation and benefits from supply chains. 3. Farmers with larger farms are more likely to benefit from organized supply chains. 16
  • 17. Hypotheses 4. The existence of good quality transport and telecommunications infrastructure are more favorable for the inclusion of small farmers in supply chains.supply chains. 5. Farmers will choose to participate in supply chains based primarily on cash price, followed by other considerations such as price stability, support for working capital, and technical assistance. 17
  • 18. Method O Desk Review O Field Investigation O Survey: 317 farmers (159 ULPI farmers) Other tobacco firms: Trans-Manila, Inc., andO Other tobacco firms: Trans-Manila, Inc., and PMFTC O Site: Ilocos Norte and Ilocos Sur (see map) O A key (and unanticipated) finding of the study: majoritymajoritymajoritymajority of Ilocos tobacco farmers are part of supply chain 18
  • 19. Go to Main slides 19
  • 20. Results 1. Hypothesis 1: Small farmers who are participating in the supply chains have relatively higher income per hectare than similar farmers not participating in supply chains. 89 80 100 Ave. netAve. netAve. netAve. net incincincinc/ha (‘000 P)/ha (‘000 P)/ha (‘000 P)/ha (‘000 P) 235 300 CountCountCountCount (74.3%) 20 8 0 20 40 60 80 SC Non-SC SC Non-SC Farmers participating in the SCs have higher average net income per ha than farmers who are not part of SCs. 235 81 0 100 200 SC Non-SC (74.3%) (25.7%)
  • 21. Results 2. Hypothesis 2: Farmer characteristics such as educational attainment, asset endowment, experience in farming, and so on, determine the likelihood of participation and benefits from supply chains. Lower Third Middle Third Upper Third % SC farmers 21 Lower Third Middle Third Upper Third Years of schooling 77.14 78.10 68.57 Years of experience 76.19 69.52 77.14 Farm assets 69.81 71.70 79.25 On the contrary: participation in SCs does not seem to depend on schooling, experience, or assets.
  • 22. Results 2. Hypothesis 2: Farmer characteristics such as educational attainment, asset endowment, experience in farming, and so on, determine the likelihood of participation and benefits from supply chains. Lower Third Middle Third Upper Third Average net income per hectare of SC farmers 22 Lower Third Middle Third Upper Third Years of schooling 106,194 86,840 73,647 Years of experience 87,238 83,943 96,565 Farm assets 78,449 86,745 101,498 Among SC farmers, net income from farming seems independent of education and farm experience, and weakly dependent on assets
  • 23. Results 3. Hypothesis 3: Farmers with larger farms are more likely to benefit from organized supply chains. Small FS Large FS AVERAGE NET INCOME PER HA (P) Large FS : >1 ha; Small FS: <1 ha See count See percentages 23 Small FS Large FS SC 92,895 77,108 Non-SC 747 34,462 On the contrary: SC farmers with smaller farms have higher average net income per ha.
  • 24. Results 5. Hypothesis 4: The existence of good quality transport and telecommunications infrastructure are more favorable for the inclusion of small farmers in supply chains. poor fair good 24 41 131 144 92.68 78.63 65.28 39 125 149 94.87 81.60 63.76 Quality of roads and bridges % of the total who are in SC % of the total who are in SC Access to cellphone signal On the contrary: Contract growers tend to be found in areas with poorer infrastructure!
  • 25. Results 5. Hypothesis 4: The existence of good quality transport and telecommunications infrastructure are more favorable for the inclusion of small farmers in supply chains. poor fair good 38 103 94Quality of roads and bridges 25 38 103 94 16.17 43.83 40.00 37 102 95 15.81 43.59 40.60 Access to cellphone signal Among all SC farmers Quality of roads and bridges Among all SC farmers Likewise, SC farmers do not necessarily cluster the most in the barangays with best infrastructure.
  • 26. Results 5. Hypothesis 5: Farmers will choose to participate in supply chains based primarily on cash price, followed by other considerations such as price stability, support for working capital, and technical assistance. Ranking Average Frequency 1 Pinansya Presyo 2 Presyo Pinansya 26 2 Presyo Pinansya 3 Inputs Inputs 4 Teknikal Teknikal 5 Proteksyon Proteksyon Cash price is only the second most important factor considered by SC farmers. Working capital advances more important. Suggests transmission channel of supply chain benefit: higher price; financing enables better farming techniques. Average cost/kg Non-SC 67 SC 39
  • 27. 27
  • 28. Multiple regression analysis O Control for variables simultaneously affecting net income O Key explanatory variable: participation in the supply chainsupply chain O Binary (SC farmer-1, Non-SC farmer-0) O Continuous (percent of output sold to SC buyers) O Endogeneity problem: need to instrument for contract growing variable: suggest location indicator as a control (e.g. Miyaka and Minot, 2008) 28
  • 29. Variable definition schain_pct % of output sold to SC buyers schain_dummy SC farmer-1 ; Non-SC farmer-0 edad age, in years tabako_ha farm size, in ha zfarm_assets farm assets (e.g. tractor, farm animals)zfarm_assets farm assets (e.g. tractor, farm animals) yrs_exp years of farming experience yrs_school years of education kasarian Male-1; Female-0 govt_support Yes-1; No-0 trans_kalyetulay quality rating (0,1,2; Poor, Fair, Good) telkom_cellphone access rating (0,1,2) telkom_internet access rating (0,1,2) 29
  • 30. Summary statistics Variable Obs Mean Std. Dev. Min Max netinc_ha 316 68,540.66 84,996.48 -154,600.00 433,440.00 edad 316 46.30 12.46 19.00 81.00 zfarm_assets 316 284,663.80 415,870.00 0.00 3,305,000.00 tabako_ha 316 0.61 0.42 0.13 4.00 yrs_exp 316 23.12 13.90 1.00 66.00 30 yrs_exp 316 23.12 13.90 1.00 66.00 yrs_school 316 8.28 2.76 0.00 14.00 kasarian 316 0.83 0.38 0.00 1.00 govt_support 316 0.35 0.48 0.00 1.00 trans_kalyetulay 316 1.33 0.69 0.00 2.00 schain_dummy 316 0.74 0.44 0.00 1.00 telkom_cellphone 316 1.51 0.63 0.00 2.00 telkom_internet 316 0.28 0.54 0.00 2.00
  • 31. Strategy: Main equation: net farm income per ha regressed against farmer characteristics and supply chain variable Instrumented: schain_pct/ schain_dummy Instruments: edad tabako_ha yrs_exp zfarm_assetsyrs_exp zfarm_assets yrs_school kasarian govt_support trans_kalyetulay telkom_cellphone telkom_internet Instrumental variables (schain_pct) and treatment effects (schain_dummy) 31
  • 32. schain_pct Coef. t P>|t| edad -0.27 -0.94 0.35 zfarm_assets 0.00 1.19 0.24 F( 10, 305) = 6.99 Prob> F = 0 Adj R-squared = 0.1676 IV Reg GMM: 1st Stage zfarm_assets 0.00 1.19 0.24 tabako_ha -0.12 -0.02 0.98 yrs_exp -0.09 -0.35 0.73 yrs_school -1.48 -1.59 0.11 kasarian -6.78 -1.19 0.23 govt_support 15.92 3.54 0.00 trans_kalyetulay -6.24 -2.02 0.05 telkom_cellphone -11.20 -3.31 0.00 telkom_internet -18.78 -3.46 0.00 _cons 128.86 8.42 0.00 N.S. InN.S. InN.S. InN.S. In OLS regOLS regOLS regOLS reg of 2ndof 2ndof 2ndof 2nd stagestagestagestage
  • 33. Wald chi2(9)= 42.17 Prob > chi2= 0 netinc_ha Coef. z P>|z| schain_pct 1,272.81 3.84 0.00 edad 954.66 1.53 0.13 IV Reg GMM: 2nd stage edad 954.66 1.53 0.13 zfarm_assets 0.00 0.42 0.67 tabako_ha 1,828.64 0.14 0.89 yrs_exp -867.12 -1.58 0.12 yrs_school -229.57 -0.12 0.91 kasarian 11,797.38 1.06 0.29 govt_support -25,820.79 -2.51 0.01 trans_kalyetulay -8,466.74 -1.10 0.27 _cons -39,574.58 -0.73 0.46 33
  • 34. Coef. z P>|z| schain_dummy telkom_cellphone -0.43 -2.81 0.01 telkom_internet -0.58 -3.88 0.00 edad -0.01 -0.88 0.38 Treatment effects: 1st stage edad -0.01 -0.88 0.38 zfarm_assets 0.00 1.49 0.14 tabako_ha -0.02 -0.08 0.94 yrs_exp 0.00 -0.41 0.68 yrs_school -0.06 -1.66 0.10 kasarian -0.23 -0.96 0.34 govt_support 0.55 2.87 0.00 trans_kalyetulay -0.26 -1.87 0.06 _cons 2.89 4.74 0.00 34
  • 35. Treatment effects: 2nd stage Wald chi2(17) = 53.94 Prob >chi2 = 0 Coef. z P>|z| netinc_ha edad 1,001.09 1.61 0.11 zfarm_assets 0.00 0.24 0.81 35 zfarm_assets 0.00 0.24 0.81 tabako_ha 2,464.50 0.22 0.83 yrs_exp -838.45 -1.50 0.13 yrs_school -111.50 -0.06 0.95 kasarian 11,760.13 0.95 0.34 govt_support -25,288.79 -2.34 0.02 trans_kalyetulay -7,706.20 -1.00 0.32 schain_dummy 127,780.60 4.09 0.00 _cons -45,585.08 -0.89 0.38
  • 36. Conclusions O Contract growing results in higher farm income. O No confirmation that contract farmers selected based on personal characteristics,selected based on personal characteristics, farm assets, or farm size O Farmers consider cash credit and price as their basis for participation in contract growing 36
  • 37. Conclusions O Assistance to farmers makes a difference in their participation in supply chains O Targeting disadvantaged farmers? Evidence favors:Evidence favors: O Strategy that prioritizes diversification, participation of farmers in high value crops (unless strong evidence for alternative priority can be found) O Promotion of smallholders in high value chains by way of contract schemes 37
  • 38. The beginning Of your most valuedOf your most valued questions and comments. 38
  • 39. Results 3. Hypothesis 3: Farmers with larger farms are more likely to benefit from organized supply chains. Large FS : >1 ha; Small FS: <1 ha See average net income See percentages Back to previous slide 39
  • 40. Results 3. Hypothesis 3: Farmers with larger farms are more likely to benefit from organized supply chains. Large FS : >1 ha; Small FS: <1 ha See count Back to previous slide 40